Reached 4M target. Taking money off table. Advice?

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JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Sat Dec 02, 2017 11:56 am

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JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Sat Dec 02, 2017 12:14 pm

CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
Are these held in taxable or tax deferred?


Both. About 1.7 M in non-taxable. The rest is taxable. We have been saving 10% in our 401K for a long time. Recently I bumped this up to 15% on my wife's account to take advantage of the 401K catch up.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
What's the state income tax rate? How much of a deduction do you get on your mortgage interest as it currently stands? You've got a few years to think about the downsizing, so no rush. They may, or may not totally be out of the house at age 22-24. No need to jump too soon if you end up housing one of them for an additional year or two beyond what you thought.
My state income tax level is 5%. And I suspect it will go up some more. With the limits on state and mortgage interest being proposed under the new tax plan, I expect my taxes to go up.

I have considered that one of my kids have moved back in. But regardless I want to move. Where I live the economy is not healthy. Pair that up with the high taxes and I wonder why anyone would want to live here. It was OK when my wife and I graduated from college 25 years ago, but for my children I think there are greener pastures.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
Nothing wrong with this plan. Then again, we drive a Honda with 215K on it, but we also sprung for a new one this year to pair with the older one as we celebrate our first empty nester 1/2 year. Are you going to turn over the old car to your youngest to take to college?
Probably not because the insurance costs are high. I had a car at college and I never used it. Or somebody wanted to borrow it or for me to drive them somewhere. IMO having a car at college is a hassle. Better to live in the dormss or some place close to campus and where food is available.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
Home ownership, in and of itself, can be a rather full time hobby for those who enjoy DIY'ing things. There's always plenty of maintenance, repairs, lawn care, and cleaning to make it a full time hobby until you can no longer physically do all of that. So consider your hobby as legit and well shared by many others who also do the same. There are two retired couples who live next to us in our neighborhood, and both of them work more hours on their homes and lawns than I do at my full time job (or so it seems). They really enjoy it, and I love visiting with them about all of the DIY stuff.
It is really funny to me. I cut my own grass, trim my bushes, spray for weeds etc. Most of my neighbors have a landscape firm take care of this. I have a sprinkler system but I turned it off. My neighbors have sprinkler systems so in July and August when my grass goes dormant their lawn is getting cut. If personally find this very strange. Now that my kids are in high school and college they really do not need (or want) me around very much. I kind of enjoy being outside and working on the yard. Why not, it is exercise and keeps me moving.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
This is probably the meat of your post that is garnering the most actionable attention from all of us. No doubt that healthcare, technology, and financials have been loved sectors this past year, but making sure your asset allocation is best positioned for your current portfolio, shorter term, and longer term goals looks like it could use some tweaks. You are domestic stock heavy, international stock, and bond light. Moving in the direction of either 70/30 or 65/35 or 60/40 or 55/45 or even 50/50 will help take some of the risk out of your portfolio, yet still provide plenty of growth to reach your second threshold and beyond as you continue to utilize your human capital by working and saving even more.
Yes I am thinking a lot about this. I want to increase my bond percentage. Specifically the vanguard admiral short term corporate box index which I use as a secondary cash account. I do not see inflation on the horizon but I do see the possibility of a stock correction. I want to make sure I have enough in cash and equivalents to ride out 3 years of a worst case scenario without touching my equities.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
Yes, you are a classic case of what Thomas Stanley would describe as the millionaire next door - especially since a single million is no longer worth as much as it was 20 or 30 years ago. You want to work - so keep on working. You don't want to spend a lot or have a lavish lifestyle - so don't. Keep on being you and carry on with confidence.
But isn't it exciting to know that I (or we) have options! As I said earlier I do not like owning a bunch of stuff. Stuff to me means things get broken, get dusty, need repair. What really interests me about money is freedom. I want to freedom to know I can do what I want (within reason). Even though I have no desire to leave my job or my chosen career.

