Bogleheads.org

Percentage-based strategies are withdrawal rates from a probability-based approach. An asset allocation that is probability-based. Some call it the Farmer’s Almanac approach to investing since it relies on historical data to predict the future. Some people are comfortable dying with a large sum of unspent money and some wish to enjoy more of the fruits of their delayed-gratification strategy. Living in constant fear of running out of money during roller coaster gyrations of the market takes a toll on many investors. Some percentage-expressed strategies are a probability-based approach. The 4% SWR stuff is a huge misnomer because it only uses a percentage when you retire, but adjusts CPI thereafter. When i hear the term percentage-based str...

Percentage-based strategies are withdrawal rates from a probability-based approach. An asset allocation that is probability-based. Some call it the Farmer’s Almanac approach to investing since it relies on historical data to predict the future. Some people are comfortable dying with a large sum of unspent money and some wish to enjoy more of the fruits of their delayed-gratification strategy. Living in constant fear of running out of money during roller coaster gyrations of the market takes a toll on many investors. Some percentage-expressed strategies are a probability-based approach. The 4% SWR stuff is a huge misnomer because it only uses a percentage when you retire, but adjusts CPI thereafter. When i hear the term percentage-based str...

I can see the value of an annuity to "force" you to spend more while insuring against longevity risk. I think the probability-based strategies all but assure that you die with a large sum of money, especially if you are overly conservative. It gets even harder to spend more as you age unless it is consumed by healthcare and assisted living. The large sum left behind at death leaves behind a lot of life unlived when you die. Do you mean percentage-based strategies? 4%/year is a percentage, not probability of something happening. Assuming you meant percentage-based strategies, it actually depends. VPW for example uses percentages, but it is designed to deplete your portfolio in the end. Percentage-based strategies are withdrawal ra...

I can see the value of an annuity to "force" you to spend more while insuring against longevity risk. I think the probability-based strategies all but assure that you die with a large sum of money, especially if you are overly conservative. It gets even harder to spend more as you age unless it is consumed by healthcare and assisted living. The large sum left behind at death leaves behind a lot of life unlived when you die.

I am leaning more and more toward a blended safety-first/probability-based approach. I think I would likely spend too little in retirement out of fear of longevity risk and end up aging and ultimately dying with fun left on the table. I will probably (joint -life) SPIA our essential expenses at around age 70, and use the remainder of the portfolio for some inflation-hedge/discretionary spending/bequest. At least that's where my head is at 5-8 years from retirement.

lepa71 wrote: ↑Tue Mar 21, 2023 10:18 am Another question.
How often does the interest get applied?

Once a month.

lepa71 wrote: ↑Tue Mar 21, 2023 10:15 am

mhc wrote: ↑Tue Mar 21, 2023 9:58 am I think VMFXX is a good choice. VUSXX may be a better choice. You have to decide what is better for you.

I feel like I can get money from VMFXX faster than from VUSXX if need to.
Is it right?

Yes. It is a settlement fund that can be linked to a checking account.

I sure hope so. I have 7-figures in VMFXX waiting for a house purchase.

Same situation here. Finishing architectural plans and going to finish outs to establish the price point and budget. Going to custom cabinet meeting in a few weeks. That should be sobering. Have the cash ready in a MM and Treasuries to do all cash purchase. The biggest issue is our priority to the price/budget and choosing the upgrades that we feel are a priority. Want to keep price in line with comps and total cost less than 20% of our net worth. The interest rates and financial friction of transaction fees/costs of a mortgage motivate us to do a cash deal. We have not revealed to the potential builder that it is a cash transaction and the dynamics of choosing finish outs with the suppliers is interesting. We are very cognizant of each cos...

By far the most important aspect of your decision is buying the right size/cost home. You get into trouble when you over extend and the recurring costs force you out prematurely. Factor in rising taxes, utilities, maintenance and insurance on a too-big-of-a-home and that leads to big problems.

It hurts savers that rely on fixed-income producing assets. Savings account and CD holders and the like.

I have a combination of CDs, Treasuries and MM (VMFXX) for my house fund. We should break ground in 1-2 months and have a 16-18 month build time. I have 1 year CD and 3 month T-bills. Trying to figure out how to pay cash and have a construction loan as well for certified draws.

quantAndHold wrote: ↑Mon Mar 13, 2023 9:24 am

goodenyou wrote: ↑Mon Mar 13, 2023 8:57 am

jebmke wrote: ↑Mon Mar 13, 2023 8:56 am

goodenyou wrote: ↑Mon Mar 13, 2023 8:54 am It just means that customer service at Vanguard will get worse. If that is even possible.

Why would this incident have any impact?

If they lost money, they will need to cut expenses.

