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Hi,
I am new to this community. I am reaching my retirement time and wanted to build portfolio for post retirement income.
I understand that annuities may not be a good way to invest.

If I want to get a monthly income of $5000.00 by investing about $1 Million what is the suggested portfolio?

Thanks
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I am new to this community.

Welcome!

I am reaching my retirement time and wanted to build portfolio for post retirement income.
I understand that annuities may not be a good way to invest.


The broad problem with annuities is that they are an insurance product. The insurer guarantees you a payout by locking in the worst-case scenario. And you're paying the insurer a profit for doing this. Most Fools are able to get better returns managing their own portfolios.

For a good time, go to the Retirement Investing board and ask if annuities are a good idea.
https://boards.fool.com/retirement-investing-100154.aspx
Just kidding. Don't do that. We've had long, long threads on that topic in recent years.


If I want to get a monthly income of $5000.00 by investing about $1 Million what is the suggested portfolio?

The best way to get $5000 a month ($60,000 a year) is to have a $1.5 million portfolio.

Extensive backtesting against historical results has shown that a portfolio of mostly stocks (I think 75% stocks / 25% bonds, someone will correct me if that's wrong) can sustain a 4% annual withdrawal for 30 years, with annual withdrawals adjusted for inflation. You could have retired in October 1929 with that portfolio and not gone broke in the next 30 years. The worst time to retire turns out to have been 1966 due to inflation and bad stock market returns in the '70s. But 4% is the Safe Withdrawal Rate (SWR).

4% withdrawal from a $1.0 million dollar portfolio is $40,000 annually, or $3333 a month. A 4% withdrawal that produces $5,000 a month requires $1.5 million dollars. It's just math.

The alternatives are hard:

1. You can withdraw an unsafe amount and risk running out of money. The higher the withdrawal the more likely you run out of money. The really hard part about this is you may run out of money when you're too old to go back to work.

2. You put off retirement until your savings have grown to the point that they can support your desired withdrawal.

3. You find additional sources of income to grow your savings to the point that they can support your desired withdrawal.

4. You manage your expenses such that you can get by with the safe withdrawal rate for your current portfolio.

I don't have any magic formula for you to make this work otherwise. Sorry.

Conversations on Retirement Investing suggest you continue your successful investment strategies into retirement, with enough cash set aside to fund the next 3-5 years so you're not forced to sell into a downturn.

Hope this helps,

- HCF
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Thanks for the helpful advice.
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How long do you want to live?
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Most folks in my house have lived 90 and beyond.. So preparing for that.. say 25 more years.
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I am reaching my retirement time and wanted to build portfolio for post retirement income.
I understand that annuities may not be a good way to invest.



I was fascinated reading your situation. Sounds like deja vue all over again. I was in that situation a little over 30 years ago. Not quite as much savings as you, but the same need exactly. $5000 a month, $60,000 a year. God willing and the creek don't rise, we will make it. The doctor told me at my annual check up a couple months ago that I could possibly be around another 10 years. My biggest concern now is if we need assisted living at some point. That is really expensive.

The advice you just got was excellent. I agree completely with everything he said. Definitely no annuities. I started with 5 years ($300,0000) in cash and never let it go below 3 years cash. I was fortunate that I retired in a high interest rate time. I split investments between bonds (mostly strips with up to 12%) and stocks. I hope you are already knowledgeable about investing. I had to start learning, and I still had one kid left to raise so I spent a lot of time enjoying family and retirement. After about 10 years I had to turn investing into a full time job. Fortunately, I enjoy it because I spend a lot of time at it.

I assume you will get social security at some time. You really need to study that to make the best long term decision. The social security office was no help to me on that. You don't say if you are married, but if you are, you need to wait as long as you can for whichever of you will get the highest payment. It keeps going up until that person is 70 years old so don't go past that. When one of you passes, the survivor keeps getting that payment with COLA the rest of their life. For the lower payment you can start it early or wait until normal retirement age depending on your financial needs. Sounds like the odds are that one of you will live past 85 and that is when this can really be important. If you pass before your wife, it can be vital for her.

If you own a house or property , you need to evaluate the future value. I am in Florida and everything goes up here, and there is a law that the property tax can only go up with the appraisal but never above 3% a year. Called Save Our Homes Act. I consider our house a savings account. I can take a loan on it or sell it if we need to go smaller or assisted living.

