U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 01-15-2016, 02:22 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716

Advertisements

Quote:
Originally Posted by Heidi60 View Post
...My DH pays less in fees but also makes less than I do with Fidelity. These are just general thoughts so I hope it is a starting point...
This is not a meaningful statement without a context. For example - it's possible to have a Fidelity account that only owns Vanguard funds or a Vanguard account that only holds Fidelity funds .* Or it's possible to have accounts that have identical holdings. There is also the possibility that you're talking about something like 2 separate 401ks. And that each has a different variety of (limited) offerings that you can choose from - and that one set of selections is better than the other. Or maybe you're a better investor than your husband .

I could hold any of my brokerage account holdings in a large number of firms - and they would perform exactly the same regardless of the firm that was holding them. Robyn

*I don't know if Fidelity offers all the Vanguard funds - or vice versa - but both firms offer lots of mutual funds from the other.
Reply With Quote Quick reply to this message

 
Old 01-15-2016, 03:17 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716
Quote:
Originally Posted by TuborgP View Post
I would not trade places with Robyn or MathJak to much of the unknown! I have investment unknowns but they are no where as critical!
I'm really quite used to it after all these decades. It's honestly less stressful than when we were working - and depending on often capricious juries to determine what we made for the year . And one nice thing about "fixed income" is it's just that. Investing to "fix" one's income. One mistake I see older/retired people making again and again and again is taking the fixed income part of their portfolios - whatever that part is - and investing it much too short term. When I get what I think is a good buying opportunity in what has pretty much been an extraordinary secular bull market in bonds for about 35 years now - I try to lock in the rates I'm getting longer term.

I do lose higher yielding bonds over the years/decades to calls/redemptions. But I don't wind up in the unenviable position of losing 25% or more of my income in a given year or two unexpectedly due to short term interest rate fluctuations. More important - I know exactly what my income will be with 95%+ certainty in the next 2-3 years. Out 3-5+ years these days - I am still 95%+ certain. Because of RMDs - which I think I have to start in 2018. All that money (about 30% of our current income more or less) will be like a deferred pension/deferred annuity/deferred Social Security/a nice bonus/whatever to us. We have never spent a dollar in principal except for years when we bought new cars or built our current house. And I have never spent a dollar in my rollover IRA (which started as a defined contribution pension and profit sharing plan in the 70's). Should be fun to spend some (fingers crossed we don't get sick and have to spend it on medical stuff ). Will also save some too.

You know - when I was younger - I read a lot about how/when to take retirement money out of equities. I found it hard to understand and a lot seemed speculative to me. Which is why I gravitated to fixed income (it just seemed steadier to me - and my husband and I wanted steady - if we didn't want steady - we would have gone back to those capricious juries ). I think our retirement streams of income are more similar than you might think. Robyn
Reply With Quote Quick reply to this message
 
Old 01-15-2016, 03:58 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716
Quote:
Originally Posted by mathjak107 View Post
but made a lot of money the last 6 . i know if you use the fidelity insight newsletter like quite a few here do you were up a bit last year . about the same had you sat in a cd .

it all averages out at the end to a respectable return .

if we get to far a head we fall back . eventually we are somewhere around the mean .

anyone who thinks you can have stocks rise 300% and that will be your return is fooling themselves . it all gets averaged out at the end of the day with the good and bad times .

to date you have never had a 10 or 20 year period you would have lost a penny from a 50% equity /50% bonds portfolio .
The last 6 six years is kind of an arbitrary number - dating from the most recent bear market lows on the SP 500. And not losing a penny isn't the same as making enough to pay the bills without incurring (big) draw downs on principal. We spend about 3% of our total liquid net worth a year. Had we made only that proverbial penny for the last 30 years - with our normal spending - we'd be broke now.

Also - I don't know about anyone else - but I put the few dollars we have in equities in various parts of the market (only domestic - not non-US). I took a look back at the Nasdaq 100 (QQQ). Which isn't exactly an obscure part of the market. And - as of the recent market highs - it still hadn't gotten back to the highs it reached in 2000 (which honestly surprised me). Mid-caps (MDY) and small caps (IWM) have done better in recent years.

