Retire at the Coffeehouse

Critical Mass: Care and Feeding For Once Attained

Top 52. Feb 25, 2005 12:38 PM

» bob90245 - Re: Re: Question from Bill

In response to Re: Question from Bill posted by WilliamGr:

Hi Bill,

Welcome to our site!

re-investing seems to be the most often recommended approach that I have seen

I would be curious if you have a link to point to discussions on this. I'm still having trouble understanding the reason for this recommendation.

I can understand for an investor accumulating assets, reinvesting dividends is desirable to further grow ones nest egg. But during retirement is the time to draw income from the nest egg. And those dividends are an important part of generating that income.

On the other hand, perhaps the philosophy is to rely on the capital gains from which to take profits. I don't know. That's only a guess if I were to take the side of "re-invest the dividends". But, this would not be my approach.

Anyway, let me again say "Welcome" to you, Bill. There are other useful message boards on this site you may want to check out.

And click here for a list of the other investing message boards at Suite101.

Or you can also click the link at the top of the page called Discussions for You

Bob

-- posted by bob90245

Top 53. Feb 25, 2005 1:15 PM

» Kirk - Welcome Bill!

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In response to Re: Question from Bill posted by WilliamGr:

Welcome to our group Bill!

We have a feature for you that will bookmark the discussions you subscribe to here AND keep track of when they have new posts. Just follow the simple instructions below.

These are some of my favorites:

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I'd bookmark this http://www.suite101.com/discussions.cfm/... Then I'd suggest subscribing to the discussion threads above using the "subscribe" button at the bottom of each discussion. Then you can click "what's new" on the left under "Member Central" to get a list of your bookmarked/subscribed topics. This makes it much easier to find these discussions should they roll off the Top 20 list bookmark or make your home page as I've done.

-- posted by Kirk

Top 54. Feb 25, 2005 6:49 PM

» WilliamGr - Re: Re: Re: Question from Bill

In response to Re: Re: Question from Bill posted by bob90245:

Hi Bob - Thanks for the welcome! I look forward to researching here. Right now we are at one of our daughters awaiting a new grand child, so internet access is limited!
Concerning "re-investing seems to be the most often recommended approach that I have seen", I guess this goes back to general conversations I've seen on other boards, but is also Vanguard's recommendation for the deferred part of retirement portfolios. First became interested in approach similar to yours when read Frank Armstrong's aritcle on Morningstar the year I retired, 2000. Other than setting aside a year's worth of expenses in money market, don't recall that he went into any further detail on withdrawal mechanics. Have been thinking about it and believe I feel best about your approach. Just recently turned 59 1/2 and am just beginning to regularly withdraw from IRA. Believe I will begin routhing those dividends to my money market beginning in April (first month of my "fiscal" year). Thanks again for the cordial welcome!

-- posted by WilliamGr

Top 55. Feb 26, 2005 6:45 AM

» iammugsy - Coffee with cream and sugar

Great articles on the Coffee house portfolio. Being such a lazy person, I had my IRA in the Vanguard total bond mkt and worried about the value in this current raising interest rate environment. So now I have reallocated it to the "Lazy man's portfolio. Dividends are being reinvested for a few more yrs until I have to mandatorily start withdrawing. Thanks Bob, for all the research you have done on this subject.

-- posted by iammugsy

Top 56. Feb 26, 2005 9:16 AM

» bob90245 - Re: Coffee with cream and sugar

In response to Coffee with cream and sugar posted by iammugsy:

Hi Mugsy,

Welcome to our group! From your comments, I think I understand a little bit more about the debate between reinvesting or not reinvesting dividends. Yes, if the retiree is not going to immediately draw income from the nest egg, then by definition you're still in "accumulation mode". And just like for working-age investors, reinvesting dividends will help further grow the nest egg.

There is only one caution (not necessarily related to the "Retire at the Coffeehouse" strategy) that seems to be getting a lot of press both here and at the Morningstar message boards. And that is the tax considerations for regular IRA's and 401(k)'s when Required Minimum Distributions (RMD) come into play at 70 1/2. Click here for the article.

