When do you take it off the table?

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Topic Author
Montgomery
Posts: 4
Joined: Sun Nov 17, 2019 1:11 pm

When do you take it off the table?

Post by Montgomery » Sun Nov 17, 2019 1:30 pm

I see a lot of threads recently that suggest people nearing their “number” are considering locking in gains and I am wondering if I should do the same. I think I have our numbers worked out and they are as follows.

My ultimate question is would you change your allocation or asset mix with my goals? I worry about being at an all time stock high but foreseeable bond returns being well below past results.

Age: me 51, wife, 50
Child- age 10
Debt- none
Home- paid for valued at $650k.
State: PA
Income- $130k/$95k (her)
Tax rate: 32 fed/3 state/2.5 local

Allocation is currently 58%/42%
My 401k: $65000
My traditional IRA( from rollovers): $524000
Roth IRA: $8000
Wife’s 401k:$313000
Wife’s traditional Ira: $300,000
Wife’s Roth IRA: $48000
Taxable joint funds: $1,550,000

529: $98,000

Our mix of stocks in mutual funds
Is 50% total stock, 15% small cap, 35% international

Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.

Are we too conservative? Are we too risk averse at this point? Suggestions are appreciated.

Topic Author
Montgomery
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Joined: Sun Nov 17, 2019 1:11 pm

Re: When do you take it off the table?

Post by Montgomery » Sun Nov 17, 2019 3:17 pm

Bumped

mrgeeze
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Re: When do you take it off the table?

Post by mrgeeze » Sun Nov 17, 2019 3:19 pm

hold the course.

MotoTrojan
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Re: When do you take it off the table?

Post by MotoTrojan » Sun Nov 17, 2019 3:22 pm

Your allocation seems about right to me. What SWR do you intend to use? With an early retirement I would plan for closer to 3% pre-tax than 4%. Given that and current assets it seems it will be up to the market whether you get to retire in 5 years or not.

Also check your math as $110K + $22K is not $122K.

As to bond yields, the only thing that matters is real yields, which are historically low I believe but we are talking 1% off, not several %.

Topic Author
Montgomery
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Re: When do you take it off the table?

Post by Montgomery » Sun Nov 17, 2019 3:31 pm

MotoTrojan wrote:
Sun Nov 17, 2019 3:22 pm
Your allocation seems about right to me. What SWR do you intend to use? With an early retirement I would plan for closer to 3% pre-tax than 4%. Given that and current assets it seems it will be up to the market whether you get to retire in 5 years or not.

Also check your math as $110K + $22K is not $122K.

As to bond yields, the only thing that matters is real yields, which are historically low I believe but we are talking 1% off, not several %.
Yes, typo. Meant 100+22 for medical.

:oops:

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JoeRetire
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Re: When do you take it off the table?

Post by JoeRetire » Sun Nov 17, 2019 3:33 pm

Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
My 401k: $65000
My traditional IRA( from rollovers): $524000
Roth IRA: $8000
Wife’s 401k:$313000
Wife’s traditional Ira: $300,000
Wife’s Roth IRA: $48000
Taxable joint funds: $1,550,000

Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
So $2,808,000 in assets.
$132,000 in expenses initially, decreasing to $110,000 eventually.

Estimated Social Security benefits?
Don't be a lemming.

Outer Marker
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Re: When do you take it off the table?

Post by Outer Marker » Sun Nov 17, 2019 3:37 pm

Your asset allocation looks fine. You’re not at your number yet. To draw $120,000 at 3% swr, you’ll need $4M. Eyeballing it, looks like you have about $3.2M.

For comparison, Vanguard’s target 2025 fund is north of 60/40. Your under that.

ralph124cf
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Re: When do you take it off the table?

Post by ralph124cf » Sun Nov 17, 2019 3:45 pm

You mentioned that you are in the 32% fed tax bracket, but your wage income puts you squarely in the middle of the 24% bracket. Any large investment income that would raise your taxable income?

Ralph

Topic Author
Montgomery
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Joined: Sun Nov 17, 2019 1:11 pm

Re: When do you take it off the table?

