Friday, June 27, 2014

Thinking about investments for retirement - what a hard job!

I just spent a couple of hours thinking through how to change our investments to incorporate my inheritance. What a hard job this is!

I asked myself several questions.
  • When will we need money and how much do I anticipate we will need at each point?
  • How will we fund catastrophic health problems and/or long term care?
  • What is our current non-retirement account investment mix?
  • How much risk can we tolerate and still sleep at night?
  • What is reasonably available as investments right now with low or no associated fees?
So here is how I thought it through. I am very curious how others are thinking about these things as they prepare to enter retirement or manage their finances in the early years of retirement.

When will we need money and how much do I anticipate we will need at each point?
  • When hubby retires from his current job at the end of 2017 we plan to sell our house and relocate back to California. There will be lots of costs associated with this.
  • In addition, there is an unknown period of time between when he retires and when his pension will start being paid as there is a retirement processing backlog for Federal pensions at this time. We will need cash flow then.
How will we fund catastophic health problems and/or long term care?
  • We have been holding on to our term life insurance as a way to fund these.
  • Now I am going to use a 5-year CD ladder as this fund.
 What is our current non-retirement account investment mix?
  • We have CDs and I bonds as well as savings accounts. Some are performing relatively well and others aren't.
 How much risk can we tolerate?
  • We are pretty risk averse but trying to push ourselves to deal with the risk that we actually are losing money due to inflation and taxes.
What is reasonably available as investments right now with low or no fees?
  • I expect to create a 5-year CD ladder, hold on to some I bonds that are returning decent rates of return and keep some money in savings for cash flow spikes.
  • I also going to invest in one of Vanguard's target date retirement index funds as well, but still need to decide which one to use. Where is that crystal ball when I need it LOL!
I realize that we are really fortunate to be able to have this challenge at all. However, I don't want to squander the money that has been accumulated by our hard work as well as the hard work of my parents and maternal grandparents. In addition we come from very long lived families and reasonable need to fund 30 more years of life.

That's the proposal I am presenting to Hubby tonight. If you have thoughts or experiences to share I'd love to hear them.

1 comment:

  1. I would check out the distribution of assets in your life cycle prospects and see how it leaves your overall distribution. It sounds like you have CD & bond investments in other accounts. You want to be sure you have enough growth prospects for 20 years from now.