Seeking best strategy for if I have to retire tomorrow

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

[Topics merged below - mod mkc]

Hi. I’m trying to figure out the best course of action to take should I need to retire tomorrow. My job is in jeopardy and agism is rampant in my profession. I recently turned 61. (On the other hand, I may not retire until I’m 65 or 67.)

I have about $1.6 million in non-tax deferred accounts and another $1.4 in Rollover IRAs and 401ks, etc. My house is paid off and I have zero debt. I am not married and have no children.

I unfortunately (in retrospect) made the disastrous decision to get completely out of the market when it was crashing during the beginning of Covid in 2020. It turned out that I got out at quite literally the worst possible moment, and I’d have twice the money today if I hadn’t. But spilt milk and all that. (I was worried at the time that the world was heading for serious depression, and the market seemed to concur until the central banks turned on their printing presses the very next day.)

I’ve been delaying getting back into the market due to the market being what I have considered to be overvalued. E.g., a P/E ratio for the S&P 500 well above 15 and the Buffet Indicator being very high. Due to this caution, however, I’ve missed out on even more upside market movement.

I know that trying to time the market is a fool’s game. (E.g., I shouldn’t have done it in 2020.) But I fear that if I dump all of my money back into the market right now, I’m likely to lose a third of it, which wouldn’t be so great if I need to retire tomorrow. And plenty of people will tell you to dollar cost average, rather than dumping all of your money into the market at once. (If you do it at a market high, it can take you 20 years to break even.)

I’ve been considering putting 1/3rd of my money (all from a non-tax-deferred account) into a fixed annuity that will start paying me about $100k/year when I turn 67 in six years. And delaying Social Security until I’m 70.

I currently make $120k, but I’ve paid off my house (worth about $500k today) so I have positive cash flow currently. (I understand that by the time I’m 95, that $100k per year is likely to be inflated down to $50k/year in inflation-adjusted dollars, but when added onto Social Security, plus hopefully gains in the stock market with the other ⅔ of my money, I should be okay.

The rest of my cash (about $2m), I’d like to put back into the stock market. But I’m worried about dumping it all in at once. Maybe I should be dollar cost averaging it in over the next ten years? And in the meantime maybe I should buy laddered Treasuries (or SPDAs?) that mature over the next ten years?

At the moment I’m getting about 5% in money markets, so I don’t feel any particular urgency, except that the market might go even higher, and I’ll be losing out on opportunity. Also, it seems as if I’m going to get a fixed annuity, I should buy it now while interest rates are still high. The amount that they pay out seems to be very sensitive to interest rates.
Last edited by darius42 on Wed Sep 06, 2023 4:25 pm, edited 1 time in total.
anoop
Posts: 3621
Joined: Tue Mar 04, 2014 12:33 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by anoop »

Your post doesn’t say how old you are now.

But I think with your savings you have enough. 4% of $3M is exactly $120k, your current income.

Right now there is a positive real rate for sitting in cash so there is no need to panic. I don’t think market will be allowed to drop without fed intervention but the more likely scenario is that it may not keep up with inflation until monetary policy becomes accommodative.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

I edited my post to say that I just turned 61. Thanks for pointing out the oversight.

Do you think that my plan is good as I stated it? When you say, "4% of $3M is exactly $120k", I think that perhaps you might think that I should skip the annuity and roll all of the $3m into the market. If so, over what period of time?

I used the following visualizer to help me decide on whether to put $1m into a fixed annuity, and the results seemed better with the annuity. OTOH, I have no idea whether the visualizer is FOS or not:

https://engaging-data.com/will-money-last-retire-early/

This visualizer assumes that all of my non-annuity money is currently in the market, however.
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

OP,

If you need 100K cash until you are 67 or 70 years, then, you just keep 600K or 900K in cash. Why do you need to do anything else complicated?

You have 1.6 million in the taxable account and 1.4 million in the IRA/401K.

Keep 1 million in cash. 600K in stock for your taxable account. Then, pick a 80% stock and 20% bond fund in your tax deferred account.

If the market crashes and does not recover for 10 years, then, it is no longer a money problem.

And, you are buying the stock and the bond at the same time. You do not need to "market time" which one is a better deal.

KlangFool
Last edited by KlangFool on Wed Sep 06, 2023 4:43 pm, edited 1 time in total.
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Wanderingwheelz
Posts: 3005
Joined: Mon Mar 04, 2019 8:52 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by Wanderingwheelz »

You said you were worried about a depression and that’s why you sold out of the stock market a couple of years ago, but you’re also worried now when there’s no realistic reason to fear a depression. You’re just worried that I’ll drop 30% which very well might happen- it will happen at some point since it’s happened routinely in the past. A 50% decline is probably in the cards, someday.

This is why you need a plan that you’re able to stay with, no matter what the markets are doing. If you’re sure you can’t stomach a steep correction, make sure you have plenty of cash and bonds to allow you to stay invested.

Since you’re the worrying type, who had a history of taking radical actions because of those strong (irrational) feelings, you should consider using a low cost financial advisor like the Vanguard PAS. There’s a good chance you told us about your most recent radical move, but there have been others too, since you have no plan.
Being wrong compounds forever.
123
Posts: 9986
Joined: Fri Oct 12, 2012 3:55 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by 123 »

For conservative investors Vanguard recognizes that stocks are essential to long-term income maintenance. Even the Vanguard Retirement Income Fund VTINX is 30% stocks.

For control of taxes and RMDs put your stock holdings in Roth and taxable accounts, leave fixed income in tax-deferred.

How about DCA at 1% a week or 1% a month to get things started?
The closest helping hand is at the end of your own arm.
anoop
Posts: 3621
Joined: Tue Mar 04, 2014 12:33 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by anoop »

nessus42 wrote: Wed Sep 06, 2023 4:34 pm I edited my post to say that I just turned 61. Thanks for pointing out the oversight.

Do you think that my plan is good as I stated it? When you say, "4% of $3M is exactly $120k", I think that perhaps you might think that I should skip the annuity and roll all of the $3m into the market. If so, over what period of time?

I used the following visualizer to help me decide on whether to put $1m into a fixed annuity, and the results seemed better with the annuity. OTOH, I have no idea whether the visualizer is FOS or not:

https://engaging-data.com/will-money-last-retire-early/

This visualizer assumes that all of my non-annuity money is currently in the market, however.
I think you're better off skipping the annuity, you can pretty much self-fund it. As to getting back into the market, I'll let others advise as I got out recently. My plan is to wait until the fed is accommodative again.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

Since you’re the worrying type, who had a history of taking radical actions
Those are rather strong words. I thought that Covid was suis generis. I stayed the course for the correction of 1987, the dot com boom/bust, and the Great Recession of 2008/9. (My only regret about the Great Recession is that I didn't buy 3X S&P 500 ETF funds when the market was down 60%. Unfortunately, I was extremely busy at the time with both a full-time job and being a teaching fellow, so I didn't get around to it.)

I saw what happened during the Great Recession and the government and Fed sat on their thumbs, let Lehman Brothers fail, and bickered about whether to prop up GM, AIG, and even Fannie Mae, IIRC. I thought the same thing would happen again. I've learned my lesson the hard way. I know now that all the central banks will now start printing money like there's no tomorrow and try to bail out everything should there be another economic crisis.
Last edited by darius42 on Wed Sep 06, 2023 5:30 pm, edited 2 times in total.
delamer
Posts: 16625
Joined: Tue Feb 08, 2011 5:13 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by delamer »

I know that trying to time the market is a fool’s game.
But you continue to try to time the market by staying in cash. The stock market is always uncertain. If you are at a point in your life that you don’t need to take the risk or don’t have the psychological makeup to invest in stocks, then don’t.