When I was 15 my dad was unemployed for a one year. My family had a lot of problems during this time. I suspect living through this has effected me for life. What I want to buy with money more than anything else is that my family and my kids never have to experience this. I suspect I have saved so much over the years in part because I am afraid of being poor. A little weird I guess.
CyclingDuo wrote:
Sat Dec 02, 2017 10:19 am
I think this would be a wonderful learning experience for both of you. If it comes down to it after he finishes college, have him prepare a complete business plan, and make a pitch to you as an investor to help him focus and develop a sound plan. We know 80% make it one year, 66% make it two years, 50% make it 5 years, and only 30% make it ten years, so studying the small businesses and industries that have the highest success rates would be key to making a go of it. Bureau of Labor Statistics’ Business Employment Dynamics are published every now and then with all of that information as a place to start.
As I think about the next season of my life, more than anything else I want to be close to my kids. I am close to my son who is 19 (or as close as you can be to a 19 year old). My daughter is 16 and thinks I am weird. I kept getting told how difficult teenagers would be. My son has a lot of freedom. At 16 I told him that my job was an adviser, that it was time for him to be responsible for his life. This has worked out pretty well.

More than anything else I would like for my children to live in the same area and for my wife and I to live within driving distance of their house. I do not want to actually life with them, I want them to have their privacy.

I keep telling my kids that I am handy. I know how to fix things. I will mow their grass. I will make sure they are not taken advantage of. That Mom and Dad will be free babysitters.

My 16 year old daughter who is 'never going to get married and going to be an actress' just rolls her eyes at me but hey I am trying!

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Sat Dec 02, 2017 12:32 pm

ryman554 wrote:
Sat Dec 02, 2017 1:20 am
If the OP is as frugal as indicated, 100k a year is way overkill. I can only assume it includes mortgage payments too.

It's also alarming that the OP does not know the remaining balance on the mortgage.

The OP does not have 4M. The OP should pay off (not down) the loan and keep on trucking. This takes money off the table, as the OP wanted while simultaneously reducing future expenses when and if retirement happens.

This might also be a good time to simplify the investments into a total market fund, total international fund, total bond fund at whatever percentage the OP wants. I suggest 40/40/20, but that's just me
This is a good question/response. The house I live in is 3400 square feet in a fancy area with high taxes. I purchased this house because my wife was going through a mid life crisis "I have worked all these years and what do I have to show for it". I find this house to big. I get along with my neighbors but I am not part of their world. The understanding with my wife is we would keep it until our kids went to college and then we would downsize. I do not want to stay in this house.

I am paying 3.25% mortgage which after tax deduction I figure is 2.75%. I figure if I can earn 2.75% or better on a diversified portfolio that there is no advantage to paying off my mortgage. That and I do not plan to stay here long term. But yes it is a fair criticism that I do not know my mortgage balance (LOL).

I put 20% down on my house so I figure I have about 200K in equity. Depending on where we downsize to this may or may not be enough so it is possible that for my next house I will carry a mortgage. I do not have concerns about carrying debt if the interest rate is low. I own no debt on anything else (cars, credit cards, etc). Only the mortgage.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Sat Dec 02, 2017 12:40 pm

chuppi wrote:
Fri Dec 01, 2017 9:55 pm
You did well. Congratulations.
If I were you, I would pay attention to downside risk and maybe go 50/50 stock/bond or even keep some 2-3 years worth of minimum yearly expense in cash/cd.
Like someone said, 4million going to 8million does not make any difference to you and your lifestyle. You don't want to see it fall to 2million.
My goals for the short term:
1. 50K in 2018 and 2019 for my son's eduction
2. 50K in 2021 and 2022 for my daughter's eduction
3. 3 years (300K) in my cash equivalent fund (vanguard admiral corporate short term bonds)

