Retirement Portfolio For the Early Years? Appreciate Advice

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LuigiLikesPizza
Posts: 377
Joined: Tue Jan 05, 2016 7:54 am

Retirement Portfolio For the Early Years? Appreciate Advice

Post by LuigiLikesPizza » Sat May 18, 2019 4:38 pm

Emergency funds: Yes
Debt: No debt

Age: 58.5
Tax Filing Status: Single, Divorced
Tax Rate: 28% Federal, 5.75% State

State of Residence: Virginia, but in transition, new location TBD

Portfolio Size : $1.6M +/-

Expected expenses in retirement: $60K/year

Key information: I am a renter, do not own any RE. Own a car without a note, value approx $10K, Planning to move from HCOL area to LCOL area in retirement.

Current retirement assets

Taxable

Money Market $105K
VTI $85K
VTIAX $148K
VTSAX $27K
XOM (Exxon) $20K
Total: $385K

Federal Government TSP (401K)

G Fund. $741K
S Fund. $ 61K
Total: $802K


Roth IRA

Money Market $30K
REIT FUND $50K
VTI $29K
VTSAX $65K
Total: $174K

HSA

IWB (Russell 1000). $27K

I-BONDS

$146K

CASH ON HAND

$80K

PENSIONS:

Private Employer: $831/month payable now, not COLA adjusted

Federal Pension: later this year will be approx $1,000/month minus $160/month for health insurance

Social Security $2000 at age 62
$3044 at age 67

Contributions

New annual Contributions

Every year I contribute the max to the TSP, to the Roth and the HSA.


Questions:

1. I will reach federal retirement eligibility this year, 9/2019. I plan to retire either then or 12/31/2019. I have recently switched my allocation away from stocks toward bond funds and cash with the understanding that this is now is the riskiest timeframe for my portfolio.
I will reconsider my AA once I am retired and a bit farther down the road.

Can anyone see any pitfalls with the way I have my assets structured, *going into retirement in 2019*?

2. Have I overlooked anything as a potential retiree? Any specific advice before making the big jump?

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nedsaid
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Re: Retirement Portfolio For the Early Years? Appreciate Advice

Post by nedsaid » Sat May 18, 2019 6:45 pm

It would be helpful if you edited your post to add fund names to the ticker symbols. Also, by chance, could you give us your asset allocation? Asset allocation is pretty vital to answering your questions. It would be cool if you could run your portfolio through the Morningstar Portfolio X-Ray and post the Stock Stylebox and the Bond Stylebox as well as the asset allocation. That would tell us volumes and you would find this as a good exercise.

I would say that a $1.6 million nest egg and expenses of $60K, you have a sustainable retirement. You will be getting about $22K in pensions which means you need to harvest about $40K a year, necessitating a withdrawal rate of 2.5%. When you move to your Low Cost of Living area, the numbers will look even better.

I am assuming that your asset allocation is conservative and that is fine. You might invest some time with a financial planner before pulling the trigger.
A fool and his money are good for business.

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Tyler Aspect
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Re: Retirement Portfolio For the Early Years? Appreciate Advice

Post by Tyler Aspect » Sat May 18, 2019 8:07 pm

Welcome to Bogleheads.

Your current allocation appears to be:
54.96% bond
31.71% stock
13.32% cash

The stock portion is 71.09% US stock, 28.91% international stock.

That might not be enough stock for the long term. A typical retirement asset allocation ranges between 60% stock / 40% bond and 40% stock / 60% bond.

Good luck!
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272 Sheep
Posts: 151
Joined: Thu Mar 26, 2009 4:14 pm
Location: Hooksett, NH

Re: Retirement Portfolio For the Early Years? Appreciate Advice

Post by 272 Sheep » Sat May 18, 2019 8:23 pm

Have you considered delaying S.S. to 70 yrs old?
Carl W.

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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: Retirement Portfolio For the Early Years? Appreciate Advice

Post by Watty » Sat May 18, 2019 9:05 pm

LuigiLikesPizza wrote:
Sat May 18, 2019 4:38 pm
Can anyone see any pitfalls with the way I have my assets structured, *going into retirement in 2019*?
A couple of points to ponder but no big problems.

1) In trying to figure out an asset l like to look at target date funds and to be in the same general ballpark as them. For comparison the Vanguard 2020 fund is 55% stocks and 45% bonds. You seem to be light in stocks.

https://investor.vanguard.com/mutual-fu ... file/VTWNX

There could be something else going on like if you have some money earmarked for buying a house or condo when you move.

2) Watch out when the iBonds mature since you are required to redeem them then and that could drive you into a higher tax bracket especially if you have RMDs by then.

3) I agree with the prior comment about looking at delaying Social Security until you are older. In addition to giving you larger check later that could allow you do more Roth conversions in a low tax bracket. That could reduce your RMDs later and also reduce your long term taxes. Be sure to understand how Social Security is taxed.

Here is a website that will suggest a claiming strategy. If you were ever widowed or divorced after ten years of marriage that may give you claiming strategies that you didn't know about, some posters don't realize that especially if they were divorced or widowed decades ago.

https://opensocialsecurity.com/

Here is info on how Social Security is taxed.

https://www.bogleheads.org/wiki/Taxatio ... y_benefits
LuigiLikesPizza wrote:
Sat May 18, 2019 4:38 pm
Key information: I am a renter, do not own any RE. Own a car without a note, value approx $10K, Planning to move from HCOL area to LCOL area in retirement.
Even if you are familiar with the area renting for a year is a good idea to make sure that everything is working out. Once you settle down it would be good to consider buying a house or condo for cash. That would reduce your monthly expenses so that your pensions and Social Security would likely cover most or all of your expenses. There is no one right answer as to if you should rent or buy but owning a home has some big advantages;
1) You may pay less in taxes. If you need $1,000 a month for rent then you may need something like $1,250 a month in income to pay $250 in taxes and have $1,000 a month for the rent.
2) You will not be forced to move when you are 80 because a landlord is not renewing your lease.
3) You do not need to worry about future rent increases.
4) If you need to move into long term care your house can be sold to help pay for that.
5) Your portfolio will be smaller because you will have taken money out to buy the property. This means that you will have less sequence of returns risk and will be hurt less if your investments decline or do not keep up with inflation.

There are cons too but at least for me having a paid off house made my retirement numbers work a lot better.
LuigiLikesPizza wrote:
Sat May 18, 2019 4:38 pm
2. Have I overlooked anything as a potential retiree?
Be sure to understand the TSP inheritance rules if you plan on leaving the money in the TSP. They are not the same as an IRA and in some special situations they are much less favorable and can cause big problems for your heirs. There is a wiki on this.

https://www.bogleheads.org/wiki/TSP_estate_planning
LuigiLikesPizza wrote:
Sat May 18, 2019 4:38 pm
Any specific advice before making the big jump?
If you retire on December 31st and will immediately move then look at the residency rules for the state you are living in and where you will move to. Ideally you could become a resident of the new state on January 1st and not have a year where you are a part year resident in both states. I am not a tax guru but when I have done that in addition to being more complicated it seemed like the tax calculations were less favorable since they were trying to keep people from gaming the system and shifting income to the lower tax state.

mhalley
Posts: 7359
Joined: Tue Nov 20, 2007 6:02 am

Re: Retirement Portfolio For the Early Years? Appreciate Advice

Post by mhalley » Sun May 19, 2019 1:13 pm

You do appear to be light in stocks unless you are trying to protect against sequence of returns risk, where you start retirement with a low stock percentage and then increase it going forward. Otherwise, 50-60 percent stocks seems more reasonable.

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