unplanned retirement

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epilnk
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unplanned retirement

Post by epilnk »

My husband's job (and company) is going away at the end of the year. He has a severance package and needs a sabbatical anyway, so he's not going back to work for at least 6 months. We are both 60, and I'm no longer working.

However we can actually afford for us both to be fully retired at this point, though it isn't what we planned so we didn't prepare for this. We're considering it, though won't decide until he's had some time off, so I've been going over the numbers.

The problem is that I've always been a long bond kind of gal, gradually reducing duration as we get older and successfully ignoring all the current bond doom and gloom. So the overall duration of the bond funds in portion of the portfolio we'd be living off for the next 5 years (munis, in taxable) is currently about 5 years. And their nav has taken a bit of a hit.

How are we feeling about bond funds these days? Normally I'd hold tight, but we are going to need to start diverting interest and dividends from reinvestment to cash. I'm not sure if there's something I should be doing.
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WoodSpinner
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Re: unplanned retirement

Post by WoodSpinner »

Epilink,

We need more information to give you a better answer….

Consider providing info in this format. You can update your original post using the pencil icon.

https://www.bogleheads.org/wiki/Asking_ ... _questions

That said, I would stop reinvesting dividends in Taxable and start building up so,e liquidity. Sounds like you will need it.



WoodSpinner
Last edited by WoodSpinner on Fri Sep 23, 2022 8:51 am, edited 1 time in total.
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whodidntante
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Re: unplanned retirement

Post by whodidntante »

It has not been a good year for the typical Boglehead balanced portfolios and there could be more pain ahead. I do think some people got caught off-guard and learned the hard way that bonds can have a significant drawdown, too.

The drawdown in bonds did increase expected returns due to the higher yields. So, in terms of what to do, I think probably nothing. With the losses came higher expected returns. Your duration is not matched to your spending, though. So I'm wondering how you selected it.
Topic Author
epilnk
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Re: unplanned retirement

Post by epilnk »

whodidntante wrote: Thu Sep 22, 2022 9:49 pmYour duration is not matched to your spending, though. So I'm wondering how you selected it.
There's never been any spending before. The duration was matched to a projected retirement age of 65-67. I've only recently added short bonds but they are still a small component.
Topic Author
epilnk
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Re: unplanned retirement

Post by epilnk »

WoodSpinner wrote: Thu Sep 22, 2022 9:39 pm We need more information to give you a better answer….
What info do you need? Your link didn’t come through.
808
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Re: unplanned retirement

Post by 808 »

epilnk wrote: Thu Sep 22, 2022 11:58 pm
WoodSpinner wrote: Thu Sep 22, 2022 9:39 pm We need more information to give you a better answer….
What info do you need? Your link didn’t come through.
I'm guessing he/she meant https://bogleheads.org/forum/viewtopic.php?t=6212
Wanderingwheelz
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Re: unplanned retirement

Post by Wanderingwheelz »

Typically, an investor who owns minis for the right reasons has a lot of options for retirement at age 60- especially if they’re following the typical Boglehead strategy of placing fixed income investments in tax-deferred accounts up to the point their AA is achieved. If there’s not enough room, only then holding bonds in taxable accounts.

That’s why others have asked for you to post more information. If your expenses aren’t too high, there’s a good chance you’re going be be just fine.
Golf maniac
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Re: unplanned retirement

Post by Golf maniac »

If you can truly live off the dividends and interest there is no concern. Yes, there is an opportunity cost because your bond portfolio is Yielding less than a current portfolio but as the bonds mature you can roll them into higher yielding bonds. Long term a more balanced portfolio of stocks and bonds will keep you ahead of inflation. That is why people are asking you for more details on your overall portfolio.

I retired at 56 and decided to take a few months off. At first I was going to do consulting full time. After a month or so off I was going to consult part time. After 3 months I decided I didn’t want to work at all. Everyone is different, best of luck on your journey.
livesoft
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Re: unplanned retirement

Post by livesoft »

There is no rule that one must only sell investments that have gains. It is perfectly OK to sell losers and use the money for expenses. This is particular true in retirement. Once one feels comfortable selling losers and spending the money, then life gets a lot easier.
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vineviz
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Re: unplanned retirement

Post by vineviz »

epilnk wrote: Thu Sep 22, 2022 9:28 pm The problem is that I've always been a long bond kind of gal, gradually reducing duration as we get older and successfully ignoring all the current bond doom and gloom. So the overall duration of the bond funds in portion of the portfolio we'd be living off for the next 5 years (munis, in taxable) is currently about 5 years. And their nav has taken a bit of a hit.

How are we feeling about bond funds these days? Normally I'd hold tight, but we are going to need to start diverting interest and dividends from reinvestment to cash. I'm not sure if there's something I should be doing.
Based on what you report, there's probably nothing you should be doing at least with respect to bond duration.

It would probably be counterproductive to be meaningfully shortening up duration at this point in your journey, so assuming your overall average bond duration is in the range of 10-20 years then "ignoring all the current bond doom and gloom" is the right course of action.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
wolf359
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Re: unplanned retirement

Post by wolf359 »

livesoft wrote: Fri Sep 23, 2022 6:44 am There is no rule that one must only sell investments that have gains. It is perfectly OK to sell losers and use the money for expenses. This is particular true in retirement. Once one feels comfortable selling losers and spending the money, then life gets a lot easier.
+1

Also, if you sell a loser, you have a loss.

You can then sell a winner and use the loss to offset the profit. You then rebuy the winner and thus reset the cost basis.

If you need to sell the winner in the future, you may have lower taxes.

(This is called "tax gain harvesting.")

Getting comfortable selling losers can be a powerful tool.
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WoodSpinner
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Re: unplanned retirement

Post by WoodSpinner »

epilnk wrote: Thu Sep 22, 2022 11:58 pm
WoodSpinner wrote: Thu Sep 22, 2022 9:39 pm We need more information to give you a better answer….
What info do you need? Your link didn’t come through.
My apologies, updated my response with the missing link….

https://www.bogleheads.org/wiki/Asking_ ... _questions
Topic Author
epilnk
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Re: unplanned retirement

Post by epilnk »

livesoft wrote: Fri Sep 23, 2022 6:44 am There is no rule that one must only sell investments that have gains. It is perfectly OK to sell losers and use the money for expenses. This is particular true in retirement. Once one feels comfortable selling losers and spending the money, then life gets a lot easier.
We don’t have a lot of “losers” - I took care of that back in 2008-9 with aggressive TLH. In fact most of our current “losers” are bond funds, which I don’t want to sell because I’ve been trying to increase my bond allocation as retirement approaches. I haven’t added new money to equites for a couple of years.

But I’m a little unhappy about diverting income away from muni reinvestment, forgoing the anticipated recovery (assuming a recovery matching the duration).
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