Post by Montgomery » Sun Nov 17, 2019 3:46 pm

JoeRetire wrote:
Sun Nov 17, 2019 3:33 pm
Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
My 401k: $65000
My traditional IRA( from rollovers): $524000
Roth IRA: $8000
Wife’s 401k:$313000
Wife’s traditional Ira: $300,000
Wife’s Roth IRA: $48000
Taxable joint funds: $1,550,000

Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
So $2,808,000 in assets.
$132,000 in expenses initially, decreasing to $110,000 eventually.

Estimated Social Security benefits?
SS has us both at $3k each at 67 assuming no cuts.....I assume we will get 2/3rd of that

livesoft
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Re: When do you take it off the table?

Post by livesoft » Sun Nov 17, 2019 3:54 pm

The allocation of 58/42 has more bonds already than any allocation that I would want for the rest of my life, so I think you have already taken it off the table.
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JoeRetire
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Re: When do you take it off the table?

Post by JoeRetire » Sun Nov 17, 2019 4:01 pm

Montgomery wrote:
Sun Nov 17, 2019 3:46 pm
JoeRetire wrote:
Sun Nov 17, 2019 3:33 pm
Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
My 401k: $65000
My traditional IRA( from rollovers): $524000
Roth IRA: $8000
Wife’s 401k:$313000
Wife’s traditional Ira: $300,000
Wife’s Roth IRA: $48000
Taxable joint funds: $1,550,000

Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
So $2,808,000 in assets.
$132,000 in expenses initially, decreasing to $110,000 eventually.

Estimated Social Security benefits?
SS has us both at $3k each at 67 assuming no cuts.....I assume we will get 2/3rd of that
So, absent any cuts, at 67, $72,000 of the $110,000 will come from Social Security benefits.

Seems like you are already just fine. Thus, you could reduce your equity investments as much as you like and still be fine.
Don't be a lemming.

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unclescrooge
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Re: When do you take it off the table?

Post by unclescrooge » Sun Nov 17, 2019 4:37 pm

livesoft wrote:
Sun Nov 17, 2019 3:54 pm
The allocation of 58/42 has more bonds already than any allocation that I would want for the rest of my life, so I think you have already taken it off the table.
+1

That's what I was thinking.

If it were me, I would put 2% back on the table.

recalcitrant
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Location: Washington D.C.

Re: When do you take it off the table?

Post by recalcitrant » Sun Nov 17, 2019 4:56 pm

Two points:

First, if you play with firecalc you will not see much of a difference between a 65/35 or 58/42 portfolio in terms of weathering a bear market. A little, but not much.

Secondly, just be careful if retiring early as SS will be reduced if retiring below 35 contribution years. But I think you’re in good shape.

Slinky
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Re: When do you take it off the table?

Post by Slinky » Sun Nov 17, 2019 6:23 pm

You already have. At your age, I think you’re being very conservative.

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Wiggums
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Re: When do you take it off the table?

Post by Wiggums » Sun Nov 17, 2019 10:00 pm

you already have a conservative portfolio. I would let it ride.

I would just verify that you have accurately captured your retirement expenses. Think of purchases that are made less often: new roof, a/c, vehicle. You added a reasonable amount for medical. You won’t be, for example, make 401k contributions in retirement.

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bengal22
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Location: Ohio

Re: When do you take it off the table?

Post by bengal22 » Sun Nov 17, 2019 10:06 pm

When would I take it off the table?

When I no longer can fog a mirror.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

OnTrack
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Re: When do you take it off the table?

Post by OnTrack » Mon Nov 18, 2019 12:50 am

Montgomery wrote:
Sun Nov 17, 2019 3:17 pm
with an additional $22,000 (122k total before tax) for healthcare until Medicare.
Just be aware that there will still be healthcare costs once on Medicare. For example 2019 part B premium is $135.50 per month per person ($3252 per year for a couple) plus medigap/part D or part C plus things that might not be covered (dental, vision, hearing, drug copayments/deductibles, medical care while traveling internationally). I do realize some part C plans may have zero or low premiums and may cover some vision/dental/hearing, but they also generally have copayments/coinsurance.

magicrat
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Re: When do you take it off the table?

Post by magicrat » Mon Nov 18, 2019 9:02 am

Montgomery wrote:
Sun Nov 17, 2019 1:30 pm

Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
You need to include taxes in your expenses.

flyingaway
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Re: When do you take it off the table?

Post by flyingaway » Mon Nov 18, 2019 9:42 am

I was going to take something off the table on Friday. But I did not have access to my computer at around 3:30PM. So I am going to do it today, selling some stock funds to buy some bond funds.

