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Investing at 70, 75, 80, or beyond?


Kirk W
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Since there are a number of us on these forums who have reached, or are nearing these ages, what is the best answer to keeping a financially secure future? Is your goal to leave a large estate to your heirs, or is there a time to "spend down" with your savings and investments? As I near my 80th birthday these questions are looming larger, yet I see little if any discussion of them on these forums, even though I know that there are members who have passed the age of 70. Pam & I have spent more than a little time in discussion of such issues and we have included our 3 sons in the conversation. How does one figure out what is the best plan for reaching that final financial goal? 

Are you willing to share your thoughts, or your plans, or how you arrived at the plans you have? 

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Ask a dozen people and get 2 dozen opinions......

I've had "investment counselors" advise me to do this or that, totally ignoring the information they'd requested.  

So, make a list of all your assets and of all your debts.  Then divide your assets in groups, such as rental income, dividend producing, residential, and stagnant.  Use this as your guide to how much you are comfortable to invest in liquid or long term categories.

In our case, we have enough rental property to mostly provide for our needs, yet every "advisor" wanted to put the bulk of our liquid assets in "conservative" holdings.  Duh, rental property (farm land) is already conservative.

In the end,  we opened an online Vanguard account and have put pretty big chunks of cash in the S&P and Nasdaq.  They've done quite well for us, and even though they might take a dip, historically, they keep up, or head of, inflation.  I've also rolled our IRAs and 401k there as well.  

Edited by rickeieio
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4 hours ago, Barbaraok said:

Make sure you are diversified

No question about that as interest rates are far below inflation rates and it appears that it will remain that way for a long time. One would think that at some point they must rise once more, but I remember being told that a 4% mortgage was part of history and never be so low again. 

1 hour ago, rickeieio said:

So, make a list of all your assets and of all your debts.  Then divide your assets in groups, such as rental income, dividend producing, residential, and stagnant.  Use this as your guide to how much you are comfortable to invest in liquid or long term categories.

You don't say if you are in the past 70 club or not, as Barb & I both are, but I would hope that most people are debt free, or close to debt free by age 70. It used to be common to suggest that one should use 100 - your age to determine how much of your assets should be in stocks, and the remainder in bonds, CD's, T-bills, and other low risk investments but with the current low interest rates, most advisors that I read have moved away from that theory. A retired investor should ask himself, what is the goal of my investing and how long must my assets last? The 2008-2009 bear market was one of the most severe, with stocks dropping 50 percent in value. Should something of that nature happen in 2022, what will that mean to your financial future? While the risk in any investment is the same for those in their 40's as it is for those of us in our 70's, the impact is sure to be greater for the retired than for those who are employed. An age difference of 20 years can be important

If your invested funds are providing income for living expenses, the plan should be very different from what would be the case if it is only used to pay for extras that your annual income could not afford, and different yet if it is a rainy day fund for emergencies. Another factor is whether or not you have a long term care policy, especially for couples. Unfortunately for the younger people, LTC insurance has become far more difficult to find and much more limited in recent years. We are fortunate to have bought an LTC policy back when 10 year pay was still available.

At what point in life are you free to expand your budget to begin "spending down" your investments such that your spending exceeds the annual growth? Or is there such a time of life? For any couple, there will be a day that one of you will not be around to share the fruits of your savings & investments, so should we be thinking of enjoying what we have while we are both still able to do so? How long will you or your spouse live? (expectancy table) Do you plan to spend your savings, or leave it to your heirs?

We were able to leave nearly all of our invested money alone until we began to have the required annual distributions and we have only taken out those RMD amounts. Now we have begun to work seriously on our bucket lists and our priorities are changing. It has become very important to us that we make sure that whichever one survives the other now look back wishing that we had followed that dream!

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It is becoming more and more common that people are leaving assets behind that could have been spent.  For many of us we have at least some fear of running out of money and so we conserve.  Often planners say they find people who have more than adequate wherewithal to spend more but don't.   I still find myself thinking about every purchase even though we have the funds.  For us as we age our want list is smaller so we tend not to spend much beyond our needs.  I would have liked to have had a little more when we were younger in what some call our go go years in early retirement but for now we are comfortable. Our savings are still growing.  Maybe even enough to keep up with inflation.

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We're both 67, and have been debt free for several years.  That helps, a bunch.  At some point we'll down size the house, that should net a couple hundred k.  

I realize that an event like the downturn of '08-'09 can happen again, and likely will, especially given the recent upturn.  But, look at the big picture.  Since the S&P was first created, in about 1947, it's averaged a 10% yearly gain.  Don't sweat a bad year or two.  And then, if/when we have a dip, be prepared to by it while it's on sale.  I got into the S&P with a modest amount when it was at 2500-ish, just 18 months ago.  Bought a bigger chunk of QQQ at $313 back in March.  It's now about $400.  I also dded to my rental holdings, to balance the conservative/ risky ratio.

