2 years in, asking for a gut check

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
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Topic Author
LearningAlot
Posts: 45
Joined: Thu Aug 02, 2018 8:43 am

2 years in, asking for a gut check

Post by LearningAlot »

Anyone who would be willing to give me a gut check on my spending/investments given my situation would be appreciated.

* 59 years old, single, two years ago stopped working, estimated life expectancy is 93
* collecting social security disability due to a permanent disability, which will transition to normal social security at 67
* due to physical issues, don't have the option to go back to work, in the event of a major market crash
* 2 year average spend is 2.5% of nest egg (net of social security)
* will transition from COBRA to Medicare in the middle of 2020
* own house, no debt, hope to live there as long as possible
* have no long term care insurance
* plan to slowly increase spending (mainly gifting) while keeping total spend at or below 3% for the foreseeable future
* nest egg is in a small number of Vanguard passive index funds
* allocation is 40% equity(75% US, 25%international), 60% Fixed income(1/3 with 2.7 year duration, 2/3 with 6.2 year duration)
* average fund fee(including 401K plan fee) is 0.10%
* my primary goal is to not run out of money as I don't want to worry about money as I have enough other things to worry about

Thanks in advance!
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Watty
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Joined: Wed Oct 10, 2007 3:55 pm

Re: 2 years in, asking for a gut check

Post by Watty »

LearningAlot wrote: Fri Dec 20, 2019 9:04 am plan to slowly increase spending (mainly gifting) while keeping total spend at or below 3% for the foreseeable future
This was the only thing that didn't pass my "gut check" .

It was not clear that you have a lot of slack in your budget so is you start needing more assistance because of your disability, or normal aging, then you expenses could get be a lot higher. Likewise there could be a bear market for the next five years and your portfolio might shrink.

I don't see that you are in a situation where you can give away much money.
fabdog
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Joined: Wed Jan 16, 2013 1:59 pm
Location: Williamsburg VA

Re: 2 years in, asking for a gut check

Post by fabdog »

Based on what you listed, 2.5% draw should be ok with a 40/60 split

I was not clear why you intended to increase spending to accommodate gifting when your main worry was running out of money, and you are using a conservative asset allocation with a long expected lifetime... I would be focused on managing the spend as conservatively as possible and perhaps evaluating a SPIA for additional fixed income

Mike
Topic Author
LearningAlot
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Joined: Thu Aug 02, 2018 8:43 am

Re: 2 years in, asking for a gut check

Post by LearningAlot »

Thanks for the feedback. Just curious, if I would get a SPIA, would you recommend it come out of my equities
or my fixed income investments?
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JoeRetire
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Joined: Tue Jan 16, 2018 2:44 pm

Re: 2 years in, asking for a gut check

Post by JoeRetire »

LearningAlot wrote: Fri Dec 20, 2019 9:04 am * have no long term care insurance
* my primary goal is to not run out of money as I don't want to worry about money as I have enough other things to worry about
Everything else looks good.
You should be fine absent the need for long term care. Is your disability one that could lead you there? Have you looked into LTCi?
It's the end of the world as we know it. | It's the end of the world as we know it. | It's the end of the world as we know it. | And I feel fine.
Topic Author
LearningAlot
Posts: 45
Joined: Thu Aug 02, 2018 8:43 am

Re: 2 years in, asking for a gut check

Post by LearningAlot »

Good question, I have not looked into LTCI , probably should, I've been under the impression that due to
my health issues (life long disability that get's progressively worse), that LTCI premiums would be
very high. If I ever do need to leave my house for some sort of assisted living, my plan has been
to fund it through my nest egg and the proceeds from the sale of my house (which would be
about $300K).
HomeStretch
Posts: 5142
Joined: Thu Dec 27, 2018 3:06 pm

Re: 2 years in, asking for a gut check

Post by HomeStretch »

You look to be in good shape. Agree with prior comments to rethink gifting if you are concerned about running out of money and to look into LTCI.

Does your current home meet your needs now (accessibility) and for aging in place? If not, consider your long term housing plans as it is easier to plan/make a change before it becomes a necessity.

As your portfolio withdrawal rate is 2.5%, have you analyzed whether it is better to take regular SS at age 67 or delay until age 70 for the higher inflation-indexed benefit? SPIAs are usually not inflation-indexed.
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