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Sat Dec 02, 2017 1:05 pm

retireearly wrote:
Fri Dec 01, 2017 1:14 pm
So, with your future income needs just about met, why have 80-85% stocks,esp now? Up until this year, I was all stock and after the great run up, I'm much closer to where I need to be than before, so I decide to move to about 33% Fixed Income. My point is that you can essentially secure your future self/family's future my doing something like 50/50. The 50% fixed income can take care of the annual stuff and the 50% equity can help guard against inflation with "hopefully" gains a decent amount beyond inflation. Even better, in a case of huge crash, you would then be in a position to dabble back and buy on sale since to you, going from 50% fixed income to 40, or even 30%, would not be a big deal.
I am concerned that the yield is SO low that fixed income yields are not keeping up with inflation. My VSCSX Vanguard Short-Term Corporate Bond Index Fund Admiral Shares is yielding 2.37. VBTLX Vanguard Total Bond Market Index Fund Admiral Shares is 2.52.

Frankly at this spread I prefer the corporate bond index.

Without going off topic I am not convinced that this is covering the inflation rate which is 'supposedly' 2%. But have you looked at the costs for cars, healthcare, real estate? I am not convinced that the reported inflation rate is accurate. I am concerned that a 50/50 or even 60/40 split is not keeping up with inflation.

When I look at my risk strategy my goal is to have enough in human capital, cash, short term equivalents, and bonds so I do not need to sell equities during a market crash. From the above list I would like 3-5 years worth.

When the last market crash occurred in 2008 I did.. nothing... I was lucky not to have lost my job. I was raising my kids. I did not even pay attention to my portfolio. If you would have asked me how much I lost I could not have told you.

Of course I could be wrong, but most recent stock market crashes have recovered in 3 years. My goal is to have coverage for that period of time.

Now that being said I think I should move towards 70/30 instead of 80/20./

inbox788
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Re: Reached 4M target. Taking money off table. Advice?

Post by inbox788 » Sat Dec 02, 2017 2:22 pm

JSnyder wrote:
Sat Dec 02, 2017 1:05 pm
Without going off topic I am not convinced that this is covering the inflation rate which is 'supposedly' 2%. But have you looked at the costs for cars, healthcare, real estate? I am not convinced that the reported inflation rate is accurate. I am concerned that a 50/50 or even 60/40 split is not keeping up with inflation.
It's not just the inflation rate accuracy that's being questions. Record low unemployment (below full employment), yet were's talking about providing stimulus that's inflationary. This is only reference to economic theory (https://en.wikipedia.org/wiki/Phillips_curve) and potential for greater than expected inflation.

Practically, in retirement, we're more concerned about what we would be spending more on (i.e. food, living, travel, healthcare, etc.). If cars or real estate had high inflation, if we were all set on those, it may not matter much.
Now that being said I think I should move towards 70/30 instead of 80/20./
If your goal can be reached with a more secure and conservative portfolio, it's hard to argue to take more chances, even though you know statistically you're giving up potential return. My answer is to create mental buckets, which is what I need for retirement and what I expect will be there for my heirs (though I would tap into that if need be). For my needs, 50/50 (or 40/60 vs 60/40) seem to be where I'm comfortable and secure. For my heir, given they're much younger 90/10 seems to be the right number. Average out the buckets, and it's quite possible it's right around 70/30 or 2/3 and 1/3.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Sat Dec 02, 2017 2:29 pm

JSnyder wrote:
Fri Dec 01, 2017 8:18 am

One upcoming expense I might have is that my son is interested in being an entrepreneur. He is a sophomore in college so this may change. But if it does not I would like to provide him with 100K in seed money to start a company. I would just write this amount off. If he makes it great. If he doesn't it would be a good learning experience. I am close to my son and I would actually like to start a business with him. Though families and business do not necessarily mix well.

