As part of my end of the year portfolio review I try to simplify my holdings without compromising performance. I am 60 years old and have a pension, but no Social Security (SS's WEP provision eliminated SS for me). I see the next 20 years as a time to spend a little bit of what I have saved knowing full well that, if I am lucky enough to live into my eighties, spending priorities will begin to shift away from "foot loose and fancy free" to "foot wear that's loose and free".
Simplification comes in two forms. One, I am attempting to simplify what I hold (the number of funds) and two, where I hold these funds (the number of institutions where I hold the funds). I manage all of my investments independent of advisors. I do attempt to seek out mutual funds that are managed. So, in a sense, I do pay for investment management advice as a function of the Expense Ratio (ER) of the funds i own that have fund managers or management teams.
Over the next 20 years my withdrawal from these investments need to fund:
- Yearly Income gaps - the yearly shortfall when I subtract my projected yearly expenses from my retirement income.
- One time Expenses - For gift costs (weddings, tuition, holidays), travel costs, medical procedures costs (not covered by insurances), large one time item costs (a car, boat, real estate)
- Roth Conversions up to the 12% tax bracket limit (25% of my retirement accounts are in deferred taxable IRA, 75% in Roth/HSA).
- Help fund retirement needs beyond 80 such as income gaps as a result of inflation, out of pocket health care costs, funeral expenses, providing for surviving spouse, and gifting to beneficiaries (Spouse, Kids, Charities)...oh yeah, and loose fitting shoes.
Here are my present holding by percentages of total:
71% Moderate to Aggressive positions (for long term growth and periodic withdrawals)
PRWCX - 22% (half Roth, half SD IRA)
PRGSX - 10.5% (Roth)
PRMTX - 7.5% (Roth)
PRHSX - 4% (SD IRA)
VMVFX - 6% (Roth)
VHCOX / POAGX-11% (Roth)
VHT - 2% (Roth)
FSMEX - 4% (Roth)
FSRPX - 4% (Roth)
6% Balance position (to cover Long term HC costs)
BRUFX - (HSA)
23% Conservative positions (to cover sequence of return withdrawals, to provide cash for buying opportunities, lower portfolio volatility)
FRIFX, VWINX, PTIAX, VFISX, PRWBX, SPRXX - (mostly Roth)
I am presently at 5 institutions which I will reduce to 4 by Spring 2020 and 3 by summer 2020
Recently, I back tested a portfolio consisting of PRWCX (34%), PRMTX (33%) and PRHSX (33%) which I consider moderately aggressive.
Its past 20 year performance had a MAXXDD recovery period of 3 years. I consider this a reasonable time frame to cover a sequence of return risk withdrawal.
Having at least 3 years of retirement income money earmarked for these future time frames (market pull backs and recoveries) seems reasonable to me. A combination of FRIFX / VWINX / PTIAX / ST Bonds are my choices for this part of my portfolio.
Any thoughts or suggestions would be appreciated.