Newly retired seeking an investment & cash flow plan

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Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Newly retired seeking an investment & cash flow plan

Post by Octavia »

Hello everyone. I am new here. I've done a lot of reading, thinking and spinning around in circles. I chronically second-guess myself which is why I'm seeking your input. So grateful for a forum like this.

My spouse and I retired in September 2019 at ages 57 and 61. In order to do so, we downsized and moved to a less expensive city. We began taking her pension immediately ($14K annual net after deduction for health care coverage). I am trying to determine if it's wise to take over the management of our retirement funds ourselves and save on fees now that we have the time and spare brain cells. We are very fond of our financial advisor, but now that we're retired, it seems we should be able to steer the boat ourselves. The uncertainty around COVID 19 has given us pause, however. It certainly threw a wrench in our plans for getting part-time jobs. So, I'm seeking input on how best to put together an investment strategy and cash flow plan that will take us each to age 70.5.

Emergency funds: $86K (HY Savings Account)

Debt: None (We own our home and pay $5,500 in property taxes)

Tax Filing Status: Married filing jointly

Tax Rate: FED: 0%-12%* STATE: 5.75%
* I'm not entirely sure about our federal tax rate as this is our first year of retirement and we had intended to work part-time. We could pull from our cash savings for a year and then pull from from investments, or begin pulling from investments now as taxes are likely to increase.

Annual expenses
: approx. $72,000

State of Residence:
VA

Age: 57, Spouse 61

Current retirement assets: approx $2 million

Pension: $14,000 annual with cola

Taxable: $2,164,237
$193,257 in Commonwealth joint brokerage
C’s IRA $1,013,423
V’s IRA $957,556
Non-taxable: $128,586
V’s Roth IRA $80,445
C’s Roth IRA NFS - $48,141
NOTE: I checked Morningstar and sec.gov but was unable to locate the expense ration for QLFPQ, HASI, OSMYX, OSMYX, OIDYX, QPRMQ, FS Global Credit Opportunities Fund, and Watermark Lodging Trust Inc Shares Cl A

C’s IRA $1,013,423 - 44.20%
Advisory Retirement Sweep Program QLFPQ
Calvert Emerging Markets Equity Fund Cl I CVMIX (0.99%)
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Eaton Vance Emerging Markets Local Income Fund Cl I EEIIX (0.90%)
Eaton Vance Floating-Rate Advantage Fund Cl I EIFAX (0.74%)
FS Global Credit Opportunities Fund - Adv 30294K107
Fidelity Otc Portfolio FOCPX (0.89%)
Hannon Armstrong Sustainable Infrastructure Capital Inc HASI
Invesco Oppenheimer International Small-Mid Company Y OSMYX
MFS International Intrinsic Value Fund Cl I MINIX (0.73%)
PIMCO Income Fund Cl I PIMIX (1.09%)
PIMCO Preferred & Capital Securities Fund Institutional Cl PFINX (0.80%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)
Watermark Lodging Trust Inc Shares Cl A 94184W100

V’s IRA $957,556 - 41.76%
Bank Deposit Sweep Program OSMYX
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
PIMCO Income Fund Cl I PIMIX (1.09%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)

JOINT TOD Brokerage $193,257 - 8.43%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Eaton Vance Emerging Markets Local Income Fund Cl I EEIIX (0.90%)
Invesco Oppenheimer International Diversified Y OIDYX
Invesco Oppenheimer Total Return Bond Y OPBYX
MainStay Mackay Short-Term Municipal Fund I MSTIX (0.40%)
PIMCO Income Fund Cl I PIMIX (1.09%)
PIMCO Preferred & Capital Securities Fund Institutional Cl PFINX (0.80%)
PIMCO Short Asset Investment Fund Institutional Cl PAIDX (0.36%)
iShares Russell Top 200 Growth ETF IWY (0.20%)

V’s Roth IRA $80,445 - 3.51%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
PIMCO Income Fund Cl I PIMIX (1.09%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)

C’s Roth IRA NFS - $48,141 - 2.10%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
T. Rowe Price New Horizons Fund PRNHX (0.74%)

Preferred Allocation:
Unsure/Need input. After running a few different models I came up with 20% Cash, 35% Equity, 45% Fixed (15% International).

