Help me cash flow my retirement!- 2023-2028

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Post Reply
Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 8:14 am

Hi everyone! Long-time Boglehead. Retiring in 2023. Living off non-retirement assets that don't generate capital gains (to facilitate annual Roth conversions) from 2023 until 2028 when RMD's and delayed Social Security start. Currently 50/50 equities/(bonds and cash).

During accumulation, asset allocation and asset choice has been relatively easy. I am now struggling to figure out what to do with assets earmarked for 2023-2027 (five years) living expenses at the beginning of retirement. Majority is currently in money market account (smaller amount are in I-bonds, high-yield on-line savings account, and short-term municipal bond fund). I am looking for best balance of stability and return.

I have been considering CD's, short/limited/intermediate term municipal bond funds, money markets, I-bonds and high-yield on-line savings accounts.

1) How can I make the best choice among these options?

2) Should I be considering other options for assets ear-marked for living expenses in 3-7 years?

3) Should I use a combo of these choices? For example, is one choice more appropriate for year 3 and another for year 7?

It seems accumulation is easy compared to planning for decumulation!

Thanks!

FrankLUSMC
Posts: 163
Joined: Tue Nov 28, 2017 1:43 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by FrankLUSMC » Sat Nov 16, 2019 10:05 am

I'll take stab on what I would do:

5 years expenses needed total so each year is 20%

1 year out from retirement buy a one year CD of 20% , 2 year 40%, 3 year of 20% and 5 year of 20%.
When the 2 year matures take half for expenses and buy another 2 year with the remaining amount to cover year 4.

dbr
Posts: 30798
Joined: Sun Mar 04, 2007 9:50 am

Re: Help me cash flow my retirement!- 2023-2028

Post by dbr » Sat Nov 16, 2019 11:05 am

I'm curious what fraction of your spending is in SS when you retire. If it is large that means the money spent in the five years is a significant fraction of your portfolio. That would indicate the above suggested scheme of CDs. If it is not large you may not need to worry about it and just take withdrawals from your taxable assets and rebalance your asset allocation if necessary. Remember spending from stocks in taxable can be balanced by selling bonds and rebuying stocks in retirement accounts. If you do distort your asset allocation by holding a lot in CDs you might pay for that in reduced return of the portfolio as a whole.

RMDs are neither here nor there. That is just a transfer of money from tax deferred to taxable accounts.

User avatar
David Jay
Posts: 7275
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help me cash flow my retirement!- 2023-2028

Post by David Jay » Sat Nov 16, 2019 11:17 am

I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
4nursebee
Posts: 1345
Joined: Sun Apr 01, 2012 7:56 am
Location: US

Re: Help me cash flow my retirement!- 2023-2028

Post by 4nursebee » Sat Nov 16, 2019 11:44 am

I don't think there is enough information to answer this question.
4nursebee

Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 1:11 pm

FrankLUSMC wrote:
Sat Nov 16, 2019 10:05 am
I'll take stab on what I would do:

5 years expenses needed total so each year is 20%

1 year out from retirement buy a one year CD of 20% , 2 year 40%, 3 year of 20% and 5 year of 20%.
When the 2 year matures take half for expenses and buy another 2 year with the remaining amount to cover year 4.
FrankLUSMC-

Sounds like a good plan. Thanks for your input! Thoughts on where to put the money for the next two years (still 3 years out from retirement)? :twisted:

Thanks again!

User avatar
fortfun
Posts: 2445
Joined: Tue Apr 19, 2016 7:31 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by fortfun » Sat Nov 16, 2019 1:15 pm

I'd recommend this book for your question (by Swedore and Grogan):
https://www.amazon.com/Complete-Guide-S ... 0857197320

Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 1:32 pm

dbr wrote:
Sat Nov 16, 2019 11:05 am
I'm curious what fraction of your spending is in SS when you retire. If it is large that means the money spent in the five years is a significant fraction of your portfolio. That would indicate the above suggested scheme of CDs. If it is not large you may not need to worry about it and just take withdrawals from your taxable assets and rebalance your asset allocation if necessary. Remember spending from stocks in taxable can be balanced by selling bonds and rebuying stocks in retirement accounts. If you do distort your asset allocation by holding a lot in CDs you might pay for that in reduced return of the portfolio as a whole.

