Planning for (Semi)Retirement

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Notme
Posts: 4
Joined: Thu Mar 21, 2019 7:50 pm
Location: New England

Planning for (Semi)Retirement

Post by Notme » Fri Feb 14, 2020 3:46 pm

I will reach full retirement age soon and will begin collecting social security in two months. I am still doing freelance work, but my income is much lower and less reliable than it used to be.

I have no savings outside of my retirement accounts, but my investments and short term savings in those add up to 725,000, at least for today. A financial advisor has urged me to sell enough of my investments to put aside three years’ worth of short term savings. I figure that putting around 9% of my holdings into cash would do that when added to my social security. My income is unknowable, so I'm not factoring that in.

Right now I have ~ 64.5% stocks, 29% bonds, 4% short term reserves, and 2.5% uncategorized. I don’t know what is being counted as uncategorized, unless my REIT is in a different category. I am over weighted in large growth and tech funds right now and will need to rebalance. I will need a new car eventually and will need to have work done on my residence eventually. My mortgage is paid off, but I have 57,000 in debt on my HELOC account, which is currently charging .5% below prime. I still have almost 10 years of draw time on that.

If I add enough cash to bring me up to 9% short term that will make me feel safer over the next few years, though I lose out on a lot of upside (and downside). I’m wondering if that gives me license to remain somewhat aggressive with my current allocations? Or should I ignore the pile of emergency funds I will have created and go with a higher percentage of bonds and a more balance approach overall?

My cash is taxable when I take it out of my retirement funds. Is there something better to do with it than have it sit in my settlement account until then? Especially considering that I’m not likely to spend more than 25,000 in 2020 and might spend much less? Does putting this much cash aside seem excessive, or justified by how chaotic things seem right now? In the past I have always just bought and held. This is the first time I’ve ever cashed in. Though it’s also the first time I’ve been this age.

Thank you.

bloom2708
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Re: Planning for (Semi)Retirement

Post by bloom2708 » Fri Feb 14, 2020 4:04 pm

How much is your annual spending?

How much will SS cover? How much do you have to withdraw each year to make up the difference?

4% of $725k is $29,000. Does SS + ~$29k cover all your spending/taxes? If so, you should be in good shape.

I would probably be closer to 50/50 stocks/bonds/cash where you are at.

I don't think there is any need to take 3 years out in one tax year. You could withdraw some to get you through the year and adjust to more bonds in your retirement accounts. Is everything pre-tax or do you have a Roth IRA?

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BolderBoy
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Re: Planning for (Semi)Retirement

Post by BolderBoy » Fri Feb 14, 2020 4:05 pm

Notme wrote:
Fri Feb 14, 2020 3:46 pm
Does putting this much cash aside seem excessive, or justified by how chaotic things seem right now? In the past I have always just bought and held. This is the first time I’ve ever cashed in. Though it’s also the first time I’ve been this age.
Sounds like the FA wants you to have some sort of emergency fund of reserves available to you on short notice. This would keep you from having to sell stocks/bonds suddenly at an inopportune time.

A bit more info would help. Can you tell us a bit about your retirement account types? Also, how much SS you anticipate getting?
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Topic Author
Notme
Posts: 4
Joined: Thu Mar 21, 2019 7:50 pm
Location: New England

Re: Planning for (Semi)Retirement

Post by Notme » Fri Feb 14, 2020 4:53 pm

Thank you for your quick response.

I will be receiving $28800 per year from SS, so that plus 29,000 should be pretty comfortable.
I would plan to spend around $50,000 a year, but would like to pay down my home equity loan, buy a car when I have to, and fix up my condo when I can.
My FA is alarmed about the current, possibly unjustified rise in the stock market, and thinks that I should cushion myself against any large shocks.
I mostly have index and managed funds. I know I have too many funds and need to simplify and rebalance.

Everything is pretax, no Roth IRAs

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