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What mutual funds are in your retirement "buckets"
Well, y'all see our's every week. The end of the trade day (Friday) finds someone mess'in with the Treasury issues. Sure don't know what they're up to. Will have to take some of the upside in the equity related stuff and find whether we can pull at least a positive number for this week. So, some of our buckets are leaking today into the outer containment vessel.
Reply to @catch22: Thanks for sharing your weekly updates. The two part wealthtack video you linked today lead me to this article. I got a lot out of both interviews. Thanks!
Christine Benz, one of the bright spots at M*, writes frequently about the bucket approach. As income circumstances are looking likely to change at our house in the fairly near future, I recently tracked down several of her pieces, and it really opened my eyes. I don't think it would be a bad thing to adapt for general investing - it sure tends to discourage overthinking every dip and surge in the markets.
Reply to @AndyJ: "it sure tends to discourage overthinking every dip and surge in the markets." I suppose one's innate temperament has a lot to do with it. I know a guy who makes more money that me, but he does things at just the wrong time, or does stuff you should NEVER do, even though it is permitted--- like taking a loan against his 401k.
Even the bucket approach, though it makes great sense, is too complicated for my situation. I suppose what I mean is that I still don't have too much to worry about: my portfolio is at $111,400 at the moment. Years ago, I'd have thought that was a big score. But the dollar isn't worth a fart in the wind, anymore. So all I do is to KISS it. Keep It Simple, Stupid. Don't make reckless bets. Avoid risk COMPLETELY and you end up poor. Investors have to accept SOME risk if they're going to make any money. And keep the LONG-term view. Honestly, I don't understand the massive flight to Treasuries, with the 10-year yield below the rate of inflation!
Buckets;shmuckets. I don't think in those terms. I'm in retirement and easily living off a couple of small pensions and social security. I have taxable and tax-deferred accounts at Fidelity totalling mid-6 figures that I invest for long-term growth and income with a little short-term trading for fun. I do have a bucket with a hole in it which is a house that is rented but with a mortgage under water; I hope to get rid of that leaky bucket in the next couple of years.
Reply to @tgeno: If you dig into it, the bucket thing as applied specifically for retirement is primarily for people who use their savings or income from same for living expenses, which doesn't really apply if there's pension etc. income adequate to the task. All it is is a slightly different way to organize and allocate investments with "duration" built into the calculation.
I think it's important to remember "the three leg stool" when thinking how your investments need to be distributed within a retirement portfolio. The bucket system feeds just one leg of that stool. The other 2 legs of course being social security and any pension or purchased annuities you may have. I suppose you could add on a forth "removable" leg if you want or need to work for added income in retirement.
I'm not there yet, but I foresee the investment leg as being 2 buckets. One being 3-5 years of CD ladders and the second bucket being a moderate risk distribution of stocks and bonds.
I'd be interested to hear from others already in retirement or those, like myself, getting close to that next life adjustment.
Mike: your laddering of CDs is a losing deal at this time. You already knew that, so I'm thinking you believe rates will be on the rise by the time you decide to pull the (pin), retire. I thought cds would be a part of my retirement funding, but not using them at this time. To much dead cash at this time. What's one to do ?
Reply to @MikeM: Mike, the way I've heard SS, pensions, annuities and any work income addressed in one bucket method is that they're a prequel you have to figure in before you structure the pots of $: quick and dirty, it's to come up with an annual budget as best you can, figure in how much of that can be covered by SS etc., & then structure short, intermediate, and long term investments around meeting the rest of the budget, plus (I suppose) emergency expenses you can't anticipate.
The linked article in Bee's OP is about how M* Discuss posters in retirement structure their investments. The original thread has a lot more than is in the article.
From what I've read it sounds like the object is just a simple way to organize your thinking about income and expenses in retirement.
Reply to @Derf: hi Derf. CDs will certainly increase once inflation kicks in. When is that? Who knows. I'm 58 now and would like to keep working full time until 62. I'm guessing 4 years from now the financial landscape will look a whole lot different. Good luck to you.
Reply to @AndyJ: hi andy. I agree with you. I thought that was what I was describing with the 3 legged stool, ss being 1 leg, annuities the 2nd and drawing from savings being that 3rd leg. All that added together supplements your retirement in come.
I've read a couple books on setting up bucket systems (for that 3rd leg). But like someone else mentioned, it's just another way to segment your investments for growth and supplemental income.
Less and less mutual funds as time goes on. I used to juggle 25-30 at a time but have weeded most of them out for individual equities and preferred shares. Just looking for that constant income stream...
To Mark – you mentioned the “income stream.” I’m not comfortable picking individual equities and preferred shares, so I would rely on funds – open and closed end. When you did juggle 25 – 30 funds, were they aimed at the income stream and if so, would you mind sharing a few of your favorites? Thanks.
@Zenergy - I did not. During my mutual fund phase I was looking for capital appreciation and more importantly momentum in the funds I chose. The funds that I hold today that do provide an income stream are TIBIX, DLTNX. RNDLX and HIX. I suppose one could add MAPIX into that mix but it it not as steady or consistent as the others.