RMDs are neither here nor there. That is just a transfer of money from tax deferred to taxable accounts.
dbr-

SS would be about 25% of retirement spending. I hope to spend from taxable assets during 2023-2027 time frame, but only from fixed income. Equities in taxable assets have a large amount of unrealized gains (from tax loss harvesting) which I hope to avoid selling during this 5 year period so I can maximize Roth conversions. Will rebalance in retirement accounts as necessary, as you suggest.

I have been thinking about CD's (which I have little experience with) based on posts by Kevin M and others. Seems like they may provide comparable or better return with less risk vs muni bond funds. Thoughts on CD's vs muni funds?

Thanks!

Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 1:41 pm

David Jay wrote:
Sat Nov 16, 2019 11:17 am
I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
David Jay-

What you describe has kind of been my default plan, although I have been using VMLUX (limited term). When I compare after tax yields, it seems like 2-5 year CD's provide greater return without greater risk. Have you considered CD's?

Thanks!

Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 1:42 pm

4nursebee wrote:
Sat Nov 16, 2019 11:44 am
I don't think there is enough information to answer this question.
4nursebee-

Thanks for responding! What additional info would be useful? Thanks again!

Topic Author
buckeye7983
Posts: 90
Joined: Fri Jun 27, 2008 12:35 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by buckeye7983 » Sat Nov 16, 2019 1:44 pm

fortfun wrote:
Sat Nov 16, 2019 1:15 pm
I'd recommend this book for your question (by Swedore and Grogan):
https://www.amazon.com/Complete-Guide-S ... 0857197320
fortfun-

I have this book by Larry and Kevin and agree it is excellent. I don't remember this particular question being addressed. :?

Thanks!

FrankLUSMC
Posts: 163
Joined: Tue Nov 28, 2017 1:43 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by FrankLUSMC » Sat Nov 16, 2019 3:01 pm

buckeye7983 wrote:
Sat Nov 16, 2019 1:11 pm
FrankLUSMC wrote:
Sat Nov 16, 2019 10:05 am
I'll take stab on what I would do:

5 years expenses needed total so each year is 20%

1 year out from retirement buy a one year CD of 20% , 2 year 40%, 3 year of 20% and 5 year of 20%.
When the 2 year matures take half for expenses and buy another 2 year with the remaining amount to cover year 4.
FrankLUSMC-

Sounds like a good plan. Thanks for your input! Thoughts on where to put the money for the next two years (still 3 years out from retirement)? :twisted:

Thanks again!

Well your second paragraph mentioned 5 years, so thats what I concentrated on, but for seven years why not:

Buy a Big 2 year CD now for (year3 and 5) , Big 3 year CD (yr 4 and 7), 5 year CD (yr 6)

Or use VIB for the whole duration or years 4-7

User avatar
David Jay
Posts: 7275
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help me cash flow my retirement!- 2023-2028

Post by David Jay » Sat Nov 16, 2019 3:11 pm

buckeye7983 wrote:
Sat Nov 16, 2019 1:41 pm
David Jay wrote:
Sat Nov 16, 2019 11:17 am
I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
David Jay-

What you describe has kind of been my default plan, although I have been using VMLUX (limited term). When I compare after tax yields, it seems like 2-5 year CD's provide greater return without greater risk. Have you considered CD's?

Thanks!
Nope. Too much hassle.

[edit] My portfolio is essentially all tax-advantaged. Purchasing CDs inside a brokerage account is a pain - trying to evaluate the early redemption terms and such on brokered CDs. The return (a fraction of 1%) is not worth the investment of time and effort.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

FrankLUSMC
Posts: 163
Joined: Tue Nov 28, 2017 1:43 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by FrankLUSMC » Sat Nov 16, 2019 3:24 pm

David Jay wrote:
Sat Nov 16, 2019 3:11 pm
buckeye7983 wrote:
Sat Nov 16, 2019 1:41 pm
David Jay wrote:
Sat Nov 16, 2019 11:17 am
I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
David Jay-

What you describe has kind of been my default plan, although I have been using VMLUX (limited term). When I compare after tax yields, it seems like 2-5 year CD's provide greater return without greater risk. Have you considered CD's?

