Reached 50X annual spending. Now what?

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retiringtype
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Reached 50X annual spending. Now what?

Post by retiringtype » Thu Dec 14, 2017 7:43 am

Thanks to the continuing bull market, my nest egg has reached 50X annual spending. From what I've gathered in this forum, that would consider me relatively "bulletproof." (Please correct me if I'm wrong.) However, I'm not sure what my proper asset allocation should be. I know it's a subjective decision, but I'd also like to know what others here think. I've seen everything from 30/70 stocks/bonds to 50/50.

A couple of things to note: I'm 62 years old and actually (and amazingly) just landed a new job (in marketing). I intend to work another year and then reassess whether I want to continue. My current asset allocation is approximately 43% stocks (60/40 domestic/international), 32% bonds (mostly munis), 17% short-term reserves, and 7% "other", which is Vanguard categorizes the lump sum value of my pension, which I've yet to touch.

Thanks in advance.

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jfn111
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Re: Reached 50X annual spending. Now what?

Post by jfn111 » Thu Dec 14, 2017 8:34 am

I'm 61 with 40X annual spending. I'm comfortable with a 35/65 portfolio.

retiredjg
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Re: Reached 50X annual spending. Now what?

Post by retiredjg » Thu Dec 14, 2017 8:41 am

There is no "right" answer. Any of those numbers is reasonable. You have no need to take risk but you could tolerate risk if you want to. so it all boils down to "willingness".

You've apparently been through market crashes before. If we have another mess like 2007 - 2009, how much would you be comfortable seeing disappear? If you'd be comfortable seeing 1/4 of your portfolio disappear, then 50% stocks might be an OK place for you. If not, pick a lower number.

livesoft
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Re: Reached 50X annual spending. Now what?

Post by livesoft » Thu Dec 14, 2017 8:47 am

Now what? Go start spending.
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westrichj312
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Re: Reached 50X annual spending. Now what?

Post by westrichj312 » Thu Dec 14, 2017 8:56 am

OMG enjoy your life and spend!

Da5id
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Re: Reached 50X annual spending. Now what?

Post by Da5id » Thu Dec 14, 2017 9:03 am

retiringtype wrote:
Thu Dec 14, 2017 7:43 am
Thanks to the continuing bull market, my nest egg has reached 50X annual spending. From what I've gathered in this forum, that would consider me relatively "bulletproof." (Please correct me if I'm wrong.) However, I'm not sure what my proper asset allocation should be. I know it's a subjective decision, but I'd also like to know what others here think. I've seen everything from 30/70 stocks/bonds to 50/50.

A couple of things to note: I'm 62 years old and actually (and amazingly) just landed a new job (in marketing). I intend to work another year and then reassess whether I want to continue. My current asset allocation is approximately 43% stocks (60/40 domestic/international), 32% bonds (mostly munis), 17% short-term reserves, and 7% "other", which is Vanguard categorizes the lump sum value of my pension, which I've yet to touch.

Thanks in advance.
Do you have Social security above/beyond that? Clearly you are financially set unless the zombie apocalypse strikes. I'd go 50/50 myself if you feel like you can stomach a 50% stock slide. Which of course could or could not happen. But less stock will also presumably work just fine. 17% short term reserves seems kind of high though, it is a portfolio drag. That is > 8 years spending apparently? And I also assume you are just working because you enjoy it, as clearly you could be retiring or working at a lower paid job you find rewarding?

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FiveK
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Re: Reached 50X annual spending. Now what?

Post by FiveK » Thu Dec 14, 2017 9:05 am

retiringtype wrote:
Thu Dec 14, 2017 7:43 am
I know it's a subjective decision, but I'd also like to know what others here think.
You have more than you need, so you
a) don't need to take risk and should have a conservative (say, 30/70) portfolio, or
b) can afford to take risk (because even a 50% drop leaves you at a presumably safe 25X) and can have an aggressive (say, 70/30 or more) portfolio.

Either is defensible. Some defenders of "a" (or "b") will not understand how anyone would choose "b" (or "a"). I think you should pick the one that appeals to you.

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Re: Reached 50X annual spending. Now what?

Post by sunnywindy » Thu Dec 14, 2017 9:12 am

retiredjg wrote:
Thu Dec 14, 2017 8:41 am
There is no "right" answer. Any of those numbers is reasonable. You have no need to take risk but you could tolerate risk if you want to. so it all boils down to "willingness".

