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I'm not retired yet and I haven't thought about this part of retirement up until now as my focus has been on saving for when we retire. What do we do with all of the hard earned money that we've saved over the years after we retire? We plan to keep at least a years worth of expenses in savings. About 250k in a CD ladder to pull from during market drops. We'll have a small pension and our SS and the house is already paid off so no debt. We should have about 1 million in investments by the time we retire but we don't know what to do with it after we retire so I need advice. I'm not afraid of risk right now but I will be once I retire. We've never invested outside of our 401ks because we didn't know how and were afraid we'd screw something up, just being honest.
We should have about 1 million in our 401k investments by the time we retire but we don't know what to do with it after we retire so I need advice. Thanks for any advice you have to offer.
Rule #1 - Don't get your investment advice from strangers over the Internet.
Rule #2 - Investing without risk is nothing more than fighting a losing battle with inflation.
Investing wisely after you retire is at least as important as investing wisely before you retire, but there are as many different strategies as there are investors. IMO, mutual funds, particularly index funds, are one of the best investment tools available to the non-expert investor, but there are as many who disagree as those who might agree. For retirees, the tough parts are creating a balanced allocation, as well as the appropriate distribution between equities and fixed income holdings. If you have a $million available to you, find an advisor with a reputable company, and pay them to manage it. I settled in on Vanguard's Personal Advisor Services several years ago and have never regretted it. Their fees are significantly less than most conventional street brokerages. Just my $0.02...
I'm not retired yet and I haven't thought about this part of retirement up until now as my focus has been on saving for when we retire. What do we do with all of the hard earned money that we've saved over the years after we retire? We plan to keep at least a years worth of expenses in savings. About 250k in a CD ladder to pull from during market drops. We'll have a small pension and our SS and the house is already paid off so no debt. We should have about 1 million in investments by the time we retire but we don't know what to do with it after we retire so I need advice. I'm not afraid of risk right now but I will be once I retire. We've never invested outside of our 401ks because we didn't know how and were afraid we'd screw something up, just being honest.
We should have about 1 million in our 401k investments by the time we retire but we don't know what to do with it after we retire so I need advice. Thanks for any advice you have to offer.
Move some of your 401k money to a ROTH IRA maybe worthwhile. Pay attention to the taxes this will cost and do a little each year that you can.
You could live for another 30+ years so you still need equities. I favor dividend paying stocks. I would avoid long term bond funds due to rising interest rates. Long term individual bonds are ok but remember you lose money to inflation.
I would consider a two or three year CD ladder and dividend stocks. I am assuming you do not need to spend down the million to cover your costs. If you do it will only be 2 or 3% of your annual asset value.
............ I'm not afraid of risk right now but I will be once I retire. ...........
There is nothing magical about changing investments upon retiring. It sounds like you are ready for a comfortable retirement and you have a plan....keeping a cash reserve. Follow your plan with the reserve. When times are good, maintain the size of the reserve. When the markets drop, pull from your reserves.
You also need a plan for your investments. You will want a balance of allocations and diversified investments. I am 6 years into retirement and still maintaining 60-70% equities. Over the 6 years, my portfolio has done well and I am glad I maintained a moderate allocation strategy. At this point, I am considering building a bigger cash reserve while maintaining the same allocation for my portfolio.
I would recommend doing some internet research, as you are doing here. If you have reliable advisors, they can also help. You also need to consider your own risk tolerance. If the markets drop, you need to be able to stand firm or even buy even more stocks and wait out the months or years when the markets are down. Good retirement calculators can also help. They will show what is likely for different allocations. I would recommend firecalc, T Rowe Price and Fidelity. Give all three a try. They will also help indicate how much you can safely withdraw and the risk of failure for different withdrawal and investment strategies.
Just keep in mind that while cash buckets are comforting to the mind they add no financial advantage.
Their weight in up markets neutralizes things so there is no difference spending from cash when markets are down vs spending equally from say a 40/60- 60/40 mix and maintaining the 60/40 allocation whether stocks are up or down.
I use buckets but only because it is easier for me to track and i can optimize a portfolio for the different time frames.
But just keeping a few years cash is only a mental benefit. In fact 100% equities with no bonds or cash has a very high succes rate .especially for longer retirements
Rule #1 - Don't get your investment advice from strangers over the Internet.
Rule #2 - Investing without risk is nothing more than fighting a losing battle with inflation.
Investing wisely after you retire is at least as important as investing wisely before you retire, but there are as many different strategies as there are investors. IMO, mutual funds, particularly index funds, are one of the best investment tools available to the non-expert investor, but there are as many who disagree as those who might agree. For retirees, the tough parts are creating a balanced allocation, as well as the appropriate distribution between equities and fixed income holdings. If you have a $million available to you, find an advisor with a reputable company, and pay them to manage it. I settled in on Vanguard's Personal Advisor Services several years ago and have never regretted it. Their fees are significantly less than most conventional street brokerages. Just my $0.02...
I agree with #1 and have no intentions of doing anything with the advice given here except use the information for further research. There are a lot of smart cookies on this thread who have already experienced a phase in their lives that I've yet to experience and I learn from their experiences, good and bad. I also agree with #2 as well. Thanks for the rest of your input also.
There are many resources and thousands of discussions out there. Do web searches on combinations of Trinity Study, Bill Bengen, Michael Kitces, SWR, retirement, withdrawal.
Learn how all of these types of income interact at tax time... Social Security, pension, capital gains, etc. It's not straightforward, but more important to understand this in detail than you might expect.
Just keep in mind that while cash buckets are comforting to the mind they add no financial advantage.
Their weight in up markets neutralizes things so there is no difference spending from cash when markets are down vs spending equally from say a 40/60- 60/40 mix and maintaining the 60/40 allocation whether stocks are up or down.
I use buckets but only because it is easier for me to track and i can optimize a portfolio for the different time frames.
But just keeping a few years cash is only a mental benefit. In fact 100% equities with no bonds or cash has a very high succes rate .especially for longer retirements
I knew I could count on you to chime in and was hoping that you would. I've paid attention to the advice and great information that you've given folks for quite a while now and although some of it flies right over my head (investing novice that I am), I've certainly learned a lot from you. Thank you.
I completely understand your point about the cash buckets idea. I guess I just saw so many horror stories back when the market crashed this last time that the idea of a "cushion" to pull from so I can stop all investment withdraws until it bounces back gives me a sense of security.
That is what cash buffers are for .easing our minds even if in reality there is no difference financially
Right...so you don't lose money by having to sell when the market is low...but all the money that you held out in cash isn't making you any money so that is still a loss. I'd love to see some calculations looking at different percentages cash of your entire portfolio with different market scenarios.
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