Fifth Check-In [Portfolio Review]

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fire_2030
Posts: 109
Joined: Sun May 17, 2020 5:53 pm

Fifth Check-In [Portfolio Review]

Post by fire_2030 »

Its been a couple years since I have frequented the forum or posted. The feedback I have gotten in the past has shaped my journey to financial freedom and for that, I will always be grateful. I have attempted to pay it forward and share the knowledge I have gained from this community to whoever might be willing to listen (while trying to respect those that will never be interested). Although I have less questions as of late I do think its prudent to get a gut check every couple years since I have not been keeping up with any new trends, methods, or forum conversations. Thanks in advanced!

First Check-In: viewtopic.php?t=315194
Second Check-In: viewtopic.php?t=350811
Third Check-In: viewtopic.php?t=374468
Fourth Check-In: viewtopic.php?t=7175804

Key Details:
Emergency funds: >12months (Mature Ibonds + Taxable Basis)
Debt: 61K on rental property (4%)
Tax Filing Status: Married Filing Jointly
Tax Rate: 32% Federal, 7% State
Age: 43/43/13/9
Desired Asset allocation: 70% Stocks / 30% Bonds (International 20% of Stock)
Retirement Portfolio Size: 2.84M
Retirement Targets (Annual Spend, WR, Size): 130K/3.5%/3.72M
Gross Income: 310K + Variable Bonus + Variable RSU

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| Account Name                        | Jan1 2025 ($) | Jan1 2025 (%) | Notes                                          |
|-------------------------------------|---------------|---------------|------------------------------------------------|
| Retirement Total                    | $2,841,664.38 | 100.0%        | 77% Stocks (86US/14INT) / 19% Bonds / 4% Cash  |
|    Tax Exempt Total (Roth)          | $822,825.92   | 29.0%         | Mix of FZROX, FZILX, and Individual Stocks     |
|    Tax Deferred Total (Traditional) | $1,452,703.56 | 51.1%         | Mix of FSKAK, FTIHX, FXNAX, and VAN TGT 2040   |
|    Tax Free Total (HSA)             | $91,077.32    | 3.2%          | Mix of FXAIX and Cash                          |
|    Tax Advantaged Total (Ibonds)    | $94,328.00    | 3.3%          | I-Bonds                                        |
|    Taxable Total (Brokerage)        | $380,729.58   | 13.4%         | Mix of ITOT, VTI, Individual Stock, and Cash   |

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| Account Name                | Jan1 2025 ($) | Jan1 2025 (%) | Notes                                                                                                              |
|-----------------------------|---------------|---------------|--------------------------------------------------------------------------------------------------------------------|
| Roth IRA (his)              | $169,161.08   | 7.4%          | 83% FZROX + 17% FZILX                                                                                              |
| Roth IRA(hers)              | $136,385.40   | 4.8%          | 79% FZROX + 21% Individual Stocks                                                                                  |
| Roth 401K (his)             | $272,827.65   | 9.6%          | 100% FZROX                                                                                                         |
| Roth 401K (hers)            | $244,451.79   | 8.6%          | 100% FZROX                                                                                                         |
| Traditional IRA (his)       | $0.00         | 0.0%          | NA                                                                                                                 |
| Traditional IRA (hers)      | $0.00         | 0.0%          | NA                                                                                                                 |
| Traditional 401K(his)       | $880,795.30   | 31.0%         | (6% Company 401K) + (94% BrokerageLink)  = (100% VAN TGT 2040 [46/30/22/2]) + (53% FSKAK + 16% FTIHX + 31% FXNAX)  |
| Traditional 401K (hers)     | $571,908.26   | 20.1%         | (70% Company 401K) + (30% BrokerageLink) =  (100% VAN TGT 2040 [46/30/22/2]) + (100% FXNAX)                        |
| HSA (his)                   | $42,351.55    | 1.5%          | 98% FXAIX + 2% Cash                                                                                                |
| HSA (hers)                  | $48,725.77    | 1.7%          | 100% FXAIX                                                                                                         |
| I-Bonds (his)               | $47,164.00    | 1.7%          | 100% I-Bonds                                                                                                       |
| I-Bonds (hers)              | $47,164.00    | 1.7%          | 100% I-Bonds                                                                                                       |
| Individual Brokerage (his)  | $155,639.66   | 5.5%          | 81% ITOT, 14% VTI, 5% Cash                                                                                         |
| Individual Brokerage (hers) | $225,089.92   | 7.9%          | 84% ITOT, 7% VTI, 5% Individual Stocks, 4% Cash                                                                                 |