You've apparently been through market crashes before. If we have another mess like 2007 - 2009, how much would you be comfortable seeing disappear? If you'd be comfortable seeing 1/4 of your portfolio disappear, then 50% stocks might be an OK place for you. If not, pick a lower number.
I agree with the above quote; your allocation seems very reasonable to me, too.
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midareff
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Re: Reached 50X annual spending. Now what?

Post by midareff » Thu Dec 14, 2017 9:22 am

Will be 70 in two weeks and can almost pay the bills from my cola'd pension and SS. Both retired although she is younger and a long way from SS. Thanks to the bull the portfolio I retired with six years ago now enables lots of things I did not expect would be possible. As I mentioned in another post there were times in my life I was very, very, poor and I will not let that happen again. I will be about 43/54/3, equities/FI/cash when I start my first RMD draw in January. I'm also about 60/40, US/International on equities. I have no intention of risking money I do want to spend on world travel and luxuries, to try and make more money I probably won't be able to use. From where I sit the risk vs. reward perspective and the desire to SWAN both say it's the right spot for me.

I think you are fine with your AA.

Perhaps your "Now what?" is in identifying and reserving your well deserved long retirement cruise.

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Watty
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Re: Reached 50X annual spending. Now what?

Post by Watty » Thu Dec 14, 2017 9:29 am

Now what?
If you have not done it yet and have not decided to rent for life then paying off your house would make sense.

Your expenses will also vary as you age so you need to also consider that. Often when people first retire they will do more travel and they may also need expensive long term care too.

One way to look at this is that you now have two portfolios. What you expect to need and what your estate will get. For the second portfolio you can use and asset allocation that would be appropriate for whoever will inherit it.
Da5id wrote:
Thu Dec 14, 2017 9:03 am
Do you have Social security above/beyond that? Clearly you are financially set unless the zombie apocalypse strikes.
+1

If you have a paid off house then the home equity would be an additional safety net.

ryman554
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Re: Reached 50X annual spending. Now what?

Post by ryman554 » Thu Dec 14, 2017 9:40 am

Get rid of all debt. What is your multiplier now?

Split your multipliers into "essential" and "essential+fun"

What do you budget for medical expenses going forward? Read up on ACA/Medicare and put line items in for that. Estimate worst-case (think rounds and rounds of chemo + nursing home care) Subtract that sum total (if you can, and if you do, please share how you did it, I'd like to know!). What is your multiplier now?

Subtract in your expected pension/SS from your expenses. What is your multiplier now?

Is your multiplier > 50%? You're bulletproof, regardless of allocation.
Is your multiplier > 33%? Your still bulletproof, particularly if you have lots of vacations planned, but don't go too conservative. 40/60 or above is fine.
Is your multiplier > 28%? Your at the edge of "perpetual", but you can't be particularly conservative. 70/30+ gets you through.
Is your multiplier > 25%? At minimal risk, but not if you can dial back expenses. You'll need to be 80/20 and have the strength to ride out the dips.

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Re: Reached 50X annual spending. Now what?

Post by dbr » Thu Dec 14, 2017 9:43 am

If it is really true that your spending has been estimated with contingencies for things that might happen and the number is 1/50 of your assets, then your asset allocation doesn't matter. More exactly your asset allocation will affect how much uncertainty there will be in your future wealth and how much your future wealth will be. If you don't care what those things are, then your asset allocation doesn't matter.

If you want someone to tell you what to do then buy a 30/70 three fund portfolio, but I am not responsible for the outcome if you don't know either.

A way to find out what can happen is to run some scenarios in FireCalc or another similar calculator and see what happens.

msk
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Re: Reached 50X annual spending. Now what?

