eat love pray and jump in today?

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Karma Skimmer
Posts: 33
Joined: Mon Jan 29, 2018 11:21 am

eat love pray and jump in today?

Post by Karma Skimmer » Fri Mar 02, 2018 1:00 pm

Emergency funds: 290K (52%) in savings, CDs, and cash value in a Whole Life policy
Debt: None (no mortgage)
Tax Filing Status: single
Tax Rate: 25% Federal, 0% State
State of Residence: FL
Age: 58

Current Allocation:
290k (52%) in cash instruments
IRA, 401k, Roth, SEP: 262k (48%) in Vanguard Target 2025

Desired Allocation by 2019:
180k (33%) in cash
IRA, 401k, Roth, SEP: 48% in Vanguard Target 2025
Brokerage: 110k (19%) in Vanguard Target 2030 and VTSAX

Steady income of $105k/year
Contributing max ($24.5k) to 401k and $6.5k to Roth yearly
Yearly living expenses: $50k

Goals:
1. I want to be financially independent. I want to remain single and will likely not buy a house. I would like to travel and write (which doesn't make me money) and so I want to be FI. I can live comfortably on 50k/year.
2. I will consider myself financially independent when net worth is $750k (currently about $550k)
2. will take social security at 62 (about 24k/year)

Questions:
1. People here will likely say my cash position is too high even after re-balancing. But I am conservative. I want to be a bogglehead but I can get a little jittery when I hear gloom-and-doom from people around me. Is my desired cash position of 33% too much? Too little?
2. I am DCA'ing about 2k a month from savings to Vanguard Target 2030. I also have about 65k in the settlement fund which I can move quickly on market down. Is this the day to move the money in?

chevca
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Re: eat love pray and jump in today?

Post by chevca » Fri Mar 02, 2018 1:30 pm

If you're conservative, I'd say the planned 33% cash and the rest in the target date funds looks fine. I don't feel like doing the math, but the planned AA with cash and target funds would put you where 40/60 or less stock/bonds and cash? That's plenty conservative.

When you DCA from cash to the target funds, you're not just going from cash to stocks. You're buying some of everything in the target fund to include a healthy amount of bonds. I would just shift the cash to the target fund now to get to the percentages you want. Or, go more than $2000 at a time... go like $10k or $20k at a time, IMO.

How long do you plan to work for? You say you'd like to add about $200k to the portfolio to reach FI, but you say you will collect SS in 4 years or so. With a conservative portfolio, I think your savings rate will have to do most of the work to add $200k to the portfolio rather than counting on growth.

Why do you have life insurance, especially a whole life policy, if you're single and staying single? Who is depending on your income? Might want to look into getting rid of that.

gotester2000
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Re: eat love pray and jump in today?

Post by gotester2000 » Fri Mar 02, 2018 1:58 pm

You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.

MotoTrojan
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Re: eat love pray and jump in today?

Post by MotoTrojan » Fri Mar 02, 2018 2:24 pm

If you want to be that conservative, do it now. No reason to DCA from too-conservative to really-conservative.

Karma Skimmer
Posts: 33
Joined: Mon Jan 29, 2018 11:21 am

Re: eat love pray and jump in today?

Post by Karma Skimmer » Fri Mar 02, 2018 4:55 pm

chevca wrote:
Fri Mar 02, 2018 1:30 pm
When you DCA from cash to the target funds, you're not just going from cash to stocks. You're buying some of everything in the target fund to include a healthy amount of bonds. I would just shift the cash to the target fund now to get to the percentages you want. Or, go more than $2000 at a time... go like $10k or $20k at a time, IMO.
Make sense, but I think it's my nerves. I understand that the stock market has a high probability of positive returns in 5 to 10 years. But it still makes me a little nervous.
How long do you plan to work for? You say you'd like to add about $200k to the portfolio to reach FI, but you say you will collect SS in 4 years or so. With a conservative portfolio, I think your savings rate will have to do most of the work to add $200k to the portfolio rather than counting on growth.
I'm saving 35k/year (including 401k), so in four years the raw savings will be $140k. With growth, I should be able to make it. If not, I'll have to work till 65.
Why do you have life insurance, especially a whole life policy, if you're single and staying single? Who is depending on your income? Might want to look into getting rid of that.
Yes, I am dissolving the life policy.

Thanks for responding!

Karma Skimmer
Posts: 33
Joined: Mon Jan 29, 2018 11:21 am

Re: eat love pray and jump in today?

Post by Karma Skimmer » Fri Mar 02, 2018 4:58 pm

gotester2000 wrote:
Fri Mar 02, 2018 1:58 pm
You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.
The 50k includes rental costs. I don't plan to buy a house in forseeable future. But the 50k does not include include increased health care costs. Not sure how to account for that.

