Gen-X Boglehead Thoughts

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Topic Author
SantaClaraSurfer
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Joined: Tue Feb 19, 2019 11:09 am

Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Throwing up a thread for those us in this smaller demographic generation that's been in the news of late.

Whatever your numeric age, if you fall outside of the "retired or retiring very soon" universe but have left (or never been in) the young accumulator "100% stocks" or "FIRE" universe, some of these thoughts may be relevant to you. Full disclosure, my wife and I have an average age of roughly 46 y.o. with me being older and her younger, we are empty nesters with two college age kids, and we are double income and not planning on retiring soon.

1. EE Bonds / I Bonds: I think these both make sense for Gen X because the 20 year horizon and the 3.5% guarantee on the EE Bonds can provide a really nice income floor 20 years out at a low price point. Given that there are not pensions for private sector employees going forward, this helps fill that guaranteed retirement income niche, but in a smaller way. The I-Bonds work really well as a steady buy and hold place to park cash and have it hold its value against the CPI. All we have to do is purchase these regularly. (Personally, we purchase about $9,000 EE per year and $5,000-$8,000 I Bonds per year.)

2. Long Term Treasury Bonds: This is a topic that gets a bit confusing here for Gen-X'ers because people of varying ages and retirement stages have distinct views. I've recently been using Long Term Treasury Bonds (via SCHQ in taxable, and VLGSX in my 401(k)) as a go to Bond Fund purchase with every Equity purchase. For this purpose, I think they work really well. So, in taxable, if I purchase $800 in Equity Index funds, I'll make sure to purchase $200 in SCHQ Long Term Treasuries. I only started doing this in 2021, but despite the doom and gloom, every single LTT purchase I've made is up for the year...and pays a steady dividend...and will provide us protection if equities drop. I've read so many posts that are negative about Long Term Treasuries, but frankly I see it the exact opposite of most critics of Long Term Treasuries if you have a Gen X horizon. Making steady LTT Index Fund purchases allows us to confidently make Equity purchases and (hopefully) stick to our IPS in coming decades.

3. 401(k) / RMDs: Edit to make it clear we max our tax deferred. Our approach to 401(k)s has been to max them out in a Target Date Fund formula based on our retirement age targets. We don't expect to draw on these until either of us reach the RMD age, and that age keeps getting pushed back by new policies. So, for example, I'm not planning on drawing on my 401(k) for 23 years and my wife for 33 years, or so. Personally, I think that makes having any kind of "for certain" tax planning with regards to our 401(k)s premature. Our goal is simply to contribute the max and leave on auto-rebalancing within a low-cost TDF. This means we are equity (and also International Equity market weight) forward in our 401(k)s versus trying to park as many Bond investments in them as possible for tax reasons, which makes no sense to me given our time horizon. We are essentially set and forget on a Vanguard TDF glide path in our 401(k)s.

4. International: We are attempting to be market weight with International whenever possible. Our long term horizon is 40-50 years, so I don't think any other approach makes sense. That's easy to do with both of our 401(k)s in a Vanguard universe, so we are simply sticking with the Vanguard allocation. While US over-weighting seems to have worked for many of our respected Boglehead colleagues, it just doesn't make sense to us at our age and looking forward for multiple decades.

5. Housing: We are currently renting and have been for the last six years. We don't really see a downside to this as the fees/taxes/interest of most places we'd be interested in buying in our area more than equal our current rent. Also the idea of a 30 year mortgage being a "no brainer investment" for a two income household is, at a minimum, changing more to a strong "it depends" kind of consideration in our experience. What will mortgages and resale value look like 25 years from now? That's a non trivial question.

6. Taxable Brokerage Accounts: We are huge fans. The flexibility we've gained by pooling our college, retirement, and spending savings in one place has been a force multiplier. Building a savings/investing war chest in a taxable brokerage account also really flips the script with regards to job changes and navigating a changing job environment. We can use brokerage account funds at any time for anything we want or need, including investing in our own careers. The peace of mind and flexibility gains are super powerful.

7. Municipal Bonds: We've steadily been purchasing Municipal Bonds and haven't regretted it yet. It's a complement to our EE and I bond purchases, and adds to our diversification with tax-free dividends.

8. Stock/Sector Fund: We steadily put about 5% of our total investments in a mix of Individual Stocks and Sector Funds. We keep this in a separate brokerage account that we don't rebalance. We don't think of this as play money, more that we have a long term commitment to make steady investments that have very long term growth potential. Looking forward, whether this pays off or not, we could also use some of these funds for charitable giving/donating down the road.
Last edited by SantaClaraSurfer on Thu Jul 08, 2021 7:43 pm, edited 4 times in total.
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Noobvestor
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Re: Gen-X Boglehead Thoughts

Post by Noobvestor »

SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 4. International: We are attempting to be market weight with International whenever possible. Our long term horizon is 40-50 years, so I don't think any other approach makes any sense. That's easy to do with both of our 401(k)s in a Vanguard universe, so we are simply sticking with the Vanguard allocation. While US over weighting seems to have worked for many of our respected Boglehead colleagues, it just doesn't make sense to us at our age and looking forward for multiple decades.
That fits. I'm in a similar boat. Older folks didn't have good, cheap access to international. Younger folks who weren't significantly invested until the 2010s have only seen international underperform. As a result, people on both generational sides tend to skew US. Those of us who were getting grounded during the 2000s and saw that the US really could lose out for a decade diversified. Of course, we didn't do well in the 2010s, but winners rotate.

One side note on muni bonds: are those really still a good deal? Have you double-checked recently? I bailed on mine a while back. The tax-equivalent yield wasn't worth the risk. I'm entirely in TIPS, Treasuries, I and EE bonds now. At least Treasuries are state tax (albeit not federal) exempt.
"In the absence of clarity, diversification is the only logical strategy" -= Larry Swedroe
Whakamole
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Re: Gen-X Boglehead Thoughts

Post by Whakamole »