Post by msk » Thu Dec 14, 2017 9:55 am

AA really ought to depend also on what you wish to do with what's left over after you have paid off your living-and-play expenses. What will probably surprise you is how quickly your leisurely retirement passes. I retired at 55, now at 73. Just like we do not want the market to clobber us in early retirement, you also need to live it up in that same period. Before it gets too late because you no longer consider your long cherished bucket list worth the bucket it's in any more. I retired with a COLA pension and a NW of 25x Job Income. No idea how your "expenses" compare to your job income. Obviously you have been living well within your job income. Upon retirement I quickly migrated all my NW to 100% stocks and left it there. I have no clue how much your calculated expenses compare to your current job income but if they are nearly the same, and you have some vision of leaving some for heirs or charity, you could consider being more aggressive in your AA. I've been lucky with the bull markets (Ok apart from those two hiccups in the last 18 years :mrgreen: ) and my NW has compounded at 11.5% p.a. even after having given away more than all the pension I have received throughout. Now I feel very comfortable as regards endowments, charity, heirs, and the empty bucket for the bucket list. Been there, done that. 100% stocks worked well for me. YMMV.

retiringtype
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Re: Reached 50X annual spending. Now what?

Post by retiringtype » Thu Dec 14, 2017 10:09 am

Thanks for all the responses. This forum is amazing. In answer to a few queries:

I took my new job mostly because of the health insurance. I was treated for prostate cancer this year. It was totally unexpected and very depressing; I've always been extremely fit and healthy. Was on an ACA plan but my doctor/hospital was threatening to stop taking ACA insurance in 2018. So a full time job became a necessity.

I haven't factored in a huge healthcare bill, mainly because I now have insurance. Hoping/assuming it will cover any extreme situations.

I've realized that I really don't know how to live relatively extravagantly and not worry about spending. I've spent my entire working life living very small and saving as much as possible. And I come from a family that never had much money (and at times, none). My big purchase this year was a new OLED TV on Black Friday and even that was painful. (Although the picture quality is awesome.)

And finally, I have no children, just a significant other. And she's doing pretty well herself. So I'm not so worried about any inheritance.

CnC
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Re: Reached 50X annual spending. Now what?

Post by CnC » Thu Dec 14, 2017 11:03 am

retiringtype wrote:
Thu Dec 14, 2017 7:43 am
Thanks to the continuing bull market, my nest egg has reached 50X annual spending. From what I've gathered in this forum, that would consider me relatively "bulletproof." (Please correct me if I'm wrong.) However, I'm not sure what my proper asset allocation should be. I know it's a subjective decision, but I'd also like to know what others here think. I've seen everything from 30/70 stocks/bonds to 50/50.

A couple of things to note: I'm 62 years old and actually (and amazingly) just landed a new job (in marketing). I intend to work another year and then reassess whether I want to continue. My current asset allocation is approximately 43% stocks (60/40 domestic/international), 32% bonds (mostly munis), 17% short-term reserves, and 7% "other", which is Vanguard categorizes the lump sum value of my pension, which I've yet to touch.

Thanks in advance.

I'll throw in some morbidly into this just because it's fun. :mrgreen:

What are your plans post life for your money? Do you have any heirs? Do you want to leave them much?


If the answer is yes go anywhere between 70/30 and 50/50. This will give you more money at your passing. You will never have to worry about running out regardless of market path because at 40x assets you can live off of bonds for 11+ years before ever touching the stocks to ride out any crash.

If the answer is no, go between 50/50 and 30/70. You still won't run out of money, you won't end life with nearly as much but with no heirs to leave it to. It won't matter. The benifit here is you have no gut punch if the market tanks.

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Re: Reached 50X annual spending. Now what?

Post by KyleAAA » Thu Dec 14, 2017 11:11 am

At a 2% withdrawal rate, practically any reasonable allocation will be fine. I'd be likely to invest a bit more aggressively (maybe something like 65/35) in that situation.

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Re: Reached 50X annual spending. Now what?

Post by panhead » Thu Dec 14, 2017 11:23 am

At 50x any reasonable portfolio would have dividends & interest that would pay all of your expenses and likely a bit more, so your AA isn't so critical. The suggestions above are all reasonable. I'm younger and am almost at 33x spending and I'm sitting at 50/50. This is my "I don't know nuthin" portfolio. If you don't care about legacy, you can go pretty conservative, probably 30/70. If you do, you could go more aggressive, though I wouldn't go above 60/40, and probably not above 50/50.

I'm not sure that helped, but as long as you don't do anything crazy, you will be fine.

Edited to add:

In my opinion, limiting your spending to 2% of portfolio value at 61 is incredibly conservative. If you are having trouble spending more than that, I would consider taking part of that pile and buying a SPIA. Just pay attention to future RMDs and other issues that could cause tax issues.

