SIGforum.com Main Page The Lounge How is you retirement investment portfolio currently set if retiring in the 2-5 years. Being that the Djia is at 26k now.
Main Page The Lounge How is you retirement investment portfolio currently set if retiring in the 2-5 years. Being that the Djia is at 26k now.Go | New | Find | Notify | Tools | Reply | |
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This is worth repeating! I saw Warren Buffet on CNBC last week. He is in his 80s and one of the richest people in the world. He made a compelling argument for stocks, which he is still buying. He made the case that bonds are a really terrible investment now, with ten year rates below 3%, you are just barely keeping up with inflation, after taxes. Bank CDs put you negative after inflation. I retired 2 years ago. I have too much "invested" in real estate. I have a pension. Of my liquid funds, about 2/3 are in stocks and stock ETFs, and 1/3 in very short term interest bearing assets, that yield about 2%. My theory is that I need about 4 years of very liquid funds outside the stock market, so that I don't have to cash out any shares if the market tanks at some point. Even though the Dow 30 is near record highs, I don't think the broad US stock market is overvalued at this point. There are still some good buys out there. The Trump tax cuts and regulatory reforms should provide benefits for the next decade, if the Dems don't screw it up. I would not touch the Vanguard 2025 fund (symbol VTTVX) mentioned earlier. It has 35% in bond funds, including foreign bonds. It also has 25% in international stocks, which I predict will be crushed by US companies over the next few years. Over the past 10 years, VTTVX has returned an average of 6.71% annually. Meanwhile, the Vanguard S&P 500 ETF (symbol VOO, all stocks) has returned an average of 10.13% over the past 10 years, years which included the great market crash of 2008-9. It has fees of .04%. ---------------------------------------------------- Dances with Crabgrass | |||
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Chilihead and Barbeque Aficionado |
I have a good chunk of my portfolio in bond funds, on the advice of my financial planner. And yea, they have not grown much over the last several years  All the growth has been in my stock funds. My portfolio is pretty conservative, and I have about five more years of work to go. Unfortunately, every time I’ve tried to do it yourself, I’ve screwed things up royally._________________________ 2nd Amendment Defender The Second Amendment is not about hunting or sport shooting. | |||
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Member |
An oversimplification: How much risk are you willing to face? I finally got my mother to talk to an advisor a few years ago and he’s done a great job transitioning her assets to more stable investments. He asked a ton of questions to get her acceptable risk level and then gave her a few options. She’s quite risk averse. I advised at least getting her toe over the line of her comfort zone for a small portion of her portfolio and it’s been paying well since Trump won. Short of a horrible disaster I think she’ll be ok. Side note: If you’re adamant about leaving your children a ton of money that’s fine. Me, I’ve encouraged my mother to live a little. I told her if I get something when she’s gone, fine and if not then I’m glad she enjoyed herself. Unless your family is filled with dirtbags they’ll enjoy seeing you happy at least as much as getting some money. | |||
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| Partial dichotomy |
Keep in mind too how long you plan to live after retirement. You always want your portfolio to grow. SIGforum: For all your needs! Imagine our influence if every gun owner in America was an NRA member! Click the box>>>  | |||
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| Green grass and high tides  |
Thank you guys and some great thoughts and insight. Hard to disagree with anything said here. We have transistioned from what Vanguard deemed an aggressive to a more conservative approach as has been mentioned by a few of you. Since our investment window is shorter than longer. The more aggressive approach has paid off in the bull market in recent years. I really thought it was a more moderate approach myself. We have what we have. It is not what I would call more than enough. But will hopefully be adequate. Time will tell. Our life style will be mostly conservative in retirement we believe. So no lavish spending!  SS will play a roll as well for us. My question really is if you take an approach as Nosler 280 or 2ADefender has pointed out how do you think a portfolio would perform in general going forward short term based on market performance. So yes, timing the market I guess. Lastly we feel like we have consulted a FA. That being Vanguard PSA service. As I posted earlier. They were very helpful, knowledgeable, professional, etc. Their advice seemed sound. My suspicion is if the market goes down or goes down significantly our portfolio will be protected. If the market goes up. It will go up ever so slightly. That is based on our risk tolerance and window. So in closing I thinking there will be a bubble at some point in the near future as well. There is my market timing nugget  "Practice like you want to play in the game" | |||