Thoughts from another Gen-Xer:
SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 1. EE Bonds / I Bonds: I think these both make sense for us because the 20 year horizon and the 3.5% guarantee on the EE Bonds can provide a really nice income floor 20 years out at a low price point. Given that there are not pensions for private sector employees going forward, this helps fill that guaranteed retirement income niche, but in a smaller way. The I-Bonds work really well as a steady buy and hold place to park cash and have it hold it's value against the CPI. All we have to do is purchase these regularly. (We purchase about $9,000 EE per year and $5,000-$8,000 I Bonds per year.)
I've been buying I-bonds for a while (even have some from the days when you could use a credit card and get cash back.) EE bonds, I'd have to know that I'd hold them for 20 years, otherwise they are not a great investment. I have a trust and personal account, which allows me to buy $20K of I bonds per year if I like. It also does double duty as an emergency fund.
2. Long Term Treasury Bonds: This is a topic that gets a bit confusing here for Gen-X'ers because people of varying ages and retirement stages have distinct views. I've recently been using Long Term Treasury Bonds (via SCHQ in taxable, and VLGSX in my 401(k)) as a go to Bond Fund purchase with every Equity purchase. For this purpose, I think they work really well. So, in taxable, if I purchase $800 in Equity Index funds, I'll make sure to purchase $200 in SCHQ Long Term Treasuries. I only started doing this in 2021, but despite the doom and gloom, every single LTT purchase I've made is up for the year...and pays a steady dividend...and will provide us protection if equities drop. I've read so many posts that are negative about Long Term Treasuries, but frankly I see it the exact opposite of most critics of Long Term Treasuries if you have a Gen X horizon. Making steady LTT Index Fund purchases allows us to confidently make Equity purchases and (hopefully) stick to our ISP in coming decades.
There are cases for and against LTT. SCHQ is paying just under 2%, which is good right now (except for I/EE bonds), but interest rate risk bothers me, even with a longer horizon. I lean short-medium term, and just made a modest investment into a TIPS fund.
3. 401(k) / RMDs: Maybe we are going to feel that we were mistaken, but our approach to 401(k)s has been to max them out (when possible) in a Target Date Fund formula based on our retirement age targets. However, we don't expect to draw on these until either of us reach the RMD age, and that age keeps getting pushed back by new policies. So for example, I'm not planning on drawing on my 401(k) for 23 years, or so, and my wife for 33 years, or so. Personally, I think that makes having any kind of "for certain" tax planning with regards to our 401(k)s premature. Our goal is simply to contribute the max and leave on auto-rebalancing within a TDF. This means we are equity (and also International Equity market weight) forward in our 401(k)s versus trying to park as many Bond investments in there as possible for tax reasons, which makes no sense to me given our time horizon. We are essentially set and forget on a Vanguard TDF glide path in our 401(k)s.
I follow the tax-efficient fund placement strategy outlined in the wiki. It's not perfect, I have to do rebalancing manually which is something that the fund company would do for me. I think it's worth it with the tax-preferred treatment of stocks in taxable. So, my tax-deferred 401(k) is mostly bonds, and my Roth/Roth 401(k) is all stock. Luckily we have the back-door Roth 401(k) at work, and about half of GenXers are able to put even more away with catch-up provisions. That's over $60K a year counting matching. If tax policy changes, I can work around that in tax-protected accounts.
4. International: We are attempting to be market weight with International whenever possible. Our long term horizon is 40-50 years, so I don't think any other approach makes any sense. That's easy to do with both of our 401(k)s in a Vanguard universe, so we are simply sticking with the Vanguard allocation. While US over weighting seems to have worked for many of our respected Boglehead colleagues, it just doesn't make sense to us at our age and looking forward for multiple decades.
Not at market weight (at 70/30) but agree, international is important. I also tilt towards small cap international which has a lower correlation with the US stock market; Vanguard's VSS/VFSAX is a cheap way to do that.
5. Housing: We are currently renting and have been for the last six years. We don't really see a downside to this as the fees/taxes/interest of most places we'd be interested in buying more than equal our current rent. Also the idea of a 30 year mortgage being a "no brainer investment" for a two income household is, at a minimum, changing more to a strong "it depends" kind of consideration in our experience. What will mortgages and resale value look like 25 years from now? It's a non trivial question without pat answers no matter where you are thinking about purchasing.
I'm single and rent, buying would be more expensive since anything I buy will either be larger (and cost more) or be a condo which is an apartment that may appreciate in value and will cause me to deal with the HOA. If I had a family, or needed the space for other reasons, it'd be different. There was a downside during the pandemic, when people with larger homes and yards had a much easier time, but larger homes with yards around here are not cheap.
6. Taxable Brokerage Accounts: We are huge fans. The flexibility we've gained by pooling our college, retirement, and spending savings in one place has been a force multiplier. Building a savings/investing war chest in a taxable brokerage account also really flips the script with regards to job changes and navigating a changing job environment. We can use brokerage account funds at any time for anything we want or need, including investing in our own careers. The peace of mind and flexibility gains are super powerful.
It is nice watching taxable go up, and having extra flexibility in getting money out if required. Maybe someday the dividends from my taxable account will be enough to live on...
7. Municipal Bonds: We've steadily been purchasing Municipal Bonds and haven't regretted it yet. It's a complement to our EE and I bond purchases, and adds to our diversification with tax-free dividends.
Makes sense if you live in a state with income tax and you are in a high tax bracket. My state has no income tax (yet.)
8. Stock/Sector Fund: We steadily put about 5% of our total investments in a mix of Individual Stocks and Sector Funds. We keep this in a separate brokerage account that we don't rebalance. We don't think of this as play money, more that we have a long term commitment to make steady investments that have very long term growth potential. Looking forward, whether this pays off or not, we could also use some of these funds for charitable giving/donating down the road.
Mixed feelings about this, I've been in sector funds that did well for a while (Vanguard Health Care), sector funds that went nowhere (wind before it was cool in the form of PBW), sector funds that decided to change strategy completely (Vanguard Precious Metals); I'm done with them. I have company stock and a small position in precious metals as an inflation hedge.
Topic Author
SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Noobvestor wrote: Thu Jul 08, 2021 2:07 am One side note on muni bonds: are those really still a good deal? Have you double-checked recently? I bailed on mine a while back. The tax-equivalent yield wasn't worth the risk. I'm entirely in TIPS, Treasuries, I and EE bonds now. At least Treasuries are state tax (albeit not federal) exempt.
While the past year has had lower dividends, our CA Long Term Muni Fund, VCITX is giving us a 2.39% distribution yield looking forward 12 months using our brokerage calculator. That checks out as our dividends have been right around that rate the last 3 months.

My back of the envelope shows a tax equivalent yield at a Fed+State marginal tax rate of 30% of 3.4%, and that number would be better for higher marginal tax rates.

Again, that's a forward look, but it's backed up by recent dividends.
Last edited by SantaClaraSurfer on Thu Jul 08, 2021 8:45 am, edited 1 time in total.
mikejuss
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Re: Gen-X Boglehead Thoughts

Post by mikejuss »

If you're saving for college, use a 529 account, not a taxable account.
Topic Author
SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

mikejuss wrote: Thu Jul 08, 2021 8:45 am If you're saving for college, use a 529 account, not a taxable account.
I agree.

We have a small 529 account, but we aren't currently saving for college, we are paying for college with recent income.

In our case, putting those funds in anything but cash doesn't make sense. We keep our non-529 college funds in a dedicated brokerage account.
sycamore
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Re: Gen-X Boglehead Thoughts

Post by sycamore »

SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 6. Taxable Brokerage Accounts: We are huge fans. The flexibility we've gained by pooling our college, retirement, and spending savings in one place has been a force multiplier. Building a savings/investing war chest in a taxable brokerage account also really flips the script with regards to job changes and navigating a changing job environment. We can use brokerage account funds at any time for anything we want or need, including investing in our own careers. The peace of mind and flexibility gains are super powerful.
Do you think the benefits of flexibility and peace of mind are (were?) worth forgoing the tax-deferred benefits of a Trad IRA or 401k? As for my household, we funded the taxable account only after maxing contributions to 401k and IRAs. A couple years I had an HDHP, and so I contributed to an HSA before taxable. So far, it looks very likely that "tax arbitrage" will work out in our favor -- we contributed to tax-deferred at higher tax brackets than our withdrawal rates will be in

As it turned out, we happened to have a high enough income to support funding our retirement goals "first," before funding other, more medium-term goals. I can see, though, if our income had been lower then we would have had to choose whether to "lock up" money in the tax-advantaged accounts.

Fwiw, there are ways to get money out of Roth IRA (contributions can be withdrawn) and even Trad IRA (SEPP) so I never felt liked the money was truly locked up.
JD2775
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Re: Gen-X Boglehead Thoughts

Post by JD2775 »

sycamore wrote: Thu Jul 08, 2021 9:18 am
SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 6. Taxable Brokerage Accounts: We are huge fans. The flexibility we've gained by pooling our college, retirement, and spending savings in one place has been a force multiplier. Building a savings/investing war chest in a taxable brokerage account also really flips the script with regards to job changes and navigating a changing job environment. We can use brokerage account funds at any time for anything we want or need, including investing in our own careers. The peace of mind and flexibility gains are super powerful.
Do you think the benefits of flexibility and peace of mind are (were?) worth forgoing the tax-deferred benefits of a Trad IRA or 401k? As for my household, we funded the taxable account only after maxing contributions to 401k and IRAs.
OP is maxing out his 401k already
SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 3. 401(k) / RMDs: Maybe we are going to feel that we were mistaken, but our approach to 401(k)s has been to max them out (when possible) in a Target Date Fund formula based on our retirement age targets. However, we don't expect to draw on these until either of us reach the RMD age, and that age keeps getting pushed back by new policies. So for example, I'm not planning on drawing on my 401(k) for 23 years, or so, and my wife for 33 years, or so. Personally, I think that makes having any kind of "for certain" tax planning with regards to our 401(k)s premature. Our goal is simply to contribute the max and leave on auto-rebalancing within a TDF. This means we are equity (and also International Equity market weight) forward in our 401(k)s versus trying to park as many Bond investments in there as possible for tax reasons, which makes no sense to me given our time horizon. We are essentially set and forget on a Vanguard TDF glide path in our 401(k)s.
mikejuss
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Re: Gen-X Boglehead Thoughts

Post by mikejuss »

SantaClaraSurfer wrote: Thu Jul 08, 2021 8:51 am
mikejuss wrote: Thu Jul 08, 2021 8:45 am If you're saving for college, use a 529 account, not a taxable account.
I agree.

We have a small 529 account, but we aren't currently saving for college, we are paying for college with recent income.

In our case, putting those funds in anything but cash doesn't make sense. We keep our non-529 college funds in a dedicated brokerage account.
I'm unclear: are you paying for college with funds from a brokerage account or with cash? If the former, you're better off keeping those funds in a 529 account.
Topic Author
SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

sycamore wrote: Thu Jul 08, 2021 9:18 am Do you think the benefits of flexibility and peace of mind are (were?) worth forgoing the tax-deferred benefits of a Trad IRA or 401k?
A Trad IRA is out of the picture for us due to our household income, and, barring job transitions, we max our 401(k)s.

