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Roth IRA- Preferred buying and holdings-Owners in their 80's
I'm not sure what you're asking or stating. Do you want to know if there are better options than preferred stock funds to hold in a Roth IRA? Are you primarily investing for income? Help.
I can tell you that although I'm only 71 I do hold preferred stocks (CHSCO & CHSCL) along with a preferred CEF fund (FPF) in my Roth account.
Mark, not necessarily for income but over all the years I have done most everything but now can't decide where to focus. It depends mostly on the market and our 2 regular IRA's are well invested broadly. I even had FPF years ago and other prefered stock funds.
Roth money is often mentioned as the last pool of money that one should draw from.
I agree , but I tend to also see Roth money as a pool of money that one can pull from at anytime in retirement. Spending these Roth withdrawals as income has the advantage of making your spending go further since it can be spent tax free.
Early on in my savings career my Roth dollars were positioned in my most aggressive investments. As I have entered retirement, I have re-positioned 3-5 years of income needs using Roth dollars. I place these Roth dollars into less aggressive investments while the rest attempts to grow aggressively (long term).
"...I place these Roth dollars into less aggressive investments while the rest attempts to grow aggressively (long term)."
Less aggressive: since moving my wife's 403b into (Trad.) IRA into BRUFX, we've been quite happy with its performance through the past year, with all the covid and OTHER nonsense going on. It's a balanced fund in the same Morningstar category with PRWCX and DODBX and a host of others. I suspect that BRUFX offers better yield, rather than leaning toward the more growth-y end of things. It is up y-t-d, but not by much. Yet it's doing better than DODBX by quite a little bit. That's another one I habitually track, which is why I mention it. And PRWCX is closed. Or go with Vanguard, maybe? Wellington, or what's that other one? VWINX, yes. I dunno the Wellington ticker, off the top of my head. Yes, here: VWELX. I've heard read some mildly unhappy reports about customer service. But Vang. funds offer very low Expense Ratios. To me, these two in particular seem bloated.
IMHO there’s too many variables to arrive at an answer, though various good approaches may be considered. There’s so many variables I won’t even attempt to list them. I’m 74 with 65-70% in Roths and the remainder in Traditional IRAs. I don’t pay a lot of attention to how the money is divided between the two, with a few exceptions.
- I try to have my best quality funds inside the Roth. There are various ways to assess funds - time held and your own experience being good barometers.
- I’ve avoided holding cash inside the Roth. What little I hold is either in the Traditional or completely outside the deferred accounts. (However, I do have some bond funds in the Roth).
- I maintain a few “duplicate” holdings in both the Roth and Traditional which allows me added flexibility when moving money around.
- Your age, portfolio approach, risk tolerance and other circumstances have more to do with choice of funds than whether you are in a Roth or Traditional.
Let’s assume your question relates only to the more aggressive (riskiest) portion of your portfolio. Here’s the three funds that comprise what I’ve coined the “Equity-Hedged” portion of mine: DODBX, RPGAX, PRWCX. Each has the potential to provide returns far above those of cash or bonds. Each has some component (or quality) that “hedges” losses in a bear market. I mention these only by way of example and they are not intended to be advice or recommendation.
Word of caution: Portfolio construction first. Roth & Traditional assignment later.
PS - At 80+, unless you really enjoy the “hunt” and tolerate losses well, you might consider putting a bundle in a good 40/60 balanced fund and letting it ride. There are many. One good one from TRP, where I mostly invest, is TRRIX. It’s a distinctly “non-exciting“ fund.
I'm looking at 2 posibilities, VTMFX and VTCLX. I do own some in regular IRA's and they cover a wide range of the best companies. The volatility and total return do differ but both can be held depending how much and long you expect to own them. You can see them here. https://stockcharts.com/freecharts/perf.php?VTCLX,VTMFX
I decided to try another fund I own PRILX and compare with VTMFX and VTCLX. I looks like it still leaves VTMFX as least volatile as well as having Bonds for much more diverse. So I expect to use VTMFX.
@ron, The tax managed approach is great for taxable accounts, but you mentioned Roth choices. VTMFX achieves tax management by owning tax free munis. Great fund.
A fund like VLAAX spreads its bond exposure over many sectors (Corp, Muni, Gov, Secur). It's 56% equities / 35% Bonds / 9 % cash right now.
A fund like VLAAX spreads its bond exposure over many sectors (Corp, Muni, Gov, Secur). It's 56% equities / 35% Bonds / 9 % cash right now.