Which leads to the obvious questions —

How much do you need to cover your annual expenses if you lose your job tomorrow? How much do you need once you become Medicare-eligible? How much of that need will be covered by SS at 70?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

delamer wrote: Wed Sep 06, 2023 4:56 pm
I know that trying to time the market is a fool’s game.
But you continue to try to time the market by staying in cash. The stock market is always uncertain. If you are at a point in your life that you don’t need to take the risk or don’t have the psychological makeup to invest in stocks, then don’t.
Other than Covid, I had the psychological makeup to be fully invested in stocks for my entire life. But part of that psychological makeup was due to dollar cost averaging over a lifetime being a fool-proof bet.

Unfortunately, I screwed up when Covid hit (it wasn't the market that scared me; it was Covid that scared me), and plenty of sources will advise against just dumping all your money into the market when it is overvalued by historical standards. E.g., a common trap is to sell at market bottoms when things look dire, and then to buy at market highs when everything is looking great.

I was thinking of putting all my money back into the market when it was approaching fair valuation at the end of last year, before the recent run-up, but a lot of crap was going on in my life at the time, and I didn't get to it then.

Though with the new world order of the Fed adopting a goal of 2% inflation in perpetuity, historical standards of valuation may not be a good metric anymore.
steadyosmosis
Posts: 584
Joined: Mon Dec 26, 2022 11:45 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by steadyosmosis »

Based on your bogleheads.org posting history, I recommend that you put no more than 50% of your money into stocks.
Early-retired: AA ~60/40: HSA,RIRA,taxable each ~100% equities: ~100% fixed income in tax-deferred (401k, traditional IRA) plus some spillover equities: spend from taxable: re-balance in tax-deferred.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

I think you're better off skipping the annuity, you can pretty much self-fund it.
Well, the payout on the annuity is pretty good when I hit 67. I.e., over 10%, which is a lot higher than 4%. (Unless the market were to more than double in the next six years.)

According to that visualizer I linked to, if I am just 100% invested in stocks, and I spend 4% a year, there is a non-negligible probability that I run out of money and am living on SS alone in my 90s.

Part of the allure of putting ⅓ of my money in an annuity is that is gives me a safety net where then I can feel comfortable being 100% invested in stocks with the rest of my money, since if I lose all my money in the stock market, I'll still be okay. Modulo a long period of high stagflation.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

steadyosmosis wrote: Wed Sep 06, 2023 5:19 pm Based on your bogleheads.org posting history, I recommend that you put no more than 50% of your money into stocks.
What posting history?

What do you recommend I do with the other 50% of my money?
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

KlangFool wrote: Wed Sep 06, 2023 4:36 pm Then, pick a 80% stock and 20% bond fund in your tax deferred account.
Why 80/20 in particular?
Elbowman
Posts: 531
Joined: Tue Apr 03, 2012 2:25 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by Elbowman »

I think DCAing over 10 years is too long. DCAing is an emotional crutch and over short periods isn't that terrible. Say the equity premium (over bonds) is 5% per year. If you DCA over one year, you are on average about half invested in stocks over the year, so you lost ~2.5% in expectation. Oh well, NBD. The same situation over 10 years, compounding, is more like 28% lost, which IMO is a big deal.
delamer
Posts: 16625
Joined: Tue Feb 08, 2011 5:13 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by delamer »

nessus42 wrote: Wed Sep 06, 2023 5:09 pm
delamer wrote: Wed Sep 06, 2023 4:56 pm
I know that trying to time the market is a fool’s game.
But you continue to try to time the market by staying in cash. The stock market is always uncertain. If you are at a point in your life that you don’t need to take the risk or don’t have the psychological makeup to invest in stocks, then don’t.
Other than Covid, I had the psychological makeup to be fully invested in stocks for my entire life. But part of that psychological makeup was due to dollar cost averaging over a lifetime being a fool-proof bet.

Unfortunately, I screwed up when Covid hit (it wasn't the market that scared me; it was Covid that scared me), and plenty of sources will advise against just dumping all your money into the market when it is overvalued by historical standards. E.g., a common trap is to sell at market bottoms when things look dire, and then to buy at market highs when everything is looking great.

I was thinking of putting all my money back into the market when it was approaching fair valuation at the end of last year, before the recent run-up, but a lot of crap was going on in my life at the time, and I didn't get to it then.

Though with the new world order of the Fed adopting a goal of 2% inflation in perpetuity, historical standards of valuation may not be a good metric anymore.
Whatever your rationale or reasons for not getting back in earlier, market timing is still market timing.

And one of the “plenty of sources” that advise against dumping money in stocks when they are “overvalued” isn’t this forum. In fact a core principle here is “Never Time The Market.” See https://www.bogleheads.org/wiki/Boglehe ... philosophy
At the moment I’m getting about 5% in money markets, so I don’t feel any particular urgency, except that the market might go even higher, and I’ll be losing out on opportunity.
My earlier question was whether you need that opportunity, based on your savings compared to expenses?
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

KlangFool wrote: Wed Sep 06, 2023 4:36 pm Keep 1 million in cash.
By "cash" I assume that you mean $1m in a bond ladder? Then every year, if I'm still employed, I take the bond payout and buy stock with it? And if I'm unemployed I spend the payout instead to live on?
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

nessus42 wrote: Wed Sep 06, 2023 5:28 pm
KlangFool wrote: Wed Sep 06, 2023 4:36 pm Then, pick a 80% stock and 20% bond fund in your tax deferred account.
Why 80/20 in particular?
1 million cash, 600K stock,

80% of 1.4m = 1.12 million stock
20% of 1.4m = 280K bond

It gives you about 57:43. 57% stock and 43% cash and bond. It is about 50:50.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

nessus42 wrote: Wed Sep 06, 2023 5:45 pm
KlangFool wrote: Wed Sep 06, 2023 4:36 pm Keep 1 million in cash.
By "cash" I assume that you mean $1m in a bond ladder? Then every year, if I'm still employed, I take the bond payout and buy stock with it? And if I'm unemployed I spend the payout instead to live on?
No. I mean actual cash in the Money Market Fund. You do not have the mentality to take any risk with this money.

If you are willing to put 1m into the annuity, then, you are willing to put 1m into cash.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
valuables
Posts: 45
Joined: Fri Feb 07, 2020 6:55 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by valuables »

You are a good candidate for a fee-only financial advisor to help you with a retirement plan. That should cost somewhere on the order of 4-8k one time. You committed a big behavioral mistake, we all do, but sometimes that's all it takes to really screw up.

If you don't have the stomach to return to a set-it and forget-it Boglehead portfolio at your desired asset allocation, then find someone who you can truly trust to chart your complete financial picture and give you the confidence to plan, then stay the course. You are probably fine to retire now, you just need some handholding to give yourself the permission.
1moreyr
Posts: 354
Joined: Sun Jan 12, 2020 6:10 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by 1moreyr »

you could also look at how much you are going to get from Social security and use that as a deduct to your annuity.
you could basically put in less as you don't need a full annuity.

it was easy to ignore the crash of 87, you probably didn't have much back then. you are 61, i am 60.. I know how old you were :wink:

There is something profound (for me) when I retired 2 years ago and discovered everything I have is...... well...... everything I have. It took a lot of risk out of me. Covid was 10 months before my target retirement date. It shook me too but I made only some adjustments to contributions.

if you need an annuity, that's up to you. I have a small pension. I took it instead of the cash balance. maybe not the smartest move but i like the stability of a paycheck i can live on. it covers half of our regular spending (excluding healthcare and travel). Did i lose a little by doing it? probably but i have a portfolio about your size and minimum spending requirements half yours. I do spend the $120k but half is discretionary and can be cut.