Vanguard’s funds lost the money. Customers who owned the funds are the losers, not Vanguard. Vanguard’s operations are paid for by ER’s on the funds, fees, etc. Not by a stock Vanguard buys on behalf of its customers.

Got it. If the funds go down, and the ERs stay the same, does the revenue go down?

jebmke wrote: ↑Mon Mar 13, 2023 8:56 am

goodenyou wrote: ↑Mon Mar 13, 2023 8:54 am It just means that customer service at Vanguard will get worse. If that is even possible.

Why would this incident have any impact?

If they lost money, they will need to cut expenses.

It just means that customer service at Vanguard will get worse. If that is even possible.

How long does the bridge need to be? Is it just 3 years, from 65 to 68? Probably? Other possibility is a wide bridge from my age 65 to 68 that narrows to two lanes for 68 to 72 (when tax-deferred drawdowns have to start). Her ideal social security age is not until I am 79 (age 70 for her). I should probably mention that we are maxing ($20K) I-bonds each year starting last year, so we will have about $200K plus accrued interest stashed there by my age 65. That definitely could cover expected expenses for those first three years, but I'd been hoping to have the I bonds run a bit longer than that. The RMD age changes from 73 to 75 in 2033 based on SECURE 2.0. You will be 66 in 2033. Unless she is the higher earner, your likely strategy is for...

Pay off student loans and start investing more into your portfolio at the desired AA with excess cash flow.

SCOXX. I also use VMFXX at Vanguard. The problem, as stated above, is the 1-day lag in liquidation with SCOXX to have the cash available.

We save less now that we have reached FI. We used to save a large percentage of gross income because we lived way below our means. We are letting the portfolio grow, but we have relaxed the savings. We want to enjoy the money while we are relatively young. We both still work in well-paying careers. Plan to work 5-10 more years. Still max out 401k with MBD Roth.

nisiprius wrote: ↑Sun Feb 12, 2023 10:05 am

goodenyou wrote: ↑Sun Feb 12, 2023 9:53 am...Intelligence is knowing that a tomato is a fruit. Genius is knowing not to put tomatoes in a fruit salad...

A friend of mine who is something of a foodie literally put (cherry) tomatoes in a fruit salad. It was good.

Intelligence is knowing that a tomato is a fruit. Common sense is knowing not to put tomatoes in a fruit salad. Creativity is taking a calculated risk on violating common sense.

Common sense is instinct. Enough of it is genius.

I believe that bonds behave more deterministically versus equities, but is it really so clear that interest rates had to rise, and on the timescale that made this a sure decision? What made it a sure decision was the pre-determined course to return to BND when it was consistently paying at least a 50% premium to stable value. If I call it a policy statement,it's not market timing, right! You have to become accustomed to BHs painting scarlet letters on you for the dreaded Market Timing. It's apparently okay to market time housing, automobile purchase, vegetables, appliances, etc., but heaven forbid you do it with securities. People market time vegetable purchases? Do you do it with tomatoes? Wait - a tomato is a fruit. An internet search pu...

I also confess impurity to market timing. It is, without a doubt, a behavioral error that reduces the return from an ideal value. The reduction in volatility and decrease in return is the cost of optionality.

We don’t rent because we cannot find a home that fits our desires. To get what we want, we have to build. The extra cost is our enjoyment. We don’t prioritize the best use of our money over our living arrangements. We like space, privacy and a quiet area within 30 minutes of a major city. That comes at a cost. Housing comfort is a top priority for us.

Want to know something funny? I volunteered to be on my partnership 401(k) committee and was turned down. Despite the fact that I may have implemented the world's best 401(k) at my own company, still nobody wants me on that committee. Doesn't hurt my feelings, but does seem kind of dumb. Our 401(k) is fine. I happen to use the PCRA option. That is really funny. Maybe they don't know your alter ego :D :D :D :D :D I have a similar story. Way back in the day, 20 years ago. I was bugging my local teacher's union to have TIAA on their "Union Approved" list of 403b providers for their members. You probably know where this is going! I was so insistent that the Treasurer was convinced that I was an official TIAA rep who would personally ...

Want to know something funny? I volunteered to be on my partnership 401(k) committee and was turned down. Despite the fact that I may have implemented the world's best 401(k) at my own company, still nobody wants me on that committee. Doesn't hurt my feelings, but does seem kind of dumb. Our 401(k) is fine. I happen to use the PCRA option. Our CFO who was on the committee as well told me the CEO wanted to switch plans because he wanted to help out a buddy and that was end of discussion. Like you, I have been doing personal wealth and retirement planning as a physician for the better part of 15 years. I was the managing partner of a 9-surgeon specialty practice with 100+ employees. One of the partners had a son "in the business". ...

White Coat Investor wrote: ↑Sat Feb 11, 2023 11:03 am Want to know something funny? I volunteered to be on my partnership 401(k) committee and was turned down.