I don't see the taxable brokerage account from the tax point of view as much as from a "Rent + Taxable Brokerage Account" versus "Own Home + Stretch for an Adequate Down Payment + Commit to an Outsized Mortgage in a HCOL area" perspective.

By the time we'd have enough freed up in taxable to make an appropriate down payment on an equivalent mortgage in our area (ie. a down payment of $260,000 to $400,000) would we want to give up flexibility and peace of mind keeping that amount money in taxable gave us? And we'd either have to empty our taxable account to do this someday...or save for further years and defer a home purchase even longer.

Your point about taxes in that case might be to flag the mortgage deduction we are foregoing. But for home purchases since 2017 that equation has changed in a HCOL area where mortgage costs are often double (or more) of the amount that is actually deductible.

"Homeowners who bought houses after Dec. 15, 2017, can deduct interest on the first $750,000 of the mortgage." -Nerdwallet

Add to that the SALT tax treatment for many of these same HCOL areas, and the tax equation favoring renting and growing a taxable brokerage account skews even more in the favor of renting.
Topic Author
SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

mikejuss wrote: Thu Jul 08, 2021 9:46 am I'm unclear: are you paying for college with funds from a brokerage account or with cash? If the former, you're better off keeping those funds in a 529 account.
We fell into the "If College is coming soon" category in this blog post on the topic.

I already said that I agree with you that 529s are great vehicles for those saving for future college expenses.
Topic Author
SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Thanks for the extensive response. I'm guessing it will be helpful for other Gen X folks to see where we overlap and where we don't!
Whakamole wrote: Thu Jul 08, 2021 2:57 am Thoughts from another Gen-Xer:
SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm 1. EE Bonds / I Bonds: I think these both make sense for us because the 20 year horizon and the 3.5% guarantee on the EE Bonds can provide a really nice income floor 20 years out at a low price point. Given that there are not pensions for private sector employees going forward, this helps fill that guaranteed retirement income niche, but in a smaller way. The I-Bonds work really well as a steady buy and hold place to park cash and have it hold it's value against the CPI. All we have to do is purchase these regularly. (We purchase about $9,000 EE per year and $5,000-$8,000 I Bonds per year.)
I've been buying I-bonds for a while (even have some from the days when you could use a credit card and get cash back.) EE bonds, I'd have to know that I'd hold them for 20 years, otherwise they are not a great investment. I have a trust and personal account, which allows me to buy $20K of I bonds per year if I like. It also does double duty as an emergency fund.
2. Long Term Treasury Bonds: This is a topic that gets a bit confusing here for Gen-X'ers because people of varying ages and retirement stages have distinct views. I've recently been using Long Term Treasury Bonds (via SCHQ in taxable, and VLGSX in my 401(k)) as a go to Bond Fund purchase with every Equity purchase. For this purpose, I think they work really well. So, in taxable, if I purchase $800 in Equity Index funds, I'll make sure to purchase $200 in SCHQ Long Term Treasuries. I only started doing this in 2021, but despite the doom and gloom, every single LTT purchase I've made is up for the year...and pays a steady dividend...and will provide us protection if equities drop. I've read so many posts that are negative about Long Term Treasuries, but frankly I see it the exact opposite of most critics of Long Term Treasuries if you have a Gen X horizon. Making steady LTT Index Fund purchases allows us to confidently make Equity purchases and (hopefully) stick to our ISP in coming decades.
There are cases for and against LTT. SCHQ is paying just under 2%, which is good right now (except for I/EE bonds), but interest rate risk bothers me, even with a longer horizon. I lean short-medium term, and just made a modest investment into a TIPS fund.
3. 401(k) / RMDs: Maybe we are going to feel that we were mistaken, but our approach to 401(k)s has been to max them out (when possible) in a Target Date Fund formula based on our retirement age targets. However, we don't expect to draw on these until either of us reach the RMD age, and that age keeps getting pushed back by new policies. So for example, I'm not planning on drawing on my 401(k) for 23 years, or so, and my wife for 33 years, or so. Personally, I think that makes having any kind of "for certain" tax planning with regards to our 401(k)s premature. Our goal is simply to contribute the max and leave on auto-rebalancing within a TDF. This means we are equity (and also International Equity market weight) forward in our 401(k)s versus trying to park as many Bond investments in there as possible for tax reasons, which makes no sense to me given our time horizon. We are essentially set and forget on a Vanguard TDF glide path in our 401(k)s.
I follow the tax-efficient fund placement strategy outlined in the wiki. It's not perfect, I have to do rebalancing manually which is something that the fund company would do for me. I think it's worth it with the tax-preferred treatment of stocks in taxable. So, my tax-deferred 401(k) is mostly bonds, and my Roth/Roth 401(k) is all stock. Luckily we have the back-door Roth 401(k) at work, and about half of GenXers are able to put even more away with catch-up provisions. That's over $60K a year counting matching. If tax policy changes, I can work around that in tax-protected accounts.
4. International: We are attempting to be market weight with International whenever possible. Our long term horizon is 40-50 years, so I don't think any other approach makes any sense. That's easy to do with both of our 401(k)s in a Vanguard universe, so we are simply sticking with the Vanguard allocation. While US over weighting seems to have worked for many of our respected Boglehead colleagues, it just doesn't make sense to us at our age and looking forward for multiple decades.
Not at market weight (at 70/30) but agree, international is important. I also tilt towards small cap international which has a lower correlation with the US stock market; Vanguard's VSS/VFSAX is a cheap way to do that.
5. Housing: We are currently renting and have been for the last six years. We don't really see a downside to this as the fees/taxes/interest of most places we'd be interested in buying more than equal our current rent. Also the idea of a 30 year mortgage being a "no brainer investment" for a two income household is, at a minimum, changing more to a strong "it depends" kind of consideration in our experience. What will mortgages and resale value look like 25 years from now? It's a non trivial question without pat answers no matter where you are thinking about purchasing.
I'm single and rent, buying would be more expensive since anything I buy will either be larger (and cost more) or be a condo which is an apartment that may appreciate in value and will cause me to deal with the HOA. If I had a family, or needed the space for other reasons, it'd be different. There was a downside during the pandemic, when people with larger homes and yards had a much easier time, but larger homes with yards around here are not cheap.
6. Taxable Brokerage Accounts: We are huge fans. The flexibility we've gained by pooling our college, retirement, and spending savings in one place has been a force multiplier. Building a savings/investing war chest in a taxable brokerage account also really flips the script with regards to job changes and navigating a changing job environment. We can use brokerage account funds at any time for anything we want or need, including investing in our own careers. The peace of mind and flexibility gains are super powerful.
It is nice watching taxable go up, and having extra flexibility in getting money out if required. Maybe someday the dividends from my taxable account will be enough to live on...
7. Municipal Bonds: We've steadily been purchasing Municipal Bonds and haven't regretted it yet. It's a complement to our EE and I bond purchases, and adds to our diversification with tax-free dividends.
Makes sense if you live in a state with income tax and you are in a high tax bracket. My state has no income tax (yet.)
8. Stock/Sector Fund: We steadily put about 5% of our total investments in a mix of Individual Stocks and Sector Funds. We keep this in a separate brokerage account that we don't rebalance. We don't think of this as play money, more that we have a long term commitment to make steady investments that have very long term growth potential. Looking forward, whether this pays off or not, we could also use some of these funds for charitable giving/donating down the road.
Mixed feelings about this, I've been in sector funds that did well for a while (Vanguard Health Care), sector funds that went nowhere (wind before it was cool in the form of PBW), sector funds that decided to change strategy completely (Vanguard Precious Metals); I'm done with them. I have company stock and a small position in precious metals as an inflation hedge.
NiceUnparticularMan
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Re: Gen-X Boglehead Thoughts

Post by NiceUnparticularMan »

We're on the older side for Gen X, so are getting to the point where a somewhat early(ish) retirement might be possible. We had kids on the later side, though (graduating from Grade 12 is still 9 years away for the youngest), and there are some other wrinkles I won't get into, so we'll see.

Anyway, with that context in mind:

On 1, 2, and 7: We've never bought bonds directly, aside from a small allocation to TIPS which are in a "Real Return" fund in a 401K. Instead, all our direct investment in low-risk assets is in a cash-balance pension and a stable value fund, and we plan to use the TSP G Fund in retirement.

That is because I long ago reached a few conclusions about bonds. First, I was uninterested in bonds for the purpose of long-term returns, I am only interested in their short-medium-term risk-management purposes. For long-term returns, I am only interested in ownership-type assets (company stocks, REITs, and such).