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| Account Name                        | INDEX US ($)  | INDEX INT ($) | INDIV STOCKS ($) | INDEX BOND ($) | CASH ($)    | RE EQUITY ($)  |
|-------------------------------------|---------------|---------------|------------------|----------------|-------------|----------------|
| Retirement Total                    | $1,855,560.28 | $297,184.05   | $39,895.43       | $527,936.60    | $121,088.02 | $0.00          |
|    Tax Exempt Total (Roth)          | $765,427.60   | $28,757.38    | $28,640.93       | $0.00          | $0.00       | $0.00          |
|    Tax Deferred Total (Traditional) | $647,276.63   | $268,426.66   | $0.00            | $527,936.60    | $9,063.67   | $0.00          |
|    Tax Free Total (HSA)             | $90,166.55    | $0.00         | $0.00            | $0.00          | $910.77     | $0.00          |
|    Tax Advantaged Total (Ibonds)    | $0.00         | $0.00         | $0.00            | $0.00          | $94,328.00  | $0.00          |
|    Taxable Total (Brokerage)        | $352,689.50   | $0.00         | $11,254.50       | $0.00          | $16,785.58  | $0.00          |
|                                     |               |               |                  |                |             |                |
| Retirement Total                    | 65.3%         | 10.5%         | 1.4%             | 18.6%          | 4.3%        | 0.0%           |
|    Tax Exempt Total (Roth)          | 26.9%         | 1.0%          | 1.0%             | 0.0%           | 0.0%        | 0.0%           |
|    Tax Deferred Total (Traditional) | 22.8%         | 9.4%          | 0.0%             | 18.6%          | 0.3%        | 0.0%           |
|    Tax Free Total (HSA)             | 3.2%          | 0.0%          | 0.0%             | 0.0%           | 0.0%        | 0.0%           |
|    Tax Advantaged Total (Ibonds)    | 0.0%          | 0.0%          | 0.0%             | 0.0%           | 3.3%        | 0.0%           |

