Where to invest non-equity portion of IRA
Terry, you have given sage advice on investments over the years which I have employed personally such as my “chicken money” invested in a TIAA-CREF variable annuity in the early 2000’s that still pays 3% guaranteed on my idle cash. My question today concerns where to invest $ a portion of my IRA funds, but first some background. Currently, the equity/non-equity split of is about 53% to 47% for all our liquid assets which total a bit over $3 million. We would like to maintain a 50-50 or 55-45 split as we are fairly conservative. We own our home and have no debts. We have a bit over 1% of our funds in SPDR Gold ETF. The equity portion of our assets is invested primarily in Vanguard domestic and international market tracking ETFs plus a bit over $500 K in Wellington funds. My wife is 59 and I am 61 . We both plan to work another 5 years and are in good health. Our pensions plus Social Security will more than cover our living needs so we will not be touching the IRA funds until forced to start withdrawing at 70.5 years old. Approximately 66% of our pensions will be inflation indexed. We do not have long term care insuance or fixed annuities.. Now back to the investing question(s). One of my Vanguard IRA’s worth $165 K is currently invested in the Vanguard Ginnie Mae fund with a duration of roughly 4.5 years and a bit over 2 percent dividends.. After reinvested dividends, so far it has lost approximately $7 K since I first invested in early 2012. Our 47% non-equities includes PIMCO All-Asset Institutional in my 401k (worth about $370 K); $300 k in i-bonds; $150 K in the bond portion of Wellington funds. etc. Question(s) – with interest rates likely on an upward path (but no one knows the trajectory and timing obviously) and wanting to keep the $165 K in non-equities, would you recommend staying with the Ginnie Mae fund; investing in short term bond fund(s) (which ones); a CD ladder; and/or something else non-bond (i.e., such as REITS). I look forward to your reply. Thanks.
SAVAGE SAYS: Gosh, you’re asking me to do an entire investment plan via email!? I have a better idea. Vanguard has an excellent retirement investment — and withdrawal — modeling service. Give them the info you just gave me, and see what they suggest. Then get back to me and I’ll comment on their plan!
My only specific comment is to ask why you bought a Ginnie Mae fund in early 2012 — just as interest rates started to rise, and you were guaranteed to lose I’d be concerned about interest rate risk in all bonds — no matter what the qualify. Here are some of the things I’ve done to offset that risk and diversify. 1. You own GLD, the bullion — as I do. But the gold mining stocks have been hit hard, and about four months ago I decided the gold stock mutual funds looked more attractive than the ETF for bullion. I still feel tht way, and there are many good gold mining stock funds. I use www.usfunds.com?Gold & Precious Metals fund?for my acount. Second, you could diversify out of dollars as a currency. I think the Canadian dollar is a good diversifier, as well as a hedge against inflation, since the country has natural resources. Besides, right now the currency is 5 cents below parity, the lowest in the past couple of years. Go to www.Everbank.com and buy an FDIC insured CD in Canadian dollars, get a slightly higher return — and some currency risk. And I own REITs as well. If looking for a fund, American Century has a good REIT fund. These are general recommendations — pick what is appropriate for you, and in the interest of full disclosure, I have these investments myself.
