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Subject:  Re: Late life retirement investing Date:  7/26/2010  9:18 AM
Author:  TwoCybers Number:  67372 of 88419

Misc comments & opinions

#1 Go to Boggleheads and spend a lot of time reading - Your amount to invest $500,000 is small enough you really need to self manage it. These people know a great deal about that and have the goal of low cost.

#2 I fail to see any reason or advantage to put any funds in a Roth. It is unlikely (i.e. less than 50% shot) your father inlaw will live 25 years. Despite what the doom sayers say, taxes are not going to go up enough to make the Roth a break even situation. If you doubt me, get out excel and do a calculation. You know the current taxes he will pay for converting the IRA funds to a Roth. His potential investment earnings will be the same for a Roth as his current IRA. So what future tax rates do you expect 5, 10, 15 and 20 years forward? Myself I think it unlikely the tax rate will increase very much. For example the personal deduction goes up every year, many states have no taxes or social security, etc. So do not look at the marginal rate i.e. the 15% rate. Look at total taxes paid divided by total income. The income tax rate will be much lower than 15% today.

To get a better handle on life expectancy, take a look at calculators such as When you look at results, keep in mind 50% of the people exceed the average.

#3 If he invests in a diversified portfolio, he should be able to withdraw 4.0% a year, with increase for the CPI -- That would be $20,000. NOTE - if the investments are not suitably diversified, the withdraw must be lowered. So in the rate of 60% stocks and 40% bonds will work. The Boggleheads will give guidance, but one simple way to accomplish the task is simply put the funds in Vanguard's Wellington Fund - it is 70% stocks and 30% equities. I believe you can set up a deal where Vanguard will deposit a check in your father inlaw's bank monthly. Than annually you can change the amount to match the CPI.

The calculations get a bid more tedious, but you also could spend a bit more money for the next few years and have less after social security and medicare kick in.

Do check out the impacts of the Healthcare bill that was passed this year. For example to famous Donut Hole in drug coverage will decrease each year going away completely at some point. A lot of stuff happens in 2014 and I do not know if the donut hole is gone then or not.

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