"In for a penny, in for a pound." After you fund the first $100K, it will be hard to stop at that. Sure, at the beginning, you can tell yourself (and him) that you're only providing the $100K and no more. But a year later, after the 100K is gone, he's put his heart and soul into into, maybe also run up his credit cards, and his start-up (as start-ups are apt to do) needs more funding--you'll probably very find too resist providing more.

Vanguard Fan 1367
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Re: Reached 4M target. Taking money off table. Advice?

Post by Vanguard Fan 1367 » Sat Dec 02, 2017 4:11 pm

One upcoming expense I might have is that my son is interested in being an entrepreneur. He is a sophomore in college so this may change. But if it does not I would like to provide him with 100K in seed money to start a company. I would just write this amount off. If he makes it great. If he doesn't it would be a good learning experience. I am close to my son and I would actually like to start a business with him. Though families and business do not necessarily mix well.

I helped my son with part loan part gift of about 100k to buy a foreclosed house. That worked out fine as he worked hard on the house and sold it for a nice profit.

I had a friend who bought a marina with a family member. That worked out very well financially for the friend and the family member but they did have a few cross words over the years.

DrGoogle2017
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Re: Reached 4M target. Taking money off table. Advice?

Post by DrGoogle2017 » Sat Dec 02, 2017 4:56 pm

WhiteMaxima wrote:
Fri Dec 01, 2017 6:22 pm
JBTX wrote:
Fri Dec 01, 2017 6:11 pm
WhiteMaxima wrote:
Fri Dec 01, 2017 4:20 pm
In casino, stop playing when you win. Because the odds is always against you.

In equity market, keep invested will always win ecause the odds is on your side. For smooth ride, just add more fix income (like Bond, CD).
No, you won't always win. Unlike casino gambling, the odds may be in your favor, especially over the long term, but you still could lose, thus the reason for taking money of the table.
Take a ruler and any 20 year curve of VT and draw a line. No Kodark, Enron or Worldcom or any individual company.
Interesting, I thought you just moved from 100% in stocks to 50/50. Did you not use a ruler?

selters
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Re: Reached 4M target. Taking money off table. Advice?

Post by selters » Sat Dec 02, 2017 7:32 pm

WhiteMaxima wrote:
Fri Dec 01, 2017 11:26 am
W Buffet has 30 billion, he is 80s and still haw money on the table.
Yes, but he also says to keep enough cash to sleep well at night. Berkshire Hathaway has $60bn in cash or cash equivalents.

moghopper
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Re: Reached 4M target. Taking money off table. Advice?

Post by moghopper » Sun Dec 03, 2017 12:30 am

Dottie57 wrote:
Fri Dec 01, 2017 10:38 pm

In retirement you have to mind borh expenses and wirhdrawls. If your stash goes down too much you need to cut expenses. It is simply math.
Exactly! You adjust. It is stupid to scare people so much that they don't even try.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Sun Dec 03, 2017 1:23 am

I agree with the statement made earlier that there is no such thing as "taking money of the table." It's all on the table, all the time. If you take it out of the equity bucket, unless you spend it, then it goes into the bonds bucket or even the cash bucket. But all of those buckets are "on the table."

Yes, the historical data shows that equity is volatile and that you can lose, even over a 15 year period. But don't think that cash and bonds are "safer", if you're looking at the long-run. Because that same historical data shows that same historical data shows that they are, statistically, not safer.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Sun Dec 03, 2017 1:25 am

Finridge wrote:
Sun Dec 03, 2017 1:23 am
I agree with the statement made earlier that there is no such thing as "taking money of the table." It's all on the table, all the time. If you take it out of the equity bucket, unless you spend it, then it goes into the bonds bucket or even the cash bucket. But all of those buckets are "on the table."

Yes, the historical data shows that equity is volatile and that you can lose, even over a 15 year period. But don't think that cash and bonds are "safer", if you're looking at the long-run. Because that same historical data shows that same historical data shows that they are, statistically, not safer. Compare hypothetical 50/50 and 80/20 portfolios in backtesting.

