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1) It's all about asset allocation. I don't recommend going 100% out of stock. You need to have a balance of equities and fixed income and cash reserves. At your age you need to focus on preservation of wealth rather than increasing wealth and depending on your risk tolerance and need for this money, I would venture to guess that a 30% equity / 70% fixed income would be fine in addition to roughly 6 months worth of expenses in the bank (savings account, money market account, etc.).
2) You can draw from your investment if needed. Traditionally at your age it is around 4-5% per year but you can draw less (say 2-3% per year) if you want to be more conservative.
3) social security isn't enough for most people to live on so drawing from their retirement is normal and expected.
I am getting very confused by many of the remarks made in some threads. A new thread this weekend has a widow asking how to make her money last. She has only SS, which is the same for us. No pension. Many responses, not only in this thread but in many, state "get out of stocks now". My confusion is that if you have money in mutual funds (Vanguard, Fidelity to name the ones we use) they obviously invest in the market. We will outlive our money if we aren't invested for the future. We have 2-3 years of living expenses in cash related funds as well (bonds, cd's cash). But it's just not possible to retire with the non existant interest rate these days if you don't have a pension unless you invest for the future.
Many on the forum live off their pensions and SS and talk about not touching their principal. We are not in that position. Having said this, what would you do?
Please understand that I am not complaining that we don't have a pension to rely on (although it would be nice!) We raised our children, put them through college, balanced our lives so that we saved and also enjoyed ourselves. I think we did a great job saving, but realistically, without a pension we do have to use our savings. We just don't want to outlive it!
Thank you in advance for your responses. So many of you are truly a gift here with your knowledge.
to get the most effective plan you really do need an advisor well schooled in the 2nd 1/2 of the game . it is more than just allocations , it is a lifestyle plan that fits you.
it requires different planning than the 1st half which every dime a dozen advisor can do.
tax planning , where you draw income from and how, as well as mixing in a base income from an spia may solidify your plan.
I have seen folks do great investing in the first 1/2 on their own ,watching every penny in expenses and fund returns only to give back way more than they should later in taxes.
retirement tax planning can be a minefield between rmd's , taxing social security , medical subsidy and medicare surcharges all interacting and coming in to play.
add in the fact with careful planning a retired couple can draw 22k a year tax free from deferred retirement money at zero tax as well as much as 42k at 1800 bucks in taxes.
they then get zero capital gain taxes on anything they sell under the limit from their taxable accounts.
it would be a shame blowing that by drawing from taxable accounts many times and leaving that tax free money after deductions and exemptions untouched if your planning would have allowed for it.
if you think paying for good advise is expensive , you can't afford free.
it is like all folks develop a plan on their own and most think they are doing the best they can do. but most of the time they could have done much better since your fair share of taxes is whatever you are knowledgeble enough to legally pay.
since the structuring to do this can get quite complex folks do not know what they don't know and as a result give their partner uncle sam a far bigger percentage of the profits..
Last edited by mathjak107; 01-14-2015 at 03:47 AM..
Thank you for these replies. MathJak, what you wrote makes a lot of sense. I often hear you state the need for a good financial planner who understands tax implications. You spelled it out and I can see where we need to make some changes and get some other professional help. My husband and I differ greatly on our stomach for risk. I am very conservative, he is much more aggressive. I do worry much more than he does.
Thank you for these replies. MathJak, what you wrote makes a lot of sense. I often hear you state the need for a good financial planner who understands tax implications. You spelled it out and I can see where we need to make some changes and get some other professional help. My husband and I differ greatly on our stomach for risk. I am very conservative, he is much more aggressive. I do worry much more than he does.
saralvr you and your husband are a good mix then. Somewhere in between is where you should be. Find a compromise mix of investments and a good planner will help there.
Given that, why did your wife (or you and your wife if you discussed this) not elect to provide a survivor's annuity from her pension in the event she were to predecease you?
There were choices and we decided to bet on taking the max due to women in her family living well into their 80's and 90's. 13 years into it and no regrets. We also looked at a life insurance policy on her but as a former smoker the rates were outrageous.
As well you should be. That's much too high of a concentration in one company - - - regardless of how well that stock has performed up until now.
I agree and this concentration in P&G is something I know I have to address. Any suggestions?
That is the Proctor & Gamble retiree disease. No matter how much the financial planners that P&G hires to counsel retirees try to get them to invest more broadly, it is hard to convince them to sell a portion of that stock and diversify.
I came by the P&G as a result of my Gillette stock. I was never an employee of either but I always liked Gillette and over the years I bought their shares. Some years back, I sold some GE and put it in Gillette.
I came by the P&G as a result of my Gillette stock. I was never an employee of either but I always liked Gillette and over the years I bought their shares. Some years back, I sold some GE and put it in Gillette.
That is good. I have seen any number of P&G retirees with 60-80% of their portfolio in P&G (and lately Smackers with all the divestitures). I spent hours with my father on the subject of diversification.
That is good. I have seen any number of P&G retirees with 60-80% of their portfolio in P&G (and lately Smackers with all the divestitures). I spent hours with my father on the subject of diversification.
P&G is $100K of my $500K investment portfolio thus 20%. It is the only direct company stock I have. The other $400K is in several Fidelity and Vanguard Mutual Funds. I also do not directly own any bonds.
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