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| Account Name                | INDEX US ($) | INDEX INT ($) | INDIV STOCKS ($) | INDEX BOND ($) | CASH ($)   | RE EQUITY ($) |
|-----------------------------|--------------|---------------|------------------|----------------|------------|---------------|
| Roth IRA (his)              | $140,403.70  | $28,757.38    | $0.00            | $0.00          | $0.00      | $0.00         |
| Roth IRA(hers)              | $107,744.47  | $0.00         | $28,640.93       | $0.00          | $0.00      | $0.00         |
| Roth 401K (his)             | $272,827.65  | $0.00         | $0.00            | $0.00          | $0.00      | $0.00         |
| Roth 401K (hers)            | $244,451.79  | $0.00         | $0.00            | $0.00          | $0.00      | $0.00         |
| Traditional IRA (his)       | $0.00        | $0.00         | $0.00            | $0.00          | $0.00      | $0.00         |
| Traditional IRA (hers)      | $0.00        | $0.00         | $0.00            | $0.00          | $0.00      | $0.00         |
| Traditional 401K(his)       | $463,122.17  | $148,325.93   | $0.00            | $268,290.25    | $1,056.95  | $0.00         |
| Traditional 401K (hers)     | $184,154.46  | $120,100.73   | $0.00            | $259,646.35    | $8,006.72  | $0.00         |
| HSA (his)                   | $41,928.03   | $0.00         | $0.00            | $0.00          | $423.52    | $0.00         |
| HSA (hers)                  | $48,238.51   | $0.00         | $0.00            | $0.00          | $487.26    | $0.00         |
| I-Bonds (his)               | $0.00        | $0.00         | $0.00            | $0.00          | $47,164.00 | $0.00         |
| I-Bonds (hers)              | $0.00        | $0.00         | $0.00            | $0.00          | $47,164.00 | $0.00         |
| Individual Brokerage (his)  | $147,857.68  | $0.00         | $0.00            | $0.00          | $7,781.98  | $0.00         |
| Individual Brokerage (hers) | $204,831.83  | $0.00         | $11,254.50       | $0.00          | $9,003.60  | $0.00         |
|                             |              |               |                  |                |            |               |
| Roth IRA (his)              | 4.9%         | 1.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| Roth IRA(hers)              | 3.8%         | 0.0%          | 1.0%             | 0.0%           | 0.0%       | 0.0%          |
| Roth 401K (his)             | 9.6%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| Roth 401K (hers)            | 8.6%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| Traditional IRA (his)       | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| Traditional IRA (hers)      | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| Traditional 401K(his)       | 16.3%        | 5.2%          | 0.0%             | 9.4%           | 0.0%       | 0.0%          |
| Traditional 401K (hers)     | 6.5%         | 4.2%          | 0.0%             | 9.1%           | 0.3%       | 0.0%          |
| HSA (his)                   | 1.5%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| HSA (hers)                  | 1.7%         | 0.0%          | 0.0%             | 0.0%           | 0.0%       | 0.0%          |
| I-Bonds (his)               | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 1.7%       | 0.0%          |
| I-Bonds (hers)              | 0.0%         | 0.0%          | 0.0%             | 0.0%           | 1.7%       | 0.0%          |
| Individual Brokerage (his)  | 5.2%         | 0.0%          | 0.0%             | 0.0%           | 0.3%       | 0.0%          |
| Individual Brokerage (hers) | 7.2%         | 0.0%          | 0.4%             | 0.0%           | 0.3%       | 0.0%          |
Ticker Information
ITOT S&P500 INDEX ER=0.03%
FZROX US MARKET INDEX ER=0%
FZILX INTL MARKET INDEX ER=0%
VAN TARGET 2040 (46% Vanguard US Index + 30% Vanguard Total Int Index + 22% Vanguard Bond Index + 2% Cash) ER=0.06%
FXNAX US BOND INDEX ER=0.025%
FSKAK US MARKET INDEX ER=0.015%
FTIHX INTL MARKET INDEX ER=0.06%
VFIAX VANGUARD 500 INDEX ADMIRAL ER=0.04%
VTI VANGUARD TOTAL STOCK MARKET ETF ER=0.03%
TGT Growth Fund (45% Vanguard US Index + 30% Vanguard Total Int Index + 25% Vanguard Bond Index) ER=0.49%
TGT Aggressive Growth Fund (60% Vanguard US Index + 40% Vanguard Total Int Index) ER=0.49%

Current non-retirement assets

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| Account Name                | Jan1 2025 ($) | Jan1 2025 (%) | Notes                                        |
|-----------------------------|---------------|---------------|----------------------------------------------|
| 529 (child1)                | $134,591.03   | 8.5%          | 100% TGT Growth Fund [45/30/25/0]            |
| 529 (child2)                | $58,977.43    | 3.7%          | 100% TGT Aggressive Growth Fund [60/40/0/0]  |
| Primary Home (value - debt) | $887,200.00   | 56.3%         | No Debt                                      |
| Rental Home (value - debt)  | $495,192.67   | 31.4%         | Debt = 60K                                   |

Contributions

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| Account Name                        | 2025 Planned |
|-------------------------------------|--------------|
| Retirement Total                    | $164,000.00  |
|    Tax Exempt Total (Roth)          | $71,500.00   |
|    Tax Deferred Total (Traditional) | $66,000.00   |
|    Tax Free Total (HSA)             | $6,500.00    |
|    Tax Advantaged Total (Ibonds)    | $0.00        |
|    Taxable Total (Brokerage)        | $20,000.00   |
| Non-Retirement Total                | $32,000.00   |
|    Tax Exempt Total (529)           | $12,000.00   |
|    Real Estate (Primary + Rental)   | $20,000.00   |
| Total Save                          | $196,000.00  |
|                                     |              |
| Account Name                        | 2025 Planned |
| Roth IRA (his) (via BDR)            | $7,000.00    |
| Roth IRA(hers) (via BDR)            | $7,000.00    |
| Roth 401K (his) (via MBDR)          | $28,750.00   |
| Roth 401K (hers) (via MBDR          | $28,750.00   |
| Traditional IRA (his)               | $0.00        |
| Traditional IRA (hers)              | $0.00        |
| Traditional 401K(his)               | $36,000.00   |
| Traditional 401K (hers)             | $30,000.00   |
| HSA (his)                           | $3,300.00    |
| HSA (hers)                          | $3,200.00    |
| I-Bonds (his)                       | $0.00        |
| I-Bonds (hers)                      | $0.00        |
| Individual Brokerage (his)          | $20,000.00   |
| Individual Brokerage (hers)         | $0.00        |
| 529 (child1)                        | $0.00        |
| 529 (child2)                        | $12,000.00   |
| Primary Home                        | $0.00        |
| Rental Home                         | $20,000.00   |