As I see it, we need to keep $36K in emergency saving in order to maintain a 6-month fund. With that in mind, I need help figuring out how to best put together a sustainable withdrawal plan and input on how to allocate our retirement funds and brokerage funds to a simple selection of low-fee index funds.

Am I on the right path? I welcome all general and specific suggestions.

Many thanks!
Last edited by Octavia on Mon Aug 10, 2020 3:23 pm, edited 1 time in total.
User avatar
FiveK
Posts: 11193
Joined: Sun Mar 16, 2014 2:43 pm

Re: Newly retired seeking an investment & cash flow plan

Post by FiveK »

Octavia, welcome to the forum.

At a quick glance, $2 million investments would support $80K/yr assuming a 4% safe withdrawal rate and no SS. You are looking at $60K/yr expenses above the pension (don't know if you included taxes, which you should), so you should be OK.

Consider Optimal Retirement Planner - Extended Parameter Form for some suggestions.

You also might find Open Social Security: Free, Open-Source Social Security Calculator worth your time.

Oh, and with regard to "I am trying to determine if it's wise to take over the management of our retirement funds ourselves and save on fees now that we have the time and spare brain cells," given you have accumulated what you have the answer is "very likely yes." Start with Getting started - Bogleheads. Good luck!
sailaway
Posts: 3027
Joined: Fri May 12, 2017 1:11 pm

Re: Newly retired seeking an investment & cash flow plan

Post by sailaway »

I would take a close look at taxes, both now and projected future. Between the two of you, you have nearly $2 million in traditional accounts. Unless you plan a lot of charitable giving, that could be a lot in RMDs a decade from now.

Once you look at the overall situation, you may determine that your personal best case scenario is to make at least some of your withdrawals from the 61yo's traditional for now and from both in the future.
Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Octavia »

Thank you for the feedback and resource suggestions, FiveK -- and for flagging the tax issue, sailaway. Exceedingly helpful. Having worked in the nonprofit world, I spent a lot of time forecasting income and expenses, but the effect of taxes never factored in. Much to learn.
radiowave
Posts: 2662
Joined: Thu Apr 30, 2015 5:01 pm

Re: Newly retired seeking an investment & cash flow plan

Post by radiowave »

Octavia, welcome!

It would help if you listed all of your funds, the percent total funds, and the respective expense ratios. If you are considering moving from your active managed account, three low cost brokerages are typically recommended here on the forum: Vanguard, Fidelity, and Schwab. There's a long discussion on the merits of each, but I'm sure you'll get plenty of feedback from forum members. One of the important next steps, if you haven't done so already, is to get organized and identify all accounts, funds, passwords, banks, etc. Suggest you build a basic Excel or Google spreadsheet. Also, If you haven't done so yet, is to read the excellent Getting Started Wiki (click on the link) and work through the different modules. If you have any questions, as you move forward, please let us know.
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page
Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Octavia »

Thank you, Radiowave! I spent the weekend getting my ducks in a row and building a dedicated spreadsheet. Will post funds, percentages and expense ratios tomorrow. Curling up with the Getting Started wiki now. Thanks for your kind assistance.
User avatar
Watty
Posts: 22221
Joined: Wed Oct 10, 2007 3:55 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Watty »

FiveK wrote: Sun Aug 09, 2020 5:28 pm At a quick glances, $2 million investments would support $80K/yr assuming a 4% safe withdrawal rate and no SS. You are looking at $60K/yr expenses above the pension (don't know if you included taxes, which you should), so you should be OK.
As mentioned your taxes need to come out of that 4% but you also need to subtract your financial advisor fees and expenses from that 4% too. If the advisor is charging you a 1% annual fee and also putting you into mutual funds that charge 1% more than necessary then that 2% that you are paying them is half of your spendable income for the year. :shock:

They may sometimes claim(or imply) that they will get you superior performance that will more than make up for the fees. That has been studied and is not true over the long term. Just by chance they might get lucky and do better than average half the time(sort of like flipping a coin) but if they could consistently beat the markets they could be making outrageous money by working on wall street. A mutual fund manager would be in the investing hall of fame if they could consistently beat a comparable index fund by 1%.

If you feel that you need a financial advisor then Vanguard will do that for a 0.3% fee and they will not put you into expensive funds. Most people can learn to manage their own investments.
RocketShipTech
Posts: 679
Joined: Sat Jun 13, 2020 10:08 pm

Re: Newly retired seeking an investment & cash flow plan

Post by RocketShipTech »

One of you is still earning six figures? Not sure how else you would be in the 22% bracket.