Second, different bonds have different and sometimes offsetting short-term risk-management attributes. Like as in if you hold both TIPS and nominal Treasuries, then they will basically just cancel each other out in the event of unexpectedly high inflation.

Given all that, I came to the conclusion what I really just wanted was something that would keep a steady value on net, and only a modest allocation (although we are ramping up somewhat as we approach possible retirement). The things we use do that, with higher returns than cash would, and that is all we needed during accumulation.

On 3 and 6: we've long maximized our use of IRAs and 401Ks (or equivalent). Our IRAs are entirely Roth (we backdoor). Once it became available as an option, we switched one set of 401K contributions to Roth. The other plan has no such option. We have not converted prior traditional 401K contributions to Roth--maybe in retirement, we'll see. We also have a taxable account. It only got somewhat seriously funded once we had enough excess from things like bonuses, restricted stock, and options to put in substantial lump sums. There has also been one somewhat substantial inheritance added so far. Unfortunately, we anticipate more. We also put some money in 529s, and max out an HSA without doing any withdrawals.

How this all shakes out in terms of account sizes and tax consequences and such in the long run is anyone's guess. I hate even trying to game that out, and here I am perfectly fine with a "do some of everything" approach basically offsetting.

On 4: We long ago set ex-U.S. at 40% of stocks. That's a little underweight in terms of allocation by market size, but I do think a mild home bias for currency reasons makes sense, and then our nominal plan was to take more risk in ex-U.S. by overweighting EM, and having more of a SV tilt. In actually getting to those targets, though, we were hampered by the limited options in the bigger 401K account. However, at this point thanks to using a lot of taxable space for ex-US stocks, and the second 401K account coming along, we are getting fairly close to those targets.

On 5: We ended up settling in a place where nice houses in nice neighborhoods are not necessarily a large multiple of available incomes, particularly not for dual-income households. So, we bought one place, sold it and bought a second place, and now likely will stay in this second place a LOOONG time if possible. Whether it was better than renting, who knows? But it was definitely not so expensive as to be a big deal.

That said, we have a mortgage which we refinanced a couple times, and have no plans to pay it down early, at least as long as we are not investing in long nominal bonds. So far I think the returns on how we invested those proceeds have probably made that a good decision, although I have never actually tried to calculate that (I generally don't really track returns at all).

Finally, on 8: The last time we did anything like that was taking a stock tip from a friend during the tech bubble, which then did very poorly. I learned about efficient markets not long after, and never since have we had any investment in individual stocks or stock sector funds, with the mild exception that our Real Return fund has a global real estate component, and some of those ex-US real estate investments are in stocks and not REITs because of the lack of the REIT structure in those jurisdictions (and I don't consider REITs company stock and therefore don't see them as a stock sector).
sandan
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Re: Gen-X Boglehead Thoughts

Post by sandan »

I'm at the tail end of X and can't relate to the op. There are too many buckets and rules for an uncertain future. The smoking gun example is municipal bonds. Why bother when there are tax deferred accounts and interest rates are low. This reminds me of the old school bogleheads trying to slice and dice everything.
NiceUnparticularMan
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Re: Gen-X Boglehead Thoughts

Post by NiceUnparticularMan »

sandan wrote: Thu Jul 08, 2021 12:00 pm I'm at the tail end of X and can't relate to the op. There are too many buckets and rules for an uncertain future. The smoking gun example is municipal bonds. Why bother when there are tax deferred accounts and interest rates are low. This reminds me of the old school bogleheads trying to slice and dice everything.
I resemble that remark!

These days, I have come to think the best advice is usually just max out your use of tax-advantaged accounts, more in a taxable account if it is comfortable to do so, and mirror something like a Target fund in each place.

And use a conventional rent versus own calculation to figure out if buying makes sense.
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

sandan wrote: Thu Jul 08, 2021 12:00 pm Why bother when there are tax deferred accounts and interest rates are low.
Maxing tax deferred already. Happy to keep our 401(k)s as TDFs.

When you say "why bother...interest rates are low"...it makes me wonder what your bond allocation is.

As I mentioned above, the current yield on the CA Muni Bond VCITX looks solid to me.

If I sold off our CA Munis to make a down payment on a 30 year mortgage in Santa Clara in 2021, I wonder which investment would eventually return more?
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MrBobcat
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Re: Gen-X Boglehead Thoughts

Post by MrBobcat »

sandan wrote: Thu Jul 08, 2021 12:00 pm I'm at the tail end of X and can't relate to the op. There are too many buckets and rules for an uncertain future. The smoking gun example is municipal bonds. Why bother when there are tax deferred accounts and interest rates are low. This reminds me of the old school bogleheads trying to slice and dice everything.
I'm on the front end of X and there are too many buckets for me too. I've gotten past the point of trying to "optimize" everything. Sure I don't want to make major mistakes, but simplicity and well diversified wins for me.

So as far as the OP goes:

1,2 & 7 covering the bonds does nothing for me as right now, slicing, dicing and whatever just aren't going to move the needle for me, so meh, total bond market is good enough and I've recently added a ST treasury fund to my taxable account.

As far as 3, yeah I'm going to continue maxing my tax deferred and the chips will fall where they may. My order has been, max tax deferred then max Roth, then to taxable it goes. Though if I had a 401(k) with match available I might go max tax deferred up to match, max roth, then finish up tax deferred bucket, then to taxable. As it turns out by the time I pull the plug it's going to be a non-issue as my tax deferred will only make up approx 30% of my retirement assets, rest will be in taxable and roth.

4. I'm not at market weight but do think international is an important diversifier and keep 30% of my equities in them.

5. Housing is a personal choice influenced by location, anticipated length of stay and purchase vs rent cost comparisons. We went with buying and it has turned out fine, I like not having a landlord. It's paid off so RE tax and House insurance only cost about $275/mo.

6. I love, love my taxable brokerage account though I didn't start it till after house was paid for. It opens up so many options.
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Thanks for the reply, and further spelling out some different approaches and perspectives.
MrBobcat wrote: Thu Jul 08, 2021 12:33 pm 6. I love, love my taxable brokerage account though I didn't start it till after house was paid for. It opens up so many options.
We do, too.

We feel like we've completely flipped the script in budgeting and personal finance terms. To share one concrete example, with two college-age young adults, we were able to open a sub-account at our brokerage dedicated just to our budget for them (education, emergency fund, discretionary, gifting.) Conversations about money goals and fluctuating expenses are much simpler and more clear with that context.

Sure, in principle money is fungible and it's all from one big pot.

But our vacation budget discussion is now wholly separated from the "Oops, I ran out of money Spring Quarter" conversation.

You could call that a bucket. I call it a big relief.
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Re: Gen-X Boglehead Thoughts

Post by mikejuss »

SantaClaraSurfer wrote: Thu Jul 08, 2021 3:41 pm Thanks for the reply, and further spelling out some different approaches and perspectives.
MrBobcat wrote: Thu Jul 08, 2021 12:33 pm 6. I love, love my taxable brokerage account though I didn't start it till after house was paid for. It opens up so many options.
We do, too.

We feel like we've completely flipped the script in budgeting and personal finance terms. To share one concrete example, with two college-age young adults, we were able to open a sub-account at our brokerage dedicated just to our budget for them (education, emergency fund, discretionary, gifting.) Conversations about money goals and fluctuating expenses are much simpler and more clear with that context.

Sure, in principle money is fungible and it's all from one big pot.

But our vacation budget discussion is now wholly separated from the "Oops, I ran out of money Spring Quarter" conversation.

You could call that a bucket. I call it a big relief.
I love my taxable brokerage account too--but it's strictly for retirement funds. I personally don't invest money that I know I'm going to use in the next year or so in stocks or bonds. But to each his own.
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

mikejuss wrote: Thu Jul 08, 2021 3:49 pm I love my taxable brokerage account too--but it's strictly for retirement funds. I personally don't invest money that I know I'm going to use in the next year or so in stocks or bonds. But to each his own.
We don't invest money we are using in the next year, either!

But we also don't leave significant funds in our bank account.

Charles Schwab has a great checking account feature. We use it frequently.

Prior to the drop in money fund rates, we also liked Schwab Money Funds like SWKXX and SWVXX for short term funds.
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Re: Gen-X Boglehead Thoughts

Post by sailaway »

SantaClaraSurfer wrote: Thu Jul 08, 2021 4:12 pm
mikejuss wrote: Thu Jul 08, 2021 3:49 pm I love my taxable brokerage account too--but it's strictly for retirement funds. I personally don't invest money that I know I'm going to use in the next year or so in stocks or bonds. But to each his own.
We don't invest money we are using in the next year, either!

But we also don't leave significant funds in our bank account.