I think there are very large (structural) differences between the equities markets today - and those in prior decades/generations. There are large differences when it comes to interest rates too (long term historical interest rates on long term government bonds have been on the order of 6% - not anything close to current rates).

Another significant issue is longer life expectancies. I think the current life expectancy stuff is a 65 year old couple has a better than 50% chance that one will live to 90-95+.

Which is causing the kinds of "gurus" you follow to think and rethink what might have been conventional wisdom 10-15-20 years ago in terms of withdrawal rates:

Retirement Rules: Time to Rethink a 4% Withdrawal Rate - Barron's

Best I can tell - "withdrawal analysis" is currently in its 3rd generation - and is still evolving. As it should be IMO. I find it informative - but not necessarily predictive/useful (because it's pretty much academic research).

Of course - none of this takes into account any type of "personal puke factor". If you're 70-75+ (or perhaps even younger) and relying on equities for 50% or more of your retirement income - well a fair number in that category might not be sleeping well these days. I know I wouldn't be. Robyn
Reply With Quote Quick reply to this message
 
Old 01-15-2016, 04:38 PM
 
71,515 posts, read 71,694,121 times
Reputation: 49088
There is lots of talk on both sides as to whethr 4% can still be supported . The real answer is no one knows .

The only thing certain is it has survived the worst of times to date . Could the future be worse ? Sure it could .

Could high inflation damage your balance and fixed income fails to keep up like 1965 ? Sure it could .

But there is not a planner worth a dime who ever tells a client take 4% a year ,inflation adjust and have a nice life.

These numbers are only ball parks to get you out the door. After that you need to monitor things and know what it takes to support the income you need and when you are off course.
Reply With Quote Quick reply to this message
 
Old 01-16-2016, 10:47 AM
 
29,775 posts, read 34,860,277 times
Reputation: 11687
Quote:
Originally Posted by Robyn55 View Post
I'm really quite used to it after all these decades. It's honestly less stressful than when we were working - and depending on often capricious juries to determine what we made for the year . And one nice thing about "fixed income" is it's just that. Investing to "fix" one's income. One mistake I see older/retired people making again and again and again is taking the fixed income part of their portfolios - whatever that part is - and investing it much too short term. When I get what I think is a good buying opportunity in what has pretty much been an extraordinary secular bull market in bonds for about 35 years now - I try to lock in the rates I'm getting longer term.

I do lose higher yielding bonds over the years/decades to calls/redemptions. But I don't wind up in the unenviable position of losing 25% or more of my income in a given year or two unexpectedly due to short term interest rate fluctuations. More important - I know exactly what my income will be with 95%+ certainty in the next 2-3 years. Out 3-5+ years these days - I am still 95%+ certain. Because of RMDs - which I think I have to start in 2018. All that money (about 30% of our current income more or less) will be like a deferred pension/deferred annuity/deferred Social Security/a nice bonus/whatever to us. We have never spent a dollar in principal except for years when we bought new cars or built our current house. And I have never spent a dollar in my rollover IRA (which started as a defined contribution pension and profit sharing plan in the 70's). Should be fun to spend some (fingers crossed we don't get sick and have to spend it on medical stuff ). Will also save some too.

You know - when I was younger - I read a lot about how/when to take retirement money out of equities. I found it hard to understand and a lot seemed speculative to me. Which is why I gravitated to fixed income (it just seemed steadier to me - and my husband and I wanted steady - if we didn't want steady - we would have gone back to those capricious juries ). I think our retirement streams of income are more similar than you might think. Robyn
Dollar amounts Along with MJ and previous discussions very similar. Our paths are very similar in results with different paths. If folks could be fully honest in this forum a lot could be learned from a number of similar result posters.
Reply With Quote Quick reply to this message
 
