Hitting your number

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curo
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Hitting your number

Post by curo » Thu Mar 16, 2017 12:28 pm

I have hit my number! Now what? I have a 60/40 portfolio (Rick Ferri Model). I only need a 3% of my portfolio to live on. Do I leave everything the same or move things around to a more conservative allocation? Any thoughts are greatly appreciated.

The Wizard
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Re: Hitting your number

Post by The Wizard » Thu Mar 16, 2017 12:36 pm

Depends.
Hitting your number is a good start. With no need to retire immediately, you might leave things about the same the next few years as you enhance your portfolio even more.

I would also ponder your eventual retirement income streams.
Will everything come from portfolio withdrawals or will you have SS, pension, or annuities as well?
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JDCarpenter
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Re: Hitting your number

Post by JDCarpenter » Thu Mar 16, 2017 12:38 pm

Are you comfortable with 60/40? How old are you? Do you want/plan to retire?

If you enjoy your career and intend to continue working, why change what has been working for you? If retirement is drawing nigh, is 60/40 too much equity for you? (60% is certainly in the objectively sweet range of options.)

For us, we started shifting to more fixed income as we neared the amount needed to retire (i.e., 4 years before retirement)--but haven't made it past 25% fixed yet (ages 57/56, retiring this year). Objectively, we are at the bleeding edge there, but DW may well live a very long time.
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pennstater2005
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Re: Hitting your number

Post by pennstater2005 » Thu Mar 16, 2017 12:41 pm

Makes me think of that commercial where people carried their giant orange retirement number with them. As The Wizard noted, knowing additional income sources will be important in determining how much of a stock allocation you may need. Have you run your numbers through FIRECalc?

Neat little retirement calculator: http://firecalc.com
“If you think nobody cares if you're alive, try missing a couple of car payments.” – Earl Wilson

NiceUnparticularMan
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Re: Hitting your number

Post by NiceUnparticularMan » Thu Mar 16, 2017 12:45 pm

Obviously the top question is whether you are going to stop working. Otherwise, broadly speaking, I think it really depends on whether you want to leave anything to heirs, and if so how much.

If you don't care much or at all about the size of your future estate, this becomes a relatively easy question to answer. You can likely use annuities and/or conservatively-allocated funds (say more like 30/70) to provide the amount of income you are talking about plus increase it for inflation and be pretty confident it will last your lifetime--it just may not provide a big inheritance. Note you might need to tweak the details of this plan depending on your age and other personal details.

If you want to also leave a big inheritance, you are pushing the limits of what is doable without a substantial risk of failure (for ordinary, not aliens-destroy-the-Earth, reasons). In that case you need to decide how to allocate that risk between yourself and your possible heirs. If things went poorly for a while, would you be willing cut back on your spending in the name of keeping your future estate on track? Or would you want your future heirs to take some of the hit? Note if you wanted your heirs to take ALL the hit, you are basically back to the original scenario above.

Something like a 60/40 allocation with no annuities could remain reasonable if you were willing to allocate all or most of that risk to yourself. But the more you want to share that risk with your heirs, the more you would probably want to change that allocation and/or consider annuities.

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bligh
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Re: Hitting your number

Post by bligh » Thu Mar 16, 2017 12:46 pm

Congratulations!

Whatever you've been doing has been working great. I wouldn't change my allocation based on hitting some arbitrary milestone number for me. Honestly how different is a 1.9 mil vs 2.0 mil portfolio? Now, if you are saying you handed in your 2 week notice today and plan on retiring, that is a change in life situation and may call for adjusting your allocation.

Personally, it is a long way off, but I plan to hold 60/40 into my retirement. Possibly 50/50 if the interest rates have gone up enough and my situation allows for it.

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Peter Foley
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Re: Hitting your number

Post by Peter Foley » Thu Mar 16, 2017 12:49 pm

Congratulations. Knowing your age would be nice.

In addition to hitting your number another goal you might consider would be to have your basic expenses covered by your non equity allocation. This may or may not be important to you, but for me it was a factor in setting my AA in retirement.

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steve roy
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Re: Hitting your number

Post by steve roy » Thu Mar 16, 2017 1:04 pm

Now that I'm retired, I take a different view of My Number. I attempted to stash away what I thought I'd need, but like everybody else I was constrained by time and cas flow. I thought I'd made My Number,, but ...

The Mrs. Isn't sure we've hit Our Number. "What if we have higher expenses, what if investments crash, what if Social Security and Medicare get rejiggered, what if we've miscalculated??" ...

To which I reply (sarcastic twit that I am) "What if the sun reaches its Red Star phase? Then we won't have to worry about it."

My Number is an estimate of what we'll need over the next 20-30 years. (Obviously). But it's a moving target and circumstances change. And calculations may have been off to start with.

curo
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Re: Hitting your number

Post by curo » Thu Mar 16, 2017 2:42 pm

Thanks to all for their insight. To clarify a few questions. I just turned 60 and I do have another source of income (commercial real estate rental income). Presently I am retired, but possibly going into part time consulting. Once again my wife and I can managed comfortably off of a 3% return from our portfolio.

John Z
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Re: Hitting your number

Post by John Z » Thu Mar 16, 2017 2:48 pm

When we hit our number we gradually went from 60/40 to 50/50 over 5 years. Why chance it? Keep what you have. When we retired we gradually went to 45/65 over 5 years to further protect our portfolio.

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TomatoTomahto
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Re: Hitting your number

Post by TomatoTomahto » Thu Mar 16, 2017 2:51 pm

Once we hit our number, I wanted to go to 50/50, but something kept pulling me to 55/45. I decided to quit fighting it, and just agree to 55/45; it's close enough.

It all depends on what you want. My wife still works, but we could live on SS alone if we absolutely had to when she retires, and any additional from our savings (401k, tIRA, rIRA, taxable) will be gravy.

NiceUnparticularMan
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Re: Hitting your number

Post by NiceUnparticularMan » Thu Mar 16, 2017 3:00 pm

curo wrote:Thanks to all for their insight. To clarify a few questions. I just turned 60 and I do have another source of income (commercial real estate rental income). Presently I am retired, but possibly going into part time consulting. Once again my wife and I can managed comfortably off of a 3% return from our portfolio.
In light of this information, I'd suggest again that if you really want to secure that 3% (adjusted for inflation) for the remainder of your lives, it might make sense to consider annuities and/or a more conservative allocation (something in the 30-40% equity range is probably what I would do--and probably what I will do!). As I previously suggested, the downside to such a plan over just keeping on with 60% equities is it may significantly reduce your estate in the long run. If you do want to reduce your equity allocation, I don't think you should feel obligated to do this immediately (although you could)--you could work out a plan to, say, hit your target allocation within 5 years or so.

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Toons
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Re: Hitting your number

Post by Toons » Thu Mar 16, 2017 4:23 pm

Breathe Deep,
No knee jerk moves.
Take your time.
We retired 6 years ago.
I have gone from 90/10 to
70/30.
Reduce gradually ,,depends on what other sources of income you have.
Remember ,you need some growth of capital the next 30 or so years :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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blueblock
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Re: Hitting your number

Post by blueblock » Thu Mar 16, 2017 5:52 pm

Another 55 stock/45 bond here. Been retired two years.

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