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Clever_Username
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Location: Southern California

Re: When do you take it off the table?

Post by Clever_Username » Mon Nov 18, 2019 11:39 am

Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
My ultimate question is would you change your allocation or asset mix with my goals? I worry about being at an all time stock high but foreseeable bond returns being well below past results.
The stock market is at or near an all-time high a very large percent of the time. That's what a regularly-growing thing does. Guess what has always done after a drop? Climbed (perhaps with some drops mixed in) until it hits an all time high again... and then breaks that record.
Montgomery wrote:
Sun Nov 17, 2019 1:30 pm

Are we too conservative? Are we too risk averse at this point? Suggestions are appreciated.
The above having been said, if you're at your number, or very likely to be at your number, being more risk averse favors adding to your likelihood of the money lasting and servings its purpose, at a somewhat diminished chance that it grows enough that you leave a huge legacy. Is that worth it to you? It is to me. I'm not even 40 years old yet, and if I get low-end historical average real growth in just what I have saved for retirement already, I'm going to be well past my number by the start of the year where I turn 59.5. And I plan to continue adding mid-five figures to it every year. Some would say my portfolio is too conservative at age-in-bonds, but it serves both my risk appetite and need to take risk.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

Marbella
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Re: When do you take it off the table?

Post by Marbella » Mon Nov 18, 2019 7:10 pm

the Low bond returns expected would make me go 70/30 in your case, obviously personal preference.

You will need some growth over the next 25 years......

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Watty
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Re: When do you take it off the table?

Post by Watty » Mon Nov 18, 2019 8:47 pm

Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
One thing to watch out for is that your expenses will be different at different ages, and if one of you survives the other.

I have seen relatives that were active in early retirement when they were doing things like traveling several times a year. By the time they reached their mid-70s they were naturally slowing down even though they were in still in relatively good health they did not want to travel much. At that point they were more interested in downsizing than buying stuff. At that point their spending went way down and their main expenses where just thing like food, utilities, insurance, property taxes, and some prescription costs.

With a budget of $110K you could also reduce that some if you really needed to without any big hardship.

When you are looking at various retirement calculators you might see some result like "5% chance of failure" like it is some dire situation where you would mindlessly spend according to plan until you are broke and homeless. In the real world if your portfolio is doing works than expected then you might just reduce your spending by 10%.

If only one of you is surviving when long term care is needed then you expenses might even go down if you are not in a real high cost of living area.

Twiggsapproved
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Re: When do you take it off the table?

Post by Twiggsapproved » Mon Nov 18, 2019 11:25 pm

Watty wrote:
Mon Nov 18, 2019 8:47 pm
Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
Our desired retirement is in 5 years and want a $110,000 annual spend with an additional $22,000 (122k total before tax) for healthcare until Medicare.
One thing to watch out for is that your expenses will be different at different ages, and if one of you survives the other.

I have seen relatives that were active in early retirement when they were doing things like traveling several times a year. By the time they reached their mid-70s they were naturally slowing down even though they were in still in relatively good health they did not want to travel much. At that point they were more interested in downsizing than buying stuff. At that point their spending went way down and their main expenses where just thing like food, utilities, insurance, property taxes, and some prescription costs.

With a budget of $110K you could also reduce that some if you really needed to without any big hardship.

When you are looking at various retirement calculators you might see some result like "5% chance of failure" like it is some dire situation where you would mindlessly spend according to plan until you are broke and homeless. In the real world if your portfolio is doing works than expected then you might just reduce your spending by 10%.

If only one of you is surviving when long term care is needed then you expenses might even go down if you are not in a real high cost of living area.

These are great points. I too look at the 5% margin and worry, then I snap back into reality that reducing a little wouldn’t be that hard.......

latesaver
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Re: When do you take it off the table?

Post by latesaver » Wed Nov 20, 2019 1:53 pm

Montgomery wrote:
Sun Nov 17, 2019 1:30 pm
I see a lot of threads recently that suggest people nearing their “number” are considering locking in gains and I am wondering if I should do the same. I think I have our numbers worked out and they are as follows.
i usually take money off the table when my algorithm signals me to do so.

the algorithm counts the number of posts akin to "should i take money off the table" on the BH forum.

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