Dottie57
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Joined: Thu May 19, 2016 5:43 pm

Re: eat love pray and jump in today?

Post by Dottie57 » Fri Mar 02, 2018 5:47 pm

gotester2000 wrote:
Fri Mar 02, 2018 1:58 pm
You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.

+1 750k is too little and sp is 750k . Reduce your expenses or work longer. Healthcare will cost a lot . Think 1k per month.

Dottie57
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Re: eat love pray and jump in today?

Post by Dottie57 » Fri Mar 02, 2018 5:48 pm

Dottie57 wrote:
Fri Mar 02, 2018 5:47 pm
gotester2000 wrote:
Fri Mar 02, 2018 1:58 pm
You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.

+1 750k is too little and sp is 750k . Reduce your expenses or work longer. Healthcare will cost a lot .

Dottie57
Posts: 4457
Joined: Thu May 19, 2016 5:43 pm

Re: eat love pray and jump in today?

Post by Dottie57 » Fri Mar 02, 2018 5:49 pm

Dottie57 wrote:
Fri Mar 02, 2018 5:48 pm
Dottie57 wrote:
Fri Mar 02, 2018 5:47 pm
gotester2000 wrote:
Fri Mar 02, 2018 1:58 pm
You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.

+1

750k is too little Reduce your expenses or work longer. Healthcare will cost a lot and is not part of your budget.

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sam5
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Re: eat love pray and jump in today?

Post by sam5 » Fri Mar 02, 2018 6:42 pm

Hello Karma Skimmer,

Congratulations on your high savings rate! You will get to financial independence.

Keep in mind, the Vanguard Target funds have bonds as well as stocks, and gradually move to a more conservative asset allocation as time goes on. These are not high risk, speculative investments. Target 2025 is presently 64% stock 36% bond. Target 2030 is presently 71% stock 29% bond.

Stop listening to the “gloom and doom” from the people around you.

Dollar Cost Averaging (DCA) can be comforting. I’ve learned (here at Bogleheads) that most of the time a lump sum investment is the better way. It also feels really great to get everything over with at once! I haven’t used DCA in a long time and can’t imagine a situation where I would. Lump sum investing the first time is very hard. Take a deep breath, hold your nose, and put the money in. If you absolutely cannot do this, divide the money into 3 equal parts and schedule 3 deposits to make the investment between now and the end of the year.

At your rate of DCA’ing $2,000 per month, it will take 4-1/2 years to move your desired $110,000 from savings to Target 2030. That is a lot of lost earnings!

Please make sure your savings are in a high yield savings account. Ally Bank is presently paying 1.45% for a savings account.

Does your $50,000 expense figure include the travel you want to do in retirement?

gotester2000
Posts: 580
Joined: Sun Nov 12, 2017 1:59 am

Re: eat love pray and jump in today?

Post by gotester2000 » Sat Mar 03, 2018 1:49 am

Karma Skimmer wrote:
Fri Mar 02, 2018 4:58 pm
gotester2000 wrote:
Fri Mar 02, 2018 1:58 pm
You did not mention your housing costs.
At 4% of 750k -> 30k + 24k SS = 54k income vs 50k expenses is tight.

I think you need to reduce expenses to 40k or build $1M to be FI.
The 50k includes rental costs. I don't plan to buy a house in forseeable future. But the 50k does not include include increased health care costs. Not sure how to account for that.
I think it is in your best interest to work till 65 - that will provide you a sufficient nest egg + SS + medicare after 65.
4 years is a short period for equity - dont expect much portfolio growth - growth has to come from savings.
You can travel and have good vacations during your working years.

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: eat love pray and jump in today?

Post by MrPotatoHead » Sat Mar 03, 2018 2:36 am

You have an advantage, at 58 you know yourself, you know what your appetite for risk is; many people only get a gut-check during a time of crisis, so you really ahead of the game. Your appetite for risk tells you your sleepwell point at life. Life is to short to spend it worrying about money, so follow your innate constitution. With that being said, if I were you I would look at ways to tilt the odds in my favor as your desires and expenses leave you a narrow margin for error.

If I were you, I would look to satiate my travel urge by picking some of the lower cost destinations and immersing myself in the local culture for a year at a time. Live as a native does, thus stretching your savings and giving you a bit longer to let you nestegg grow. For example a couple can allegedly live a pretty nice lifestyle for around 18K a year in Belize. Bonus, health care is cheap. My point is, you will be relatively young and single, there are a lot of nice places you can go, get an apartment, immerse yourself in the local culture and save a lot of money. If you get lucky on the sequence of events, your nestegg can grow larger and give you a bit more cushion for visiting more developed and expensive destinations later on. Just the savings on healthcare could be substantial.
Last edited by MrPotatoHead on Thu Mar 08, 2018 12:57 am, edited 1 time in total.