-- posted by bob90245

Top 57. Jun 14, 2005 9:40 AM

» bob90245 - Re: Re: Conclusion - Actually a question from a new member

In response to Re: Conclusion - Actually a question from a new member posted by Dick_Y:

Hi Dick,

Welcome to our group! I'm not sure if in your case you are saving for retirement or already in retirement. I'll assume that you're saving for retirement.

Gosh, my memory is drawing a blank on your question. I don't know where or if I posted my preference to ETF's. But maybe you can look HERE and see what my current holdings are. I do have both mutual funds and ETF's. I use ETF's mainly in my taxable online brokerage account.

If I were to give advice to people, it would be to stick with mutual funds and reinvest the distributions (for someone saving for retirement). Personally, I like ETF's for most, but not all slices. ETF's make it easier to harvest losses for tax purposes (when the ETF's are in your taxable account).

I hold REITs ( VGSIX ) in my IRA's. In this case with their relatively high distributions, I recommend using a REIT mutual fund instead of an ETF. This assumes that one has not retired yet. It could be a different story for a retiree who wants to take the distributions as cash and not reinvest.

As you see there are no hard and fast "rules". I hope I've given you good answer to your question. If not, let me know and I'll try again. <img src=http://www.suite101.com/images/emoteicon...>

-- posted by bob90245

Top 58. Jun 14, 2005 12:31 PM

» bob90245 - Re: Conclusion - Actually a question from a new member

In response to Re: Re: Re: Conclusion - Actually a question from a new member posted by Dick_Y:

Given your situation in retirement, I'm not sure whether there will be an advantage to ETF's. An IRA rollover in Vanguard funds gives you a lot of flexibility. You can elect to either reinvest the distributions back into the individual fund or direct the distributions to a money market where they will be available for withdrawal. Another advantage using all Vanguard mutual funds is that if you want to rebalance your portfolio, it is easy to exchange shares between funds.

-- posted by bob90245

Top 59. Jun 14, 2005 4:31 PM

» bob90245 - Re: Re: Re: Conclusion - Actually a question from a new member

In response to Re: Re: Conclusion - Actually a question from a new member posted by Dick_Y:

OK, I see now why ETF's may be of interest for you. However, I would like you to reconsider your beliefs about "Secular Bear Markets". Consider that this belief is promoted by gurus who either have an interest in market timing by selling advice, a book, a newsletter, etc. or who have not studied the concept of 'slice and dice' as apposed to "The Market" as represented by the Dow, S&P 500 or Total Stock Market index.

Two case in point. As I detailed in THIS ARTICLE, while large caps suffered through sub-par returns during the 1966-1982 period, small-caps enjoyed their greatest bull run ever. A more recent example is detailed by Paul Merriman in THIS ARTICLE he wrote.

Now as you probably read in my CHAPTER 15, there have been times when all areas of the market (slice and dice) succumbed to THE BEAR. And there will likely be times in the future when that will happen again. So it is up to each retiree to have a game plan for these inevitable occurrences. After all even at age 65, it is likely that you will see several more bear markets (as well as bull markets) during your and your wife's lifetime.

My own preference is to be less dramatic in my timing moves. As I explained HERE, I will go from 60:40 stock:bond allocation to 50:50 and back again. Alternatively, you can say my "Core" allocation is 50:40 with an "Explore" portion of 10% that I trade.

-- posted by bob90245

Top 60. Jun 15, 2005 7:18 AM

» allancoleman - Re: Conclusion - Actually a question from a new memb

In response to Re: Re: Re: Re: Conclusion - Actually a question from a new memb posted by Dick_Y:

one of the problems in being a market timer is the missed opportunities . i , also , missed the cyclical run up in 2003 . managed to make the one last fall and also managed to get out at the highs this march 4th / 7th .

however , probably one of the best calls i made was getting out in mid 1999 , before bob brinker , and saving tons of critical mass in 2000 . i sleep better , even when i miss the runups , cause i manage to keep my returns positive year over year and grow my critical mass even when living out of it .

good luck in your soul searching .

-- posted by allancoleman