AssetBuilder Inc. Registered Investment Advisor - Simple Investing. Smart Future.

Scott,

Which couch potato portfolio is most appropriate for an upcoming retiree, age 60, wanting to invest for income and enough growth to cover inflation for a 25 - 30 year retirement?

Thank you,

Bill

I can't answer the question as it is asked. Your portfolio choice depends very much on other factors in your life and retirement such as the size of your Social Security benefits, whether you have an employer pension, and whether you own your house or condo free and clear.

The Couch Potato Portfolios vary from 50 percent fixed income down to 20 percent fixed income. If your situation includes strong SS benefits, no debt, and no mortgage debt on your home, you should be going for one of the more aggressive portfolios--- at least the 6 Ways from Sunday which is 2/3rds equities.

If you have some debt, limited SS benefits, etc. you should favor the lower risk portfolios such as the original Couch Potato or the Four Square.

 All the portfolios are listed, with trailing performances, on the website.

 Scott

Scott,

Here is a little more information regarding my situation.  I am considering retiring at age 60 near the end of this year.  My wife (currently age 62) and I have about $2.1M in investable assets, a house worth about $300k with mortgage balance of $195k at 6.125% fixed with 22 years remaining.  No other debts.  My SS benefits are estimated to be a little over $21k per year at age 62 or $28k at age 66.  I would like to delay starting SS benefits until age 66 if possible.  My spouse will begin Texas Teacher's Retirement System retirement benefits of about $11k per year early in 2009.  Because of these benefits, her SS spousal benefit will be reduced to about $6k per year if delayed until I turn 66.  My company pension will likely be taken in a lump sum and is included in the above $2.1M figure.  We plan to remain living in Houston during retirement due to low cost of living, nearby family, etc.  Estimated retirement living expenses are about $100k per year before taxes.

Under these conditions, which couch potato portfolio sounds most appropriate to you.  The more I read about the outlook for the stock market over the next decade to two, the more concerned I become. 

Thank you so much for your comments.

Bill

Bill,

If your company pension is paid in a lump sum you might consider converting part of it to a lifetime annuity with joint and survivor benefits. This will increase the odds that you will never run out of money. It will also reduce the amount of money you need to withdraw from your tax-deferred accounts for the early years of retirement.

If you invested all of the money rather than turning some into a lifetime annuity, you should be more conservative. To me, that means an equity allocation of not more than 67 percent. This would allow you to use any of the Couch Potato portfolios up to the Six Ways from Sunday portfolio.

If you put a portion of your pension lump sum into a lifetime annuity, you could increase the equity allocation and START at 67 percent moving toward the 80 percent of the 10 Speed. This change would allow you to add the value segments, enhancing the odds of a good long term return.

Scott

Scott, I have to disagree with Bill.  You are absolutely able to now move your funds from your 401k while you are still actively working with your company and after transferring the money you can still participate and contribute to your company's 401k. 

 I don't know who the company is that contacted you but that is beside the point that there are no rules in place that allow you to do this.  The only requirement is that the company you work for actually has to have this feature in place with thier plan administrator.  Most fortune 500 companies have implemented this feature in thier 401k plans at the counsel of their legal departments since the law has made this available.

 It is an excellent thing to do if you are vested and you can transfer the vested value of your account, especially if you are not happy with the fees of your 401k or the performance of the accounts or the choice of the portfolio available.

 You should look into it further.