Karma Skimmer
Posts: 33
Joined: Mon Jan 29, 2018 11:21 am

Re: eat love pray and jump in today?

Post by Karma Skimmer » Wed Mar 07, 2018 10:38 pm

MrPotatoHead wrote:
Sat Mar 03, 2018 2:36 am
... I would look to satiate my travel urge by picking some of the lower cost destinations and immersing myself in the local culture for a year at a time ...
Thank you! Yes, that's what I want to do. Immerse myself in Thailand, India etc with a Lonely Planet guide and live on 20k/year!

MrPotatoHead
Posts: 429
Joined: Sat Oct 14, 2017 10:41 pm

Re: eat love pray and jump in today?

Post by MrPotatoHead » Thu Mar 08, 2018 1:22 am

Karma Skimmer wrote:
Wed Mar 07, 2018 10:38 pm
MrPotatoHead wrote:
Sat Mar 03, 2018 2:36 am
... I would look to satiate my travel urge by picking some of the lower cost destinations and immersing myself in the local culture for a year at a time ...
Thank you! Yes, that's what I want to do. Immerse myself in Thailand, India etc with a Lonely Planet guide and live on 20k/year!
Just as an FYI for you, in the states if you stay at a hotel for a certain length of time as a non-resident some will kick the tax back to you. As I recall in NC it is 90 days or so. When I travel and immerse in a community in the U.S. I usually use long term stay hotels like Extended Stay America, where you can usually negotiate a decent long term rate (fyi, most hotel seven Hiltons and Marriotts will drop rates for long term stays, not make you clean out you room on weekends and other concessions). Doing longer term stays can really drop your travel costs, especially places with a kitchen.

blackcat allie
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Re: eat love pray and jump in today?

Post by blackcat allie » Thu Mar 08, 2018 2:21 am

Offshoot question, please - Karma Skimmer wrote they have Target 2030 in brokerage/taxable. Are there many others here that have Target Funds in taxable?

-- thanks in advance (I'm under impression that some purists might only have straight stock indexes and municipal/tax efficient bonds in non-tax advantaged space. Very new to all this though)

TwstdSista
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Re: eat love pray and jump in today?

Post by TwstdSista » Thu Mar 08, 2018 5:11 am

Black Cat wrote:
Thu Mar 08, 2018 2:21 am
Offshoot question, please - Karma Skimmer wrote they have Target 2030 in brokerage/taxable. Are there many others here that have Target Funds in taxable?

-- thanks in advance (I'm under impression that some purists might only have straight stock indexes and municipal/tax efficient bonds in non-tax advantaged space. Very new to all this though)
I do not have a taxable account, but yes -- your impression would be the advice I would give to any poster.

Karma Skimmer
Posts: 33
Joined: Mon Jan 29, 2018 11:21 am

Re: eat love pray and jump in today?

Post by Karma Skimmer » Thu Mar 08, 2018 8:28 am

Black Cat wrote:
Thu Mar 08, 2018 2:21 am
Offshoot question, please - Karma Skimmer wrote they have Target 2030 in brokerage/taxable. Are there many others here that have Target Funds in taxable?

-- thanks in advance (I'm under impression that some purists might only have straight stock indexes and municipal/tax efficient bonds in non-tax advantaged space. Very new to all this though)
Hi Black Cat, after reading here about it, I plan to change taxable Target 2030 to equivalent proportions of VTSAX, VTIAX, VWIUX. I don't have much money transferred yet; and I'll make the change on a loss day to avoid taxes. From what I understand, dividends on VTSAX and VTIAX are still taxed.

Karma Skimmer
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Re: eat love pray and jump in today?

Post by Karma Skimmer » Thu Mar 08, 2018 8:39 am

sam5 wrote:
Fri Mar 02, 2018 6:42 pm
Hello Karma Skimmer,
Congratulations on your high savings rate! You will get to financial independence. ...
Thanks for the validation! After my experiences and mistakes in 2008, I need to build up some confidence and faith again.
At your rate of DCA’ing $2,000 per month, it will take 4-1/2 years to move your desired $110,000 from savings to Target 2030. That is a lot of lost earnings!
You're right, of course. I will do both. I'll DCA and also lump-sum during down-days, and get the money in before the end of the year.
Please make sure your savings are in a high yield savings account. Ally Bank is presently paying 1.45% for a savings account.
I use Ally. But now I'm also thinking whether I can simply buy CD's through Vanguard and keep very accessible money in the settlement fund.
Does your $50,000 expense figure include the travel you want to do in retirement?
The way I like to travel, I spend less money while traveling than I would if I remained at home. I am single and want to travel through low-cost countries and stay in modest hotels and use local transportation. I've done this three times before. My worry is not expense; it's my age and declining energy level.