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randomizer
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Re: Reached 50X annual spending. Now what?

Post by randomizer » Thu Dec 14, 2017 11:26 am

I'll most likely never get anywhere near 50x. If I were you I would've headed for the hills long ago.
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NextMil
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Re: Reached 50X annual spending. Now what?

Post by NextMil » Thu Dec 14, 2017 11:27 am

Nothing substantive to add on this, but wanted to say congratulations. That is pretty amazing. Well done.

TravelforFun
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Re: Reached 50X annual spending. Now what?

Post by TravelforFun » Thu Dec 14, 2017 12:02 pm

Congratulations on the 50X but I often wonder about the X. Would X be your frugal annual spending or annual spending that includes a ittle extravagance?

I'm 50X with a little cut back on spending, 40X average spending, and 25X with extravagances.

TravelforFun

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Re: Reached 50X annual spending. Now what?

Post by bloom2708 » Thu Dec 14, 2017 12:09 pm

randomizer wrote:
Thu Dec 14, 2017 11:26 am
I'll most likely never get anywhere near 50x. If I were you I would've headed for the hills long ago.
+1

OPs username should be updated to "notthe-retiringtype" :wink:
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Re: Reached 50X annual spending. Now what?

Post by sport » Thu Dec 14, 2017 12:14 pm

I would suggest that you decide which of these two things is more important to you:
1. I want to grow my investments as much as reasonably possible.
2. I want to preserve and protect what I already have.

If #1 is more important, you should have a 60/40 or 70/30 portfolio.
If #2 is more important, you should have a 40/60 or 30/70 portfolio.

A further guideline is that your equity percentage should be about double the amount you are willing to lose in a bear market. So, if you wish to limit your possible losses to 15%, then a 30/70 portfolio would be appropriate.

In any case, your selected allocation should be somewhere between 80/20 and 20/80.

retire57
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Re: Reached 50X annual spending. Now what?

Post by retire57 » Thu Dec 14, 2017 12:14 pm

We also achieved that goal last year at 58 and 62. Congrats, BTW!

We are at 50/50 which has been a bit nettling with this bull run but .... we keep reminding ourselves that in 2008, we were grateful to hold 30% bonds. And yes, having no debt at retirement was a key component of our financial plan.

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Will do good
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Re: Reached 50X annual spending. Now what?

Post by Will do good » Thu Dec 14, 2017 12:20 pm

FiveK wrote:
Thu Dec 14, 2017 9:05 am
retiringtype wrote:
Thu Dec 14, 2017 7:43 am
I know it's a subjective decision, but I'd also like to know what others here think.
You have more than you need, so you
a) don't need to take risk and should have a conservative (say, 30/70) portfolio, or
b) can afford to take risk (because even a 50% drop leaves you at a presumably safe 25X) and can have an aggressive (say, 70/30 or more) portfolio.

Either is defensible. Some defenders of "a" (or "b") will not understand how anyone would choose "b" (or "a"). I think you should pick the one that appeals to you.
+1
I'm for the b camp.

SimplicityNow
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Re: Reached 50X annual spending. Now what?

Post by SimplicityNow » Thu Dec 14, 2017 12:26 pm

Congrats! Being able to retire when you want to is very empowering.

As others have said, you are just fine with your allocation as is.

No need to take on more risk and you've weathered the storm before so it isn't likely you'll sell when the market declines.

I would just this. Life is short. It can change in an instant as you learned.

Once you have a plan for health insurance then stop working when it isn't fun. Enjoy life.

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Re: Reached 50X annual spending. Now what?

Post by thangngo » Thu Dec 14, 2017 12:27 pm

retiringtype wrote:
Thu Dec 14, 2017 7:43 am
Thanks to the continuing bull market, my nest egg has reached 50X annual spending. From what I've gathered in this forum, that would consider me relatively "bulletproof." (Please correct me if I'm wrong.) However, I'm not sure what my proper asset allocation should be. I know it's a subjective decision, but I'd also like to know what others here think. I've seen everything from 30/70 stocks/bonds to 50/50.