So, my philosophy is to keep some cash reserves around to get on things when they're on sale.

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Quote

In a letter to Berkshire Hathaway shareholders, Warren Buffett outlines his plans to follow the 90/10 rule regarding his wife's inheritance, which will be invested 90% in an S&P 500 index fund and 10% in government bonds.

And Hillary Clinton's tax records showed that she was 100% in the S&P.
So there's that.
But one must be able to withstand periods of recession - in Buffets case, someone with enough money could do well on government bonds alone.

For us with properties - they can be the best choice for keeping up with inflation.
One dilemma with rental properties is for do-it-yourselfers is when getting older the physical challenges may increase. 
Do you really want to be on the roof, or climbing ladders on a regular basis at 75 yrs old.  85?  90?
(I looked up "elderly" to see when that happens and world-wide, "elderly" is generally accepted to be achieved when one reaches 70 years of age.)  

With rentals there are three viable choices for us elderly: sell, donate or delegate (hire a management company).
Sell, get the cash - pay the cap gains tax.
Donate: look into Charitable Gift Annuities - which provide income and avoids capital gains.
Delegate: A good management company will take you completely out of the loop, get top dollar and send you checks and bills.

There is much to consider.  


  

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I've had good fortune in mutual funds, mine have been in the aggressive growth category since 1990, I've maintained the same mutual funds since I created that IRA. Now that I must take a MRD yearly the grand total has slowed, but in 3-4 months the fund has recovered that amount.

I'll be 78 Christmas day and I'm considering switching to less risky funds, especially given current economic forecasts..

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3 hours ago, Ray,IN said:

I'll be 78 Christmas day and I'm considering switching to less risky funds, especially given current economic forecasts..

I am just a little more than a year older than you and have had similar thoughts. 

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It's interesting to read other's perspectives on conserving/growing assets.    I guess there's lots of ways to skin this cat.

Much of my financial advice comes from my wife's brother-in-law, who was an accountant for the wealthy, and trust advisor.  In fact he taught trust law at a prestigious university for some time.  In his late 60's, he and my sister-in-law bought a "ranch" in Colorado, and financed it.  I asked why, at that age, would you finance.  He responded that he could deduct the interest and make more money on his investments than he paid in interest.  Not my philosophy, but he's got more $$$ than I.

Like Kirk, I like being debt free in my later years.  It was a struggle, for too long.

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12 hours ago, Kirk W said:

I am just a little more than a year older than you and have had similar thoughts. 

I miscounted,I'll be 79, DOB1942.

This is not a good holiday season. My oldest daughter died from ALS Sep. 26 2020, her husband-my son in law took his life Sunday night, he could not handle losing her. Now I need to make arrangements for financial assistance for their 2 teen-age sons.

Sorry, now back to regular programming.

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1 hour ago, Ray,IN said:

I miscounted,I'll be 79, DOB1942.

This is not a good holiday season. My oldest daughter died from ALS Sep. 26 2020, her husband-my son in law took his life Sunday night, he could not handle losing her. Now I need to make arrangements for financial assistance for their 2 teen-age sons.

Sorry, now back to regular programming.

Ray, so very sorry for your losses.  You now have a lot on your shoulders.  Bless you!

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Really sad about your daughter and son in law but happy you are still around to help the kids and others to deal with it. Life sure can change quickly and sometimes radically and tragically. I just can not  truly convey how sympathetic I feel.

 

As far as investing some very smart people with lots of money have been caught and hammered in some investing. IE bernie Maddof and if I remember Enron hit a lot of people.  I also feel that we have been forced to prop up the economy with the  ultra=low  and 0 interest rates for people less able to take risk.  What is that,? some could call it a type of welfare.

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bigjim, interest rates have been near 2-4% for the last 5 years; well, unless you''re paying on a CC. IMO low interest rates are behind this house buying frenzy. We want to downsize to a smaller ranch-type house without the burden of maintaining a lot of land, but decided to wait until the coming summer to list our house. hopefully this buying frenzy and accompanying bloated prices have subsided; then paying cash might work out better.

 

 

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I was mainly thinking of interest earned to help offset inflation somewhat if you are not an investor.  You wouldn't be keeping up but at least the hole would not get bigger as fast. And is a good thing if you are one wanting to finance but that means the low rates are subsidizing just about everyone.  Doesn't seem fair but whoever said life was fair.  Maybe someone will thank us peons instead of just blaming everything on the current president who ever it is at the time.  Even the ones I didn't like don't have the control  many people seem to think they do.   I do consider what rickieio said about his wife's brother in law said about financing. 