Charles Schwab has a great checking account feature. We use it frequently.

Prior to the drop in money fund rates, we also liked Schwab Money Funds like SWKXX and SWVXX for short term funds.
We don't invest money we plan to spend before the next lump sum, but if we invest in August and decide to spend in September, we sell whatever nets the lowest tax (usually the month old investment, even at the higher rate, since it hasn't had time to grow).
Greg in Idaho
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Re: Gen-X Boglehead Thoughts

Post by Greg in Idaho »

Whatever...nevermind...
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JamesSFO
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Re: Gen-X Boglehead Thoughts

Post by JamesSFO »

Gen X’er here tracking for interest nothing specific to add right now.
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Re: Gen-X Boglehead Thoughts

Post by sandan »

SantaClaraSurfer wrote: Thu Jul 08, 2021 12:26 pm
sandan wrote: Thu Jul 08, 2021 12:00 pm Why bother when there are tax deferred accounts and interest rates are low.
Maxing tax deferred already. Happy to keep our 401(k)s as TDFs.

When you say "why bother...interest rates are low"...it makes me wonder what your bond allocation is.

As I mentioned above, the current yield on the CA Muni Bond VCITX looks solid to me.

If I sold off our CA Munis to make a down payment on a 30 year mortgage in Santa Clara in 2021, I wonder which investment would eventually return more?
I'm about 45% bonds with a very large fraction of it in tax deferred. When I've purchased my homes, I've sold my stock in taxable accounts and shifted my assets in tax deferred to my desired asset allocation. I do make the shift semi-gradually so there is usually a year where I'm holding 1/2 of the purchase dollars in taxable accounts such as cds and money markets.

Muni's are niche and are not very liquid during a crisis. There's been two muni crises that I am aware of in my lifetime (1994 - orange county & 2008 nationwide). They both occurred right before or during the best years to purchase property in California.
Last edited by sandan on Thu Jul 08, 2021 6:04 pm, edited 1 time in total.
mikejuss
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Re: Gen-X Boglehead Thoughts

Post by mikejuss »

Greg in Idaho wrote: Thu Jul 08, 2021 5:49 pm Whatever...nevermind...
+1.
Johnathon Livingston
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Re: Gen-X Boglehead Thoughts

Post by Johnathon Livingston »

I’m also a Gen Xer. 47.

Comment on your international allocation: consider Vanguard’s research and reasoning for doing 60/40 US/ex-US instead of pure market weight. It’s a slight US tilt. In a nutshell, 40% ex-US is the average maximum allocation that achieves most reduction in volatility. Probably makes a small difference, but something to consider. https://www.vanguard.com/pdf/ISGGEB.pdf
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Re: Gen-X Boglehead Thoughts

Post by aristotelian »

Good thread. I am of similar age and interested to hear perspective of others. My only point of disagreement is your equity forward approach to 401k. IMO, I would rather slow down growth in 401k by overweighting bonds and have more stocks instead of muni bonds in taxable. Net effect will be same total portfolio balance and stock/bond allocation but with more gains in taxable and less in 401k, meaning fewer gains taxed as income and subject to RMDs. For the same reason that you are "huge fans" of taxable, you should overweight equities in taxable and overweight bonds in 401k IMO.
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Re: Gen-X Boglehead Thoughts

Post by MoonOrb »

This Gen X-exer's Take:

Bonds (1, 2, 7): all of our bond holdings are in Vanguard Total Bond Market Index and I have not given any thought to making it more complicated than this. All of our bonds are held in Rollover IRAs or 403b plans, none in taxable.

401k (or similar tax deferred in our case): we max out our 403bs, I have a 401a, and we contribute another ~$24k annually into 457 deferred comp plans. We don't max out the deferred comp and instead invest some in taxable (about $6k annually). This is one part of my plan that I'm a little ambivalent about.

International: About 20% of our overall investments are in international; this is about 30% of our equities.

Housing: it made sense for us to buy and we bought; if it made more sense for us to rent, we'd rent. I don't think there is any reason to be dogmatic about this and don't consider purchasing a home to be a no-brainer, either.

Taxable brokerage fund: as mentioned above, I'm a little ambivalent about contributing to a taxable account when I have space left in tax-deferred 457 plans (we first fully fund HSA/Roths). If I change anything, this is what I'll change and put this all in tax deferred space. I feel like we have a ton of investments in tax deferred (74%) compared to Roth (17%) and taxable (9%) and I'm not sure exactly what this portends for the future.
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Re: Gen-X Boglehead Thoughts

Post by tomsense76 »

Not a Gen-Xer, but on the earlier end of the Millenial generation (so maybe Gen-X adjacent :wink: ). Also using/interested in a lot of things discussed here, do hold some bonds, though like the FI (unsure about RE). So hopefully it's ok to participate :happy

Big fan of savings bonds. Definitely something I've happily learned from this site/forum. As I'm eyeing maybe retiring in 50s or early 60s, see these as a useful way to bridge to SS/normal retirement age. In the worst case I Bonds can be raided in an emergency (though have other places I can tap into before getting to them).

Agree that LTT are interesting and have read vineviz perspective (though maybe not all of that thread). While this is interesting, already have savings bonds and don't have a LTT fund in 401k (and IRAs would complicate Backdoor Roth). I suppose taxable would be an option. Think 401k can have brokerage link enabled, but not sure if this would mess up Mega Backdoor Roth. Given it is not a super pressing need, have held off, but do understand why someone would make this choice.

Also max out 401k. The default was a TDF, but it had a 40 basis points ER :shock: . I know there are worse 401k stories out there, but didn't want to eat 40 basis points if I had a choice. Plus with the growth of taxable and other accounts, it's just been simpler hold & rebalance separate stock and bond funds in the 401k. Though am a fan of TDF and if one has a low cost option that definitely makes it easier to tune out the noise and know things are getting rebalanced without needing to get involved.

Am a fan of global cap weight as well. Last year I finally started buying international in taxable. The only thing that has given me pause about this is the tax (in?)efficiency of international. Since the dividends are higher (~3% with some variable) and ~30% of the dividend is ordinary, this can result in a bit of drag in taxable (even with the foreign tax credit of ~0.20% ). The foreign tax credit does a reasonable job of balancing out the ordinary dividend portion, but YMMV based on tax bracket.

Renting as well and agree it's probably the right choice for many. Am ambivalent on rent vs. buy personally based on my local housing market and where I see my life going in the next several years. As I'm single the buy question would be condo or townhouse, both of which can be a mixed bag, or buying a bit more than I need (like SFH) with the idea I will eventually "grow into it" (possibly renting out additional space in the interim). There could be a good argument for the latter as it could help setup my next stage in life (though maybe I'm assuming too much about the destination).

Have also enjoyed building up taxable. This works well with moving some cash to tax-advantaged accounts. Maybe this is a behavioral hang-up on my end or I'm still getting use to this strategy, but haven't quite been able to move all cash needs into tax-advantaged accounts. Then again maybe there is just something to be said for having some cash with easy access on hand.

Agree that municipal bonds are great. Being in a higher tax bracket and having that tax free dividend come in once a month is nice. Admittedly the dividend is pretty puny now expect this will grow over time as I get more bonds.

I've not really got into the whole slice and dice thing. The closest I've gotten is debating doing some slice and dice by account. For example was considering placing SCV in Roth to capture future outperformance that factorheads claim is coming, but am still thinking about it. Another variation on this that Bogle mentioned was holding Value in tax-advantaged accounts and Growth in taxable during earning years and flipping them in retirement. Do like that idea from just a minimal tax drag perspective, but again haven't made any moves here yet. Mostly this feels like it will become a hassle particularly for future me (who regrets having done the slice and dice :P ). Already feel similarly about an S&P 500 fund I inherited and have similar mixed feeling about adding the completion index to fill that out. So maybe I'll leave this to musing and leave it to others to play with these things :D

Hold some ESPP until qualified and then sell. Though this is a smallish part of my portfolio. Don't otherwise pick stocks.

Debating dabbling in some form of real estate indirectly. Still thinking about this though
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

Johnathon Livingston wrote: Thu Jul 08, 2021 6:49 pm I’m also a Gen Xer. 47.

Comment on your international allocation: consider Vanguard’s research and reasoning for doing 60/40 US/ex-US instead of pure market weight. It’s a slight US tilt. In a nutshell, 40% ex-US is the average maximum allocation that achieves most reduction in volatility. Probably makes a small difference, but something to consider. https://www.vanguard.com/pdf/ISGGEB.pdf
Thanks for pointing this out!

So, for the record, I guess we don't quite follow even Vanguard's modified slight US tilt for Int'l after all.