Thanks!
Nope. Too much hassle.

[edit] My portfolio is essentially all tax-advantaged. Purchasing CDs inside a brokerage account is a pain - trying to understand the early redemption terms and such. The return is not worth the investment of time and effort.
I've bought 5 different CDs through my Vanguard brokerage account all inside my IRA. Why do you need early redemption if in tax-advantaged account?

User avatar
David Jay
Posts: 7275
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: Help me cash flow my retirement!- 2023-2028

Post by David Jay » Sat Nov 16, 2019 3:29 pm

FrankLUSMC wrote:
Sat Nov 16, 2019 3:24 pm
David Jay wrote:
Sat Nov 16, 2019 3:11 pm
buckeye7983 wrote:
Sat Nov 16, 2019 1:41 pm
David Jay wrote:
Sat Nov 16, 2019 11:17 am
I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
David Jay-

What you describe has kind of been my default plan, although I have been using VMLUX (limited term). When I compare after tax yields, it seems like 2-5 year CD's provide greater return without greater risk. Have you considered CD's?

Thanks!
Nope. Too much hassle.

[edit] My portfolio is essentially all tax-advantaged. Purchasing CDs inside a brokerage account is a pain - trying to understand the early redemption terms and such. The return is not worth the investment of time and effort.
I've bought 5 different CDs through my Vanguard brokerage account all inside my IRA. Why do you need early redemption if in tax-advantaged account?
These are living expenses. What if a vehicle dies? I’m keeping them in Prime Money Market at 1.8%, thanks...

[edit]If you are talking about the out years, there is no assurance that a 2.x% CD will outperform short term bonds.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

FrankLUSMC
Posts: 163
Joined: Tue Nov 28, 2017 1:43 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by FrankLUSMC » Sat Nov 16, 2019 3:48 pm

David Jay wrote:
Sat Nov 16, 2019 3:29 pm
FrankLUSMC wrote:
Sat Nov 16, 2019 3:24 pm
David Jay wrote:
Sat Nov 16, 2019 3:11 pm
buckeye7983 wrote:
Sat Nov 16, 2019 1:41 pm
David Jay wrote:
Sat Nov 16, 2019 11:17 am
I have my first two years in Prime Money Market fund, years 3, 4 and 5 in Short Term bond fund.

Everything else is in my normal portfolio at my selected AA.
David Jay-

What you describe has kind of been my default plan, although I have been using VMLUX (limited term). When I compare after tax yields, it seems like 2-5 year CD's provide greater return without greater risk. Have you considered CD's?

Thanks!
Nope. Too much hassle.

[edit] My portfolio is essentially all tax-advantaged. Purchasing CDs inside a brokerage account is a pain - trying to understand the early redemption terms and such. The return is not worth the investment of time and effort.
I've bought 5 different CDs through my Vanguard brokerage account all inside my IRA. Why do you need early redemption if in tax-advantaged account?
These are living expenses. What if a vehicle dies? I’m keeping them in Prime Money Market at 1.8%, thanks...

[edit]If you are talking about the out years, there is no assurance that a 2.x% CD will outperform short term bonds.
Well of course you don't buy CD for living expense only for out years. I was talking about your hassle complaint, no hassle involved. There is no guarantee for anything in investing. But with a CD you do get your basis plus interest. Same with bonds. Bonds and CDs are pretty similar in the Vanguard brokerage. Pick your dessert.

User avatar
fortfun
Posts: 2445
Joined: Tue Apr 19, 2016 7:31 pm

Re: Help me cash flow my retirement!- 2023-2028

Post by fortfun » Sat Nov 16, 2019 8:36 pm

buckeye7983 wrote:
Sat Nov 16, 2019 1:44 pm
fortfun wrote:
Sat Nov 16, 2019 1:15 pm
I'd recommend this book for your question (by Swedore and Grogan):
https://www.amazon.com/Complete-Guide-S ... 0857197320
fortfun-

I have this book by Larry and Kevin and agree it is excellent. I don't remember this particular question being addressed. :?

Thanks!
So much for being a "complete" guide. :)

Post Reply