It's hard to say your temperament during a global pandemic means you can't be in equity. Others may get that from a paragraph or two or mining your posts over a 60 year life....It's more than I will conjecture .. I think the best place to figure that out is your own mirror.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

KlangFool wrote: Wed Sep 06, 2023 5:48 pm
nessus42 wrote: Wed Sep 06, 2023 5:45 pm
KlangFool wrote: Wed Sep 06, 2023 4:36 pm Keep 1 million in cash.
By "cash" I assume that you mean $1m in a bond ladder? Then every year, if I'm still employed, I take the bond payout and buy stock with it? And if I'm unemployed I spend the payout instead to live on?
No. I mean actual cash in the Money Market Fund. You do not have the mentality to take any risk with this money.

If you are willing to put 1m into the annuity, then, you are willing to put 1m into cash.

KlangFool
Risk in a Treasury bond ladder??? There's no risk in a bond ladder. Unless you think I'm worried about hyperinflation or something.
SnowBog
Posts: 4192
Joined: Fri Dec 21, 2018 10:21 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by SnowBog »

nessus42 wrote: Wed Sep 06, 2023 5:09 pm
delamer wrote: Wed Sep 06, 2023 4:56 pm
I know that trying to time the market is a fool’s game.
But you continue to try to time the market by staying in cash. The stock market is always uncertain. If you are at a point in your life that you don’t need to take the risk or don’t have the psychological makeup to invest in stocks, then don’t.
Other than Covid, I had the psychological makeup to be fully invested in stocks for my entire life. But part of that psychological makeup was due to dollar cost averaging over a lifetime being a fool-proof bet.
Perhaps that's part of the problem... It seems in retrospect that an Asset Allocation of 100% stocks was not appropriate for you...

Regardless, as you [consider] transitioning into retirement, again I'd argue that an AA of 100% stocks is not appropriate for you. There's sage advice that one's AA should land somewhere between 80/20 and 20/80, often with people in/nearing retirement closer to that midpoint (50/50 or 60/40).

IMHO, your first course of action should be determining the appropriate AA for yourself, based on your need, willingness, and ability to take risk.

If you end up deciding that an AA of say 80/20 or 60/40 is more appropriate, than as KlangFool pointed out earlier:
KlangFool wrote: Wed Sep 06, 2023 4:36 pm OP,

If you need 100K cash until you are 67 or 70 years, then, you just keep 600K or 900K in cash. Why do you need to do anything else complicated?

You have 1.6 million in the taxable account and 1.4 million in the IRA/401K.

Keep 1 million in cash. 600K in stock for your taxable account. Then, pick a 80% stock and 20% bond fund in your tax deferred account.

If the market crashes and does not recover for 10 years, then, it is no longer a money problem.

And, you are buying the stock and the bond at the same time. You do not need to "market time" which one is a better deal.

KlangFool
If it's not clear, the general idea is having a "balanced" portfolio gives a "buffer". If the concern is stocks may temporarily go down in value, you still have bonds when generally aren't going to change their value by as much (and may in fact go up in value as stocks go down as people "seek safety"). So, if you "set aside" enough "fixed income" to cover your gap, you can leave the rest invested in stocks and growing.

I personally wouldn't keep a large amount of cash - even at our current high rates, as cash will always lose to inflation [and taxes] over time. Not being invested is costing you more money every day... I keep enough cash to cover a few months expenses, the rest (to hit my AA) is invested in treasuries, bonds, etc. If you are concerned about inflation, building a "ladder" of TIPS might be of interest to you.

As far as timing, if you haven't seen this, you might want to watch this short video on the world's worst market timer: https://www.youtube.com/watch?v=pFgPNVytlwA&t=320s. "Bob" only invested right before major market crashes, but never left the market - and they turned out OK (but not as good as they would have if they invested all along). Hopefully this will help you understand:
  • Time in the market beats "timing" the market
  • Being afraid of a "crash" will cause sub-optimal results
  • Having an appropriate AA that allows you to remain invested will help ensure better outcomes
Towards that end, its usually the case that "lump sum" generally turns out better than DCA. The problem is, if you have fears/doubts, and you see the market "go down", you'll second guess yourself and risk pulling money out again (which is the worst thing you could do). As such, for you, a "dollar cost averaging" approach may make sense. But my recommendation would be to set a timeline (ideally no more than 1 year) and automate the reinvestment. You want to take emotion out of consideration. And you've been "too busy" a few times - so remove that risk/excuse as well. For example, if you want to invest $1,000,000 in 12 months, that works out to $83k/month or $19k/week. Pick your frequency, divide the amount you want to reinvest by that, and schedule those investments (most brokerages have "automatic" investment options).

As for your overall plan, unless I missed it, you didn't share what your annual expenses are. Ultimately retirement, and thus your plan, are highly dependent on your expenses. If you currently make $120k/year, presumably your expenses are less than that - as you are paying taxes (including social security), presumably work-related expenses (commuting, clothes, higher costs of food and/or services that you don't have time to do yourself), "saving" money in retirement/taxable accounts, etc. IMHO your 2nd action (after figuring out AA) is to figure out your expected annual expenses. Keep in mind, you'll need to figure out any "extra" expenses after retiring - most commonly things like medical insurance if you are currently on an employer plan.

Hypothetically, let's say you can live off $60k/year. With $3M saved, you'd be looking at a 2% withdrawal rate - which is arguably a "perpetual" rate (assuming you are invested in the market). As anoop previously posted, even if you need $120k/year - that's still a 4% withdrawal rate - before accounting for any social security (or pension if applicable), which is still arguably a "safe" withdrawal rate (for a 30ish year retirement). Presumably you are somewhere between 2% and 4% - which again is a healthy range to be in. You'll need to figure out your expenses, and thus figure out your withdrawal rate - to see where you land in that range.

Given that I think you are likely better off than you think - I don't think an annuity is needed. But given you seemingly don't have desires (or concerns) about "leaving behind" money - there's nothing wrong with considering a Single Premium Immediate Annuity (SPIA) - if it buys you peace of mind and helps you enjoy retirement with less fear/concern over money. (For clarity - the general recommendation is a SPIA is the only annuity you should consider.) Going back to your annual expenses, you could go one step further and figure out your "essential" (non-discretionary) vs. "discretionary" expenses. Knowing that your "essential" expenses are covered by a combination of an annuity and/or social security (when that kicks in) effectively removes all concerns about "running out of money", and the remainder of your investments cover the "discretionary" side of things. (This is in effect what we are doing with a combination of I & EE Bonds - creating a "DIY Annuity" - that will bridge until social security kicks in, but we started years in advance. viewtopic.php?t=358793 A SPIA would likely be more appropriate for you given your potential timing.)

And in a similar vein, I'm not sure delaying social security to 70 is the best option for you. In theory - for someone single - there isn't necessarily an "optimal" time for SS - mainly because you don't know how long you will live. If you delay to 70, but pass away before then, you get $0 social security. (If married, and the higher earner, delaying to 70 is almost always the right decision. Not as clear cut when single.) If you haven't yet, recommend checking out https://opensocialsecurity.com/ and https://ssa.tools/. Given your concerns, claiming earlier - or at least at FRA - might ultimately be better for you - especially if the amount is enough to cover all your "essential" expenses (and maybe part of your discretionary as well). For example, going back to my hypothetical $60k annual expenses, let's say $20k are your "essential" expenses, and your SS if you claim at 62 happens to also be $20k; that arguably removes any need/interest in having an annuity - as your "essential" expenses are already covered for life (or lowers the amount of an annuity that might make sense), it would also bring down your withdrawal to $40k/year against $3M is now 1.3%, which is less than a "perpetual" withdrawal rate - meaning you should never have to worry about money again.