2025 Portfolio Insights:
  • Stock vs Bond % really got away from me over the last couple of years. With a target early retirement year of 2030 I am not comfortable maintaining near 80% stock weighting. First plan of action is to fix that with some conversion into Bonds, see portfolio questions below.
  • Lifestyle creep and annual spend increases have not stopped year over year (cant blame it all on inflation). The old me would have freaked out and forced a strict budget to get it under control but I have become better at accepting this and just making sure we understand its impacts on final target numbers and retirement date. There is a direct correlation between getting closer to retirement date and reduced stress at work which has in turn made me ok working longer. Always interesting to read about that when I was younger but another thing to experience it first hand!

2025 Portfolio Questions:
  • To continue efforts to reduce account complexity I was thinking of closing one of the individual accounts and just having one joint brokerage account? Any issues with moving investments from one fidelity account to another without selling and incurring taxable gains? Any gotchas?
  • To get closer to my desired 70/30 allocation we are moving effective immediately ~350K out of her company 401k (VAN TGT 2040). Plan to push it into FXNAX within the brokeragelink account. Since this is a mutual fund any issues with moving that much all at once? If it was an ETF I would be more hesitant to make sure to put limit order ect but if its mutual fund no concerns and this is probably small compared to how much is bought/sold each day right?
  • My plan is to go to 65/35 in 3-4 years then go to 60/40 on the day of early retirement. I think I would be fine with a more aggressive portfolio after I have weathered the first 3-5 years of early retirement. Maybe march it up to 65/35 but don't see me going any higher then 70/30 from here on out. Is sitting at 60/40 for 3-5 years enough to compensate for sequence of returns risk?
  • Plan to use Roth conversion ladder to move 401K/IRA into RothIRA in early retirement. Will need taxable + ibonds to fund 5 years of expenses as well as conversion tax costs. Our desired annual budget is increasing year over year so this has been difficult to get on top of. 130K*5=650K but you have growth over those 5 years so targeting 580K. Don't think I will get to that amount by my desired target year (2030) so plan on leveraging roth contribution basis as a backup or selling rental for equity or HELOC? Is general consensus to not touch roth contribution amounts unless last resort?
  • At this point I don't think I can be convinced that a sub 3.5% withdrawal rate is needed even with my longer runway but over the last couple of years has this consensus changed at all?
User avatar
dogagility
Posts: 4190
Joined: Fri Feb 24, 2017 5:41 am
Location: Del Boca Vista - Phase 3

Re: Fifth Check-In [Portfolio Review]

Post by dogagility »

fire_2030 wrote: Mon Feb 03, 2025 6:57 pm [*] My plan is to go to 65/35 in 3-4 years then go to 60/40 on the day of early retirement. I think I would be fine with a more aggressive portfolio after I have weathered the first 3-5 years of early retirement. Maybe march it up to 65/35 but don't see me going any higher then 70/30 from here on out. Is sitting at 60/40 for 3-5 years enough to compensate for sequence of returns risk?
I suggest you contemplate modifying withdrawals using amortization-based withdrawal methods (e.g. TPAW and VPW) rather than modifying your asset allocation if this is a concern of yours.