DrGoogle2017
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Re: Reached 4M target. Taking money off table. Advice?

Post by DrGoogle2017 » Sun Dec 03, 2017 1:30 am

What about TIPS, would that be safer than bonds. But I notice VTIP also zigs and zags. I don’t know how much zig and zag when the actual time comes.

dbr
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Re: Reached 4M target. Taking money off table. Advice?

Post by dbr » Sun Dec 03, 2017 9:02 am

DrGoogle2017 wrote:
Sun Dec 03, 2017 1:30 am
What about TIPS, would that be safer than bonds. But I notice VTIP also zigs and zags. I don’t know how much zig and zag when the actual time comes.
TIPS are sensitive to real interest rates the same as nominal bonds are to nominal interest rates. For a person who feels endangered whenever the value of their bond holdings fluctuates, TIPS are no help. I wonder if people feel endangered when the value of their bond holding goes up.

blastoff
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Re: Reached 4M target. Taking money off table. Advice?

Post by blastoff » Sun Dec 03, 2017 9:47 am

Maybe I missed it.

How much a year do you spend or want to spend to be happy?

Based on your descriptions, it seems like it would be much less than 3-4%.

Rondo
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Re: Reached 4M target. Taking money off table. Advice?

Post by Rondo » Sun Dec 03, 2017 10:20 am

I haven't read all the posts in this thread, so excuse me if it was mentioned, but one thing I often don't see referenced when I see people talking about SWR is the fact that depending on how you are invested and the size of your portfolio, the income generated from the portfolio could potentially mean you can have a 0% SWR. For example, between just two of my funds Wellesley (VWIAX) and PA Municipal Bond Fund (VPALX), even with the low interest environment we are in, with about 1.7M split evenly between the two, I will see about 70K in income depending on how the end of the year goes.

If I had 4M invested as the OP has stated, from just those 2 funds, I would see something around 150K in income and not had to withdraw anything at all.

dbr
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Re: Reached 4M target. Taking money off table. Advice?

Post by dbr » Sun Dec 03, 2017 10:27 am

Rondo wrote:
Sun Dec 03, 2017 10:20 am
I haven't read all the posts in this thread, so excuse me if it was mentioned, but one thing I often don't see referenced when I see people talking about SWR is the fact that depending on how you are invested and the size of your portfolio, the income generated from the portfolio could potentially mean you can have a 0% SWR. For example, between just two of my funds Wellesley (VWIAX) and PA Municipal Bond Fund (VPALX), even with the low interest environment we are in, with about 1.7M split evenly between the two, I will see about 70K in income depending on how the end of the year goes.

If I had 4M invested as the OP has stated, from just those 2 funds, I would see something around 150K in income and not had to withdraw anything at all.
Cashing dividend and interest checks IS a withdrawal. The return that is used to model portfolio withdrawals includes dividends and interest in the returns. The definition of return used in all standard discussion of investing includes dividends and interest (and capital gains distributions) in return.

Dandy
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Re: Reached 4M target. Taking money off table. Advice?

Post by Dandy » Sun Dec 03, 2017 11:45 am

Financially you are in great shape. Even better with future inheritance and housing downsizing in a lower cost area. You seen like you would have some difficulty spending a large withdrawal due to lack of interest in most high spending things like travel.

Just one comment about cars. While you are afraid to fly - fairly normal you are driving old cars when there are much safer cars available. I strongly suggest looking at new or newer cars that have much better safety features. I used to buy into the frugal bragging about how I drove my old car into the ground to maximize the value extracted from the purchase. For those who have enough - I feel that noble frugal approach has been negated by the emergence of significant safety features. e.g. blind spot monitoring, automatic braking, lane departure warnings, a feature that warns of cars passing behind you as you are backing up from a parking spot, etc. Accidents are expensive and often dangerous avoiding them or minimizing them seems to make sense. I know that my next car will have these type of features since I would feel terrible if a life was damaged or lost because I could have prevented an accident if had I spent money that I could well afford.