A simplified version of above:
  • Figure out an appropriate AA
  • Figure out your expected annual expenses in retirement
  • Figure out the subset of "essential" (non-discretionary) expected retirement expenses
  • Figure out your expected social security at 62 (earliest), FRA, 70
  • Compare your social security estimates to your "essential" expenses
  • If SS @ 62 > "essential" expenses - you are arguably set, your "strategy" can be "work for as long as you want" then claim SS, and let your portfolio cover your "discretionary" expenses
  • If SS @ 62 < "essential" expenses - figure out how much needed to buy a SPIA to make up the difference, and again "work for as long as you want"
  • Figure out your withdrawal rate of your expenses (minus any social security/annuity) by your portfolio (minus any money used for annuity), if under 4% - you could arguably retire anytime you want, especially if/as that % approaches 3% or lower
  • Set a plan to get your money working for you again, arguably within no more than 1 year (you've already waited 3, don't delay it for 10 more years)... Take emotion out. Use your AA, determine your timeline (again would recommend no more than 12 months), determine your frequency - and automate as much of that as you can.
Enjoy your retirement (when it comes and/or you are ready for it)!
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

nessus42 wrote: Wed Sep 06, 2023 6:06 pm
KlangFool wrote: Wed Sep 06, 2023 5:48 pm
nessus42 wrote: Wed Sep 06, 2023 5:45 pm
KlangFool wrote: Wed Sep 06, 2023 4:36 pm Keep 1 million in cash.
By "cash" I assume that you mean $1m in a bond ladder? Then every year, if I'm still employed, I take the bond payout and buy stock with it? And if I'm unemployed I spend the payout instead to live on?
No. I mean actual cash in the Money Market Fund. You do not have the mentality to take any risk with this money.

If you are willing to put 1m into the annuity, then, you are willing to put 1m into cash.

KlangFool
Risk in a Treasury bond ladder??? There's no risk in a bond ladder. Unless you think I'm worried about hyperinflation or something.
nessus42,

You are too smart for your own good. When a simple Money Market Fund will work for you, you want to do something else.

"There's no risk in a bond ladder."

You are the risk factor. The more that you touch your portfolio, the more likely for you to do something bad.

If you really understand this and have confidence about this approach, you would had sold your stock and buy the bonds. You did not.

You cannot buy confidence from anyone else. You went to cash when you panicked. It was not treasury bond.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

KlangFool wrote: Wed Sep 06, 2023 6:20 pm You are too smart for your own good. When a simple Money Market Fund will work for you, you want to do something else.
Money markets aren't going to be paying 5% forever. I can lock in decent interest rates now with Treasuries.
You are the risk factor. The more that you touch your portfolio, the more likely for you to do something bad.
Please? What bad thing am I going to do??? Leave it in cash? The horror!

The worst thing that happens is what I usually do: nothing. Then, when the Treasuries mature, the money gets swept into my core MM fund.
If you really understand this and have confidence about this approach, you would had sold your stock and buy the bonds. You did not.
I didn't buy bonds in 2020 because they weren't paying anything. There was a time around then when a 10-year treasury had a negative yield!
You cannot buy confidence from anyone else. You went to cash when you panicked. It was not treasury bond.
I didn't panic. I quite reasonably thought that Covid was threat to the entire world economy, and at the time I thought that safety was a prudent choice. It's the only time in my entire life that I thought this. A lesson learned the hard way. But a lesson learned.

P.S. I was also hedging my bets because my mother had a lot of stock that she was planning on leaving to me and my brother for the inheritance step-up, since that was stock that was worth a couple of million and she had virtually a zero cost basis on, due to a stock tip I gave her in 1991. I was planning on that stock (Cisco) staying in her portfolio. Unfortunately, my brother called her up crying, and begged her to get out of the market. When I found out that he did this, I thought that this was virtually grounds for fratricide. It's a good thing that I live a couple of hundred miles away....
rich126
Posts: 4073
Joined: Thu Mar 01, 2018 3:56 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by rich126 »

I've spent a lot of time looking at annuities but unless rates and inflation are low and remain low they don't seem like a good idea.

With $3M and no debt you have plenty of money. I would probably invest the cash I need in treasuries and/or tips to cover my expenses until 70. And invest the rest in a 70/30 portfolio. The 30 is in treasuries or bonds. Basically you let the 70% grow in the market over the next decade. It would be a rare case if the market is lower in a decade and you also are getting dividends from the market.

That is sort of what I am doing although I have a decent amount of individual stocks that most here wouldn't. For example a large chunk in Berkshire and also in Google. Slowly building up the index funds to simplify things if I pass away before my wife. I just retired this year.

Sounds like you are being excessively conservative. Unless health insurance is an issue you have plenty to retire now. I understand the need to plan for living to 90 but worrying too much for something most don't achieve isn't helpful either.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

rich126 wrote: Wed Sep 06, 2023 7:06 pm
Sounds like you are being excessively conservative. Unless health insurance is an issue you have plenty to retire now. I understand the need to plan for living to 90 but worrying too much for something most don't achieve isn't helpful either.
rich126,

OP was 100% stock. Then, 100% cash.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

nessus42 wrote: Wed Sep 06, 2023 6:59 pm
Money markets aren't going to be paying 5% forever. I can lock in decent interest rates now with Treasuries.
nessus42,

You are too smart for your own good. You assume that you know a lot of stuff that may not be true.

My family member earned millions in annual salary and bonuses from wall street. He managed billions in assets. He lost 10 millions of his own money during Telecom bust just like the rest of us.

Nobody know nothing.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Dregob
Posts: 684
Joined: Wed Sep 26, 2018 9:45 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by Dregob »

nessus42 wrote: Wed Sep 06, 2023 4:34 pm I edited my post to say that I just turned 61. Thanks for pointing out the oversight.

Do you think that my plan is good as I stated it? When you say, "4% of $3M is exactly $120k", I think that perhaps you might think that I should skip the annuity and roll all of the $3m into the market. If so, over what period of time?

I used the following visualizer to help me decide on whether to put $1m into a fixed annuity, and the results seemed better with the annuity. OTOH, I have no idea whether the visualizer is FOS or not:

https://engaging-data.com/will-money-last-retire-early/

This visualizer assumes that all of my non-annuity money is currently in the market, however.
120K before SS. You'll be fine. I do understand your concern. I retired last year and it is a strange feeling not having a paycheck.
Wanderingwheelz
Posts: 3005
Joined: Mon Mar 04, 2019 8:52 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by Wanderingwheelz »

nessus42 wrote: Wed Sep 06, 2023 6:59 pm
KlangFool wrote: Wed Sep 06, 2023 6:20 pm You are too smart for your own good. When a simple Money Market Fund will work for you, you want to do something else.
Money markets aren't going to be paying 5% forever. I can lock in decent interest rates now with Treasuries.
You are the risk factor. The more that you touch your portfolio, the more likely for you to do something bad.
Please? What bad thing am I going to do??? Leave it in cash? The horror!