Despite the fact that I may have implemented the world's best 401(k) at my own company, still nobody wants me on that committee.

Doesn't hurt my feelings, but does seem kind of dumb.

Our 401(k) is fine. I happen to use the PCRA option.

That is really funny. Maybe they don't know your alter ego

Housing decisions are more complex and don't follow rules-based investing decisions. The important rule in housing is not to allow housing decisions derail your financial future. Too big and too costly can put a drag on accumulation or outright cause financial chaos with distressed selling. Housing, for us, isn't an investment. It is a consumable. If we own, we hope the retained value will lower the imputed rent. The quality of life in a home we enjoy is the consumption. We don't overspend at our peril. People who rent can avoid this because of the optionality of less financial friction to get out of a bad decision.

Another thing to consider--friend might have some leverage. With only 2 docs covering the whole service, the hospital/practice is kind of screwed if one leaves. S/he could take this other offer to the hospital and say I'm out unless you hire or get calls covered some other way. In my experience EVERYONE is replaceable other than a few rare unicorns (Elon Musk like) of which no physician is a unicorn (sorry). My friend was probably the replacement of a prior same scenario.. if down to one I suspect health care system will say to the other person now your comp goes up by x%. It’s not personal it’s just business. New trainees finish every year with probably the same gleam and hope along with freshly minted enthusiasm. You are correct. There i...

Your 401k Plan may have a stipulation that ALL sources of funding be invested the same. My wife's Employer (Mega International Pharma) 401k Plan does not allow the converted after-tax to Roth 401k to be invested differently than the pre-tax (employee deferral & employer match) contributions.

I rolled the Roth 401k to Roth IRA (all at Fidelity), so the Roth balance could be invested differently. Also, before SECURE 2.0, Roth 401k were subject to RMDs. That has changed, AFAIK, so Roth 401ks are treated the same as Roth IRAs and are NOT subject to RMDs.

Not hard at all. Figure out what kind of lifestyle you want to have by not earning income, and save for that number. You can use a 4% SWR as a starting point. Assuming you have filled all the obvious tax-advantaged spaces, then save in taxable to keep your AA where you want it. Easy answer.

Whether we worry about it or not, it is an issue that cannot be discussed here on this forum. Your thread will be locked.

Just be careful not to crowd out the match with after-tax contributions (if there is one) by reaching IRS limits too soon into the year and miss out on free match money. That is, if your company has a match and/or does not have a true-up. This issue has been discussed at length here on other threads.

Coopsdaddy wrote: ↑Mon Jan 23, 2023 2:24 pm Blown away by your salary,you doctors?

Also plan on starting my own business in 4-5 years which will require $1M capital in cash

Doctors (usually) don't do that. So, very unlikely.

Happy 99th Birthday Taylor and may you have many more SPIA payments in the future!

Thanks for your inspiration and wisdom!

Put the money in short term Treasuries and build your balance sheet so it makes financial sense to buy a $2-3M house in the future.

I wouldn’t buy a house that was 3-4x my income early in my career if I had the ability to accumulate enough wealth to have financial freedom while living comfortably in a $1M house. But that’s me.

8301 wrote: ↑Fri Jan 20, 2023 3:16 pm

goodenyou wrote: ↑Fri Jan 20, 2023 3:07 pm I wonder if you reframed the question as “if you woke up and realized that you won the Powerball Lottery, would you continue to work?”, if the answers would be different.

I assume so. I assume the answer goes back to the degree of FI and the vagueness of TRULY.

Let me reframe your question with a slightly different flavor. If the president of the country woke up and realized that he won the Powerball Lottery, would he continue to work or resign from the presidency immediately?

Oh boy. That is a real softball. I will refrain.

I wonder if you reframed the question as “if you woke up and realized that you won the Powerball Lottery, would you continue to work?”, if the answers would be different.

I assume so. I assume the answer goes back to the degree of FI and the vagueness of TRULY.

On another note, for people who redeem their bond, how quickly was the money transferred to the bank?

Members are posting 1-2 day turn around times in other I Bond threads

Stinky wrote: ↑Thu Jan 19, 2023 10:16 am

NiceUnparticularMan wrote: ↑Thu Jan 19, 2023 9:18 am
Like, for whatever reason the inflation protection in TIPS seems cheap to the point of being negligible, but maybe otherwise inflation protection is more expensive.

The federal government is able to provide unlimited, apparently inexpensive, inflation protection, as seen in both TIPS and Social Security, in part because of its authority to tax and to print money.

Private businesses do not have that authority.

Once you add in the cost of administration/profit, there is no juice left in the squeeze. Taxpayers pick up that cost in the federal government.