I agree with the "buckets, schmukets" thought. Why make things so complicated? We use a very simple approach. Any dollars you might need from your portfolio over the next 3-5 years should be in cash, CDs or short-term bonds. In good years, we capture gains from our other investments (stock, balanced, longer-term bonds) and use those for cash flow. In down years, the set-aside dollars are used so that sales in down markets are not necessary. This is a very easy strategy to implement. No buckets of separate accounts required.
The other part of this equation is maximizing tax strategy. In other words, don't leave money on the table that could fill up lower tax brackets. For example, if you still have room in your 15% taxable income, consider using IRA (taxable) accounts to max out the bracket (especially the 10% bracket!). Conversely, if your income looks like it could push you above the 25% bracket, you might want to emphasize income from your non-taxable accounts. Manipulating tax brackets is a smart way to maximize your portfolio strategy.
Thanks Mark. As it happens, I use TIBIX, DLTNX AND RNDLX as well. I’m transitioning to an income focus from a strict capital appreciation approach. It sounds like you’re a few years ahead of me. RNDLX is interesting in that it has a closed end fund component that adds an element not found in open end funds. Thanks again for your thoughts.
From a “bucket” perspective, it may still be a good idea to set aside some long term I’m-not’-going-to –touch-this-money and allow it to just grow in value. But as one really begins to think about retirement, the immediate thought is “how do I replace the paycheck I won’t be getting”. That really snaps the income focus into view.
I just started to look at closed end funds trying to pick CEF's when the price per share dips below the NAV of the fund price to reach the discount territory. So far I liked PDT and Alliance Bernstein Global High Income AWF. I reviewed Dividend Detective and like the above 2. There is about a 6-7% return.
I am surprised that we never hear much on MFO about CEF's. I would like to hear more members of the board comment.
I own one CEF - First Trust Strategic High Income 2 (FHY). It trades at a very small premium. It returns about 9% which is virtually all income (i.e. no return of capital, except for a very tiny amount last September.) It invest mostly in corporate bonds. It's also given me about one percent capital appreciation over and above the income distribution since I acquired it 2 months ago.
Comments
Well, y'all see our's every week. The end of the trade day (Friday) finds someone mess'in with the Treasury issues. Sure don't know what they're up to. Will have to take some of the upside in the equity related stuff and find whether we can pull at least a positive number for this week.
So, some of our buckets are leaking today into the outer containment vessel.
Take care,
Catch
Thanks for sharing your weekly updates. The two part wealthtack video you linked today lead me to this article. I got a lot out of both interviews. Thanks!
"it sure tends to discourage overthinking every dip and surge in the markets." I suppose one's innate temperament has a lot to do with it. I know a guy who makes more money that me, but he does things at just the wrong time, or does stuff you should NEVER do, even though it is permitted--- like taking a loan against his 401k.
Even the bucket approach, though it makes great sense, is too complicated for my situation. I suppose what I mean is that I still don't have too much to worry about: my portfolio is at $111,400 at the moment. Years ago, I'd have thought that was a big score. But the dollar isn't worth a fart in the wind, anymore. So all I do is to KISS it. Keep It Simple, Stupid. Don't make reckless bets. Avoid risk COMPLETELY and you end up poor. Investors have to accept SOME risk if they're going to make any money. And keep the LONG-term view. Honestly, I don't understand the massive flight to Treasuries, with the 10-year yield below the rate of inflation!
I'm not there yet, but I foresee the investment leg as being 2 buckets. One being 3-5 years of CD ladders and the second bucket being a moderate risk distribution of stocks and bonds.
I'd be interested to hear from others already in retirement or those, like myself, getting close to that next life adjustment.
Have a good wked,
Derf
The linked article in Bee's OP is about how M* Discuss posters in retirement structure their investments. The original thread has a lot more than is in the article.
From what I've read it sounds like the object is just a simple way to organize your thinking about income and expenses in retirement.
I've read a couple books on setting up bucket systems (for that 3rd leg). But like someone else mentioned, it's just another way to segment your investments for growth and supplemental income.
The other part of this equation is maximizing tax strategy. In other words, don't leave money on the table that could fill up lower tax brackets. For example, if you still have room in your 15% taxable income, consider using IRA (taxable) accounts to max out the bracket (especially the 10% bracket!). Conversely, if your income looks like it could push you above the 25% bracket, you might want to emphasize income from your non-taxable accounts. Manipulating tax brackets is a smart way to maximize your portfolio strategy.
From a “bucket” perspective, it may still be a good idea to set aside some long term I’m-not’-going-to –touch-this-money and allow it to just grow in value. But as one really begins to think about retirement, the immediate thought is “how do I replace the paycheck I won’t be getting”. That really snaps the income focus into view.
I am surprised that we never hear much on MFO about CEF's. I would like to hear more members of the board comment.
Prinx
Prinx