The worst thing that happens is what I usually do: nothing. Then, when the Treasuries mature, the money gets swept into my core MM fund.
If you really understand this and have confidence about this approach, you would had sold your stock and buy the bonds. You did not.
I didn't buy bonds in 2020 because they weren't paying anything. There was a time around then when a 10-year treasury had a negative yield!
You cannot buy confidence from anyone else. You went to cash when you panicked. It was not treasury bond.
I didn't panic. I quite reasonably thought that Covid was threat to the entire world economy, and at the time I thought that safety was a prudent choice. It's the only time in my entire life that I thought this. A lesson learned the hard way. But a lesson learned.

P.S. I was also hedging my bets because my mother had a lot of stock that she was planning on leaving to me and my brother for the inheritance step-up, since that was stock that was worth a couple of million and she had virtually a zero cost basis on, due to a stock tip I gave her in 1991. I was planning on that stock (Cisco) staying in her portfolio. Unfortunately, my brother called her up crying, and begged her to get out of the market. When I found out that he did this, I thought that this was virtually grounds for fratricide. It's a good thing that I live a couple of hundred miles away....
Since you were “hedging your bests” by selling all of your equities because your mom was (hopefully) going to leave you $1,000,000 of Cisco stock someday, wouldn’t it have been sensible to hustle a very large chunk of your cash back into the equity market when you got the news she bailed too?

Is your mom still frozen in cash, too?

Looking at it the way you did back in 2020 right now, equities would help hedge the big bet you’ve placed on cash.
Being wrong compounds forever.
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

SnowBog wrote: Wed Sep 06, 2023 6:17 pm
Thanks for the detailed response. I'll work on digesting all that you've written tomorrow.
User avatar
arcticpineapplecorp.
Posts: 13980
Joined: Tue Mar 06, 2012 8:22 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by arcticpineapplecorp. »

welcome to the group. helpful to read one's own words I think:
nessus42 wrote: Wed Sep 06, 2023 3:25 pm I unfortunately (in retrospect) made the disastrous decision to get completely out of the market when it was crashing during the beginning of Covid in 2020. It turned out that I got out at quite literally the worst possible moment, and I’d have twice the money today if I hadn’t. But spilt milk and all that. (I was worried at the time that the world was heading for serious depression, and the market seemed to concur until the central banks turned on their printing presses the very next day.)

I’ve been delaying getting back into the market due to the market being what I have considered to be overvalued. E.g., a P/E ratio for the S&P 500 well above 15 and the Buffet Indicator being very high. Due to this caution, however, I’ve missed out on even more upside market movement.

I know that trying to time the market is a fool’s game. (E.g., I shouldn’t have done it in 2020.) But I fear that if I dump all of my money back into the market right now, I’m likely to lose a third of it, which wouldn’t be so great if I need to retire tomorrow. And plenty of people will tell you to dollar cost average, rather than dumping all of your money into the market at once. (If you do it at a market high, it can take you 20 years to break even.)

The rest of my cash (about $2m), I’d like to put back into the stock market. But I’m worried about dumping it all in at once. Maybe I should be dollar cost averaging it in over the next ten years?
1. Wanderingwheelz said you're the "worrying" type which you took offense to, but look at all the words in red above that say "worry", "fear", "caution", etc. In the quoted area at the end you use the word "scared" a couple times. Maybe you're not as worried as you appear to others?

2. Read the other stuff in red above. Basically what I read is all or nothing mentality. Either IN or OUT of the market. Regardless of the market timing thing which I'll get to next, you're considering putting it ALL back IN the market IMMEDIATELY (or not). Sure you are wondering if you should DCA instead. But the fact that you got out of the market entirely and now are asking if you should get back into the market entirely, says to me you simply haven't figured out what your true asset allocation should be. Hint: it isn't 100% stocks or 0% stocks but somewhere in between. Determining that number, is your task at hand. Not whether you should put it all in tomorrow or over 10 years. What percentage your AA should be. Once you've determined that, you invest according to your AA. Not over 10 years. Immediately. But you're not 100% stock guy. And you're not 0% stock guy either. So what are you? That's you're task. Klangfool has given you a couple suggestions so far regarding different asset allocations that might help you, and another poster mentiond the target date retirement fund is 30/70 in retirement so people are trying to help you get to an actual asset allocation that isn't 100% stock or 0% stock. Read the following articles to start to think about your need, ability and willingness to take risk and how to deal with conflict between these three:

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/

3. Next this market timing thing. You said you know market timing is a fool's game. But you also talk about valuation, P/E, Buffett indicator, etc. as if these have any predictive value. They don't. The market is fairly priced based on all available public information. If valuations are higher than before it's because people are optimistic, until some news comes along to change that. And that new information will be priced into the market. When will that happen? Who knows. As you can see, being out of the market waiting for a decline can be costly. So are you sure you know market timing is a fool's game? Because you're not talking or acting like that. Mentioning different indicators to inform you when it's the right time to get in or out is the very definition of market timing. Getting out of the market and asking if/when you should get back in (now or over 10 years) is the very definition of market timing. "The first principle is that you must not fool yourself, and you are the easiest person to fool."--Richard Feynman

4. I'm not sure where you get the idea that buying in at the top of a market can take 20 years to recover. Perhaps you're thinking Great Depression stuff where everybody says it took the stock market 25 years to recover. It didn't. Try 4 1/2 years. Then the market fell again after the first fall. It wasn't one market crash that didn't bounce back for 25 years. Revisionist History. Not saying the G.D. didn't put the hurt on a lot of people. I for one am glad I wasn't alive to live through that. But still. A lot has been learned about what went wrong during that period (read a Monetary history of the United States, 1867-1960 to find out why and why if we learned from history, we're not likely to do that again (it was mostly our own fault). "I have seen the enemy and he is us."--Pogo

5. Even if you buy at a high point, i'm not seeing where it takes 20 years to recover. The Great Recession was the worst recession since the Great Depression and even if you bought in at the high point in 2007 before the market crashed in 2008-2009 you would have recovered by the end of 2012 at the latest. To put a bow on this, if you had been 50/50 stock/bond instead of 100% stock you would have recovered by Sept 2010, or two years earlier. How's that for Asset Allocation rather than All or Nothing thinking (100% or 0% stock)?
nessus42 wrote: Wed Sep 06, 2023 4:51 pm I thought that Covid was suis generis. I stayed the course for the correction of 1987, the dot com boom/bust, and the Great Recession of 2008/9. (My only regret about the Great Recession is that I didn't buy 3X S&P 500 ETF funds when the market was down 60%. Unfortunately, I was extremely busy at the time with both a full-time job and being a teaching fellow, so I didn't get around to it.)

I saw what happened during the Great Recession and the government and Fed sat on their thumbs, let Lehman Brothers fail, and bickered about whether to prop up GM, AIG, and even Fannie Mae, IIRC. I thought the same thing would happen again. I've learned my lesson the hard way. I know now that all the central banks will now start printing money like there's no tomorrow and try to bail out everything should there be another economic crisis.
I'm no teacher so I had to look up suis generis. This time is different? Those are the four most dangerous words in investing you know.

Regarding whether or not the Fed will act, act quickly, and whether the public responds or not is all outside your control. You're assuming the right things will be done. But shouldn't you build your asset allocation (there goes that phrase again) so you're ok even if the Fed doesn't do what you hope/expect them to? You should be prepared for the declines to your asset allocation based on the market falling 50%, not based on whether the Fed will fix things or not:

Image

How much are you willing to lose? That's the max pain point. You choose the allocation that doesn't carry more risk than you have a willingness to lose. Then you get your money allocated. There's no need to DCA over 10 years. Why? You assume a percentage of risk and that risk remains at all times. If you instead DCA over 10 years and in 10 years have 100% in stocks, then what? You risk losing more than you want to then (just as you're not willing to lose that now, right?). In 10 years when you're 100% in stock (after DCAing) you gonna then sell out 100% in 10 years and then DCA back in over another 10 year period? See how that makes no sense? Instead just pick the portfolio that contains the max loss you are willing to accept and invest according to that allocation RIGHT NOW, knowing that amount of risk is ever present.
nessus42 wrote: Wed Sep 06, 2023 5:09 pm Other than Covid, I had the psychological makeup to be fully invested in stocks for my entire life. But part of that psychological makeup was due to dollar cost averaging over a lifetime being a fool-proof bet.