I didn’t purchase a home that put a drag on my ability to accumulate wealth when I was your age. A $2M house in NYS will come with about $50k-60k a year of property taxes. Add in P&I @20% down, insurance and maintenance and you’re getting close to $20k per month. So, the first $240k/year goes to the house before you turn the lights on. If you have a great job and you can save much more, then go for it. If you are trying to get to the point to which you can afford to live in the house and maintain your lifestyle without working, you have to have a very stable and high paying job that you (both) like to do for a long time. Waiting for the perfect time to buy is impossible. Waiting for housing prices to reset for interest rates may take a ...

I wonder how employees would feel about lower salaries today in exchange for a defined benefit of retirement income. If participation in a 401k is any sign, I think employees would take the cash. Guaranteeing a pension based on unrealistic return expectations has created a big problem for industry and States in this country. Unless, of course, it is a Federal pension backed by the money printing press of the US government.

Employees that participate in a 401k are anchored to the accumulation of an asset the can also be passed to heirs. This has created a mind set that is hard to break. Can't have your cake and eat it too.

$126,500 in VMFXX

$126,500 in a CD

supalong52 wrote: ↑Tue Jan 17, 2023 10:39 am I think most who are TRULY financial independent wonder if they TRULY are

TRULY is not a measurable quantity that I am aware of. It's also not used in any serious financial planning literature either.

You assume that X is written in stone. In reality, annual expense changes a great degree. The more affluent Americans are, the more they spend on stuff they don’t need. A bigger house in a nicer neighborhood, a newer car fully equipped with new tech, international traveling with first class tickets and upscale hotel. Make no mistake, anyone can spend all of his or her savings. The ones who get a good handle on their spending can make the money last. Somebody upthread posted about 37X and I had to giggle. I can tell you what X was last year, I can probably have a pretty good idea about this year, maybe some idea about the year after, but 10 years from now? No idea. Maybe if we define X as the floor number below which you’d have to make dras...

If I wasn't paid well for doing something very valuable, I wouldn't continue to work. I have a skill and experience to do something valuable, so I continue to work. As long as I can control my time, I will work. Once things get out of balance, I will retire. Having the freedom to make these choices is invaluable. Same goes for my wife. We both have a nice work-life balance in our 50s as empty-nesters.

Things we spent extra on over the last few years: ... trips where we cover most of the cost for our friends. Genuinely curious, was there any awkwardness in that? How did you proffer the invitation? ETA: or, was there no invitation as such, but you just "grabbed the check." I'm not sure about EnjoyIt, but sometimes I'll rent a place with some extra space. After it's paid for, I'll simply ask friends if they want to join. I've also been the recipient of a free place to stay many times. One thing I'd like to do as I get close to 25X is be more generous with family and friends but in certain situations it can lead to some awkwardness. Same here. I have very close friends since childhood that have very very large wealth differentials...

You are young and would not be subject to RMDs for 30 years, but 401k(s) do not benefit from the aggregation rule (as of current legislation). This may be a consideration when you approach retirement age.

Also, rolling your 401k to an IRA can be a royal PIA depending on 401k custodian. Your former employer may be moving this plan around over the next few decades, and it may end up with a PIA custodian. For that reason, I would roll it over.

In some states, the ERISA protection of a 401k may confer some added judgement protection against creditors, but in many states IRAs are nearly bullet-proof.

AnnetteLouisan wrote: ↑Wed Jan 11, 2023 5:18 pm I’m not saying work for free. I’m saying enjoy the work you do, or try to find paid work that you enjoy. Leisure for too long is not what it may seem.

Some like the work that they do because they are paid well to do it. If you do important work, and there is a regulated market in your field, you will likely have your work devalued. That leads to job dissatisfaction.

I would just use VUSXX for ease and liquidity. If you want to pull the trigger on a house, you don't want to have your money tied up in any way. Even if it's in a Treasury. If you assume a 50bp spread between the two, that is about a $3,000 difference for a year. That is, if it stays at 50bps spread, and you keep it there for a year or beyond. If you had it in Treasuries, you would be subject to market value adjustment if you wanted to liquidate before maturity.

IMO, VUSXX for ease and simplicity, if you want to pull the trigger at a moment's notice.

Ken Dychtwald wrote a book on the coming workforce crisis about 15 years ago. It resonates with me as we see many race to the finish line to be financially independent. We are losing many valuable contributors. The phenomenon is even more perilous in medicine. Judgement and skill come from experience. This can only be achieved with time. Having physicians retire early is a disservice to society, but I understand the motivation. https://www.amazon.com/Workforce-Crisis-Coming-Shortage-Skills/dp/1591395216 I think we also have to acknowledge that the state pays for a significant amount of medical education, and it should be in the interest of the state that is funding a lot of us to choose people who are more likely to practice longer, and no...