If you are not comfortable investing, you may need to get a financial advisor. Just be sure you get a fiduciary if you go this route. I suspect there are local people around you who are competent. Try to get as much information as you can before you start talking to them. Just remember that every one % they charge is one percent off your earnings so cost is important. You are in a really good place at the Motley Fool to get help if you decide to try it on your own. They also have a money management group. I know nothing about them, but assume they would be similar to what you see in their various services.


Sorry so long. I just keep thinking. Invest as much as you possibly can before you retire. Put as much as you possibly can in a Roth IRA. That is one of the few things the government has done for retired people. It can save you a fortune in taxes. If you have traditional IRA, transfer it a little at a time consistent with minimizing the taxes you pay. When you need to take money from your IRA take it first from the traditional IRA until it costs you in taxes. Then go to non retirement accounts. Ideally you want to run out of money in the traditional IRA first, then take money from non retirement and Roth IRA in the best way for your personal situation.

Sorry I was so long. If I think of anything else, I will come here and post it.
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Sorry so long. I just keep thinking. Invest as much as you possibly can before you retire. Put as much as you possibly can in a Roth IRA. That is one of the few things the government has done for retired people. It can save you a fortune in taxes. If you have traditional IRA, transfer it a little at a time consistent with minimizing the taxes you pay.

When long term care qualifies as a medical expense, withdrawals from IRAs will mostly be offset by medical deductions.
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Have not reached that point yet so can't comment on long term care and the IRS. I have had to do extensive travel for health care and the IRS recognizes well under half of medical travel costs as a medical expense. I have had years with actual costs over $30,000 and was better off taking the standard deduction. I suspect the IRS has a similar view of long term care. They want you to stay at the YMCA and ride a bicycle. Most of my travel has been to M D Anderson in Houston, and I cannot afford to stay at the hospital's hotel. If I stayed there my expenses would have been a lot more.
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I suspect the IRS has a similar view of long term care. They want you to stay at the YMCA and ride a bicycle.

We haven't dealt with lodging for medical care. The IRS enforces tax laws and doesn't make them.

We have dealt with long term care. Long term care was included in medical deduction which means the deduction is reduced by 7.5% of income. The rest is a schedule A deduction. For my mother-in-law, it meant she didn't pay income taxes for the last years of her life.

The larger standard deduction is not permanent. It is set to expire at the end of 2024. It isn't a coincidence that it expires after the current presidential term. Standard politics.
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I have had to do extensive travel for health care and the IRS recognizes well under half of medical travel costs as a medical expense. I have had years with actual costs over $30,000 and was better off taking the standard deduction.

Actually, the IRS recognizes expenses based on the laws that Congress passes, so blame your representatives, not the IRS. For travel, the mileage rate for driving your own car is only $0.17 per mile or actual expenses like gas and oil. Unlike for business travel, you don't get to include expenses like depreciation, insurance or general repairs, which is why the mileage rate for business travel is significantly higher than for medical travel. All other allowable travel expenses (like lodging, car rental or plane tickets) are recognized at their cost. And of course, there is the issue that only expenses in excess of 7.5% (or 10%, depending on the year and your age) of your AGI are deductible, and the issue that the standard deduction significantly increased with passage of the TCJA. So, yes, it's quite possible that taking the standard deduction would be better than itemizing even with over $30k in allowable expenses.

That said, for those in long term care, it's often still possible to offset some/all of the taxes on their RMD income by deducting medical expenses. So, for those who are self-insuring for the possibility of long term care, converting 100% their Traditional retirement account money to Roth is probably not the best strategy to pay the least taxes in their lifetime.

AJ
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The larger standard deduction is not permanent. It is set to expire at the end of 2024. It isn't a coincidence that it expires after the current presidential term. Standard politics.

Actually, it expires Dec 31, 2025, not 2024. That said, it's aligned to give the President and Congress elected in 2024 almost a full year to pass an extension before the expiration. It could have been intially set for up to 10 years, I think, instead of the 7 that it actually was. So, the expiration date likely is not a coincidence.

AJ
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AJ,

Thanks for the information
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