Today I had my follow-up call with T. Rowe Price Advisory Services.
Here's the big picture rundown:
Based on my total annual savings (which they erroneously recorded as $37,500 annually instead of $31,000 annually), they recommend that in my 1st year of retirement, I withdraw $35,455 as income ($2,955 a month) instead of $43,000 a year ($3,583 a month). Every year thereafter I would adjust for inflation.
This is not too much of a biggie to me since I've been generally aiming at between $40 and $43K income in retirement.
They did not include Social Security income at all, so whenever I do decide to begin collecting SS, it will just make things that much easier.
They also did not factor in any inheritances, other than what is already in my accounts.
They are not suggesting many changes, only fine-tuning, in my overall and current asset allocation of 61% stocks, 25% bonds and 14% short-term investments.
They're recommending 60% stocks, 30% bonds and 10% in short-term investments. So they are mainly suggesting I move some money that's now in "cash" into bond funds, for upside growth potential.
Based on what I told them about my investment preferences, they're recommending I remain in a "balanced" portfolio.
Getting into more detail:
Domestic stocks: Increase my mid cap and international exposure by 3% each, decrease my sector/specialty exposure (a REIT and healthcare fund) from 6% to 0%.
Bonds: Decrease investment grade bonds by 4% and increase high Yield by 3% and international bonds by 6% (i currently have no exposure to international bonds or high yield).
Short-Term Investments: They recommend I decrease my short-term investments, which includes my CDs my online money market accounts as well as my Vanguard money market, by 4%. I would still have nearly 2 years of living expenses, or $80,000, in short-term investments after doing so.
She's going to make some final adjustments to her numbers based on my correcting her on my annual savings, along with new info on the 401k employer match I received (an extra $3536 which I guess I can count on annually) and then I'll be able to access it online again. The revised report will have suggested retirement withdrawal amounts each year, which includes adjustments for inflation, so I don't have to trouble my math-challenged brain.
They will also check in with me annually or I can contact them in the interim if there are any big changes to my financial life, like a layoff, inheritance being finalized, etc.
In other news: I met with local florist today and she chose 5 of the 8 pieces of art I brought to exhibit for sale in her shop. They are priced on the high side, so not sure how they'll do. Each time I draw up a little contract agreement, I do a better job of it! I also created some take-home bios for anyone who purchases a piece, so they can learn more about the artist.
Also followed up on the first real estate brokerage I contacted about long-term art exhibits in their offices. It probably wouldn't work there because they don't have extra wall space, but she asked me to send jpgs and prices anyway, which I did. She meets and knows a lot of people so she could possibly send them my way maybe.
In the meantime, I've decided that each week my goal will be to do at least one tangible thing to find new markets or further market my mother's art. It all takes a fair amount of time. So next week my goal will be to contact a 2nd real estate brokerage in my hometown, with the same query/offer about showing my mother's art. This idea had been suggested to me by someone at the art association who knew someone else who had done pretty well selling their art in this way. I would focus on the larger pieces for the brokerages since the smaller stuff can go in various gift shops/galleries.
I still have at least 2 more local shops in mind that I might like to approach. Also, the florist suggested, since I had mentioned how some of the art might appeal to interior decorators, of an interior designer who just set up shop in Sandy Hook Center. Couldn't find him online so will go down there in person to get the name.
I'm getting plenty of activity at my new suction cup window bird feeder, but it's driving Luther nuts as he lunges toward the birds each time he sees them. So they're a bit more timid that usual and I'm debating whether to move the feeder elsewhere.
My new windchimes, made out of grandma's silverware.
Good news on the retirement front
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The LAST thing I would buy is high yield bonds. In the current market, investors are stretching for yield and turning a blind eye to the risk. If interest rates go up or the business climate deteriorates, the interest rate and default risks will far outweigh any benefit from the higher yields. You could lose a lot of money if you put a significant part of your portfolio in junk bonds.
Right now, there is little upside benefit to increasing any bond exposure. Generally, bonds do not correlate to equities. That is NOT the case right now. Both asset classes are very expensive. In my opinion, bonds have further to fall if interest rates rise and/or the market's perception of risk changes significantly. CD's under perform bonds by a relatively small percentage and are backed by the FDIC. That's close to the "risk free" rate of return, and I would not take on interest rate and default risk for the small premium of bonds or bond funds. I shop CD rates at www.depositaccounts.com and have CD ladders in place of bonds and bond funds.
International is divided into the developed world and emerging markets. Developed markets have been depressed, and they have potential. Emerging markets are very risky - democracy and GAAP are not sure things in a lot of those countries. By owning US-based companies that do business in emerging markets, you participate in the increasing wealth of those societies without exposing your portfolio directly to government and business failures. I would skip emerging market bonds and equities altogether.
Shifting out of REITs can be justified, but healthcare? Suggest you look at the long term performance of PRHSX and its' competitors at Vanguard and Fidelity. Things have been a little volatile the last year or two, but I see nothing that says this sector is going to stop growing. The pricing power of these companies has not been disrupted by the ACA and the insurance side of the business is far better at understanding and exploiting the marketplace than are the folks that regulate those companies.
In your shoes, I would want at least one year of expenses in non-retirement savings, such as an on-line savings or money market account. I would probably have another two years in laddered CD's and similar instruments. That will carry you through a lot of difficult situations, including another layoff or retiring at a bad time in the stock market and hitting a bad sequence of returns.
I would ask myself how much risk am I willing to take on. In your shoes, I would be conservative, because a big drop in your portfolio value will dramatically affect your retirement. However, conservative does not mean what it used to. Going 100 percent into bonds is now very risky, possible as risky as stretching for return with junk bonds and emerging markets.
In your shoes, I would create a diversified portfolio of equities, keep the CD's and money market funds, and have a close look at the bonds and bond funds. Run some of the more sophisticated retirement planners such as FIREcalc and Fidelity's RIP to see how confident you can be in your current plan.
Finally, I would look at some other forums that are more focused on retirement assets and income. One that has been useful to me is early-retirement.org. There are a lot of people there that are in your age bracket and many of them have similar asset levels. It's more focused that Saving Advice but not as technical as the bogleheads forum.
September 26th, 2017 at 03:12 pm 1506438775