Here's where we fall:

-VTIVX (the fund my wife's employer uses as the basis for her TDF) is 36% Int'l Stocks and 3.2% Int'l Bonds
-Guideline (my new, mostly Vanguard-based 401(k)) currently is set up for 28% Int'l Stocks and 7% Int'l Bonds
-The equity portion of our taxable account is 37% invested in Int'l broad index funds and we hold 0% Int'l bonds there

That puts us at around a 35-40% International share. I did not realize that this was not really a true Int'l market weight.

Rather than fight it, maybe I'll simply call that range out in our IPS.

I guess I could further tweak the defaults in the Guideline 401(k) plan, as well, if I wanted to bring it closer to 40%.
Tingting1013
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Re: Gen-X Boglehead Thoughts

Post by Tingting1013 »

Johnathon Livingston wrote: Thu Jul 08, 2021 6:49 pm I’m also a Gen Xer. 47.

Comment on your international allocation: consider Vanguard’s research and reasoning for doing 60/40 US/ex-US instead of pure market weight. It’s a slight US tilt. In a nutshell, 40% ex-US is the average maximum allocation that achieves most reduction in volatility. Probably makes a small difference, but something to consider. https://www.vanguard.com/pdf/ISGGEB.pdf
60/40 is pure market weight!

https://investor.vanguard.com/etf/profile/portfolio/vt
jharkin
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Re: Gen-X Boglehead Thoughts

Post by jharkin »

SantaClaraSurfer wrote: Thu Jul 08, 2021 8:51 am
mikejuss wrote: Thu Jul 08, 2021 8:45 am If you're saving for college, use a 529 account, not a taxable account.
I agree.

We have a small 529 account, but we aren't currently saving for college, we are paying for college with recent income.

In our case, putting those funds in anything but cash doesn't make sense. We keep our non-529 college funds in a dedicated brokerage account.
Basically the same age as OP but we had kids much later it seems…. Mine are 10.

We are contributing to 529 but only up to the tiny state tax deduction limit of 2k. Don’t see much value in tying up more for just 8 more years of growth, as I wouldn’t invest it aggressively for that short time horizon.


—-

Another big challenge for some of us in this age group: Finding the funds to max all tax advantage. Being a tech/public k12 employee household we have access to something approaching 100k+ of tax advantage space, close to 50% of gross income. Balancing retirement, HCOL housing and college savings is tough.
mikeyzito22
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Re: Gen-X Boglehead Thoughts

Post by mikeyzito22 »

VXUS: YTD: 6.58%
VTI: YTD: 16.36%

I guess I'll keep plowing into VXUS?
fortunefavored
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Re: Gen-X Boglehead Thoughts

Post by fortunefavored »

Well, GenX here but I'm not sure what I'd chime in with - it seems excessively complicated to me, although admittedly I don't have kids.

Max tax advantaged accounts, backdoor roth if you can, then put the rest into taxable. I used muni bonds in taxable when I ran out of room in tax deferred. 70/30 stock/bonds, market weight US/international.

Houses are places to live in - bought a house to live the lifestyle I wanted that was unavailable from renting.

Quit the rat race in January with, I hope "enough."
Johnathon Livingston
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Re: Gen-X Boglehead Thoughts

Post by Johnathon Livingston »

Tingting1013 wrote: Thu Jul 08, 2021 7:42 pm
Johnathon Livingston wrote: Thu Jul 08, 2021 6:49 pm I’m also a Gen Xer. 47.

Comment on your international allocation: consider Vanguard’s research and reasoning for doing 60/40 US/ex-US instead of pure market weight. It’s a slight US tilt. In a nutshell, 40% ex-US is the average maximum allocation that achieves most reduction in volatility. Probably makes a small difference, but something to consider. https://www.vanguard.com/pdf/ISGGEB.pdf
60/40 is pure market weight!

https://investor.vanguard.com/etf/profile/portfolio/vt
North America is 60%, which includes Canada. US is around 57%. So, it’s pretty dang close at this point.
Ron Ronnerson
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Re: Gen-X Boglehead Thoughts

Post by Ron Ronnerson »

One thing that’s sort of interesting to me is the different stages that people who are the same age can be in. My wife and I turn 47 this year and our daughter just finished kindergarten. The fact that we became parents at the very tail-end of our 30s vs. earlier affects all sorts of choices we’ve made as a result. Many of our friends have kids who are already grown up while others our age have children just as young as ours. It’s sort of strange.

Back when our kid was 3, my wife (who was 43 at the time) decided to become a stay-at-home parent to spend some quality time with our daughter while she was so young. Even though she might get a job again, it seems more and more likely now that my wife is perhaps already retired. I plan to work full time until I’m 55 and then may go down to part time for a few years and will probably retire somewhere between age 59-61.

Due to the age that we were when we became parents, we can use retirement accounts to pay for college without having to face early-withdrawal penalties. So we’re not using a 529 at all but do max out our retirement accounts.

We have a simple 3-fund portfolio which is roughly 70/30 equities to bonds (and cash), with roughly 62% of equities in the US market and 38% in international. The breakdown by type of account is about 43% Roth, 36% tax-deferred, 5% taxable brokerage, and 16% is sitting in cash at the moment.
The reason for all the cash has to do with having recently done a cash-out refinance on our house. We want the cash for liquidity purposes for the next few years but will gradually use it up.

Our house story is a bit unusual. We bought our home in 2010 and owe more on the house today than we did when we purchased it. We’ve refinanced three times, restarting the 30-year clock each time, and are on track to pay off the home in 41 years. We have tried to take advantage of low-interest rates to put as much as we can into investments rather than pay down the house. So far, this has worked out well. Our net worth when we bought the house 11 years ago was $80k and it is $1.6m today (income is about $115k). Our retirement expenses should be pretty much covered by my teacher’s pension and my wife’s social security.

Our goals at this stage are to maximize time together as a family rather than try to increase our income or look to move up in our professions. I have a seven-year-old that won’t always be this age and I know the time is ticking. I lost my dad at a young age and that's shaped me. I want to spend as much time as I can with the people I love while the opportunity exists.
lazynovice
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Re: Gen-X Boglehead Thoughts

Post by lazynovice »

We are 50/51. By end of summer, second kid is done with college. My spouse has been retired for three years. I am still working. I would like to retire in 1-2 years.

We maxed two 401(k)s from probably 1998 to 2018. (Edit: contributed from 93 forward but couldn’t max both until 98). Only one since then. Started back door Roths in 2012. Started taxable account in 2010. The 529s were sufficient to get one kid through grad school and the second through undergrad with a bunch left over. Some of that will be held for kid 2 to use for grad school if he wants. Some will go to future grandkids.

At this point our taxable account is 65% of our portfolio. We have never withdrawn from it, but it has always been 100% equities while the 401(k)s hold all bonds now and has always had bonds.

No I bonds, EE bonds, or LTTs. I am too lazy to add a Treasury Direct account. Fidelity Total Bond index works for us. We have a Vanguard Intermediate Tax Exempt in taxable. We decided to stop doing a % allocation to bonds and instead have about 10 years of expenses in bonds and cash and just put the rest in equities. But overall we are about 65/35.

I am surprised how heavy others in this thread are in international. 25% of our equity allocation is international and it feels like a lot to me. I’ve been on Bogleheads too long.

We have owned all of our homes since a year after college graduation. Always treated them as places to live and not investments. Haven’t ever made a bunch of money on any of them. The current one is by far too big. It was a huge blessing during COVID. It has increased in value 25% since we bought it. Will we be able to sell it when we want? Who knows? I would like to get some cash out of it when I retire and we downsize. We paid off our mortgage in 2007 and had one briefly in 2018 which we paid off in six months. Not the best decisions mathematically but having secure housing during recessions etc. when markets were crashing was nice.

Never owned an individual stock and never plan to.

Up next—-weddings, helping with down payments for kids, hoping we don’t get bitten by sequence of returns risk and doing a lot of math on Roth conversions.

I remember when they said we would be the first generation to do worse than our parents. In our case it wasn’t true but I do worry about our kids (Gen Z).
Last edited by lazynovice on Fri Jul 09, 2021 9:06 am, edited 1 time in total.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
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SantaClaraSurfer
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Re: Gen-X Boglehead Thoughts

Post by SantaClaraSurfer »

jharkin wrote: Thu Jul 08, 2021 7:50 pm Another big challenge for some of us in this age group: Finding the funds to max all tax advantage. Being a tech/public k12 employee household we have access to something approaching 100k+ of tax advantage space, close to 50% of gross income. Balancing retirement, HCOL housing and college savings is tough.
Yes, I know that feeling of balancing well. There was a point where we did not even understand the possibility of using tax advantaged space to the maximum.