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In 2009 we were relocating from N. IN to Vegas. Didn't want to be concerned about my investments so moved everything to a guaranteed fund that earns about 3.5% Took me until about 2016 to get my head around getting more than about 20% in the market. (Thanks Obama) As mentioned earlier I'm now up to about 40% which is close to where I want to be for the long term. The combined average returns should be 6-8% over the long haul. My point being that I missed a big portion of the 2009-2016 upside because I couldn't get my mind around how the market could possibly sustain itself. Going forward I just say no to any market timing. | |||
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Member |
Why so high on treasuries and bonds? My knowledge of this stuff is pretty shallow, but my understanding is that with interest rates so low right now, they aren't making a lot of income, and with interest rates rising, the value of current low-interest-rate treasuries and bonds will go down. | |||
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| Member |
He is nearing retirement and willingness to loose money is waning. Treasuries have boosted quite a bit recently, and the 2 year is North of 2.60%. Local CD's are not much better, plus you pay a fee if you need to get out (3 months interest typically). His fund has run the gambut this year, and while it nearing the top, he indicated he does not want loss of principal. Furthermore bond funds offer a (near) fixed rate of return with solid ratings. Plus bondholder are in front of stock in case a company goes belly up. Yields are already up, and unless you expect the 10-30 maturities to skyrocket, it is not a bad time to buy. Resistance is already in place, and even if the yields rise (bond prices fall), he will not loose his investment (it matures at par). The only way he would loose money is A) interest rate rise, he sells bonds (at a lower price), or B) inflation goes apeshit, and his rate of return is not inflation adjusted (he earns 4% annually, but the cost of bread and milk are increasing by 5% annually). We are playing the short game now, and he is more interested in knowing he will earn x amount a month, and not loose money if the market tanks. For those over 65, you should only have in stocks what you do not depend on for retirement. Now, if he has a family history of living to 105, that would change the analysis, but for most people, the analysis is targeted for 80. While you are working (read as immediatly before retirement) the target is 40% in equities. If you are risk averse, you can increase that by 15%, is you are highly conservative with your money, reduce it by 15%. At you age, increase wealth, own stuff, and grow a portfolio, your risk changes. At 20 you should be 95% equities, and by the time you pony up to 75, you should be no more than 5-10% equities (unless you made a boatload, and have a lot of spare change). A lot depends on your living condition (own/rent), retirement community/ continued care; pension/ age of claiming social security or medical coverage; living style (stay at home and yell at kids to get off your good damn grass/ play golf every day/ travel and see the world), and physical health. It is different for everybody, and takes a full picture to make a specific recommendation. Plus when stocks tumble, people naturally move into bonds. More government, but some corporate and munis too. Increased demand increases the cost, but decreases the yield. If you are long bonds before a slide you have fixed your cost, and your yiele will be higher than those buying in later. Take SCHZ (example, not a recommendation). It is 50.47 today, just .56 for its all time low. The current yield is 2.69%. If you buy 1 share, the annual yield will produce $1.36/ year. Say you buy 100 shares for an investment of $5047, which yield you $136/year. If the market starts selling off, and people start fleeing to safety, the price will increase. Let's say it goes to 54. You now have 100 shares that are worth $5400 (7% increase) but the yield still pays you $136/ year, but the interpolated yield is a 2.51%. The morale of the story is that stocks and bonds (typically) move inversely. If you think stocks are going to run for 6 more years, stay in stocks, but if you are nearly at retirement, and want to reduce risk, and think the bull is getting tire, visit the bear and buy bonds. | |||
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I have a question about the equity funds that I have in my work retirement account. I work for a Not-for-Profit very large health care organization, so it's virtually identical to a 401k but classified as something else due to the org structure. I am managing to put away just about 1k/month into the account, gaining the 3% Employer match as well. I have the money going into 4 different funds. Three of the funds are classified as aggressive, and the fourth is listed as Moderate. My question is whether I need to be using all four of these funds, or if I should boil it down and just use the higher returning aggressive fund and the moderate fund. Am I gaining any increased diversification as in reviewing the fund prospectus' it looks as if they are well diversified by how the fund is constructed, but still limited because of the fund target. The funds and YTD info on them here, and I have been in all four of these funds the entire YTD: Vanguard Institutional Index, 37% of my account