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(Retired 8-years) For several years, I've had some sizable, self-directed IRA's invested in a relatively stable 'managed accounts' of a large bank/brokerage company. I'm not making (or losing) any money in these accounts, meaning I've barely averaged 1+ percent return. (Frankly, the bank is making more money in fees on them, than I am!)
We have other retirement income sources and don't need to draw-down these accounts to live, although RMD's are coming due and the tax hit is going to significantly cut into the initial principle just to pay the taxes). [I often wonder how people who are actually living on their IRA's manage??].
I've never been much of an investor and don't want the stress or hassle of monitoring and managing stock and bond accounts, but this is getting ridiculous!
What are you 'securely' invested in that pays you a reasonable return - without a roller-coaster risk scenario. I'm thinking perhaps dividend stocks or ??? (I was going to post this in the 'Investing' thread, but am more specifically interested in the responses of "experienced retirees."
I guess we're "experienced" retirees.
Our strategy for decades has been to use mostly high quality munis in our taxable accounts. High quality taxable fixed income in our IRA accounts (including a lot of brokered CDs). All individual buy and hold bonds - not funds. I trade a relatively small portion of my IRA account (various things) - but that's not part of the core strategy. The munis in the taxable accounts help to keep our taxes low (we also have fairly large medical deductions).
How long have you had the managed accounts? If 8 years - then your bank/brokerage company has failed you IMO. Because there have been some very good buying opportunities in fixed income during that period of time. If the last 1-2 years - then it's more difficult to fault the company. Because rates have been pretty low during that period of time (although the nosebleed lows have basically been in the last year). That's especially true when it comes to taxable fixed income (tax-free muni yields have often been higher than taxable yields in recent years).
Because we've been buying for years - the yields on our individual holdings are all over the place. From - for example - about 3% on the munis to over 5%. Probably an average of about 4%. Overall average on the taxable holdings is somewhat less. Since we don't have a manager and these aren't funds - these returns are all "net". The bond prices do fluctuate. Sometimes a little - sometimes a lot. Doesn't really bother us. Because we don't sell our bonds. We hold them until they mature or are called. I honestly wouldn't care if interest rates continued to rise - and the bond values went down. Because then our RMDs (starting in 2018) will be lower. Rising interest rates would also give us the opportunity to replace older holdings that mature/get called at higher yields.
In terms of what to do today? That's a really tough one. I haven't bought anything outside my trading portfolio in months. The last thing I bought were some high quality corporate "cushion bonds" in our IRAs (Microsoft):
In terms of things like "dividend stocks" - I sometimes have some of those in my trading portfolio. Ditto when it comes to "preferred stocks". I do those through ETFs. My trading time frame is intermediate.
I guess I'm the exact opposite of you in that I've been "rolling my own" for a long time and don't mind doing it. I also don't mind some price volatility since I'm basically an income oriented investor. It "comes with the territory" these days. Are you thinking about becoming more involved in things yourself - or are you just looking for ideas to run by your manager? Robyn
you can buy them from fidelity and sell them when you like . interest is a bit less but it can be worth the convenience . if rates fall you can sell them for more than you paid .
The bid/ask spreads on brokered CDs are huge (up to 5% or so). I would never buy one if I thought I might have to sell it. Robyn
The first thing you can do is fire your manager and manage your portfolio directly. That alone may increase your return by 1% (assuming that's what they charge you). Move your portfolio to a low cost broker and buy low fee index funds/ETFs. Nothing is totally risk free, even stuffing your funds under a mattress (house can burn down). With index funds, you take on the market rate of risk which over time, will likely favor you.
Our strategy for decades has been to use mostly high quality munis in our taxable accounts. High quality taxable fixed income in our IRA accounts (including a lot of brokered CDs). All individual buy and hold bonds - not funds. I trade a relatively small portion of my IRA account (various things) - but that's not part of the core strategy. The munis in the taxable accounts help to keep our taxes low (we also have fairly large medical deductions).
How long have you had the managed accounts? If 8 years - then your bank/brokerage company has failed you IMO. Because there have been some very good buying opportunities in fixed income during that period of time. If the last 1-2 years - then it's more difficult to fault the company. Because rates have been pretty low during that period of time (although the nosebleed lows have basically been in the last year). That's especially true when it comes to taxable fixed income (tax-free muni yields have often been higher than taxable yields in recent years).
Because we've been buying for years - the yields on our individual holdings are all over the place. From - for example - about 3% on the munis to over 5%. Probably an average of about 4%. Overall average on the taxable holdings is somewhat less. Since we don't have a manager and these aren't funds - these returns are all "net". The bond prices do fluctuate. Sometimes a little - sometimes a lot. Doesn't really bother us. Because we don't sell our bonds. We hold them until they mature or are called. I honestly wouldn't care if interest rates continued to rise - and the bond values went down. Because then our RMDs (starting in 2018) will be lower. Rising interest rates would also give us the opportunity to replace older holdings that mature/get called at higher yields.
In terms of what to do today? That's a really tough one. I haven't bought anything outside my trading portfolio in months. The last thing I bought were some high quality corporate "cushion bonds" in our IRAs (Microsoft):
In terms of things like "dividend stocks" - I sometimes have some of those in my trading portfolio. Ditto when it comes to "preferred stocks". I do those through ETFs. My trading time frame is intermediate.
I guess I'm the exact opposite of you in that I've been "rolling my own" for a long time and don't mind doing it. I also don't mind some price volatility since I'm basically an income oriented investor. It "comes with the territory" these days. Are you thinking about becoming more involved in things yourself - or are you just looking for ideas to run by your manager? Robyn
Thanks Robyn -- Very informative!
I'm thinking I may need to get a new management company with lower fees and more personal oversight. I don't mind some volatility and understand ups/downs and dollar cost averaging. It's just that over the last 8-years, the ups have been nominal and short-lived, while the downs have seemed to be more the rule than the exception.
I will likewise start taking RMD's in 2018 (although my wife has already been taking hers for 2-years. I plan to kick-off an annuity income stream at the same time to cover taxes and grandkid's college. Ironically, when I bought the annuities I received a ton of negative reaction, but over the years, they have proven to be a higher return/lower risk investment vehicle than IRA managed accounts.
But, that still leaves a significant sum in relatively flat growth IRA's. Perhaps I need to redirect my manager toward cushion bonds and some of the other vehicles you mentioned... which will likely require another broker/company. - Again, thanks for your insight.
I lost half of my portfolio in 2008. I didn't know what to do. I listen to radio investment programs and read about it some but to invest wisely it has to be interesting to you and almost your passion and hobby.
I got a for fee, ridiculously expensive investment advisor. He is barley holding his own right now but he has built up my money to more than pre 2007 amount and in 2012 I made more than when I was working, I didn't do a thing.
Before you write this off as a silly reply, consider:
- No RMDs
- No minimum investment
- No real risk (e.g. market crash)
- Damn little taxes
- Quite profitable
...oh, and did I mention? Lower food bills, better-tasting food, no stress....
Well, yeah, but this does involve some real work, and there is risk there as well, the animals can get sick. Of course for a guy like you who knows what he's doing, the risks are small and probably the fact that you can personally mitigate the risk is satisfying.
All I can add is over the years I used fee based financial advisors who had nothing to sell me. I did not always follow their advice to the letter but overall I followed their advice. My IRA's have been in various Fidelity and VanGuard Funds (all no-load funds) and I have been very happy with their returns.
I am 74 and only take RMD's from my IRA's. I do have some non-IRA Mutual Funds that I have started to draw down.
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