@HImom, everything is in our 401K that we need to rebalance, so there is no tax issue for us. I had heard that philosophy about the new money, however, I fear it would take several years of contributing new money to get to the desired ratio.
@IxnayBob, you’re probably right. And 98% equities is probably not a smart place for anyone to be. I know based on our age the recommendations are more like 55/45…but we’re intending not to pull it until we have to take RMD’s (15 years from now), even though our FA recommends otherwise.
Another thing that folks can consider us instead of having each account balanced say 65% stocks and 35% bonds is to have all your joint assets balanced in that manner. Say you choose to have stocks in taxable and Roth and bond funds in traditional IRA rather than H’s taxable 65/35, H’s tIRA 65/35, H’s Roth 65/35, repeat for W.
We do this to a large extent. H’s 403 is mostly bond index funds. We have a bunch of cash, some real estate that is “bond-like” and a bunch of stocks and stock index funds in the other accounts.
Since you have a FA, what are his recommendations? You may wish to post on Bogleheads.org to see what they recommend. They are a lot ic very helpful folks on that forum.
I definitely see that point, HImom, balancing it between the two of you. But in our case, my husband is only 7% bond funds, so that helps a little.
The FA didn’t make any specific recommendations about the balancing. She mentioned it briefly, however I don’t think she was giving investment recommendations. This was a free analysis negotiated by our union and company. I think we definitely need to check out that Bogleheads forum!
I’ve heard real estate and pensions to be considered “bond-like” as they don’t fluctuate the way equities do, so since you have some of those, that makes you a bit less overweight in equities as well overall. Real estate also serves as a hedge and some protection against inflation.
I think you’re right, HImom. But lately we’ve been thinking about getting rid of the rental properties. When we consider what we could get for selling them, they are only giving us about a 2% return, and we’re getting weary of being landlords. Trying to destress our lives. The pensions definitely could be considered a hedge.
When and if you do sell the properties, you could use those new funds to buy bond funds or bond-like items such as CDs, money market, t-bills, etc.
We use a property manager or would have given up on real estate a long time ago. It’s definitely work to keep the tenants in the units, desk with maintenance, etc. One doesn’t want to violate landlord tenant laws either.
We just found a buyer for our second home. We’ve owned it for 20 years and took an offer of 3 times what we paid for it. There will be capital gains, but even after that, I will still be able to pay off enough bills that I will be able to go month to month and pay my credit card in full. Without having to pay the taxes, homeowner’s insurance, water and electric bills from the house, which was never occupied, I will have enough extra discretionary income that I may be able to come close to maxing out my 401k contributions for only the second time ever. I will look into a Roth, but at my age, I don’t know that it pays. I am not going to do any conversions because of the current tax bracket.
Now, I just have to wait a few more years till I can sell the foreclosure house we bought last year.
If you are talking to me, we have not and are not depreciating the property. It was never used as a rental and was never occupied. We bought it so my parents could live there, but they decided to move 3000 miles away from their only grandchildren. Then we thought about moving MIL in there, but moving her to a different county would have cut off her Medicaid 24/7 coverage. It would cost about $20K that I don’t have to make the house suitable for renting and the municipality it is in is not friendly to rentals. There is a yearly fee and an inspection requirement. I am happy to sell it and pay off my mortgage on my primary residence. I am so sure that I want to sell that I dragged H into therapy to deal with his insistence on holding on to the place.
@CountingDown , yes about capital gains in 401k not being an issue, but it is still not a good idea to auto reinvest dividends, since you can incur an inadvertent wash sale between taxable and tax deferred.
Our accountant depreciates them every year. I’m not sure if that deduction is going to work for us…these new tax laws are complicated. I guess we’ll see if they use the QBID deduction for us this year.
We are going through ANOTHER water loss. Wondering if our insurance company is going to ditch us this time. Tenant is annoyed, I’m sure there will be assessments because of a number of units with issues, condo management has been worthless. I’m really tired of this! I’d bet we could get a better return in the market, even if we were very conservative…with no angry tenants calling us in the middle of the night. We’re so done with this.
Forgive me if this is all TMI! We made our own”balanced portfolio.” I paid $300 to see an advisor last year and he just smiled and said it all sounded good, so he was either totally NOT helpful, or was validating of our approach. We have no debt, fully paid newish vehicles and no mortgage on house valued at about 475K. We have 350K in Roth and/or inherited retirement accounts - (80/20 stocks/bond- so fairly aggressive.) 50K in bank and working on adding more laddered CDs. I plan to retire early next fall, and will have small combined after-tax pension of $2400 a month for life, not indexed for inflation. I may take SS early at 62, not out of need, but because I question my longevity. DH will work 3 years after I retire and will receive pension of about 75K, plus SS taken at 67. We can purchase health insurance at greatly subsidized rate, as long as city continues to offer it to retirees. We haven’t been this well-off for long, and we are now contributing to Roth at about 24K a year each. My contributions will end when I quit in September, but we anticipate DH’s to continue, so possibly total savings/investments of 500K. I will be 59 at retirement, and may go back to work parttime after I take a year off to care for new grandbaby (fingers crossed that all goes well with that.).
We are fairly frugal people; like to camp, not big into buying things, house is in good shape…
Many of you are very knowledgeable about money matters. What am I missing here? What haven’t I thought about? Would you be comfortable retiring with this amount in the bank and with those pensions?
I will just point out that, if you can afford it, you can make your entire $24K 401k contribution by September, it doesn’t have to be spaced out over the whole year.
@anxiousmom — Does your H’s pension offer the option for him to receive a lower monthly benefit at retirement but to then continue payments to you if he should pre-decease you? I don’t know what the correct terminology is for that sort of survivor benefit. The problem I see with your plan is that it might be difficult for you to live on $29K + SS on your own. Is the medical insurance offered through your employer or your H’s? What will the other spouse do for medical if one dies?
Without knowing your annual expenses, $100K in pensions + SS and the opportunity to purchase medical insurance seems as though it should be enough to support two of you.