balance in this fund, up 9.75 YTD JP Morgan Large Cap Growth, 38% of account balance in this account, up 22.93% YTD Wells Fargo Adv Disc; 11% of account in this fund; up 18.31% YTD Vanguard Extended Mkt Index, 14% of account in this fund; up 12.52% YTD. The Vanguard Institutional Index is rated as Moderate risk, the other three are rated aggressive. My question is, should I combine all of the moneys or some balance there of from the three aggressive funds and just throw it all into the JP Morgan fund, and also keep some %, up to half, in the moderate Vanguard fund? Am I gaining any diversification by spreading money across these three aggressive funds, or should I just try to max out the highest return? I expect about 15 years left until I could think about retiring, currently 54 years old. I have other things that are investments, some land, gold and silver bullion (not a great amount) and some whole life and term insurance for my kids if I go. I am continuing to increase my monthly contributions, as I receive annual raises or promotions, I increase my contributions, hoping to be up to 15% by 2020. Any thoughts? | |||
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Your investments should reflect what you need from them and your comfort level. Never chase gains for the sake of chasing them...that's gambling. Given that you are 2 yrs from retiring, having some cash to begin funding the distributions wouldn't be a bad idea. As a CFP, I concur with the suggestions of speaking with someone to offer some personalized/specific guidance after thoroughly reviewing all that will impact your retirement income/lifestyle. There is no cookie cutter solution to what works best for YOU! | |||
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Thank you for the thorough response. | |||
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Would it be a 403B? I am familiar with the JPM Large Cap fund and the Vanguard Institutional. The JPM Large Cap Growth is a solid 4 star invested in Large Corporations and is poised for equities that are growth oriented. The Vanguard is on the very high end of any person's moderate risk scale. It is considered a Large Cap Core mutual fund. I don't know the other two, so I can't comment. To answer your question, I don't like leaving all my eggs in one basket. I also don't money only on #21 when I am at the roulette table either. Diversity between account is good. I'd say you are diversifies between funds, but not between risk or holdings. You are invested like a kid out of college should be, and at 54 that is not a great plan. The bigger question is why are you invested that way? IF it is because you were not sure, and have never revisited your original elections - you fall into a category of about 50% of American's. If it is because it had the best recent return, it is worth the effort. Unfortunately, your investment diversity would be like if the Air Force only had the F35, F/A 18, and the F22. They are all really good at one thing, but without the tanker, the bomber, the AWACS, and close air support, it is very one dimensional. Try a madcap value fund if it is available to you (you seem highly concentrated on blue chip, and large institutional entities), or get into a defensive (Utility) dividend fund. I'd also either rebalance some away from equities, or put funds toward a (short) targeted fund. Not having a complete picture makes giving advise challenging, but try to stay in two of the four you have listed, and get into either a target fund, a bond fund (small percent), and at least get into different sectors. You seem to be comfortable with aggressive investing, but honestly trying to decide to invest based on highest return sometimes ends in tears. Also, even with a 403B you have catch-up contributions. Get your plan data and find out if you are capped by any other means, but you should be able to put away up to $24,500 in 2018. Not that you may be able to put all of that away, but it is something to consider as an option. Also, at your age, transferring to a Roth would make no sense (compounding interest). Keep saving, and even if you only reallocate your future deductions, it will still help out. | |||
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| Green grass and high tides |
Yes, thank you nosler. Excellent explanation. You obviously know your stuff and thank you for sharing "Practice like you want to play in the game" | |||
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His Royal Hiney |
I have a thought for you based on my personal experience. I maxed out my 401k in the last 8 years of working starting at age 50. I don't regret it. It reduced my taxable income and it built up my nest egg enough to give me the option of not having to work at age 59. That's even considering in 2008, my 401k became a 201k due to the market crash. I think that helped prompt me to save more just to catch up. "It did not really matter what we expected from life, but rather what life expected from us. We needed to stop asking about the meaning of life, and instead to think of ourselves as those who were being questioned by life – daily and hourly. Our answer must consist not in talk and meditation, but in right action and in right conduct. Life ultimately means taking the responsibility to find the right answer to its problems and to fulfill the tasks which it constantly sets for each individual." Viktor Frankl, Man's Search for Meaning, 1946. | |||