A couple of things to note: I'm 62 years old and actually (and amazingly) just landed a new job (in marketing). I intend to work another year and then reassess whether I want to continue. My current asset allocation is approximately 43% stocks (60/40 domestic/international), 32% bonds (mostly munis), 17% short-term reserves, and 7% "other", which is Vanguard categorizes the lump sum value of my pension, which I've yet to touch.

Thanks in advance.
Now what? Just do your thing.

Thesaints
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Re: Reached 50X annual spending. Now what?

Post by Thesaints » Thu Dec 14, 2017 12:28 pm

Increase annual spending, or reduce portfolio volatility bringing it down toward zero.

Osp62
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Re: Reached 50X annual spending. Now what?

Post by Osp62 » Thu Dec 14, 2017 12:43 pm

Congratulations on your nest egg and can definitely understand some of the issues you bring up. In a July 2016 post you stated that you had 6mm in assets and if you are only spending 2% a year at 61 (with no children) after a cancer scare you may want to enjoy your money more.

Perhaps spend more than what you are sending now and just go with a medium allocation - if you are not sure just go 50-50 and don’t worry about the asset allocation or minor expenses ( as I notice from some of your past postings) any more. Enjoy your money which is hopefully closer to 8mm now.

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Re: Reached 50X annual spending. Now what?

Post by David Jay » Thu Dec 14, 2017 12:47 pm

Rick Ferri (wrote the book: "All About Asset Allocation") says that 30/70 is the "sweet spot" for retirees - low volatility with enough stocks for some growth.

At 50X, you can do anything you want. But if you don't know what to do, go with 30% equities.
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ACA
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Re: Reached 50X annual spending. Now what?

Post by ACA » Thu Dec 14, 2017 12:51 pm

midareff wrote:
Thu Dec 14, 2017 9:22 am
Will be 70 in two weeks.. Both retired although she is younger and a long way from SS.
STUD

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PhysicianOnFIRE
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Re: Reached 50X annual spending. Now what?

Post by PhysicianOnFIRE » Thu Dec 14, 2017 1:25 pm

Will do good wrote:
Thu Dec 14, 2017 12:20 pm
FiveK wrote:
Thu Dec 14, 2017 9:05 am
retiringtype wrote:
Thu Dec 14, 2017 7:43 am
I know it's a subjective decision, but I'd also like to know what others here think.
You have more than you need, so you
a) don't need to take risk and should have a conservative (say, 30/70) portfolio, or
b) can afford to take risk (because even a 50% drop leaves you at a presumably safe 25X) and can have an aggressive (say, 70/30 or more) portfolio.

Either is defensible. Some defenders of "a" (or "b") will not understand how anyone would choose "b" (or "a"). I think you should pick the one that appeals to you.
+1
I'm for the b camp.
I'm a b) type as well.

I'm guessing Social Security will also cover a decent portion of your annual X.

I would take the 25x that covers your needs with a 4% SWR and treat it as conservative as you need to be comfortable. Let's say in the 40 / 60 to 60 / 40 range.

The remaining 25x is money you can afford to lose. I'd put it in 100% stocks and let it ride. The overall allocation of the entire portfolio would therefore be in the 70 / 30 to 80 / 20 range.

If your only concern is not running out of money, you could go with 100% TIPS and you should be good until at least age 112. But if you'd like to see the money pile continue to grow, you can easily afford a more aggressive portfolio than proposed.

FWIW, I'm about 90 / 10 with somewhere between 30x and 40x depending on future health care costs. But I'm 42 and still working part-time.

:beer
-PoF

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Sandtrap
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Re: Reached 50X annual spending. Now what?

Post by Sandtrap » Thu Dec 14, 2017 1:38 pm

Welcome :D
Congratulations on your successes and hard work. :sharebeer

I also have 50X and sleep well with a 30/70 allocation (per Rick Ferri) in a hybrid LMP that is somewhat "black swan" resistant. I also am diversified in real estate for the "super black swans" (terrifying enormous wingspans).

You can follow the "age in bonds" rule of thumb and with your assets be as conservative as 20/80 with minimal repercussions because of the size of your assets.

Use Firecalc to get an idea of projected growth of your assets.
PORFOLIO VISUALIZERS, PROJECTIONS, AND ANALYSIS
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Firecalc. Retirement. How long will your money last?
https://www.firecalc.com

If you care to, you can also calc using the "funded ratio". Google the "wiki" on that. "bobcat2" did some excellent write ups on it.