The comments of Ben Mathew and Willthrill81 in this thread speak to this. viewtopic.php?p=6029911#p6029911

Here is more from Ben Mathew on the utility of implementing a variable withdrawal plan for SORR concern.
https://tpawplanner.com/learn/sequence-of-return-risk

viewtopic.php?p=6048207#p6048207

viewtopic.php?p=6050719#p6050719
tpawplanner.com - Cheers to Ben Mathew and his brother! | Daaaaa Jankees Lose! - David Ortiz
HomeStretch
Posts: 13028
Joined: Thu Dec 27, 2018 2:06 pm

Re: Fifth Check-In [Portfolio Review]

Post by HomeStretch »

1. 1 less account for simplicity is good. There are no tax consequences for transferring assets between spouses.

2. Exchanging $350k all at once is not an issue imo

3. There is not a significant risk difference between a portfolio AA of 65/35 v. 60/40 imo.

4. and 5. Opinions on “safe” withdrawal rates (WR) vary. If you are comfortable at 3.5% that is all that matters. dogagility’s suggestion to look at an amortization-based withdrawal method is good. In 5 years at age 48 with an increasing desired retirement budget and children not yet through college/launched, I personally would be targeting 3%. Long retirement horizon, potential long term care costs, SORR, etc. are concerns.
bonesly
Posts: 2496
Joined: Mon Dec 18, 2017 9:28 pm
Location: WA

Re: Fifth Check-In [Portfolio Review]

Post by bonesly »

fire_2030 wrote: Mon Feb 03, 2025 6:57 pm To continue efforts to reduce account complexity I was thinking of closing one of the individual accounts and just having one joint brokerage account? Any issues with moving investments from one fidelity account to another without selling and incurring taxable gains? Any gotchas?
From Investopedia: Transferring assets between spouses does not trigger any taxable events. Just make sure to transfer the assets in-kind rather than sell to cash and then transfer the cash (as that would incur taxes). There is also a forum topic on this subject where at least one poster was told by their broker that they could NOT make such a transfer... the overwhelming responses in that thread suggest that it is possible to transfer a "gift" in-kind between spouses (e.g., from individual to joint) without limits (no $19K gift limit for spouses) and without tax-consequences (in-kind is not a sale, just a change in registered ownership).
fire_2030 wrote: Mon Feb 03, 2025 6:57 pm To get closer to my desired 70/30 allocation we are moving effective immediately ~350K out of her company 401k (VAN TGT 2040). Plan to push it into FXNAX within the brokeragelink account. Since this is a mutual fund any issues with moving that much all at once? If it was an ETF I would be more hesitant to make sure to put limit order ect but if its mutual fund no concerns and this is probably small compared to how much is bought/sold each day right?
Your $350K trade is not going to "move the market," if that's your concern. FXNAX is a mutual fund so the daily volume isn't seen on BigCharts, but you can see the volume for BND on BigCharts (an ETF not a MF) and that's likely similar to the volume for FXNAX at around 5M shares/day. FXNAX is about $10.25/share so $350,000 / $10.25 is about 34,000 shares. 34,000 shares / 5,000,000 shares is about 0.68% of the daily volume... that's nothing (certainly not enough to move the market). Plus, as you said, as a mutual fund you're trade will be settled at end-of-day on the closing NAV for all trades of this fund (which is a headache for the MF companies... they would much prefer if everyone used ETFs and traded directly with other investors on the exchanges rather than having the MFC be an intermediary that has to estimate a NAV for all trades that day. :D).
fire_2030 wrote: Mon Feb 03, 2025 6:57 pm My plan is to go to 65/35 in 3-4 years then go to 60/40 on the day of early retirement. I think I would be fine with a more aggressive portfolio after I have weathered the first 3-5 years of early retirement. Maybe march it up to 65/35 but don't see me going any higher then 70/30 from here on out. Is sitting at 60/40 for 3-5 years enough to compensate for sequence of returns risk?
I agree with @dogagility that using VPW rather than a const-$ withdrawal strategy is a better way to deal with really bad SOR risk than tweaking your AA by amounts less than 10%. I also agree with @HomeStretch that 60/40 vs 65/35 is an immaterial difference... consider the two charts below.