Are you asking for permission to fully retire?

Not sure what the question is.
User avatar
BolderBoy
Posts: 5540
Joined: Wed Apr 07, 2010 12:16 pm
Location: Colorado

Re: Newly retired seeking an investment & cash flow plan

Post by BolderBoy »

Octavia wrote: Sun Aug 09, 2020 4:10 pmAm I on the right path?
You are definitely on the right path and can ditch the financial advisor and do this yourself going forward.
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect
User avatar
GerryL
Posts: 3100
Joined: Fri Sep 20, 2013 11:40 pm

Re: Newly retired seeking an investment & cash flow plan

Post by GerryL »

Another resource to look at is the book How to Make Your Money Last: The Indispensable Retirement Guide by Jane Bryant Quinn. Look for the most recent version.
CurlyDave
Posts: 2515
Joined: Thu Jul 28, 2016 11:37 am

Re: Newly retired seeking an investment & cash flow plan

Post by CurlyDave »

Octavia wrote: Sun Aug 09, 2020 4:10 pm ...I am trying to determine if it's wise to take over the management of our retirement funds ourselves and save on fees now that we have the time and spare brain cells. We are very fond of our financial advisor, but now that we're retired, it seems we should be able to steer the boat ourselves.

You can easily do this and save whatever his fee might be. No matter how fond of him you are you are your own best advisor.


As I see it, we need to keep $33K in emergency saving in order to maintain a 6-month fund. With that in mind, I'm trying to put together a plan that will allow us to do the following 1) pull $4K monthly from the remaining $53K we have on hand, 2) move the brokerage account and manage it so that we can draw from it when we exhaust the $53K, 3) move our retirement funds to a simple selection of Vanguard index funds to avoid unnecessary fees.

Am I on the right path? I welcome all general and specific suggestions
IMHO you can ditch the EF completely.

Before I retired my biggest financial worry was what would happen if one of us lost a job. This is really the thinking behind X months expenses in an EF. In retirement, I don't have a job to lose and neither does DW. Our entire portfolio is our EF and we can just manage it as one big portfolio. You have enough in taxable to tap in an emergency until you reach the age for penalty free withdrawals from your 401(k) plans.

I would move 401(k) plans to IRAs.
rossington
Posts: 826
Joined: Fri Jun 07, 2019 2:00 am
Location: Florida

Re: Newly retired seeking an investment & cash flow plan

Post by rossington »

Octavia wrote: Sun Aug 09, 2020 4:10 pm Hello everyone. I am new here. I've done a lot of reading, thinking and spinning around in circles. I chronically second-guess myself which is why I'm seeking your input. So grateful for a forum like this.

My spouse and I retired in September 2019 at ages 57 and 61. In order to do so, we downsized and moved to a less expensive city. We began taking her pension immediately ($14K annual net after deduction for health care coverage). I am trying to determine if it's wise to take over the management of our retirement funds ourselves and save on fees now that we have the time and spare brain cells. We are very fond of our financial advisor, but now that we're retired, it seems we should be able to steer the boat ourselves. The uncertainty around COVID 19 has given us pause, however. It certainly threw a wrench in our plans for getting part-time jobs. So, I'm seeking input on how best to put together an investment strategy and cash flow plan that will take us each to age 70.5.

Emergency funds: $86K
Debt: None (We own our home and pay $5,500 in property taxes)
Tax Filing Status: Married filing jointly

Tax Rate: FED: 22% STATE: 5.75%

State of Residence: VA

Age: 57, Spouse 61

Current retirement assets: approx $2 million

Pension: $14,000 annual with cola

Taxable: total
$85K in HY joint savings account
$193,000K in Commonwealth joint brokerage

A's 401k $958K
C's 401K $1 million

A's Roth IRA at Commonwealth - $80K
C's Roth IRA at Commonwealth - $48K

As I see it, we need to keep $33K in emergency saving in order to maintain a 6-month fund. With that in mind, I'm trying to put together a plan that will allow us to do the following 1) pull $4K monthly from the remaining $53K we have on hand, 2) move the brokerage account and manage it so that we can draw from it when we exhaust the $53K, 3) move our retirement funds to a simple selection of Vanguard index funds to avoid unnecessary fees.

Am I on the right path? I welcome all general and specific suggestions.