This is not directly related to your comment, but when our kids were in Junior High, I had a spell working as an office temp and as a clerk at a popular low cost grocery store. At that point we were barely covering an expensive rent in a good school district and digging out of debt. It was during those years that the financial adviser (free consult thru my wife's work) told us we should focus on paying off the debt and leave the 529 accounts alone.

I don't think she considered that we could have increased our income by as much as we did and eventually pay off our debts.

We were just as happy then, but we were less financially secure. And that financial stress was enormous.

I think that's a bit of the Gen X experience, too. There's less predictability for many of us, but also some truly varied career paths that open up real possibilities for earning a higher income.

I've taken some criticism in this thread for the seeming complexity of our IPS (it's really simpler than this post makes it seem) and our apparent buckets (EE Bonds, I Bonds, Muni Bonds)...but honestly some of that is just wanting to lay a balanced and diversified foundation for the years ahead.

On a personal note, one thing I always try to remember is that we were truly happy as a family then in the midst of that financial stress, but we'd like to avoid repeating that exprerience. I think that's the main appeal of keeping EE bonds as a part of our portfolio and our reluctance to purchase a home at inflated prices given our family's experience of the GFC. That's something that I've learned about myself via this thread.
slicendice
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Re: Gen-X Boglehead Thoughts

Post by slicendice »

Average age 49 here with a kid in high school. We share many of your sentiments. Hoping to be FI in 9 years or less.

I don't love the 20 year lockup of EE bonds so I have never bought them. I love I-bonds will try to continue to purchase $20K per year until I retire.

The threads originated by vineviz on bond duration/investment horizon are some of the best on this forum in my opinion. I am all aboard the long term treasury train for a majority of my 35% bond allocation. I hold some intermediate TIPS but will exchange them for LTPZ if long term rates ever get back to zero. I do a similar dollar cost average into LTT as the OP in my taxable. I never bothered to hold bonds until a couple of years ago. I distinctly remember thinking 10 years ago "why would I give the gubmnt my $ for a stinking 4% yield for 30 years?" Sheesh how times have changed. If I could get likely postive real yields on treasuries my AA would be 50:50 right now.

We don't currently max our tax deferred contributions because we have alot of annual space there, our tax deferred accounts are about 70% of net worth, and we will get one small to significant pension on top of dual SS. I also think we are likely at a minima in terms of tax brackets, so would like to use the next few years to build up taxable/Roth accounts to try to build in some tax diversification. When tax rates revert in 2026 we may max out the tax deferred space again.

40 percent of equities in international (1/3 total, 1/3 developed small value, 1/3 emerging markets). We also have some exposure (5% of portfolio) to emerging market bonds through VEGBX. I think it is insane to not have significant international exposure when you can buy it for less than 10 basis points.

As a lifestyle choice we would vastly prefer owning. But right now in our area, renting is a financial slam dunk. We'll see how long we can resist becoming house poor.

Agree completely on the peace of mind taxable investing brings.

Muni bonds have always been a meh for us. If we were in the highest tax brackets we would reconsider. I actually prefer LTT's even in taxable because right now bonds are simply diversifiers for when equity risk shows up.

Individual stocks are less than 5% of current networth. I stopped my stock picking 4 to 5 years ago.
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JupiterJones
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Re: Gen-X Boglehead Thoughts

Post by JupiterJones »

As a Gen-Xer myself, most of my investments are tied up in collectible G.I. Joe action figures (with Kung-Fu grip!)
Stay on target...
NiceUnparticularMan
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Re: Gen-X Boglehead Thoughts

Post by NiceUnparticularMan »

Just some quick thoughts on 529s: we haven't done any expenditures out of them yet, but I think they are a reasonable vehicle for putting aside investments/savings for qualified expenses. But I also think logically their use, or potential non-use, will often depend on when in your career cycle you have kids, and when you might be incurring those expenditures.

In our case, we were having children late enough that we already had good careers started, so 529 contributions were not stopping us from maxing out other tax advantaged space, and conversely we could foresee the possibility of these expenses occurring during the critical period around retirement. Early on, this meant to me we could be at least a little aggressive with the risk-taking in the hope of getting a decent return, but we also mapped out shifting to much more conservative allocations on the back end. And in fact, the final stage is shifting everything to Pennsylvania's GSP program (we are PA residents).

And that seems pretty critical to me. It is tough enough trying to figure out how to deal with sequence of returns risk in that critical period around retirement with respect to your own expenses. Adding in higher education expenses would really up the uncertainty. In theory you can still do all that in a unified portfolio setting, but for us at least, it really helps simplify our thinking to at least know a lot of those expenses are going to be handled by the 529s on the kids' schedule, regardless of when we end up retiring.
LHRAdam
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Re: Gen-X Boglehead Thoughts

Post by LHRAdam »

I’m 49 and a Gen-Xer as well. In the UK, so some of the specifics are different.

Similar to one of the posters above I would NEVER have bought a government bond until finding Bogleheads. So funny because I was completely clueless.

Right now, 50/50 and planning to retire at 54. Own my apartment with paid off mortgage but I live in a LCOL city.

Equity - 2 funds which make up global
Bonds - have been reducing average length of bonds by using cash generated from rebalancing out of equity in 2020/21 to buy short term treasuries.
Otherwise no change to makeup of portfolio since finding BH in December 2017.

Very happy and great thread!!
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hornet96
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Re: Gen-X Boglehead Thoughts

Post by hornet96 »

Fellow Gen-X'er here as well. We're at the tail end of Gen-X (some would call us "Xenials").... old enough to have experienced the analog world, but young enough to embrace the digital world. :D

I don't have much to add other than to say I'm enjoying this thread. As the forgotten generation, we're used to being ignored, so it's nice to see a thread on this topic. :sharebeer
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MrBobcat
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Re: Gen-X Boglehead Thoughts

Post by MrBobcat »

Ron Ronnerson wrote: Thu Jul 08, 2021 9:46 pm One thing that’s sort of interesting to me is the different stages that people who are the same age can be in. My wife and I turn 47 this year and our daughter just finished kindergarten. The fact that we became parents at the very tail-end of our 30s vs. earlier affects all sorts of choices we’ve made as a result. Many of our friends have kids who are already grown up while others our age have children just as young as ours. It’s sort of strange.
I feel the same way, my best friend (same age as me) oldest just graduated from HS and has another one going to start his Jr. Year in HS. My youngest graduated college 6 years ago. I used to feel slightly jealous when he and his wife traveled and did things prior to kids, now not so much as I wouldn't want HS kids in the house, and now we can travel while he's stuck paying for college, lol.
lazynovice
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Re: Gen-X Boglehead Thoughts

Post by lazynovice »

MrBobcat wrote: Fri Jul 09, 2021 12:25 pm
Ron Ronnerson wrote: Thu Jul 08, 2021 9:46 pm One thing that’s sort of interesting to me is the different stages that people who are the same age can be in. My wife and I turn 47 this year and our daughter just finished kindergarten. The fact that we became parents at the very tail-end of our 30s vs. earlier affects all sorts of choices we’ve made as a result. Many of our friends have kids who are already grown up while others our age have children just as young as ours. It’s sort of strange.
I feel the same way, my best friend (same age as me) oldest just graduated from HS and has another one going to start his Jr. Year in HS. My youngest graduated college 6 years ago. I used to feel slightly jealous when he and his wife traveled and did things prior to kids, now not so much as I wouldn't want HS kids in the house, and now we can travel while he's stuck paying for college, lol.
I see advantages to both approaches. I think having adult children in our prime earning years makes it far easier to pay for things I might otherwise not have paid for. Taking them on vacation, helping with car purchases so I know they are safe, helping with weddings, etc etc. If I had kids later, I probably would have said “Sorry, can’t help” and I might have saved a lot of money in the long run. Interesting to watch my friends who waited longer take their kids on much nicer vacations than we could so maybe not.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
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Portfolio7
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Re: Gen-X Boglehead Thoughts

Post by Portfolio7 »

SantaClaraSurfer wrote: Wed Jul 07, 2021 9:56 pm Throwing up a thread for those us in this smaller demographic generation that's been in the news of late.
Leading edge of Gen X here.