AA is the least impact on your balance-at-retirement in the accumulation phase. Corollary is that AA is the least impact on your balance-to-heirs in the withdrawal phase (the draw rate, which is tied to the withdrawal method, and the withdrawal period in years matter much more).
Image

Next chart shows some nominal contribution level for some period of time; 25th through 75th percentiles are pretty similar for ±10% differences in stock concentration (extremely good or bad SOR is noticeable). Pick an AA in 10-20% increments that lets you sleep well at night and don't worry about it further... slicing <10% is counter-productive (unless it was part of a planned glide-slope that's gradually changing by more than 10% in total).
Image
fire_2030 wrote: Mon Feb 03, 2025 6:57 pm Plan to use Roth conversion ladder to move 401K/IRA into RothIRA in early retirement. Will need taxable + ibonds to fund 5 years of expenses as well as conversion tax costs. Our desired annual budget is increasing year over year so this has been difficult to get on top of. 130K*5=650K but you have growth over those 5 years so targeting 580K. Don't think I will get to that amount by my desired target year (2030) so plan on leveraging roth contribution basis as a backup or selling rental for equity or HELOC? Is general consensus to not touch roth contribution amounts unless last resort?
I don't think this is a consensus but I would not touch Roth contributions except as a last resort as that will reduce tax-free compound earnings in the future and Roth Tax-Free dollars are (generally) worth more than Trad Tax-Deferred or Taxable dollars. I would consider selling the rental but would not consider going into debt, unless the rate on the HELOC was fixed at less than the 3m T-Bill (currently at 4.31%). HELOCs tend to be variable, so I wouldn't pick a variable rate ever for your situation and goal (maybe a fixed equity loan if the rate was <3.3%).
fire_2030 wrote: Mon Feb 03, 2025 6:57 pm At this point I don't think I can be convinced that a sub 3.5% withdrawal rate is needed even with my longer runway but over the last couple of years has this consensus changed at all?
A 3.5% initial draw for a const-$ strategy would likely last for 40 years with only a 10% chance of running out early (compared to 4% and 30y from the original Trinity Study parameters). 3.15% is near a perpetual initial draw (55y with a 10% chance of failure). However, I'll reiterate that if you can structure your budget vs income streams such that the mandatory expenses are covered by pensions + SocSec + TIPS ladder, then the portfolio can be 100% discretionary and that's perfectly aligned with a const-% or var-% withdrawal strategy that has zero chance of running out early. VPW has the benefit of letting you spend more in exchange for leaving a smaller legacy to heirs.

There's no reason to live at a sub-3.5% withdrawal rate if you're willing to accept "pay cuts" along the way by using const-% or VPW... if you absolutely cannot tolerate pay cuts and need every penny of your portfolio draw to cover mandatory expenses, then const-$ is probably a better strategy (although it bears the risk of running out early in exchange for a smooth exponential increase in portfolio spending... never a pay cut). See the chart below for an example (a single random draw for the sequence on the right, which could vary significantly across 1,000 or 10,000 trials). Notice that the scale for const-% is almost double the spending of const-$, but it has dips (pay cuts in response to market down-turns).

Image
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
Topic Author
fire_2030
Posts: 109
Joined: Sun May 17, 2020 5:53 pm

Re: Fifth Check-In [Portfolio Review]

Post by fire_2030 »

dogagility wrote: Tue Feb 04, 2025 3:38 am I suggest you contemplate modifying withdrawals using amortization-based withdrawal methods (e.g. TPAW and VPW) rather than modifying your asset allocation if this is a concern of yours.
Many thanks for all the links. Honestly I have avoided going deep into withdrawal methods as it was always so far away to care about. I think its about time I put more thought into it. I went thru your article links and summarized my notes below for my own future reference. In short, I will re-evaluate using allocation as a method to reduce SORR. Will leverage a variable withdrawal strategy to de-risk SORR instead. Not 100% sure yet what method to pick but will update my original post when I have settled on a method. I do need to read up on static glide vs dynamic glide on the allocation front. Conceptually it makes sense if your willing to adjust withdrawal based on market why wouldn't you adjust your allocation glide.
Seems like a lot of good data in the TPAW camp.

