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thanks. many think i am overly technical and these things don't apply to them but they are very wrong.
the smaller your savings the more it applys because you have less margin for error and it not as simple as just using the reverse amortization calculators found on the internet.
life can you eat you alive compared to what they show using averages.
I have run numerous models on retirement - one from Fidelity, one from another advisor, and one I wrote myself (I wrote and ran Monte Carlo simulations while in graduate school). All of these had roughly the same outcome. I think we are fine as far as understanding risk, allocation, and expected return for a given confidence level. I am not seeking help in those areas.
I am really trying to figure out three things: (1) how to minimize fees that are incurred in many investment instruments (like mutual funds) yet keep the investments as simple as possible, (2) how to minimize taxes, and (3) how to best convert all my investments from one focused on growth to one more weighted to cash flow.
For (1), since I am a strong believer that over the long term it is hard to beat a broad index fund, I am tempted to invest heavily in the lowest load, S&P 500 tracking index fund. At least for the equities portion. So I am looking for pros/cons on ETFs or maybe SPYDR to do that. ETFs are simple, so that achieves that goal.
For (2) and (3), from some of the comments above, I think I see how to best do that. The one element I am not so sure of is how to best create a fixed-income/cash-equivalent structure. My risk tolerance is such that I will set aside 5 years of projected withdrawals as fixed-income/cash (this comes to about 15-20% of the total). Everything else will go into equities. If the market gets walloped, we will live off the cash and sell the fixed-income if necessary. Equities will recover, they always do. This plan will give them 5 years to recover. So the question for me is what is best for the fixed-income/cash-equivalent investment? Really the main requirement I have is principle preservation and inflation protection. In that regard, TIPS will work. But if I can squeeze 1-2% above inflation out of a low-risk bond, that would be good. So I am thinking that for the fixed-income/cash bucket I will keep 20% of that as hard cash, 40% as TIPS, and 40% on bonds (which bonds?).
Any comments on this?
if a fair amount of money is involved and you expect to have money left that will not be spent the best advice anyone can give you is see an advisor who specializes in the 2nd half of the game.
most advisors are a dime a dozen and are good at the first half of the game. they can tell you what to buy and about college and tax savings but most kind of remind of doctors when it comes to the 2nd half of the game ,the spending down part.
like doctors can treat you when you are sick but know little about nutrition and keeping you healthy most planners suck at the second 1/2.
to understand why read some books from a guy like ed slott who is a master of the 2nd 1/2.
as an example: if i leave marilyn a million bucks in my ira money she has taxable rmd's.
we do not even know what her net to live on at this point will be.
she has a mortgage due on my retirement money and unlike a real mortgage we don't even know how much we will owe down the road.
but if i take some ira money and buy a single premium life insurance policy for the same amount as the ira i would left it accomplishes two things.
one is it is leveraged so i will not pay anywhere what it will pay out and so i leveraged my money without worrying about what stock markets or interest rates will do. marilyn gets 1 million tax free dollars to live on instead of 1 million in taxable money.
two i can leave whatever is left in the ira's to the kids who get to pay the taxes over their lifetime.
it is a wonderful way to take forever taxable money and make it never taxable money for your spouse without worrying about the whims of financial markets.
Invest in income producing stocks and plan on never touching the principle/selling the stocks. For example, check out Realty Income (Stock Symbol O). Known as the 'Monthly Dividend Company'. Paying over 5% right now. Have never reduced the dividend since going public in 1974.
Increased it 74 times including 65 consecutive quarterly increases (most very small)....
Other like ATT also over 5%. You can stagger your quarterly payers so that the dividends are essentially equal per month.
O invested in Realty Income for just that reason. My dividends are matching my minimum required distributions.
I wouldn't put all of my $ in one stock, however. Take a look at Wellington & Wellesley. One is an income focused fund with 60% in bonds, the other more growth focused with 40% in bonds.
An alternative is buying an S&P ETF for the stock portion, but I don't know of a bond ETF/Fund that like. Maybe laddered CDs (I hear the Navy Credit Union has some better ones right now)
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