Review the following. Post a portfolio for review if you care to. The information and education will answer your questions and much more.
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Re: Reached 50X annual spending. Now what?

Post by btenny » Thu Dec 14, 2017 1:57 pm

I think your asset allocation is just fine and I would not change a thing. You are holding about your age in bonds which is very reasonable. Enough risk in stocks to keep up with inflation and grow some but not so much to cause you to bail in a bad market.

BUT I do suggest you reconsider taking that new job even though you will have to do ACA insurance for a few years. Retire now and go fishing or hiking or play golf or some other fun thing. Why do you want to exert the effort to learn a new company and work that hard just to make more $$$ that you will never spend? Are you sure that is what you want to do for the next few years????

Good Luck.

PS. I retired young and thought I would go back to work. I never did. It was about the best decision I have ever made. And I had less money than you and I have more now than when I retired 18 years ago.

PPS. Please PM for me for details. I am a 17 year Prostate cancer survivor. This type of cancer is totally treatable in most men. So try not to worry. Yes it causes issues but you will be OK.

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Re: Reached 50X annual spending. Now what?

Post by inbox788 » Thu Dec 14, 2017 2:15 pm

retiringtype wrote:
Thu Dec 14, 2017 7:43 am
However, I'm not sure what my proper asset allocation should be. I know it's a subjective decision, but I'd also like to know what others here think. I've seen everything from 30/70 stocks/bonds to 50/50.

A couple of things to note: I'm 62 years old and actually (and amazingly) just landed a new job (in marketing). I intend to work another year and then reassess whether I want to continue. My current asset allocation is approximately 43% stocks (60/40 domestic/international), 32% bonds (mostly munis), 17% short-term reserves, and 7% "other", which is Vanguard categorizes the lump sum value of my pension, which I've yet to touch.
How much are you budgeting for health insurance and health costs? Company provided health insurance is often forgotten cost if you retire early and have a gap before Medicare kicks in.

Do you have a mortgage? Will you be paying rent in retirement? That makes a big difference in budget planning. A range of 30/70 to 50/50 is a good goal to have. One retirees 30/70 may be more aggressive than another's 50/50 depending on specifics. You count the 7% pension as bond equivalents, but what about social security? Pull the pension and you're closer to 50/50, but if you add the social security, you'd be closer to 30/70.

You could always spend more! Maybe not frivolously, but budget higher inflation estimates, so you might only be at 40X or 45X, or retire a year earlier and draw down 2X annual spending for every year you take off. Working an extra year means you're not drawing from the 50X years, so you add an extra year in the tail end, plus you get 4% SWR growth, and you might have excess income that you don't spend. Makes a big difference if you need it, but you don't. Enjoy your work. You might get bored in retirement.

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Re: Reached 50X annual spending. Now what?

Post by bobcat2 » Thu Dec 14, 2017 6:51 pm

Sandtrap wrote:
Thu Dec 14, 2017 1:38 pm
If you care to, you can also calc using the "funded ratio". Google the "wiki" on that. "bobcat2" did some excellent write ups on it.
The funded ratio (FR) is a metric that can be used to monitor your retirement investment plan. The FR tells you how much (what percentage) of your retirement income goal you could purchase today. It is simply the ratio of your assets to your liabilities, where the assets are the size of your portfolio and the liabilities are the present value (PV) of your targeted retirement income stream. A relatively easy and straightforward way to estimate the PV of the liabilities in the denominator is to price a deferred real life annuity that has payouts that match your targeted retirement income and begins payments in your expected retirement year.

Link to funded ratio thread - viewtopic.php?f=10&t=219878
That TIAA-CREF example reinforces the need for goal- or liability-driven investing. …Regarding the example, it is important to decide whether the pot is a savings account or a retirement account. It is hard to have two different goals because they conflict. One calls for having principal stability, which is a Treasury bill. The other calls for standard-of-living and income stability, which is a long-term bond. You cannot have both.

If you get clients to focus on rates of return and asset mixes, it is likely to be the wrong approach. You should get people to determine their goals instead of asking them how much they want to put in real estate.