Unfortunately, I screwed up when Covid hit (it wasn't the market that scared me; it was Covid that scared me), and plenty of sources will advise against just dumping all your money into the market when it is overvalued by historical standards. E.g., a common trap is to sell at market bottoms when things look dire, and then to buy at market highs when everything is looking great.

I was thinking of putting all my money back into the market when it was approaching fair valuation at the end of last year, before the recent run-up, but a lot of crap was going on in my life at the time, and I didn't get to it then.

Though with the new world order of the Fed adopting a goal of 2% inflation in perpetuity, historical standards of valuation may not be a good metric anymore.
All of this is noise. Distraction. Nobody knows nuthin'. Making predictions is hard, especially about the future. Investing is simple. Choose an allocation of stocks/bonds that carries the risk you have the need, ability and willingness to take. Tune out the rest. News is there to scare you. Fear leads. Ignore it all.
nessus42 wrote: Wed Sep 06, 2023 6:59 pm I didn't panic. I quite reasonably thought that Covid was threat to the entire world economy, and at the time I thought that safety was a prudent choice. It's the only time in my entire life that I thought this. A lesson learned the hard way. But a lesson learned.

P.S. I was also hedging my bets because my mother had a lot of stock that she was planning on leaving to me and my brother for the inheritance step-up, since that was stock that was worth a couple of million and she had virtually a zero cost basis on, due to a stock tip I gave her in 1991. I was planning on that stock (Cisco) staying in her portfolio. Unfortunately, my brother called her up crying, and begged her to get out of the market. When I found out that he did this, I thought that this was virtually grounds for fratricide. It's a good thing that I live a couple of hundred miles away....
You can spin things however you want, but the reality is, you didn't consider your asset allocation and your need, ability and willingness to take risk. Then when the world goes to heck in a handbasket, you already understand how your portfolio will behave. It's not a mystery. It's just math.

Stock tip? Single stock risk for your mother? Cisco may have been a lucky pick but you should never confuse outcome with strategy.

thoughts?
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

arcticpineapplecorp. wrote: Wed Sep 06, 2023 8:44 pm
Thanks for all the free psychoanalysis. I know that it typically costs hundreds of dollars per hour these days. At least from a trained professional...
nessus42 wrote: Wed Sep 06, 2023 3:25 pm But the fact that you got out of the market entirely and now are asking if you should get back into the market entirely, says to me you simply haven't figured out what your true asset allocation should be. Hint: it isn't 100% stocks or 0% stocks but somewhere in between.
I find it interesting that you can colorize bits of my text to make your argument, and yet with all that red ink, come to the conclusion that I was considering getting back into the market 100%, when instead I specifically said that I was considering putting ⅓ of my money into a fixed annuity and ⅔ of my money into the market.
4. I'm not sure where you get the idea that buying in at the top of a market can take 20 years to recover.
From Peter Lynch in One Up On Wall Street. He pointed out in this book that if you invested at the height of the market in 1968, it would have taken you more than twenty years to break even in inflation-adjusted dollars.
Stock tip? Single stock risk for your mother? Cisco may have been a lucky pick but you should never confuse outcome with strategy.
I had quite a few other stock tips for my mother that did quite well: Amazon in the late 90s, Google in 2004, Red Hat in 1999, Apple and Microsoft in the early teens, etc.
thoughts?
My thoughts are that I'd find your advice more compelling without all the pointless polemic.
Valuethinker
Posts: 47645
Joined: Fri May 11, 2007 11:07 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by Valuethinker »

nessus42 wrote: Wed Sep 06, 2023 3:25 pm Hi. I’m trying to figure out the best course of action to take should I need to retire tomorrow. My job is in jeopardy and agism is rampant in my profession. I recently turned 61. (On the other hand, I may not retire until I’m 65 or 67.)

I have about $1.6 million in non-tax deferred accounts and another $1.4 in Rollover IRAs and 401ks, etc. My house is paid off and I have zero debt. I am not married and have no children.

I unfortunately (in retrospect) made the disastrous decision to get completely out of the market when it was crashing during the beginning of Covid in 2020. It turned out that I got out at quite literally the worst possible moment, and I’d have twice the money today if I hadn’t. But spilt milk and all that. (I was worried at the time that the world was heading for serious depression, and the market seemed to concur until the central banks turned on their printing presses the very next day.)

I’ve been delaying getting back into the market due to the market being what I have considered to be overvalued. E.g., a P/E ratio for the S&P 500 well above 15 and the Buffet Indicator being very high. Due to this caution, however, I’ve missed out on even more upside market movement.

I know that trying to time the market is a fool’s game. (E.g., I shouldn’t have done it in 2020.) But I fear that if I dump all of my money back into the market right now, I’m likely to lose a third of it, which wouldn’t be so great if I need to retire tomorrow. And plenty of people will tell you to dollar cost average, rather than dumping all of your money into the market at once. (If you do it at a market high, it can take you 20 years to break even.)

I’ve been considering putting 1/3rd of my money (all from a non-tax-deferred account) into a fixed annuity that will start paying me about $100k/year when I turn 67 in six years. And delaying Social Security until I’m 70.

I currently make $120k, but I’ve paid off my house (worth about $500k today) so I have positive cash flow currently. (I understand that by the time I’m 95, that $100k per year is likely to be inflated down to $50k/year in inflation-adjusted dollars, but when added onto Social Security, plus hopefully gains in the stock market with the other ⅔ of my money, I should be okay.

The rest of my cash (about $2m), I’d like to put back into the stock market. But I’m worried about dumping it all in at once. Maybe I should be dollar cost averaging it in over the next ten years? And in the meantime maybe I should buy laddered Treasuries (or SPDAs?) that mature over the next ten years?

At the moment I’m getting about 5% in money markets, so I don’t feel any particular urgency, except that the market might go even higher, and I’ll be losing out on opportunity. Also, it seems as if I’m going to get a fixed annuity, I should buy it now while interest rates are still high. The amount that they pay out seems to be very sensitive to interest rates.
Either

1. do a dollar-cost averaging strategy over say 1-2 years

2. adjust your asset allocation down to have fewer equities

I am a huge fan of 50/50 fixed income (including CDs) & equity. A really bad stock market crash does not then wipe the investor out.

Fixed annuities are tricky because you cannot buy inflation protection. So I think a preferred route might simply be to spend capital to delay taking SS (which is a good anti-inflation strategy).

I encourage everyone to think away from a "4% rule" because I think future asset returns are just not likely to justify it. To be fair, interest rates are a heck of a lot higher now than they were, and that does make the situation better. The true SWR is what an annuity will give you - and that was 2.5% for an inflation-adjusted annuity (in the UK). Not sure what the number is now.
User avatar
dogagility
Posts: 2916
Joined: Fri Feb 24, 2017 5:41 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by dogagility »

You call articpineapplecorp's response a polemic, but there is a lot of wisdom in that thoughtful and hopefully thought-provoking response.