Good choice, bee. An even better choice is VLAIX, the institutional shares. Requires, however, an initial minimum investment of $100,000 at Fidelity and Vanguard. Its risk/reward profile is very similar to wunderkind fund PRWCX.
Roth money is often mentioned as the last pool of money that one should draw from.
If you often spend more money in your early days of retirement, would you not want to draw on roth vs traditional to not realize the income for tax purposes?
Roth money is often mentioned as the last pool of money that one should draw from.
If you often spend more money in your early days of retirement, would you not want to draw on Roth vs traditional to not realize the income for tax purposes?
I personally agree that taxes matter. I presently try to manage my taxable withdrawal verses tax free withdrawals to stay below (or at) the 12% tax bracket. Roth withdrawals have the advantage of being a tax free withdrawal.
Even if one does not need income (equivalent to the 12% threshold) it seems to me that Roth conversions (up to the 12% threshold) make good sense as well. They my be the lowest rates we ever experience going forward.
For 2020 the 12% threshold: Single = $40,125 Joint = $80,250 H of H = $53,700
Comments
I can tell you that although I'm only 71 I do hold preferred stocks (CHSCO & CHSCL) along with a preferred CEF fund (FPF) in my Roth account.
I agree , but I tend to also see Roth money as a pool of money that one can pull from at anytime in retirement. Spending these Roth withdrawals as income has the advantage of making your spending go further since it can be spent tax free.
Early on in my savings career my Roth dollars were positioned in my most aggressive investments. As I have entered retirement, I have re-positioned 3-5 years of income needs using Roth dollars. I place these Roth dollars into less aggressive investments while the rest attempts to grow aggressively (long term).
Less aggressive: since moving my wife's 403b into (Trad.) IRA into BRUFX, we've been quite happy with its performance through the past year, with all the covid and OTHER nonsense going on. It's a balanced fund in the same Morningstar category with PRWCX and DODBX and a host of others. I suspect that BRUFX offers better yield, rather than leaning toward the more growth-y end of things. It is up y-t-d, but not by much. Yet it's doing better than DODBX by quite a little bit. That's another one I habitually track, which is why I mention it. And PRWCX is closed. Or go with Vanguard, maybe? Wellington, or what's that other one? VWINX, yes. I dunno the Wellington ticker, off the top of my head. Yes, here: VWELX. I've heard read some mildly unhappy reports about customer service. But Vang. funds offer very low Expense Ratios. To me, these two in particular seem bloated.
IMHO there’s too many variables to arrive at an answer, though various good approaches may be considered. There’s so many variables I won’t even attempt to list them. I’m 74 with 65-70% in Roths and the remainder in Traditional IRAs. I don’t pay a lot of attention to how the money is divided between the two, with a few exceptions.
- I try to have my best quality funds inside the Roth. There are various ways to assess funds - time held and your own experience being good barometers.
- I’ve avoided holding cash inside the Roth. What little I hold is either in the Traditional or completely outside the deferred accounts. (However, I do have some bond funds in the Roth).
- I maintain a few “duplicate” holdings in both the Roth and Traditional which allows me added flexibility when moving money around.
- Your age, portfolio approach, risk tolerance and other circumstances have more to do with choice of funds than whether you are in a Roth or Traditional.
Let’s assume your question relates only to the more aggressive (riskiest) portion of your portfolio. Here’s the three funds that comprise what I’ve coined the “Equity-Hedged” portion of mine: DODBX, RPGAX, PRWCX. Each has the potential to provide returns far above those of cash or bonds. Each has some component (or quality) that “hedges” losses in a bear market. I mention these only by way of example and they are not intended to be advice or recommendation.
Word of caution: Portfolio construction first. Roth & Traditional assignment later.
PS - At 80+, unless you really enjoy the “hunt” and tolerate losses well, you might consider putting a bundle in a good 40/60 balanced fund and letting it ride. There are many. One good one from TRP, where I mostly invest, is TRRIX. It’s a distinctly “non-exciting“ fund.
Good luck.
A fund like VLAAX spreads its bond exposure over many sectors (Corp, Muni, Gov, Secur). It's 56% equities / 35% Bonds / 9 % cash right now.
Good choice, bee. An even better choice is VLAIX, the institutional shares. Requires, however, an initial minimum investment of $100,000 at Fidelity and Vanguard. Its risk/reward profile is very similar to wunderkind fund PRWCX.
Good luck,
Fred
Even if one does not need income (equivalent to the 12% threshold) it seems to me that Roth conversions (up to the 12% threshold) make good sense as well. They my be the lowest rates we ever experience going forward.
For 2020 the 12% threshold:
Single = $40,125
Joint = $80,250
H of H = $53,700