Notes:
  • Acronyms: SORR - Sequence of Return Risk, SWR - Safe Withdrawal Rate, VPW - Variable Percentage Withdrawal, PWR - Perpetual Withdrawal Rate, ABW - Amortization Based Withdrawal Rate, TPAW - Target Portfolio Allocation Withdrawal
  • SORR is always an issue. Even at older age while using ABW, a market event will require a lower withdrawals. Your shifting your risk, in non variable SWR you have portfolio depletion risk, in ABW you have withdrawal risk (could be lower then your basic needs)
  • True SORR elimination would be a TIPS ladder. Misconception that SORR only matters if you sell stock, its really about consuming a higher percentage of your portfolio after a downturn.
  • Treat each day as the first day of the rest of your retirement
  • Most basic way to avoid SORR is a lower withdrawal rate during downturns. As your withdrawal rate in relation to your portfolio size shrink's, your exposure to sequence of returns risk also shrinks. TPAW - Withdrawals decline percent-for-percent during the crash, but also recover percent-for-percent when the market recovers.
  • Common agreement that 2.5% is a safe PWR but also common agreement that this is way to conservative to start and maintain.
  • Knowing your end goal is important (deplete your portfolio? pass down wealth? ect) Goals lead to buckets.
  • TPAW places the funds for each goal--whether it's college expenses, wealth transfer, or retirement funding for age 87--into its own bucket and applies a fixed AA on that bucket based on risk preferences for that goal. The complexity comes from the fact that there are many goals and many buckets. It's the aggregation--the adding up of all the buckets--that can make things look complex from up top. But the mechanism operating on each bucket is extremely simple.
  • Even if you want to be conservative, ABW can be made as conservative as you want by selecting a sufficiently high growth amortization
    schedule.
HomeStretch wrote: Tue Feb 04, 2025 4:05 am 1. 1 less account for simplicity is good. There are no tax consequences for transferring assets between spouses.
bonesly wrote: Tue Feb 04, 2025 12:59 pm Transferring assets between spouses does not trigger any taxable events. Just make sure to transfer the assets in-kind rather than sell to cash and then transfer the cash (as that would incur taxes)
ok yes, should be easy since its fidelity to fidelity
HomeStretch wrote: Tue Feb 04, 2025 4:05 am 2. Exchanging $350k all at once is not an issue imo
bonesly wrote: Tue Feb 04, 2025 12:59 pm 34,000 shares / 5,000,000 shares is about 0.68% of the daily volume... that's nothing (certainly not enough to move the market)
aligns to my thinking but nice to see the numbers to support as well, thanks!
HomeStretch wrote: Tue Feb 04, 2025 4:05 am 3. There is not a significant risk difference between a portfolio AA of 65/35 v. 60/40 imo.
Kind of funny because 4 years ago I had even worse stair step from 80/20 to 78/22 then 76/24 ect ect. Got chewed out for that, thought a step of 5 was better but your point is it should be more like 10. Not sure how big of steps target funds use? Anyway, I'm fine staying at 70/30 till retirement and evaluating moving directly to 60/40 at that time. Again need to read more about dynamic allocation strategy and bucket approach presented in TPAW.
bonesly wrote: Tue Feb 04, 2025 12:59 pm I agree with @dogagility that using VPW rather than a const-$ withdrawal strategy is a better way to deal with really bad SOR risk than tweaking your AA by amounts less than 10%. I also agree with @HomeStretch that 60/40 vs 65/35 is an immaterial difference... consider the two charts below.
Yep on board now with this thinking. Very much like your AA to to retirement vs AA at retirement to heirs analogy. Understand now that withdrawal strategy is a primary knob and AA more a secondary knob.
bonesly wrote: Tue Feb 04, 2025 12:59 pm I would consider selling the rental but would not consider going into debt, unless the rate on the HELOC was fixed at less than the 3m T-Bill (currently at 4.31%).
Yeah debt, variable debt at that, seems silly. At the end of the day I will try and fund the brokerage account as much as I can to enable the first 5 year strategy. In step with the variable withdrawal discussion there is nothing saying you cant adjust withdrawals in the first 5 years either based on final brokerage savings amount. The desired yearly spend number has a lot of slop vs the bare bones necessity number.

Again thanks to all you for the replies! Exciting to re-visit these ideas after a two year hiatus from the forum.
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