Kaktus
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Re: Reached 4M target. Taking money off table. Advice?

Post by Kaktus » Sun Dec 03, 2017 1:00 pm

The OPs issue does not seem to be the exact percentages or sums in different assets. To me this sounds between the lines more about what goal to set up for himself. The vague talk about thresholds while not sharing nearly enough info to give advice on different assets or whatever. I would recommend fucusing on that, perhaps by going to seminars about setting up goals, and read financial advisors who bring in thw whole picture like Bodo Schäfer.
I dont like to give advice about finance, but I would myself put all new savings into paying of that house loan while I worked on establishing new life goals.

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snackdog
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Re: Reached 4M target. Taking money off table. Advice?

Post by snackdog » Sun Dec 03, 2017 5:02 pm

I'm in a vaguely similar situation, minus kids but with a lot more real estate. There has been a bunch of advice here and it has been all over the board but too much of it crushingly conservative.

I see no reason not to remain fully invested in stocks and bonds and no reason to pay off your mortgage. Stay the course. Work if you want, or retire any time you like on the 4% plan with flexibility to spend more or less. Ignore the chicken littles who want you to drop under 4%, divest, pay off your mortgage or splurge on new cars for "safety" reasons. You are doing great and your $4MM will be $10MM before you know it. Drive as little as you can for reasons of safety, health and the environment.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Mon Dec 04, 2017 4:11 am

Rondo wrote:
Sun Dec 03, 2017 10:20 am
I haven't read all the posts in this thread, so excuse me if it was mentioned, but one thing I often don't see referenced when I see people talking about SWR is the fact that depending on how you are invested and the size of your portfolio, the income generated from the portfolio could potentially mean you can have a 0% SWR. For example, between just two of my funds Wellesley (VWIAX) and PA Municipal Bond Fund (VPALX), even with the low interest environment we are in, with about 1.7M split evenly between the two, I will see about 70K in income depending on how the end of the year goes.

If I had 4M invested as the OP has stated, from just those 2 funds, I would see something around 150K in income and not had to withdraw anything at all.
I don't think it works that way. Any money that you move out of your investment accounts and spend count as a "withdrawal" (whether "safe" or not). It doesn't matter if these funds were from capital appreciation, stock dividends, bond coupon payments, or (as in the case of VWIAX). The data underlying the "4/% rule" assumes the immediate reinvestment of any dividends, bond coupon payments, etc.

If you have 1.7M in VWIAX and VPALX, and you are moving 70K out of Vanguard each year and spending it, then your annual withdrawal rate is not 0%, rather it is approximately 4.2%

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 7:01 am

Dandy wrote:
Sun Dec 03, 2017 11:45 am
Just one comment about cars. While you are afraid to fly - fairly normal you are driving old cars when there are much safer cars available. I strongly suggest looking at new or newer cars that have much better safety features. I used to buy into the frugal bragging about how I drove my old car into the ground to maximize the value extracted from the purchase. For those who have enough - I feel that noble frugal approach has been negated by the emergence of significant safety features. e.g. blind spot monitoring, automatic braking, lane departure warnings, a feature that warns of cars passing behind you as you are backing up from a parking spot, etc. Accidents are expensive and often dangerous avoiding them or minimizing them seems to make sense. I know that my next car will have these type of features since I would feel terrible if a life was damaged or lost because I could have prevented an accident if had I spent money that I could well afford.
It is interesting you bring this up because this is something I have been thinking about. A year or two ago my wife fell asleep at the wheel and had a front end collision. Luckily low speed. And she tells me that she cannot see very well at night.