Old 01-16-2016, 02:48 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716
Quote:
Originally Posted by TuborgP View Post
Dollar amounts Along with MJ and previous discussions very similar. Our paths are very similar in results with different paths. If folks could be fully honest in this forum a lot could be learned from a number of similar result posters.
I wasn't talking about dollar amounts - just the relative predictability of cash flows. I don't have a clue what you earn/have - and I suspect you don't have a clue about me either . My husband and I are quite private about our financial lives. About the only person who has a decent but not 100% idea of what's going on is our accountant/personal representative. Even then - he doesn't know everything (although he does know where everything is!!!). Because - since he's our accountant now - and not our personal representative - he is more concerned with cash flow and income taxes than assets and estate taxes. Robyn
Reply With Quote Quick reply to this message
 
Old 01-16-2016, 03:59 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716
Quote:
Originally Posted by mathjak107 View Post
i would disagree about risk mgmt vs market timing .

market timers usually are trying to beat market returns . even fund managers are attempting to beat their index's even in a bull market .

risk mgmt is not about beating index's or maximizing gains .

it is about reducing losses but also reducing gains as a side effect...
Sometimes but not always true. It really depends on the nature of the move down (for long only traders). The length and the severity. For example - in the secular bull market in equities in the 80's and 90's - it was very hard - perhaps impossible - to outperform buy and hold trading through small and mostly short lived-corrections/at best tiny bears. When it comes to the 2 secular bear markets since 2000 - it has been very easy to outperform buy and hold. Because of the depth and length of the bear markets. If anyone could tell me whether the current market move will be a short term correction in a bull market - or morph into a secular bear market - I could tell you whether I'll underperform or outperform. Unfortunately - no one can predict these things in advance.

Note that I've been investing since the 70's. And my parents for decades before that. Markets can and do go up - down - or sideways. Sometimes for long periods of time (except for secular bear markets - which are usually shorter than secular bull markets - average length of about 2 years IIRC) - especially on an inflation adjusted basis.

Two things that are missing in current markets are relatively high dividend yields - and relatively high interest rates (remember 5% on passbook savings accounts?). Both were staples for a long time. Both were almost always good/appropriate for lots of people - including many seniors/retired people. Today - with crummy dividends and crummy safe interest rates - many people - especially retired seniors - feel like they're being pushed out further and further on the "risk curve". Into areas where they have no business being - especially with large chunks of their money. I wish I could say I see this ending soon - but I don't. I'm in the camp that says the Fed goes to 0% again before it gets to 1%. And I think volatility in equities will continue to be the same - or get worse - and remain very central bank dependent.

I think you approach a lot of this in a manner perhaps more appropriate for a general financial chat board than this Retirement Forum. First off - you're not even a senior yet (although your wife seems to have hit 65). Second - you are recently retired. I suspect you think in the back of your mind that if the sh** hits the fan - you could go back to work. Because you're not that old and whatever skills you have in the work you did aren't rusty yet. For many seniors/retired people - that simply isn't the case. Unless they take a low wage job doing something like being a greeter at Walmart <sigh>. Even if my husband and I remembered how to be lawyers - we'd be competing with tens of thousands of young unemployed lawyers for jobs if we had any inclination/need to go back to work (which we don't).

Overall - looking at today - I think a safe investment return assumption for a safe "senior appropriate" portfolio is perhaps 3%. It is still pretty easy these days to get high quality longer term munis at 3% or so - longer term brokered CDs as well. And I do not recommend a large allocation to equities for anyone who can't pay the bills with monies coming in from "safe sources" (annuities/pensions/Social Security/conservative fixed income/etc.). I also don't recommend a large allocation to equities for most other seniors either. I am quite content with 5-10% max. I think that as one gets older - there is a lot to be said for the "sound sleep at night factor".