Everyone in this room knows what people want for retirement. It is an income. Social security gives an income. DB plans give an income. In DC plans, for some reason, we do not show people the funded ratio. We are showing them the wrong thing, and then we are saying they are making the wrong decisions. We are telling people that risk is the value of their fund, when risk is really how much income they can sustain for retirement.
Jeremy Siegel


I don't believe there is currently anything about the funded ratio in the Bogleheads' Wiki. :(

BobK
Last edited by bobcat2 on Thu Dec 14, 2017 8:24 pm, edited 3 times in total.
In finance risk is defined as uncertainty that is consequential (nontrivial). | The two main methods of dealing with financial risk are the matching of assets to goals & diversifying.

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Toons
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Re: Reached 50X annual spending. Now what?

Post by Toons » Thu Dec 14, 2017 6:53 pm

Now What?
Easy.
Do what YOU want to do :happy
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protagonist
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Re: Reached 50X annual spending. Now what?

Post by protagonist » Thu Dec 14, 2017 7:02 pm

Stop postponing joy.

Dandy
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Re: Reached 50X annual spending. Now what?

Post by Dandy » Thu Dec 14, 2017 7:50 pm

Your current allocation is quite good. I do think you have "enough". I was and am in a similar position but now almost 70. Several years ago I came across Dr. Bernstein's idea of having 20-25 years in "safe" investments and then allocation the rest any way you want. It made sense to switch from top level asset allocation to do it from the bottom (secure funding for retirement) up. I chose "safe" investments to age 90 as my top priority.

My overall allocation is 43/57. But the big change was in my fixed income choices. Instead of all intermediate bond funds I chose CDs, Savings accounts, short term bond funds, and money market accounts. (The author also suggested individual TIPs ladder which would be great but I didn't want to go that route).

My"safe" portfolio is about 2/3 of my total fixed income. My "risk" portfolio ended up being 67/33. I feel much more comfortable with this bottom up arrangement rather than guessing if 40/60 or 60/40 was right for me. No approach is set it and forget it so I keep tabs on my expenses and make sure that "safe" assets/yearly draw down dollars = at least the number of years to get me to age 90. I may need to "top off" my "safe" portfolio once in a while to make sure it is properly funded.

I also expect to draw some or all my yearly draw down from my "risk" portfolio when it does well and to fund some splurges e.g. winter vacation from it as well.

This approach has worked for me - I feel my retirement funding is secure since the equity market can plunge and I will likely be ok. Of course no plan is truely bullet proof.

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Re: Reached 50X annual spending. Now what?

Post by MrPotatoHead » Thu Dec 14, 2017 8:20 pm

I would suggest you stop saving for the sake of investment and simply work a year or two and pile up a bunch of cash while at the same time creating your splurge bucket list. Then take that pile of money and align it with the splurge bucket list items and go to town. In other words you apparently are not the type to live extravagantly, but I bet you are the type who could live large for a little bit of time if you earmarked funds deliberately for that purpose. You deserve to taste the high life. My guess is, it will be an amusing pastime for a limited duration of time but won't be you and you will settle back to a more plebeian lifestyle. But at least, you will have had the experience and tasted a bit more of what life has to offer.

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Re: Reached 50X annual spending. Now what?

Post by nura » Thu Dec 14, 2017 8:58 pm

15X annual spending in fixed income, rest in equities; hence 30/70 AA

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Re: Reached 50X annual spending. Now what?

Post by abuss368 » Thu Dec 14, 2017 9:03 pm

Congrats! That is quite an achievement.

Remember at some point it becomes more important to protect what we have than to take unnecessary risks to get more.
John C. Bogle: "You simply do not need to put your money into 8 different mutual funds!" | | Disclosure: Three Fund Portfolio + U.S. & International REITs

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Re: Reached 50X annual spending. Now what?

Post by blevine » Thu Dec 14, 2017 9:08 pm

X should include good medical insurance.
Now are you 50x ?

Finridge
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Re: Reached 50X annual spending. Now what?

Post by Finridge » Thu Dec 14, 2017 9:40 pm

Your AA should depend on your expected timeline of withdrawals, and your ability to emotionally deal with volatility. But the way I see it, volatility and risk are not the same thing. The risk depends on your time horizon. While bonds are less volatile, over longer time horizons they can be more risky.