The next vehicle I buy will definitely have the safety features you indicate above. But I am also interested to see if something better will be developed within the next few years. I have no interest in self driving vehicles. However, Toyota is working on a system called the guardian which will take over if it thinks a crash will occur.

http://corporatenews.pressroom.toyota.c ... nomous.htm

As our vehicles are really old, we only use them for around town. Whenever we drive out of town for vacation or a wedding we rent. My analysis is this makes a lot of sense.

Another factor is my insurance. Because I have a 19 year old male on my policy, I pay a lot. The cost of insuring my son is equal to the cost of insuring both my wife and myself. I have Amica insurance. One interesting thing they do is pair the most expensive driver (my son) with the cheapest car (my 2004 Toyota Sienna with 186k miles). That saves me a little.

I am interested if there will be further safety improvements on cars over the next few years. Or if progress will slow down with what is currently out there.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 7:17 am

An area I have been reflecting upon is how the amount of assets effects asset allocation. As someone posted earlier, Warren Buffet has a lot of assets in stock. But he also has a lot of cash.

So even though Warren Buffets cash position may be low as a percentage of his overall portfolio, it is high compared to living expenses.

For me asset allocation is protection for riding through the next recession and/or stock market drop without having to tap your equities at a loss.

This is my defensive game for this. I am assuming I need 100K a year while riding out the storm.

1. 100K in cash
2. 150K in vanguard corporate short term bonds
3. 300K in vanguard total bond market

Based on this I figure I have 5.5 years of reserves. And not this does not include dividends and yields.

Ideally I would like to have 200K in vanguard corporate short term bonds. This is one of my next goals. The reason is this would give me 3 years in cash and short term equivalents. 'Most' recessions last 3 years. That way I would never tap my bonds.

Yes, I know the big one might happens. But if we go into another great depression (1929-1939) I am not convinced there will be a safe harbor for any of us. And yes I know that my bond funds may go down during the next recession. How much is an interesting academic question for those smarter than me. But I hope they would not go down more than 10%.

A wrinkle is I figure I have 200K in education expenses over the next 5 years. But if it really got bad I would go for low interest student loans, tap my home equity, or borrow from my parents.

smectym
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Re: Reached 4M target. Taking money off table. Advice?

Post by smectym » Mon Dec 04, 2017 7:43 am

Sergeant,

No doubt trolling exists but not sure why you target OP.

You imply his “writing skills are lacking” as if that’s a red flag signaling trolldom—a shaky assumption. At any rate, apart from minor typos, a few comma splices, failure to capitalize “Toyota” etc., don’t see major writing issues with OP’s post.

In general, floating “is this a troll” is a bad habit unless there is clear cause for concern. Being a first time poster on the bogleheads forum does not create a presumption that “he’s probably a shady character, till proved otherwise.” Even if he admits that his first financial goal was higher than $1000.

The forum is typically friendly and welcoming to newcomers but every once in a while a certain “small town” mentality surfaces.

tampaite
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Re: Reached 4M target. Taking money off table. Advice?

Post by tampaite » Mon Dec 04, 2017 8:22 am

JSnyder wrote:
Fri Dec 01, 2017 8:18 am

Actually I am probably at the 5 million. I expect to inherit $1 million. My parents are mid 80s.

I have about 100K in cash. 150K in vanguard short-term bond. 300K in vanguard total bond index. The rest is in U.S. stocks.
IMO, Sell all - invest in CDs. You have enough to worry about volatility in the market.

Bacchus01
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Re: Reached 4M target. Taking money off table. Advice?

