jIM wrote:
- quote -

Jim, all good advice, but I think you meant, "don't replenish cushion"
in a down year as opposed to "don't drawdown" from cushion in down year,
right?

-Will

Andrew Koenig wrote:

- quote -

As Elizabeth caught, not one of my best nights. Indeed there's 30%
bonds. A good all in one fund. Still too rich for a retiree. But a bit
of fixed and this fund would take care of the 60/40 target.
JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:mPudnRFLCou5M53bnZ2dnUVZ_rSjnZ2d[at]comcast.com...
..
- quote -

Please forgive me for repeating myself from another part of this thread, but
Wellington is nearly 1/3 bonds at present.

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:4e-dnQ1iM4IjBZ3bnZ2dnUVZ_q6vnZ2d[at]comcast.com...

- quote -

Wellington is currently 32.6% bonds.

Elizabeth Richardson wrote:

- quote -

You are correct. The 4% rule, which isn't owned by any one author seems
to have multiple references to a 60% stock, 40% fixed income mix at
retirement. One set of numbers at
http://www.retireearlyhomepage.com/re60.html
indicates that any higher or lower percent actually pulls down the safe
withdrawal rate. 60%, not 75%. And maybe lower than 60% based on sleep
factor.
(But if OP flipped all 350K to Wellington, she'd have only 17% in fixed,
so I should have been more clear that no matter what her decision, she
needs to view her portfolio in total, and allocate on that basis.)

JOE

"joetaxpayer" <joetaxpayer[at]nospam.com> wrote in message
news:4e-dnQ1iM4IjBZ3bnZ2dnUVZ_q6vnZ2d[at]comcast.com...
- quote -

Joe, I usually find your advice very sound. However, 75/25 stock/bond mix
seems rather aggressive for a 62 year old only 1-3 years from retirement,
and this investor in particular.

Jane, since you have looked at some of the Vanguard funds, you might
consider the LifeStrategy Conservative Growth Fund for some of your money -
at least the two company stocks, and part, if not all, of your Hancock
Fixed Income Fund. It is designed for people a few years from retirement
and, as its name implies, is conservative in its investing approach. 50% of
this fund is invested in two of Vanguard's bond funds, 20% in its Total
Stock Market Fund, 5% Internationally. The remaining 25% is invested in
Vanguard's Asset Allocation Fund, a fund which is actively managed and will
be invested diversely in stocks, bonds, and cash. Vanguard also has a
LifeStrategy Income Fund, in which you might find some comfort with whatever
balance of the John Hancock Income Fund remains after your other choices. As
you probably know, Vanguard has very low expenses so you would likely be
getting the most work out of your money compared to other fund companies you
might choose.

Good luck,

Elizabeth Richardson

Jane wrote:

- quote -

The Admiral Version of the fund (100K$ min) has a fee of .17% vs cat
average of 1.14%.

It sports a current yield of 3% which makes sense as it's a large cap
value fund. I don't have any issue with this choice, it's certainly not
'terrible'. Given the choice between what you have now and this, I'd
take the Wellington. You are too loaded on fixed income, and too young
to give up on the growth that stocks offer.

You are VERY nervous, but considering this? 100%?

I believe a 'proper' mix for your age is 75% stock, 25% fixed
income/bonds. You see, even at tapping 4%/year, the 75% in stocks will
yield 2%+ (of your total worth) and you'd tap the remaining 2% from the
25% in fixed. So 25% fixed represents 10 years of withdrawals.

Given the 'VERY', if 75% stock will have you lose sleep, go 50/50. And
rebalance if the stock side should grow beyond 60%. So over time, you'd
only sell in up years, and ride out bad stock years with all the fixed
income. Given your situation, $50 in two stocks isn't good, not even
stock in two different sectors. If all the other money were balanced,
this would still stand out as an issue for me.

JOE

- quote -

It is this reason I suggest someone have 5-7 years CASH ready to
handle a down market early in retirement. A more conservative
investor might even want 8-10 years cash.

