No. of Recommendations: 3
I will be retiring in a couple of months. Age 62. My pension can be $1200/month 10 year certain and life or $182,000 lumpSum. My wife is much younger than I am and earns $60,000/yr. Relatively debt free. The market is terrible, wouldn't want ind. stocks.I have approx. $30,000 in blue chip stocks. I was thinking about $90,000 vanguard S&P 500 index fund and $90,000 tax deferred municipal bonds.Will be receiving approx. $2,000 soc. Sec. monthly benefit. (We have a 15 yr old mentally challenged child.)WE would like to supplement our income with $500/month from the $182,000. We will still be in a high tax bracket that is why I was considering the Tax free municipal bonds.I am in good health and feel altho I am retiring, I can handle a little risk than all fixed income. I would appreciate any suggestions or advise. T.I.A.

I don't think it can be right to take the $182,000 lump sum, pay 36% federal and 10% state taxes, and then reinvest the money. Reinvesting in an IRA deferring tax over 23 plus years must be better. In a tax deferred account investment grade corpoarates do better than municipals as you do not have the benefit of tax exempt interest--all of the income from an IRA is fully taxable.

As you are in good health it would be a good idea to defer taking Social Security until you are 65. Your benefit is actuarily reduced for each month you take it before 65. With the substantial income from your wife's salary, you would likely be taxed now on 85% of social security now. When she retires you will be taxed at 50% of SS income on a larger benefit.

As for investments for the IRA i prefer 3 asset classes VanguardTotal Stock Market Fund, VTSMX; Vanguard Real Estate Index, VSIGX; and Vanguard Inflation Protected Securities, VIPSX. VIPSX holds TIPS, treasuries with inflation protection, top credit rating and guaranteed to yield 3.25% required payout rate and maintain the buying power of the principal.

Best wishes for a long prosperous and healthy retirement!

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