Another issue when it comes to married couples where one spouse does more/is more interested than the other is whether the spouse who doesn't do as much is prepared to take over whatever the portfolio is if/when the other spouse dies/becomes disabled? What have you told your wife to do if you die/get disabled suddenly? Just follow the newsletter? I've told my husband to sell out my equities trading positions in that event. Which are all in my IRA accounts - and he has trading authority in those accounts. And we both know each other's passwords in all our separate accounts. Having trading authority and passwords are both super important these days. Robyn

[/quote]
Reply With Quote Quick reply to this message
 
Old 01-16-2016, 04:29 PM
 
71,515 posts, read 71,694,121 times
Reputation: 49088
more than 1/3 of the time the last 45 years interest rates on cd's produced negative real returns and 50% of the time produced negative real returns on cd's when taxes were added in to the equation .

along with higher interest rates on financing ,car loans and everything else most of the time those higher interest rates were actually no better then today .

how a senior allocates depends on what they need to draw .

fixed income can only support bullet proof withdrawals of 2% inflation adjusted or less or they become riskier and riskier .

not many seniors who are not wealthy or have pensions can survive on 2% from their assets , i know we can't .

so that leaves little room for not using equity's .

history says at least 35% is needed to pull 45 but that little means there is a good chance there will be little left for heirs .

so far 40-50% have been found to be optimum but like i said to date there has been near zero risk of losing a penny over 30 years in a 50/50 mix nor has it failed a 45 inflation adjusted .

trying to do that with out equity's would be the biggest gamble of all .
Reply With Quote Quick reply to this message
 
Old 01-16-2016, 07:11 PM
 
71,515 posts, read 71,694,121 times
Reputation: 49088
the 45 in the above post should read 4% . i hate typing on these nooks .

the problem with fixed income as an only investment is while inflation is low now you can get your butt kicked down the road

those retirees in 1965 retired in to a 1% inflation scenario . the thought inflation would chew them up and spit them out 5 years later was as ridiculous sounding as it would be today . by the end of 1974 they were looking at 12% inflation .

just to pay the same bills required huge amounts of additional money drawing their balances far lower then they should have been .

so if you are avoiding equity's you better hold to 2% or less as a draw , you may need lots of dry powder .

of course there is no guarantee we can hold the 4% withdrawal level even with equity's today but at least you are taking the shot with what has never failed vs fixed income only which has failed over and over at 3-4% draw rates . besides if it looks like you can't hold the 4% level a few years in you can cut your draw .
Reply With Quote Quick reply to this message
 
Old 01-17-2016, 04:28 PM
 
Location: Ponte Vedra Beach FL
14,628 posts, read 17,925,663 times
Reputation: 6716
Quote:
Originally Posted by mathjak107 View Post
more than 1/3 of the time the last 45 years interest rates on cd's produced negative real returns and 50% of the time produced negative real returns on cd's when taxes were added in to the equation .

along with higher interest rates on financing ,car loans and everything else most of the time those higher interest rates were actually no better then today .

how a senior allocates depends on what they need to draw .

fixed income can only support bullet proof withdrawals of 2% inflation adjusted or less or they become riskier and riskier .

not many seniors who are not wealthy or have pensions can survive on 2% from their assets , i know we can't .

so that leaves little room for not using equity's .

history says at least 35% is needed to pull 45 but that little means there is a good chance there will be little left for heirs .

so far 40-50% have been found to be optimum but like i said to date there has been near zero risk of losing a penny over 30 years in a 50/50 mix nor has it failed a 45 inflation adjusted .

trying to do that with out equity's would be the biggest gamble of all .
I don't think most people know enough about fixed income. For example - one can get 3%+ in 100% safe brokered CDs or high quality munis. Even today. Yes - you have to go out 10+ years. But a certain 3% is enough for some people when it comes to these things. Our fixed income investments yield a fair amount more - because we're been been buying them forever - and still have lots with higher interest rates.

I think the new millennium brought us a different investing climate in terms of many things. The compounded rate of return on the SP500 since the turn of the century has been 1.57% plus dividends (perhaps about 2%). About the same or perhaps a bit less than CD returns and worse compared to after-tax yields when it comes to a high quality muni portfolio. With a lot more stomach churning volatility.

I don't think most seniors can stomach current equities market volatility. Especially since it might not - even in the longer run - result in higher returns than fixed income today (I think 15 years is longer term - don't you?).

Guess it helps that I live in a no-income tax state like Florida - and don't have to worry about state taxes when it comes to something like putting together a municipal bond portfolio. Robyn
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top