Might not make sense allocation wise, but if person has enough to
sustain a down market early in retirement, I assume success rates of
example would change.

<darkness39[at]yahoo.com> wrote in message
news:1174407576.256777.278940[at]e1g2000hsg.googlegroups.com...
- quote -

Yeah, but if the OP wants to roll the 401(k) over to an IRA anyway, rolling
it over to Vanguard would entitle the OP to an asset-allocation analysis at
no extra charge. And as Vanguard doesn't charge commissions for buying or
selling their funds, there is no incentive to create churn.

On Mar 20, 6:54 am, "Jane" <googlemail2...[at]yahoo.com> wrote:
- quote -

You might want to find your "Break-Even" Social Security age, using
the calculator at http://www.ssa.gov/OACT/quickcalc/when2retire.html
It could be to your advantage to collect SS early and bank it or
invest it and collect interest/growth on it.

If your SS at age 66 would be $2000, your break-even age would be
75.25, with SS at age 66 of $2200, your break-even age would be <73
years, etc.

You might also want to do a "what if" analysis using software like
TurboTax. I found that I can collect $1300/month from Social Security
at age 62 and work a part-time job making around $10k year while
paying minimal income tax. (I have some mortgage interest to deduct).

John Cowart

"Jane" <googlemail2003[at]yahoo.com> writes:

- quote -

Actually, that's not necessarily true. Numerous tax attorneys
are pointing out the IRS is likely to lose on that.

For one such person's take on it, see:
http://fairmark.com/news/061208a-demutualization.htm

--
Rich Carreiro rlcarr[at]animato.arlington.ma.us

- quote -

Its just an overly cautious estimation. Social security is taxable to
certain extents if income exceeds a given level. At 66 the OP may be
taking in $20k in social security + another $33-40K in ordinary income
from IRAs. We know nothing about the OPs filing status, marital
situation, deductions, etc...

Taxes could vary widely based on facts that I do not have. At $33k the
necessary rate of return would be about 5%. That would just further my
thought that "safe" fixed income investments could for the most part
(if not completely) satisfy the OPs goals. As I said previoiusly,
"Given these numerous, varying, and arguable assumptions..."

This discussion brings up an interesting detail.

A Mutual Fund provider (a biased and profit seeking corporation)
published an article last month about distribution phases. Most of the
article was full of fluff about the superiority of their bond funds
and their fund's capture ratios. However, I noticed a seemingly
valuable example when they were laying the factual groundwork for
their sales pitch.

They took two portfolios, A and B. Both with $10,000 initial
investments. They listed the actual S&P500 returns in order from 1966
up to 2005 (30 years). They then listed the returns in inverse order.
Both sets of returns average 10.28% and had a std dev. of 16.7.
Portfolio A experienced the actual returns and Port B experienced the
inverse returns.

If one were accumulating, order of returns wouldn't have mattered.
Both accounts grew from $10k to above $500k.

However, when these same returns were used during a distribution phase
of 5% (with 4% annual inflation adjustment) the differences were quite
noticable. Portfolio A (which had 4 bad years in the first 10) was
totally depleted in 2002. Portfolio B was still worth 12.7 times the
original investment in 2005. It just goes to show how important
returns are (not AVERAGE returns) during the distribution phase.

I wish I could link the article, but I am not sure I am legally
allowed. The article is behind a password protected site and I don't
think it is client approved. I hope I accurately represented all its
nuances and details here.

- quote -

Are I series bonds similar to TIPS? I assumed I series bonds were I
bonds, which have a component linked to inflation.


- quote -

This is probably biggest decision you need to make right now. You
have "too much" risk in the single stock, but the sale will increase
your tax bill.

- quote -

where did you find data to suggest 30k needs to be pre-tax? In that
case, my calculations show married filing jointly would be a ~33k
"taxable income" to generate 30k of after tax income. It's not 40k
(if married filing jointly).

33k

15100 taxed at 10% (1510)
19410 taxed at 15% (2911)

Great replies. Thank you so much.