Many thanks!
1) 5.5k x 6= 33k...are you still only planning that your EF covers your property taxes exclusively? Since you had planned to get part time jobs which have not materialized you may want to increase the EF assuming you were counting on that part time income...but with 2M to draw on it is really moot.
2) If you both are retired how are you in the 22% tax bracket on a 14k net pension only? Where is the additional income coming from?
3) What amount of income is your taxable account generating (net)?
4) It may be advantageous to do Roth conversions up until age 72 (not 70.5) now but we need more information.
5) Moving from actively managed to low ER index funds will increase your total return. ***As to what funds to choose requires further information from you, IE: Risk tolerance for asset allocation, etc.***
"Success is going from failure to failure without loss of enthusiasm." Winston Churchill.
Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Octavia »

Thanks for all of your thoughtful replies. I've updated my original post with more detailed information. We did convert our 401Ks to IRAs. My mistake in the original post.

Thanks for the recommendation of the Jane Bryant Quinn book. One of hers was the first personal finance book I ever read as a young professional.

Just to clarify, I'm not asking for permission to retire. We are retired. :) But hopefully I clarified my need for guidance with a withdrawal strategy and moving our investments to index funds.

Again, thanks all! It's really buoyed my spirits to have a community to turn to.

Cheers!
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FiveK
Posts: 11193
Joined: Sun Mar 16, 2014 2:43 pm

Re: Newly retired seeking an investment & cash flow plan

Post by FiveK »

Octavia wrote: Sun Aug 09, 2020 4:10 pm Tax Rate: FED: 0%-12%* STATE: 5.75%
* I'm not entirely sure about our federal tax rate as this is our first year of retirement and we had intended to work part-time.
There is your first order of business: come up with a good estimate. Are you comfortable estimating your own taxes?
Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Octavia »

Well, we aren't currently taking any distributions, so the only income we have is the $14,000 pension and our savings. So, if our only income is the pension and I back out our deductions and exemptions, the rate will be 0%. Of course, that will change as we take distributions.
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FiveK
Posts: 11193
Joined: Sun Mar 16, 2014 2:43 pm

Re: Newly retired seeking an investment & cash flow plan

Post by FiveK »

Octavia wrote: Mon Aug 10, 2020 3:56 pm Well, we aren't currently taking any distributions, so the only income we have is the $14,000 pension and our savings. So, if our only income is the pension and I back out our deductions and exemptions, the rate will be 0%. Of course, that will change as we take distributions.
If you are at all comfortable using Excel, the personal finance toolbox can show you your marginal tax rate for any range of traditional withdrawals (converted to Roth or not) you wish to see. You can also add SS benefits and increased ages to show how those might change things for you in the future.

It is also possible to use other tax calculation/estimation tools, but you have to rerun those multiple times and plot the (change in tax)/(change in income) by hand to see a similar chart.
Topic Author
Octavia
Posts: 31
Joined: Sun Aug 09, 2020 2:25 pm

Re: Newly retired seeking an investment & cash flow plan

Post by Octavia »

Luckily, I am very comfortable with Excel. Thank you for the tip. I'll follow-up.

I've not, however, figured out how to insert others' responses in my replies. Newbie.
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FiveK
Posts: 11193
Joined: Sun Mar 16, 2014 2:43 pm

Re: Newly retired seeking an investment & cash flow plan

Post by FiveK »

Octavia wrote: Mon Aug 10, 2020 4:20 pm I've not, however, figured out how to insert others' responses in my replies. Newbie.
As was everyone at some point. ;)

Please Try Out Test Posts Here - Bogleheads.org may be helpful.
reln
Posts: 485
Joined: Fri Apr 19, 2019 4:01 pm

Re: Newly retired seeking an investment & cash flow plan

Post by reln »

Octavia wrote: Sun Aug 09, 2020 4:10 pm Hello everyone. I am new here. I've done a lot of reading, thinking and spinning around in circles. I chronically second-guess myself which is why I'm seeking your input. So grateful for a forum like this.

My spouse and I retired in September 2019 at ages 57 and 61. In order to do so, we downsized and moved to a less expensive city. We began taking her pension immediately ($14K annual net after deduction for health care coverage). I am trying to determine if it's wise to take over the management of our retirement funds ourselves and save on fees now that we have the time and spare brain cells. We are very fond of our financial advisor, but now that we're retired, it seems we should be able to steer the boat ourselves. The uncertainty around COVID 19 has given us pause, however. It certainly threw a wrench in our plans for getting part-time jobs. So, I'm seeking input on how best to put together an investment strategy and cash flow plan that will take us each to age 70.5.