* 1,2 & 7: We just have a Stable Value Fund (2.5%) where available, Total Bond Fund where not, and a sliver of NSTX. Works for us.
* 3: We've always just tried to get a good amount into our Trad 401Ks. We were not able to max often; the 'after' question was moot.
* 4: 40% of equities in Int'l, roughly. I picked the wrong time to implement geographic diversification (2009)!
* 5: We buy. First house was our best investment ever (20% CAGR over 8 years), and it was pure luck. A house is a multi-faceted decision.
* 6: Don't have a taxable brokerage account. We're more interested in paying down debt right now, but we may start one before long.
* 8: All the non-Index stuff is a couple percent of investments.
* 9: Thought I'd add one: Cars: We've used the 'buy new and run them into the ground' for two cars, about 18-20 years each. We are currently doing the 'buy 10 YO quality cars with less than 100k miles on them' strategy. Hasn't worked as well thus far, but you roll the dice and take your lumps.
"An investment in knowledge pays the best interest" - Benjamin Franklin
Ron Ronnerson
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Re: Gen-X Boglehead Thoughts

Post by Ron Ronnerson »

lazynovice wrote: Fri Jul 09, 2021 12:31 pm
MrBobcat wrote: Fri Jul 09, 2021 12:25 pm
Ron Ronnerson wrote: Thu Jul 08, 2021 9:46 pm One thing that’s sort of interesting to me is the different stages that people who are the same age can be in. My wife and I turn 47 this year and our daughter just finished kindergarten. The fact that we became parents at the very tail-end of our 30s vs. earlier affects all sorts of choices we’ve made as a result. Many of our friends have kids who are already grown up while others our age have children just as young as ours. It’s sort of strange.
I feel the same way, my best friend (same age as me) oldest just graduated from HS and has another one going to start his Jr. Year in HS. My youngest graduated college 6 years ago. I used to feel slightly jealous when he and his wife traveled and did things prior to kids, now not so much as I wouldn't want HS kids in the house, and now we can travel while he's stuck paying for college, lol.
I see advantages to both approaches. I think having adult children in our prime earning years makes it far easier to pay for things I might otherwise not have paid for. Taking them on vacation, helping with car purchases so I know they are safe, helping with weddings, etc etc. If I had kids later, I probably would have said “Sorry, can’t help” and I might have saved a lot of money in the long run. Interesting to watch my friends who waited longer take their kids on much nicer vacations than we could so maybe not.
I agree about the advantages (as well as disadvantages) to both. One thing that comes to my mind is how vastly different travel was in our 30s vs. these days. In our case, becoming parents at age 39 meant that we could travel pretty freely throughout our 30s. We were younger and had plenty of energy and were kid-free. We tried to utilize that time period and took trips to places like the Galapagos, Costa Rica, Dubai, Croatia, Greece, and a bunch more. However, we had much less money to our names at the time and it was a tricky thing to try to use the opportunity to visit these places but do so on a budget.

It's been so different in our 40s. We’ve taken multiple trips to Hawaii, Disneyland, and Las Vegas (to visit family and enjoy swimming at the Mandalay Bay pool). We’re in a much better place financially so are able to spend more freely now on vacations but haven’t been interested in venturing too far from home during the kid's early years. When our daughter gets a little older, we’re hoping to start doing some international travel again. We’ll be in our 50s then and hopefully we will still have enough energy to enjoy it as much as we did in our 30s. On the one hand, it will be neat to take our daughter along and share the experiences with her. On the other hand, it won't just be my wife and me. So, yes, there are upsides and downsides.
lazynovice
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Re: Gen-X Boglehead Thoughts

Post by lazynovice »

Ron Ronnerson wrote: Fri Jul 09, 2021 1:23 pm
lazynovice wrote: Fri Jul 09, 2021 12:31 pm
MrBobcat wrote: Fri Jul 09, 2021 12:25 pm
Ron Ronnerson wrote: Thu Jul 08, 2021 9:46 pm One thing that’s sort of interesting to me is the different stages that people who are the same age can be in. My wife and I turn 47 this year and our daughter just finished kindergarten. The fact that we became parents at the very tail-end of our 30s vs. earlier affects all sorts of choices we’ve made as a result. Many of our friends have kids who are already grown up while others our age have children just as young as ours. It’s sort of strange.
I feel the same way, my best friend (same age as me) oldest just graduated from HS and has another one going to start his Jr. Year in HS. My youngest graduated college 6 years ago. I used to feel slightly jealous when he and his wife traveled and did things prior to kids, now not so much as I wouldn't want HS kids in the house, and now we can travel while he's stuck paying for college, lol.
I see advantages to both approaches. I think having adult children in our prime earning years makes it far easier to pay for things I might otherwise not have paid for. Taking them on vacation, helping with car purchases so I know they are safe, helping with weddings, etc etc. If I had kids later, I probably would have said “Sorry, can’t help” and I might have saved a lot of money in the long run. Interesting to watch my friends who waited longer take their kids on much nicer vacations than we could so maybe not.
I agree about the advantages (as well as disadvantages) to both. One thing that comes to my mind is how vastly different travel was in our 30s vs. these days. In our case, becoming parents at age 39 meant that we could travel pretty freely throughout our 30s. We were younger and had plenty of energy and were kid-free. We tried to utilize that time period and took trips to places like the Galapagos, Costa Rica, Dubai, Croatia, Greece, and a bunch more. However, we had much less money to our names at the time and it was a tricky thing to try to use the opportunity to visit these places but do so on a budget.

It's been so different in our 40s. We’ve taken multiple trips to Hawaii, Disneyland, and Las Vegas (to visit family and enjoy swimming at the Mandalay Bay pool). We’re in a much better place financially so are able to spend more freely now on vacations but haven’t been interested in venturing too far from home during the kid's early years. When our daughter gets a little older, we’re hoping to start doing some international travel again. We’ll be in our 50s then and hopefully we will still have enough energy to enjoy it as much as we did in our 30s. On the one hand, it will be neat to take our daughter along and share the experiences with her. On the other hand, it won't just be my wife and me. So, yes, there are upsides and downsides.
Right. Compared to us who had no money to spend in our 20s and when we were in our 30s had to use a lot of our PTO for when the kids were sick. So even if we had the money, we had little time off. Traveling with family means condos and bigger hotel rooms plus 4x airfare and 4x food.
“I didn’t want my sailboat to be in the driveway when I died.” Nomadland
printer86
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Re: Gen-X Boglehead Thoughts

Post by printer86 »

As the 4th of 5 children, and the first Gen-Xer in the family, this thread reminds me of the toast I gave at one of our large family Christmas gatherings. The toast went like this, "Here's to Mom and Dad. They had 5 kids and raised 3."
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nedsaid
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Re: Gen-X Boglehead Thoughts

Post by nedsaid »

Boomer here, just turned 62. Thought I would chime in here because it didn't seem so long ago when I was 46 myself, 16 years changed a whole lot of things for me. Another thing is that I was born near the tail end of the baby boom which lasted from 1946-1964. I probably have more in common with the older Xers than I do with the older Boomers, for example I am too young to have served in the Vietnam War. I came of age during the late 1970's and the early 1980's, more Alex P. Keaton (Michael J. Fox) than Meathead (Micheal played by Rob Reiner).

First, don't wait until your early sixties to start serious retirement planning. If there are flaws in your plan, you have enough time to fix them. You still have twenty years or so to work and accumulate retirement assets. Sort of like concrete, the older you get the harder it sets and the harder it is to make changes.

Second, make good use of ROTH Accounts. You don't get the tax deduction but you have a source of future tax free money in retirement. Crystal ball, as always is cloudy, but I think there is a better than 50/50 chance that tax rates will go up in the future, even for retirees. This was one area where I would like to have done better.

Third, beef up that emergency fund. I have been recommending a goal of one year's worth of expenses in an emergency fund by age 50.

Fourth, in your fifties you might be targeted for lay-off. Employers weren't always loyal to their boomer employees and probably won't be so loyal to the X-ers either. Keep your job skills up and keep an eye open for opportunities. That means being open to new things, volunteering for new assignments, being a team player. Be prepared for the unthinkable, keep the ol' resume, cover letter, and list of references up to date. Also keep up to date on the modern job search, lots of things have changed, this isn't your father's job market. It goes beyond saying that you need to network and to stay in touch with those people, never know when you might need them. If you have a professional association, be active in that.

It is both the best of times and the worst of times. Don't get pessimistic over what you hear on the news, it is skewed negative, and there are lots of positive things going on that get little media attention. As for investing, there are opportunities galore, for example I can invest my money now at institutional rates as an individual investor, something unthinkable 40 years ago. Technology is making life better and better, work from home is a big example of this. Lots of reasons to be hopeful and optimistic about the future.

In 15-16 years you can join me at the coffee shop complaining about the cost of everything particularly property taxes. You have lots of time to make your future life better, make the most of it.
A fool and his money are good for business.
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