Regarding the stock:

The Hancock stock was a result of the company going public. My basis
in that stock is zero. I would have to pay tax on the entire sale.
Should I sell it all at once, or over the course of a couple of years?

Wellpoint stock was purchased under company employee stock plan. I
got it at a discount, but I did pay 85% of going rate so there is some
basis on that one.

How does your debt look? Hopefully your liabilities have dwindled with
age, but that also means most of your tax deductions have also.

Your also going to need a life expectancy estimation. 90 - 95 is
usually a good starting range. The HSFA medicaid tables estimate a 62
year old female will live another 21.6 years (not trying to be
insensitive, just try to be helpful and realistic). If you are married
to someone near the same age, there is a 50.3% chance one of you will
live to at least age 90. You don't want to run out of money early so
err on the side of caution.

You've got $670K and the vast majority of it is in tax-deffered
retirement vehicles. This means that bulk of your retirment
distributions will be taxed at ordinary income tax rates. You also
indicated that you are highly conservative which is probably
appropriate for someone entering the "distribution phase" of
retirement. Market downturns early in distribution will devestate a
portfolio.

Your $30K goal is after tax. You will need to account for inflation
and taxes. You may want to use an inflation rate slightly higher than
CPI. According to the US bureau of labor statistics the inflation rate
for those over 65 is about 1% higher than the country's average
inflation. Medical expenses make up a larger budget percentage in
seniors. In the 25% tax bracket you would need $40k this year to yield
30k after tax. I also assumed withdrawals will not begin until age 66
and inflation is 4%.

Given these numerous, varying, and arguable assumptions, you will need
about a 6.5% annual return to withdraw $30k in inflation adjusted,
after-tax dollars through age 90.

Your next task is the devise an asset allocation that minimizes risk
while achieving this goal. 6.6% is slightly higher than most fixed
income instruments, so some riskIER investments may be necessary in
your portfolio. Another alternative is to revise your goals (or tweak
my assumptions). Consider consolidating your portfolio as best as
possible. A large percentage in "safe" fixed income combined with a
smaller percentage in well diversified ETFs or MFs will probably go a
long way towards accomplishing your goals. Having a large "safe"
position can also protect against early market downturns.

Sorry for the long post Skip. I tried to be brief.

On Mar 20, 3:56 pm, "Andrew Koenig" <a...[at]acm.org> wrote:
- quote -

I would agree, although I don't thing anyone should invest in just one
fund.

But putting half one's money in such a fund is not a bad idea.

I think as a first step the Original Poster should sell their
individual stock holdings in their employer and ex employer, and put
that into the Wellington Fund.

It has
- quote -

And long run, a continuation of a 3% yield, and a total return of 7-8%
pa is likely.

The dividend income from that fund is likely to grow with inflation
(given that it is 65% stocks, and stocks tend to grow dividends
somewhat faster than inflation).

- quote -

My problem with Financial Advisers is that unless they are the pay by
the hour model, they tend to want you to churn your portfolio, to
generate commission for them. This is true even subconsciously ie
even if that is not what they think they are doing.

The hardest call is the OP is very risk averse, and therefore has
about half her funds in a fixed income fund, plus cash and I Bonds.
As others have pointed out the income from these won't grow over time,
but inflation will.

That bond fund could at most lose maybe 10% of its NAV in a bad year,
and is very unlikely to do even that (and there would still be the
4.5% yield if it did). Historically when there have been years that
bad, the subsequent years have tended to see some catch up. But at 3%
inflation, the money will be worth half as much in 24 years time.

"Jane" <googlemail2003[at]yahoo.com> wrote in message
news:1174393382.433551.314130[at]n76g2000hsh.googlegroups.com...

- quote -

Certainly not terrible--maybe even good. If I had to put all of my money in
a single fund, Wellington would be high on my list of candidates. It has
returned 8.4%/year since its inception in July, 1929--which means over a
period that included the Great Depression. It returned 9.79%/year over the
10 years ending 12/31/2006, a period that included the 2000-2002 bear. It
returned nearly 15% in 2006. Its worst year since 1992 was 2002, when it
lost 6.9%, as compared with a 22.1% loss for the S&P 500.

