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Portfolio Critic Please

Posted: Mon Dec 09, 2019 12:36 pm
by Phinance
I am conservative for my age (I understand the risks I’m taking in lost income being so high in cash/bonds, I need to get over this psychological/risk averse barrier). We are anticipating a large home purchase soon (300K deposit) and a child on the way. I would like to approach 5K in passive income/mo (to meet our expenses per month), that is my highest priority, how do I get there? Would really appreciate your help:

**Age: 37 (RETIRE @ 50 - 2033)
**Age (Spouse): 32
Kids: 1 on the way

**Net Worth: 1.28M
**Assets: 1.40M (Most of this 1.1M is in a Vanguard Taxable Account 3 fund portfolio, rest in 401K/Roth)
**Liability: 120K in student loans (spouse), no mortgage, no car payments.
**Expenses/mo: 5K (would think financial independence is 1.5M net worth).

**Active Income/mo: $20K
**Passive Income/mo: $2K

**Assets:
**Stocks (TOTAL): 550K
**Bonds (TOTAL): 300K
**Cash (TOTAL): 550K

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 1:48 pm
by Grt2bOutdoors
Phinance wrote: Mon Dec 09, 2019 12:36 pm I am conservative for my age (I understand the risks I’m taking in lost income being so high in cash/bonds, I need to get over this psychological/risk averse barrier). We are anticipating a large home purchase soon (300K deposit) and a child on the way. I would like to approach 5K in passive income/mo (to meet our expenses per month), that is my highest priority, how do I get there? Would really appreciate your help:

**Age: 37 (RETIRE @ 50 - 2033)
**Age (Spouse): 32
Kids: 1 on the way

**Net Worth: 1.28M
**Assets: 1.40M (Most of this 1.1M is in a Vanguard Taxable Account 3 fund portfolio, rest in 401K/Roth)
**Liability: 120K in student loans (spouse), no mortgage, no car payments.
**Expenses/mo: 5K (would think financial independence is 1.5M net worth).

**Active Income/mo: $20K
**Passive Income/mo: $2K

**Assets:
**Stocks (TOTAL): 550K
**Bonds (TOTAL): 300K
**Cash (TOTAL): 550K
Cash yields what? 2%. Okay, you have up coming house down payment, baby- let’s call it $450k.
What is the interest rate on the student loans? You see where I’m going with this? If those loans are costing you 6% plus - I’d work on getting rid of them sooner rather than later, even if you have to reduce your equity position somewhat to maintain proper allocation according to your risk tolerance.

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 2:15 pm
by Phinance
Thank you. Student loans @ 4.5%. I think cash is yielding 1.75%, bonds 1.9%, stocks 4-5% (if that).

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 2:20 pm
by retired@50
Phinance wrote: Mon Dec 09, 2019 12:36 pm
**Expenses/mo: 5K (would think financial independence is 1.5M net worth).
This assumes a 4% withdrawal rate from age 50 until death. This may be too high a withdrawal rate if you live until 90 or beyond.

For longer than average retirement, I'd urge a more conservative withdrawal rate closer to 3%.

Regards,

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 2:23 pm
by Jack FFR1846
Something to just keep in the back of your head because you're about what my age was with my first son. You're planning to retire before your first kid goes to college. If you have more, what's your college plans. For me, I planned to fully fund....anywhere....for both my sons and funded accordingly. Will your spouse continue to work after the kid(s) arrive? How will that affect your plans? Of course, you can always change your plans as you go along.

I do read the FIRE sites and get that plenty of parents think that they'll just let the kids pay their own way through community college. I have one in community college and tuition alone is over $9k a year, so it's not the $200 a semester that it was for me in the mid 70's. Add car expenses to that.

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 2:27 pm
by snailderby
- Backtesting has its limitations, but according to https://portfoliocharts.com/portfolio/portfolio-matrix/, the perpetual withdrawal rate for a portfolio consisting of 40% U.S. total stock market/30% intermediate bonds/30% cash (T-bills) was 3.3%.

- Here's a chart summarizing the odds of your money lasting 30-60 years at different stock allocations:

Image

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 2:41 pm
by big bang
Phinance wrote: Mon Dec 09, 2019 12:36 pm **Assets:
**Stocks (TOTAL): 550K
**Bonds (TOTAL): 300K
**Cash (TOTAL): 550K
Your current AA is:
Stocks 39%
Bonds 22%
Cash 39%

After house purchase, the AA will change to:
Stocks 50%
Bonds 27%
Cash 23%
If it helps you to sleep well, this is not too bad for a conservative portfolio.

However, with this conservative portfolio, mortgage, current student loan balance and a child still to young by planed retirement age, thinking about retiring at age 50 maybe too early and risky. Unless, you are able to increase your income further during those years and save a lot.

Re: Portfolio Critic Please

Posted: Mon Dec 09, 2019 5:17 pm
by Phinance
Super helpful, thank you all.