I agree with the other responses that you need to stop reading and listening to financial news, don't think as if you (or any of us) know where the stock market is headed in the short term, and pick an appropriate asset allocation.

You have a lot of money. I suggest looking into a TIPS ladder to fund a floor of spending as a bridge to social security. Invest the remainder in a combination of stock and bond total market index funds.

Then, stop looking at your portfolio and watching/listening to/reading about financial "news".

Good luck! :beer
The more flexibility you have the less you need to know what happens next. -- Morgan Housel. A penny saved in a storage headache. -- Conor Friedersdorf
Silverado
Posts: 1409
Joined: Fri Oct 18, 2013 6:07 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by Silverado »

Yikes. I might copy the text of a couple of our veteran posters to keep. Wow, have they tried hard to help, providing some excellent words of wisdom based on many decades of working this exact problem. It feels wasted on OP, but still great reinforcement.
BanquetBeer
Posts: 604
Joined: Thu Jul 13, 2017 5:57 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by BanquetBeer »

This thread is pretty eye opening... OP came here asking for advice when in reality it seems he was asking for conformation.

I see a lot of good advice, nothing more I can add to the financial side of things and I agree with the consensus. I am only posting to state my observation that the OP seems to be very defensive about his decisions and seems to be shifting blame from his strategy/plan (or lack of a plan) to external factors 'beyond his control' (the fed, etc).

This is the reality of the market; I think most people on Bogleheads invest with their eyes wide open, knowing that these are risks.

My suggestion is to either be receptive to what people wrote: read it again from the true perspective of helpful advice (you seem to have take it as criticism and focus on how you can reject their comments). Or - don't take the advice and consider not wasting everyones time with unproductive arguments.
HomeStretch
Posts: 10164
Joined: Thu Dec 27, 2018 2:06 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by HomeStretch »

Welcome to the forum!

Congratulations, you have amassed a good-size portfolio which should give you the option of retiring at any time. If you were to retire today, you could likely safely withdraw enough to pay your current expenses. The biggest risk to your portfolio is inflation and your current portfolio holdings likely won’t keep up with inflation over the rest of your life.

An annuity (SPIA) is not indexed for inflation and will lose purchasing power as you noted. Perhaps it is a better tool for later in life, if still needed/desired. Delay claiming SS (an annuity with COLA for life) until at least FRA and up to age 70.

Instead of buying a SPIA today, consider investing at least 30% of your portfolio ($900k) in equities in your Taxable and Roth accounts over the next 30-90 days which should help your portfolio keep up with inflation. See how that feels and then decide whether you want to keep increasing your equity position via DCA.

Also consider re-reading a couple times the feedback (which I consider very good) that you have received in this thread.
User avatar
Wiggums
Posts: 6441
Joined: Thu Jan 31, 2019 7:02 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by Wiggums »

BanquetBeer wrote: Thu Sep 07, 2023 6:25 am This thread is pretty eye opening... OP came here asking for advice when in reality it seems he was asking for conformation.

I see a lot of good advice, nothing more I can add to the financial side of things and I agree with the consensus. I am only posting to state my observation that the OP seems to be very defensive about his decisions and seems to be shifting blame from his strategy/plan (or lack of a plan) to external factors 'beyond his control' (the fed, etc).

This is the reality of the market; I think most people on Bogleheads invest with their eyes wide open, knowing that these are risks.

My suggestion is to either be receptive to what people wrote: read it again from the true perspective of helpful advice (you seem to have take it as criticism and focus on how you can reject their comments). Or - don't take the advice and consider not wasting everyones time with unproductive arguments.
I agree that unproductive comments discourage people from responding.

Different Investing strategies by three people:

My in-laws wanted ZERO investment risk. So all CDs.

My 94 year old Mom has 30% stock, 50 bonds, 20% cash

We retired at 56 and dropped to 65/35. During the 30% market crash, we spent less money being stuck at home. We started buying equities weekly and doing BIG Roth conversions.

Three people, three different investment strategies.
"I started with nothing and I still have most of it left."
soccerrules
Posts: 1154
Joined: Mon Nov 14, 2016 3:01 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by soccerrules »

I think you have received a decent amount of solid advice. This is not Yahoo comments, so you should expect most Bogleheads to provide pretty similar advice.

I wonder if you really wanted help in making your decisions or were looking for a lively debate.

Best Wishes, I am pretty sure in the end you will be fine.
Don't let your outflow exceed your income or your upkeep will be your downfall.
AlohaBill
Posts: 590
Joined: Thu Jan 24, 2008 12:20 pm
Location: California

Re: Seeking best strategy for if I have to retire tomorrow

Post by AlohaBill »

Op,
You know how much you have.
You know how much you need.
You are covered with good medical insurance.
You own your house.
You know you will probably die in ——- years. Say 22 years.

Put everything in a Life Strategy Fund or the three fund portfolio.

However, methinks you still want to play the game after the panic of 2020. :beer
User avatar
arcticpineapplecorp.
Posts: 13980
Joined: Tue Mar 06, 2012 8:22 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by arcticpineapplecorp. »

though there were 40 replies (41 now), 2924 people viewed this thread. I like to think even if the OP doesn't find value in what's been offered, perhaps one or more of the other 2924 people who viewed this thread might.

one last thing to mention for the OP, only because the OP is asking if the OP should DCA over 10 years, perhaps you haven't read Do Not Dollar-Cost-Average for More than Twelve Months

hope that wasn't too polemic. And if it was, perhaps someone else may find value in that information. Best of luck.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
pizzy
Posts: 3149
Joined: Tue Jun 02, 2020 6:59 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by pizzy »

I, for one, learned something new from this thread.

"Polemic"
NJ | Late 30's | 72% US Stock | 18% Int'l Stock | 10% Cash | 53% Vanguard | 47% Fidelity
tvubpwcisla
Posts: 1165
Joined: Sat Nov 09, 2019 9:09 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by tvubpwcisla »

It could be as simple as reduce expenses, reduce withdrawal rate, and achieve a side hustle if needed.
Wanderingwheelz
Posts: 3005
Joined: Mon Mar 04, 2019 8:52 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by Wanderingwheelz »

pizzy wrote: Thu Sep 07, 2023 9:57 am I, for one, learned something new from this thread.

"Polemic"
For me it was “fratricide”.
Being wrong compounds forever.
User avatar
arcticpineapplecorp.
Posts: 13980
Joined: Tue Mar 06, 2012 8:22 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by arcticpineapplecorp. »

nessus42 wrote: Thu Sep 07, 2023 2:27 am 4. I'm not sure where you get the idea that buying in at the top of a market can take 20 years to recover.

From Peter Lynch in One Up On Wall Street. He pointed out in this book that if you invested at the height of the market in 1968, it would have taken you more than twenty years to break even in inflation-adjusted dollars.
couple other things to think about.

1. One is you thought the 2020 pandemic was somehow different this time. But was it?
A deadly global pandemic that killed 100,000 Americans, mass protests for racial equality, and a rising stock market. Sound like 2020? Nope, it's actually 1968.

In 1968, an estimated 100,000 Americans died from the H3N2 flu, which was a global influenza pandemic that killed 1 million people globally.

In 2020, the COVID-19 pandemic spread across the globe and so far has killed 100,000 Americans, and 371,000 people globally.

In 1968, the S&P 500 fell 9% from January to March, rallied 24% off of the bottom, and finished the year with a total return of 10.8%.

In 2020, the S&P 500 fell 32% from January to March, and rallied 40% off of the bottom.