I imagine that if you work with a financial advisor, you may be able to come
up with a strategy that will be better suited to your needs than Wellington,
but you could also do a heck of a lot worse.

- quote -

Your total assets add up to 671k.

To comfortably live on 30k for 30+ years, you will want ~$750k saved.
(30k/.04 withdraw). This does not include SS.

If you factor in SS (1400*12=16,800), the investment portion only
needs to supply the 14k annual difference. To withdraw 14k from
assets, the 350k you have in the John Hancock fund is enough (14k/.
04=350k).

These calculations assume a 4% initial withdraw.

You have two issues playing tug of war (financially). One is your
risk tolerance, the other is you might "outlive" your savings (if you
live 30+ years in retirement).

Wellington is a 60-40 Equity-bond mix. I think rolling 401k into
Wellington makes sense. This is 190k total.

I see 81k in cash type vehicles (CDs and I Bonds). This is ~ 5 years
of income (81k/14k=5.75). I might suggest spending this money first,
and draw down other assets to replenish this supply. This "5 year"
cash position is an excellent hedge against market risk (market could
go down for 5 years and you would NOT run out of income until 6th
year). A further suggestion is to add another year to this "cushion"
in an up market, and leave it alone if market goes down (don't "draw
down" on a "down year").

The only other change I would suggest is to sell the Manulife/John
Hancock stock and the well point stock. I would add this to "fixed
income fund" position. This would reduce your risk some. Holding two
individual stocks is not enough diversification, and I think the other
investments look solid.

On Mar 20, 12:54 pm, "Jane" <googlemail2...[at]yahoo.com> wrote:
- quote -

Jane

I am not a US based financial adviser. Please take my comments as
thoughts rather than the definitive truth!!

Delaying SS as long as possible is normally a good idea, although you
can figure out when the 'crossover' point will be.

the reason being SS is indexed to increases in wages. Nothing in the
private sector (other than a gold plated Defined Benefit scheme) can
match that. If you live a long time, that guarantee can be worth a
lot.

By contrast, your fixed income investments will never grow in monthly
payments (if interest rates go up, the value of the funds will fall).

Say you live 30 years. At 3.5% per annum growth, your SS payment will
be 2.8 times what it is now.

Dividend growth in stocks *might* reach that level, but your capital
is at far higher risk.

I also have a small pension.
- quote -


That would be *increasing* your exposure to equities, given that
Wellington is 66% equities, which are more volatile than bonds, and
more likely to lose you money.

Notwithstanding, I think the Wellington fund is a good one:
conservatively managed, low costs. But I wouldn't recommend anyone
put *all* their retirement monies in one fund.

Would that be a
- quote -

Tax has big implications here. Selling assets outside the 401k can
generate taxable capital gains.

A reasonable rule of thumb for taxes is to put fixed income
investments (bonds, CDs etc.) inside tax deferred accounts (like 401Ks
and IRAs). Put dividend paying investments outside-- because the tax
rate on dividends is much lower (15%). So too is the tax rate on
capital gains (than on fixed interest).

However the costs of making that switch in your portfolio might make
it too expensive to do.

- quote -

OK from what you say above, this is in a 401k? I don't know anything
about IRA rollovers.

- quote -

Are these in the 401k? What I say below assumes they are not.

- quote -

Your first consideration, to my mind, is what to do about the Manulife
and Wellpoint stock. Manulife is a good company, but you are exposed
to the performance of *one* company operating almost entirely in life
insurance. Wellpoint I don't know but the same principle applies.

I would suggest selling those, and putting them in the Vanguard
Wellington Fund. That should increase your income (a bit) and be less
risky, long run. You might want to stagger these sales over 2 tax
years, to minimise capital gains tax (for example, by waiting until
after you retire, when your income will be lower).

Others will chip in with more sophisticated advice, including how to
reach your target income.