The strategy

Okay, continuing with the backstory.  It's 2007, my mom's a 65-year-old widow, retired, with a small savings account and a house that will net about $400k.  Again, $600k in investment accounts.  So a net worth of about a million bucks.  I've taken on the responsibility of minding this money, talking with various "financial planners" from banks, the local branches of brokerage companies, and a few other various pros around town my dad had dealings with (most of whom didn't really want to talk unless I was buying something they were selling, usually at what seemed to me inflated prices).

The other thing I need to mention is that, income-wise, she's pretty well covered.  Between Social Security and two pensions, her take-home is as much as mine; but instead of carrying four passengers, her plane is carrying just one.  So month-to-month, fine.

This is what I had in mind:

Steady income stream: check (pension and Social Security would cover monthly expenses for some years to come).

Housing: check (the sale of the home would provide enough for moving expenses, transition costs, and the full purchase price of a condo in a 55+ community, which was her goal).

Back-up savings for supplemental expenses: check (with a suplus coming from the home sale along with current savings, she'd be able to add $10k to her income for 5-10 years, no problem).

In September of 2007, I read a post on SmartMoney called "A League of Their Own" about Harvard's and Yale's endowment funds.  Both were doing extremely well, and the author of the article proposes how one might replicate their strategy.  I'd been buying ETFs for years with my own but never had seen anything that laid out a work plan for the indefinite future so clearly. This is what their portfolios look like:


So now I set about figuring out how to use James Stewart's ETF model for a retirement account.

What this blog is about

For some time now, I've been following the occasional posts on pfblog.com. Though the number of posts have fallen off lately, I feel like I've gotten to know the author's goals and strategies, and I can see how his documentation has kept him on track.

In 2005, my father passed away and I had the priviledge of sorting through his financial documents. I don't know what I expected to find, but if there were any surprises they were mostly that he didn't leave much money behind. A small monthly pension that would continue paying out for the rest of my mother's life, a very small Roth IRA, a few dubious penny-stock certificates, fairly high credit card bills (all accumulating interest every month), and a whole bunch of unused check books.

My mother and I discussed having a financial advisor take over, but honestly there wasn't much to advise on at the time except for her 401k. However, she was her own boss on that front, and facing her own imminent retirement, she was going all in. In the two and a half years between Dad's passing and her last day at work, her retirement account went from (as I recall) $277k to $470k.

Her risky investment strategy had worked. Now it was time to think about how to maintain that money for the long term. I set up a rollover IRA and went about determining how best to allocate her three investment accounts: her brokerage, which had some stock she'd inherited and continued owning over the years in a DRIP progam; her Roth IRA, which was combined with Dad's but was still had a very modest balance; and her Rollover IRA. In all, the three accounts had just over $600,000 in them. Now the question was, how do we make it last?