Emergency funds: $86K (HY Savings Account)

Debt: None (We own our home and pay $5,500 in property taxes)

Tax Filing Status: Married filing jointly

Tax Rate: FED: 0%-12%* STATE: 5.75%
* I'm not entirely sure about our federal tax rate as this is our first year of retirement and we had intended to work part-time. We could pull from our cash savings for a year and then pull from from investments, or begin pulling from investments now as taxes are likely to increase.

Annual expenses
: approx. $72,000

State of Residence:
VA

Age: 57, Spouse 61

Current retirement assets: approx $2 million

Pension: $14,000 annual with cola

Taxable: $2,164,237
$193,257 in Commonwealth joint brokerage
C’s IRA $1,013,423
V’s IRA $957,556
Non-taxable: $128,586
V’s Roth IRA $80,445
C’s Roth IRA NFS - $48,141
NOTE: I checked Morningstar and sec.gov but was unable to locate the expense ration for QLFPQ, HASI, OSMYX, OSMYX, OIDYX, QPRMQ, FS Global Credit Opportunities Fund, and Watermark Lodging Trust Inc Shares Cl A

C’s IRA $1,013,423 - 44.20%
Advisory Retirement Sweep Program QLFPQ
Calvert Emerging Markets Equity Fund Cl I CVMIX (0.99%)
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Eaton Vance Emerging Markets Local Income Fund Cl I EEIIX (0.90%)
Eaton Vance Floating-Rate Advantage Fund Cl I EIFAX (0.74%)
FS Global Credit Opportunities Fund - Adv 30294K107
Fidelity Otc Portfolio FOCPX (0.89%)
Hannon Armstrong Sustainable Infrastructure Capital Inc HASI
Invesco Oppenheimer International Small-Mid Company Y OSMYX
MFS International Intrinsic Value Fund Cl I MINIX (0.73%)
PIMCO Income Fund Cl I PIMIX (1.09%)
PIMCO Preferred & Capital Securities Fund Institutional Cl PFINX (0.80%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)
Watermark Lodging Trust Inc Shares Cl A 94184W100

V’s IRA $957,556 - 41.76%
Bank Deposit Sweep Program OSMYX
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
PIMCO Income Fund Cl I PIMIX (1.09%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)

JOINT TOD Brokerage $193,257 - 8.43%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Eaton Vance Emerging Markets Local Income Fund Cl I EEIIX (0.90%)
Invesco Oppenheimer International Diversified Y OIDYX
Invesco Oppenheimer Total Return Bond Y OPBYX
MainStay Mackay Short-Term Municipal Fund I MSTIX (0.40%)
PIMCO Income Fund Cl I PIMIX (1.09%)
PIMCO Preferred & Capital Securities Fund Institutional Cl PFINX (0.80%)
PIMCO Short Asset Investment Fund Institutional Cl PAIDX (0.36%)
iShares Russell Top 200 Growth ETF IWY (0.20%)

V’s Roth IRA $80,445 - 3.51%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
PIMCO Income Fund Cl I PIMIX (1.09%)
T. Rowe Price New Horizons Fund PRNHX (0.74%)

C’s Roth IRA NFS - $48,141 - 2.10%
Bank Deposit Sweep Program QPRMQ
Columbia Dividend Income Fund Advisor Cl CVIRX (0.71%)
Fidelity Otc Portfolio FOCPX (0.89%)
Invesco Oppenheimer International Diversified Y OIDYX
T. Rowe Price New Horizons Fund PRNHX (0.74%)

Preferred Allocation:
Unsure/Need input. After running a few different models I came up with 20% Cash, 35% Equity, 45% Fixed (15% International).

As I see it, we need to keep $36K in emergency saving in order to maintain a 6-month fund. With that in mind, I need help figuring out how to best put together a sustainable withdrawal plan and input on how to allocate our retirement funds and brokerage funds to a simple selection of low-fee index funds.

Am I on the right path? I welcome all general and specific suggestions.

Many thanks!
You have money enough.

I recommend you go with vanguard's personal advisor service.
https://investor.vanguard.com/financial ... ial-advice
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