Edited by bigjim
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2 hours ago, Ray,IN said:

bigjim, interest rates have been near 2-4% for the last 5 years; well, unless you''re paying on a CC. IMO low interest rates are behind this house buying frenzy. We want to downsize to a smaller ranch-type house without the burden of maintaining a lot of land, but decided to wait until the coming summer to list our house. hopefully this buying frenzy and accompanying bloated prices have subsided; then paying cash might work out better.

 

 

If you are flexible and you can swing it it might be best to sell your home while prices are high and then live in your RV for a time until prices come down... if they do.  That way you aren't pressured into buying.

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35 minutes ago, 2gypsies said:

If you are flexible and you can swing it it might be best to sell your home while prices are high and then live in your RV for a time until prices come down... if they do.  That way you aren't pressured into buying.

If he has a place to park the RV once he sells the house. And a place to store everything he wants to move to the smaller house.

Linda

Edited by sandsys
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4 hours ago, sandsys said:

If he has a place to park the RV once he sells the house. And a place to store everything he wants to move to the smaller house.

Linda

Therein lies the problem, our alias's are Mr. and Mrs. packrat. We are going to contact a realtor about a place that meets our desires in South-central FL (Lake City and South area) We'll probably wind up buying a place in FL before we sell ours. IF the stock market panic of today is just a short term thing. This new O variant really has the country in a tizzy. Dr. Fauci said today it is already here in the U.S.A. But that's off-topic, enough already.

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Regarding the stock market, I read many books in the mid eighties, the best two were written by Charles Schwab and Peter Lynch. I mostly followed the advice from their books. I had to wait until I was 66 due to SS and Medicare. All of my retirement funds are in mutual funds, 80% stocks and 20% bonds. I retired on September 1st, 2016 with an IRA of $1,200,000. After taking $6,000 per month since then, the current balance of the IRA is $1,300,000. Stock mutual funds have been good to me since I started funding my retirement account, it was a 403b account while I was working. About one third of the $1,200,000 was what I put in, one third was what my company put in for me and the other third was growth of the account. Those men stated in their books that stocks where betting on the US and they thought that was a good idea and it worked for me.

As I watched my parents aged, I noticed that as they got older they didn't require as much money. No longterm care for them. Mother died of a stroke at 84 and my Father at 90 with heart failure one year later,

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9 hours ago, whj469 said:

Regarding the stock market,

Interesting.  I retired back in 2000, taking an early retirement plan from my employer that allowed me to retire at 57 with a fixed monthly pension that came with a "bridge to social security" of 80% of the anticipated SS at age 62 added to my monthly pension until my 62nd birthday, when that ended whether or not I took early SS(which I did). Fortunately it also included health insurance to age 65 for both of us and  a supplement after 65. But my employer also got involved with the IRA accounts in 1974 when they were created and then in 1978 they introduced a 401k program within a month of its creation. After retirement I rolled all of my 401k into the IRA where I had more control and a wider range of options. I have since moved the IRA on 2 occasions but it has now been with the same financial company for almost 20 years. In addition, I did have some other investments and when we sold the house to go fulltime we also put a large portion of that money into an investment fund to allow for us to buy a home again when/if the day came that we needed to leave the road. We retired with our only debt being our motorhome which was paid off from our investment income over our first 5 years on the road. 

The setting aside money to buy another home turned out to be providential as in 2011 we bought in an RV-port community for reasons of Pam's health issues. My IRA/401k didn't total even close to what yours was (about 1/4 million), even with Pam's small IRA added to that but with my fixed pension and our other funds we took nothing out of the tax sheltered funds until we left the road when the last of Pam's IRA as well as the house funds were used to buy the new home. We have since sold that home and now live in a retirement community near 2 of our sons. We took nothing at all from my 401k/IRA funds until the required minimum withdrawal (RMD) began that continues to be the case, as our 2 SS checks and my fixed pension still pay nearly all of our daily living expenses with a small additional portion from our non-tax-sheltered funds to supplement. We do have a long term care policy that was 10 year pay so is fully paid up, but those are not available today. 

Edited by Kirk W
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You also got to retire at age 57 and I had to work 10 years more. Additionally, I was putting $30,000 per year into my 403b retirement account and during that 10 years I had to pay for wife's medical insurance which was over $900 per month until the last two years, when it dropped to $700 per month. My Medicare Advantage plan is also a lot better then the $900 or $700 planes I had at work for those 10 years. My good fortune was that stocks have been good for a long time overall. In my case Mr. Schwab and Mr. Lynch were correct.

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