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Thanks for the input, and also Nosler as well. I am trying to get to the contribution max out if I can. I think that's the best I can do with what I have to work with. The fund choices in the 403b plan are not voluminous, so there is not as great a range of choices as I would like. To Nosler's point in his response, my personal situation involved pretty much getting wiped out in the 2008 crunch. Without the ugly details, lost about as much as you can imagine, and just had to get back up and start over. Trying to save now as much as I can, but I don't see where I will get back to where I was prior to that year. I am fortunate though, I have education, technical and management experience, so I was able to find a decent paying position to start rebuilding. No complaints, and I'm just not going to worry about what I can't control.  | |||
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I don't have any plans to retire, but given that I will be required to start receiving SSA disbursements in five years, I'm using that as my standard. Two years ago, I met with a financial planner, and moved a self-directed IRA into an annuity fund and an investment fund. This means that when I combine SSA and my annuity, I should have the same standard of living I enjoy today. The investment fund will be "mad money" for travel, extravagances, more guns... You can't truly call yourself "peaceful" unless you are capable of great violence. If you're not capable of great violence, you're not peaceful, you're harmless. NRA Benefactor/Patriot Member | |||
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Don't Panic |
Correct. Bonds are risky investments, just like stocks. They have somewhat less risk of downside but almost no upside. And their value goes down when interest rates go up, which the Fed has pledged to make happen. I've never been a fan of bonds....US equities greatly outperform them over time. I understand the appeal, and I understand their useage in the mix after one has fully retired and needs a predictable income from one's portfolio. But in the meantime, while you're earning and saving toward retirement, bonds aren't earning much and time passes, making their poor earning power compound their deficiencies compared to equities. Putting money into bonds because one thinks the stock market is too high is just 'timing the market' by a different name. Good luck with that. | |||
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Mine has held even. There’s been a lot of highs along with some equally low lows. I’m in a moderately aggressive mode so I’m good days I win big and on bad days lose big so it’s held about even. I retired fully about 3 months ago. My 401 will be the last place I go to draw funds so I’m willing to win and lose for awhile. I did miss the initial Trump bump after the election I still had those funds out of the market and sheltered from the Obama economy. Had I gone back into the market sooner I would probably be ahead by a bit. "Fixed fortifications are monuments to mans stupidity" - George S. Patton | |||
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Ammoholic |
I don't agree. Unless you plan on spending through your retirement and dying in 10 years than I think a heavy bond mix is bad. Yes you are retiring and you don't want to lose principal, I get that. What most people don't consider is we live longer now. You used to retire and did in 5, 10, 15 years. Now people can be retired for 30 or even 40 years. Without equity exposure your money never increases and you are only covering inflation with no increase in value of the money. Name me any ten year period that the S&P has been down. Doesn't happen, and if it does we probably have some other serious issues going on. If you have 30 years in retirement, you can weather ups and downs just the same as you did in working years. If you exit equities or go really bond heavy you sacrificing earnings you may need in your eighties or nineties for very little risk. Jesse Sic Semper Tyrannis | |||
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| As Extraordinary as Everyone Else  |
This is something that many of the older retirement models fail to consider. Unless your health situation dictates other wise you should plan on living to at least 90 or even 95. You should still have somewhat of a growth component to your portfolio if nothing else to negate the effects of inflation. Many years ago there was a theory floating around that you could withdraw 4% of your portfolio per year and be alright. That has proven to be wrong and now depending on your situation 2 to 3% is more realistic but that requires that your portfolio is set up to average at least a 5% return over time. You can set up your stock portfolio more defensively by investing in utility funds and other dividend paying funds. JMHO ------------------ Eddie Our Founding Fathers were men who understood that the right thing is not necessarily the written thing. -kkina | |||
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SIGforum.com Main Page The Lounge How is you retirement investment portfolio currently set if retiring in the 2-5 years. Being that the Djia is at 26k now.
Main Page The Lounge How is you retirement investment portfolio currently set if retiring in the 2-5 years. Being that the Djia is at 26k now.© SIGforum 2024