I was just going through this same exercise myself--re-evaluating my AA. If you haven't already, take this questionnaire. https://personal.vanguard.com/us/FundsInvQuestionnaire

Also run different allocations through simulations using cFIREsim and other similar calculators. http://www.cfiresim.com/

I personally found doing this to be very helpful.

One big question is what you plan to do with your funds. If you are allocating some for children or grandchildren, the AA for that should reflect their (not your) time horizon.

I personally ended up going with a higher equity allocation then many other people are comfortable with--obviously, that's not for most people.

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Re: Reached 50X annual spending. Now what?

Post by Finridge » Fri Dec 15, 2017 12:28 am

nura wrote:
Thu Dec 14, 2017 8:58 pm
15X annual spending in fixed income, rest in equities; hence 30/70 AA
That sounds about right to me. But wouldn't that be a 70/30 AA (70% stock, 30% bonds)?

TheBogleWay
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Re: Reached 50X annual spending. Now what?

Post by TheBogleWay » Fri Dec 15, 2017 12:47 am

NextMil wrote:
Thu Dec 14, 2017 11:27 am
Nothing substantive to add on this, but wanted to say congratulations. That is pretty amazing. Well done.
^ this.

Live it up. Just read your post and wanted to say congratulations. I say you throw a party every single day for the next 10 years to celebrate. 50x annual spending is nuts.

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Re: Reached 50X annual spending. Now what?

Post by HJG0989 » Fri Dec 15, 2017 3:08 am

TheBogleWay wrote:
Fri Dec 15, 2017 12:47 am
NextMil wrote:
Thu Dec 14, 2017 11:27 am
Nothing substantive to add on this, but wanted to say congratulations. That is pretty amazing. Well done.
^ this.

Live it up. Just read your post and wanted to say congratulations. I say you throw a party every single day for the next 10 years to celebrate. 50x annual spending is nuts.
Yes, congratulations! Now you just need to figure out how to maximize your happiness. Just remember, it's not just about how much money you have but how many healthy years you have left - and that's a finite number.

We have 33x our annual budget, but we are nearing 5 years of retirement and have not yet spent the annual budget in any of the years. So I don't really know how to compute beyond to say we have more than we need.

We've been doing a lot of traveling, but we also get a lot of satisfaction from being generous to our friends and donating to charities.

Whatever you decide to do, I hope you enjoy your life. :sharebeer

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Re: Reached 50X annual spending. Now what?

Post by aristotelian » Fri Dec 15, 2017 7:02 am

You've won the game. Statistically speaking there is no way you can go wrong as long as you maintain your spending. Your allocation is purely a judgment call at this point. I would be inclined to stick with whatever has worked for you in the past. Err on the aggressive side if you have grandkids or charitable causes that you want to help. Think more about what you want to do (or have done) with the money than how it's allocated.

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Re: Reached 50X annual spending. Now what?

Post by Tamarind » Fri Dec 15, 2017 7:04 am

I (31) would have gone and FIREd employer if I hit 50x in invested assets. Life is too short. OP, you're pretty set even with major medical costs now baked in. Or okay look at it this way, without major medical/insurance costs there's no way you could spend it all no matter how long you live, given your frugal disposition.

If you want to keep working until you're a year closer to Medicare that's perfectly fine. But I don't think you need to, so long as you always maintain good health coverage. If good ACA/other individual coverage is available in your market, you can afford to pay for it. I would only keep working if no acceptable options were available for purchase in my market (based on coverage, not price).

At least heave a sigh of relief and know that you're only working because you enjoy it.

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Re: Reached 50X annual spending. Now what?

Post by whiteprius » Fri Dec 15, 2017 7:30 am

I'd get a bunch of cosmetic surgery and other health expenses to try and look 50 again, maybe even 40 again if you're lucky. They say you only live once but sometimes you can live twice.

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Re: Reached 50X annual spending. Now what?

Post by retiringtype » Fri Dec 15, 2017 10:30 am

Many thanks to everyone for all the excellent replies. It's interesting: No matter how much money you have, it never feels like enough. Maybe it's because of the way I grew up — with not very much. I remember seeing adidas basketball sneakers for the first time as a kid. No one had ever seen leather sneakers before, and I wanted them desperately. Of course, my parents couldn't afford to buy them. So they bought me a pair of very cheap knockoffs. Trouble is, they had FOUR stripes, not three. I was teased pretty mercelessly on the playground.

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