Karma Skimmer
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Re: eat love pray and jump in today?

Post by Karma Skimmer » Thu Mar 08, 2018 8:46 am

gotester2000 wrote:
Sat Mar 03, 2018 1:49 am
I think it is in your best interest to work till 65 - that will provide you a sufficient nest egg + SS + medicare after 65.
It might turn out that way.

I did not mention that I have some flexibility in my plan. I can keep working (though I don't want to and companies will not hire old Software developers), I can work part-time, I can reduce my expenses to 40k, I can live abroad part-time, and at some point I will have a 300k inheritance.

My worry is not that I might have to work later. My worry is my own confidence level after my experiences and mistakes of 2008.

protagonist
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Re: eat love pray and jump in today?

Post by protagonist » Thu Mar 08, 2018 8:57 am

No basic problems with your conservative portfolio. There are many roads to Dublin. (Actually there aren't. There are, fortunately for me, many roads to NYC, since I do that drive frequently, but that is a different discussion entirely).

You are out of debt which is great.

You have a "steady income" of $105K (Do you mean for life?)...If I interpreted that correctly and you do not have huge financial demands for your happiness you should be in good shape, regardless of what happens to the economy. Thus being conservative makes sense. You also want to remain single ("the best laid plans of mice and men...."), so unless you are trying to amass huge amounts of wealth to leave to children (which has its own risks), you should have no worries. That's a great income in retirement for a single person and will go much farther than you think.

My one question is why you want to take SS at 62? On the surface, it doesn't appear to me that you should need the money, unless you have large necessary expenses that you have not divulged. By waiting you will get 8% annually on your very safe "investment" (up to age 70)- as a fiscal conservative, you can't even get half of that in a safe investment elsewhere.

blackcat allie
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Re: eat love pray and jump in today?

Post by blackcat allie » Thu Mar 08, 2018 11:37 am

Hi Karma Skimmer, I was actually asking question about your Target in nontaxable, because I was thinking maybe it's not that bad a placement. I looked back further and and saw there are several other posts on this topic. I'm in a lower bracket (between 12-22%) and I was thinking maybe I was over concerned with tax efficiency. Anyway...

Happy travelling & writing :happy

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Meg77
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Re: eat love pray and jump in today?

Post by Meg77 » Thu Mar 08, 2018 11:47 am

sam5 wrote:
Fri Mar 02, 2018 6:42 pm
Hello Karma Skimmer,

Congratulations on your high savings rate! You will get to financial independence.

Keep in mind, the Vanguard Target funds have bonds as well as stocks, and gradually move to a more conservative asset allocation as time goes on. These are not high risk, speculative investments. Target 2025 is presently 64% stock 36% bond. Target 2030 is presently 71% stock 29% bond.

Stop listening to the “gloom and doom” from the people around you.

Dollar Cost Averaging (DCA) can be comforting. I’ve learned (here at Bogleheads) that most of the time a lump sum investment is the better way. It also feels really great to get everything over with at once! I haven’t used DCA in a long time and can’t imagine a situation where I would. Lump sum investing the first time is very hard. Take a deep breath, hold your nose, and put the money in. If you absolutely cannot do this, divide the money into 3 equal parts and schedule 3 deposits to make the investment between now and the end of the year.

At your rate of DCA’ing $2,000 per month, it will take 4-1/2 years to move your desired $110,000 from savings to Target 2030. That is a lot of lost earnings!

Please make sure your savings are in a high yield savings account. Ally Bank is presently paying 1.45% for a savings account.

Does your $50,000 expense figure include the travel you want to do in retirement?
I totally agree with this. The target date funds are not all stocks and get more conservative every year. If you factor in the present value of your social security income (another fixed income stream), you actually only have a very small amount of your investments exposed to stock market fluctuations.

And I agree that $2k per month or $24k per year being invested is way too slow of a dollar cost averaging plan. Usually when you DCA a lump sum rather than investing it all at once (which is fine if you value psychology over probabilities), you're talking about a 6-12 month plan. 18 months is about as far as I'd stretch it. So if you want your cash position down to $180K then you need to be moving more like $9000 a month from cash to your target retirement date fund.

I also question even wanting $180K in cash at least while you are still working. That is nearly 4 years of expenses in cash. Once you factor in your social security, $180K is 7 years of net expenses in cash. I think you should aim for $125K - 2.5 years of expenses. Very conservative, but appropriate given your risk tolerance. Once you start getting social security though, you may find that you're comfortable with even less cash on hand.
"An investment in knowledge pays the best interest." - Benjamin Franklin

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