The uncanny similarities between 1968 and 2020 serve as a good reminder to investors that the stock market doesn't always trade on news headlines.

https://markets.businessinsider.com/new ... 1029273829
You can confirm this yourself here: http://www.moneychimp.com/features/market_cagr.htm though that article isn't adjusting for inflation. When you do that the CAGR for 1968 was still 6.03%. Not bad considering all that happened that year (the pandemic wasn't all. The article goes into the other stuff too).

2. Now your point is not about one year 1968 but about a much longer period. But is it accurate to just look at one period or the periods in between the period?

For instance using that same historical CAGR from that site above (and adjusting for inflation) shows you would have had a positive returns from:
1968-1972
1968-1983 and/or any year therafter

any missing years i didn't list were negative after adjusting for inflation (like 1968-1969, 1968-1970, 1968-1971, 1968 through any year through 1982).

so it seems that that the LONGEST period you would have had to go through with negative inflation adjusted returns was 15 years (1968-1982), not more than 20 years (your words, above).

Granted that's a long time to wait but how many times has this happened in the stock market?

It could happen again. That's the nature of probabilities. But Bonds didn't help during that period either methinks because rates didn't start rising in a real way until the early 80s. Would cash have helped any more? No, cash loses to inflation over time. Doesn't matter if your cash paid you 10% if inflation ran at 12%.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
KlangFool
Posts: 29678
Joined: Sat Oct 11, 2008 12:35 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by KlangFool »

arcticpineapplecorp. wrote: Thu Sep 07, 2023 10:20 am
nessus42 wrote: Thu Sep 07, 2023 2:27 am 4. I'm not sure where you get the idea that buying in at the top of a market can take 20 years to recover.

From Peter Lynch in One Up On Wall Street. He pointed out in this book that if you invested at the height of the market in 1968, it would have taken you more than twenty years to break even in inflation-adjusted dollars.
arcticpineapplecorp.,

And, the simple answer from dumb people like me would be do not be 100% stock. Hence, that will not a problem. Keep a reasonable AA in between 70/30 to 70/30. Meanwhile, smart people keep on thinking they can "market time" correctly to avoid the problem.

It is smart to know that we are not that smart.

It is very simple.

A) Assume that you can predict the future and you can jump in and out of market at the right time.

B) Assume that you cannot predict the future and adopt an investing strategy that works all the time.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
darius42
Posts: 52
Joined: Wed Sep 06, 2023 3:14 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by darius42 »

BanquetBeer wrote: Thu Sep 07, 2023 6:25 am Or - don't take the advice and consider not wasting everyones time with unproductive arguments.
It is quite possible, even on the Internet, to give advice and also be polite while doing so. E.g., SnowBog and some others did, and I thanked Snowbog for their advice, and I also thank others who were polite in their responses. I have received plenty of information to think about, and I am thankful for the information.
invest2bfree
Posts: 1151
Joined: Sun Jan 12, 2020 8:44 am

Re: Seeking best strategy for if I have to retire tomorrow

Post by invest2bfree »

nessus42 wrote: Wed Sep 06, 2023 3:25 pm Hi. I’m trying to figure out the best course of action to take should I need to retire tomorrow. My job is in jeopardy and agism is rampant in my profession. I recently turned 61. (On the other hand, I may not retire until I’m 65 or 67.)

I have about $1.6 million in non-tax deferred accounts and another $1.4 in Rollover IRAs and 401ks, etc. My house is paid off and I have zero debt. I am not married and have no children.

I unfortunately (in retrospect) made the disastrous decision to get completely out of the market when it was crashing during the beginning of Covid in 2020. It turned out that I got out at quite literally the worst possible moment, and I’d have twice the money today if I hadn’t. But spilt milk and all that. (I was worried at the time that the world was heading for serious depression, and the market seemed to concur until the central banks turned on their printing presses the very next day.)

I’ve been delaying getting back into the market due to the market being what I have considered to be overvalued. E.g., a P/E ratio for the S&P 500 well above 15 and the Buffet Indicator being very high. Due to this caution, however, I’ve missed out on even more upside market movement.

I know that trying to time the market is a fool’s game. (E.g., I shouldn’t have done it in 2020.) But I fear that if I dump all of my money back into the market right now, I’m likely to lose a third of it, which wouldn’t be so great if I need to retire tomorrow. And plenty of people will tell you to dollar cost average, rather than dumping all of your money into the market at once. (If you do it at a market high, it can take you 20 years to break even.)

I’ve been considering putting 1/3rd of my money (all from a non-tax-deferred account) into a fixed annuity that will start paying me about $100k/year when I turn 67 in six years. And delaying Social Security until I’m 70.

I currently make $120k, but I’ve paid off my house (worth about $500k today) so I have positive cash flow currently. (I understand that by the time I’m 95, that $100k per year is likely to be inflated down to $50k/year in inflation-adjusted dollars, but when added onto Social Security, plus hopefully gains in the stock market with the other ⅔ of my money, I should be okay.

The rest of my cash (about $2m), I’d like to put back into the stock market. But I’m worried about dumping it all in at once. Maybe I should be dollar cost averaging it in over the next ten years? And in the meantime maybe I should buy laddered Treasuries (or SPDAs?) that mature over the next ten years?

At the moment I’m getting about 5% in money markets, so I don’t feel any particular urgency, except that the market might go even higher, and I’ll be losing out on opportunity. Also, it seems as if I’m going to get a fixed annuity, I should buy it now while interest rates are still high. The amount that they pay out seems to be very sensitive to interest rates.
You and me are on the same boat but Iam younger will turn 49 this month still the same concerns remain. Iam in IT and ageism is huge.

Look at my strategy in the signature.

IRA\401k all in corporate bonds.

Taxable - Split between a dividend Growth etf and Preferred stock.

I dont need growth but I need to keep what I have.


Now I do have experience dealing with individual issues but you can use etfs to mimic mine.

VCLT or VWESX are vanguard bond funds.

PFFD is a preferred stock etf.

I went with SCHD because of higher yield but you can also use VYM.
37% (IRA) - Individual LT Corporate Bonds , 30%(taxable) - Individual Preferred stocks, 33%(taxable) - SCHD Dividend Growth
DebiT
Posts: 877
Joined: Sat Dec 28, 2013 12:45 pm

Re: Seeking best strategy for if I have to retire tomorrow

Post by DebiT »

Wanderingwheelz wrote: Thu Sep 07, 2023 10:10 am
pizzy wrote: Thu Sep 07, 2023 9:57 am I, for one, learned something new from this thread.

"Polemic"
For me it was “fratricide”.

Suis generis

But seriously, I’m sure OP wasn’t the only one to feel this way, and luckily he has a good sized nest egg. I personally think an SPIA at 61 won’t hold up with inflation over life, but I am no expert.

Having been suddenly widowed at 61, and then retiring, I would suggest the following:

1. Use the tools above to figure out best age for social security
2. Use TBills to fund expenses until Social Security
3. Decide on an asset allocation that is appropriate for this phase of life, perhaps increasing stock/bond ratio after SS
4. Either go all in, or dollar cost average, for no more than one year.
5. Never allow yourself to think “this time is different”. Even Covid wasn’t different. Spanish Flu was globally much much worse.

Hope this helps.

PS in , in my experience it is best to be polite to responders. They take a lot of time with these responses, and there is always something to be learned, even it turns out to be wrong for you. It’s possible you are a bit nervous, especially if you are feeling forced into retiring earlier. But written responses live on a long time, and come across a bit sharper that perhaps intended. Trained professional here, FWIW. Deep breaths, an AA you can live with, and then get it started. All will be well.
Age 65, life turned upside down 3/2/19, thanking God for what I've learned from this group.
Post Reply