Post by Bacchus01 » Mon Dec 04, 2017 8:39 am

JSnyder wrote:
Mon Dec 04, 2017 7:01 am
Dandy wrote:
Sun Dec 03, 2017 11:45 am
Just one comment about cars. While you are afraid to fly - fairly normal you are driving old cars when there are much safer cars available. I strongly suggest looking at new or newer cars that have much better safety features. I used to buy into the frugal bragging about how I drove my old car into the ground to maximize the value extracted from the purchase. For those who have enough - I feel that noble frugal approach has been negated by the emergence of significant safety features. e.g. blind spot monitoring, automatic braking, lane departure warnings, a feature that warns of cars passing behind you as you are backing up from a parking spot, etc. Accidents are expensive and often dangerous avoiding them or minimizing them seems to make sense. I know that my next car will have these type of features since I would feel terrible if a life was damaged or lost because I could have prevented an accident if had I spent money that I could well afford.
It is interesting you bring this up because this is something I have been thinking about. A year or two ago my wife fell asleep at the wheel and had a front end collision. Luckily low speed. And she tells me that she cannot see very well at night.

The next vehicle I buy will definitely have the safety features you indicate above. But I am also interested to see if something better will be developed within the next few years. I have no interest in self driving vehicles. However, Toyota is working on a system called the guardian which will take over if it thinks a crash will occur.

http://corporatenews.pressroom.toyota.c ... nomous.htm

As our vehicles are really old, we only use them for around town. Whenever we drive out of town for vacation or a wedding we rent. My analysis is this makes a lot of sense.

Another factor is my insurance. Because I have a 19 year old male on my policy, I pay a lot. The cost of insuring my son is equal to the cost of insuring both my wife and myself. I have Amica insurance. One interesting thing they do is pair the most expensive driver (my son) with the cheapest car (my 2004 Toyota Sienna with 186k miles). That saves me a little.

I am interested if there will be further safety improvements on cars over the next few years. Or if progress will slow down with what is currently out there.
Given your asset base, it’s almost irrational not to buy newer safer vehicles now. Worry about new tech that might come out when it does. There is no rational reason to wait.

supersharpie
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Re: Reached 4M target. Taking money off table. Advice?

Post by supersharpie » Mon Dec 04, 2017 8:43 am

moghopper wrote:
Fri Dec 01, 2017 9:46 pm
mad_pear wrote:
Fri Dec 01, 2017 9:33 pm
He has 4 million. Thats a 82% success rate over 45 years.
At a $160k annual withdrawal rate, just to clarify.
Its threads like these that make me wonder why I'm here.

Why retire? Retiring actually makes you die sooner, and then if I'm not retired, I won't have to worry about an "only" 82% success rate at $160K. Based on what I hear sometimes, I may as well stay working - then I never have to spend principal. I want to thank all the posters who consistently attempt to prove to me, that it isn't worth it because I should only spend 1% of my nest egg.
I sincerely doubt that retirement itself leads to earlier death. It is likely that, on average, retirees lead a less healthy lifestyle than during their working years. Furthermore, keep in mind that many people retire because they are in poor health to begin with, which certainly skews the numbers.

Logic would dictate that if you spend your extra 50 hours of weekly free time exercising and remaining engaged in activities you enjoy then retired life will lead to greater longevity.

10YearPlan
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Re: Reached 4M target. Taking money off table. Advice?

Post by 10YearPlan » Mon Dec 04, 2017 9:27 am

First of all, congratulations on reaching such an impressive milestone at a young age!

Second, I agree with a few of the other posters that paying down/off the mortgage is a good way to take some money off the table now, while also reducing income need in retirement. I think the big thing missing for me in this equation is - what does your wife want to do? You indicate you don't want her to stop working yet, but what is her opinion/desire on that? Also, you indicate you want to downsize, but sounds like she fell in love with the house you're in. You say you don't want to travel, but what does she want to do?

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 10:18 am

smectym wrote:
Mon Dec 04, 2017 7:43 am
Sergeant,

No doubt trolling exists but not sure why you target OP.

You imply his “writing skills are lacking” as if that’s a red flag signaling trolldom—a shaky assumption. At any rate, apart from minor typos, a few comma splices, failure to capitalize “Toyota” etc., don’t see major writing issues with OP’s post.

In general, floating “is this a troll” is a bad habit unless there is clear cause for concern. Being a first time poster on the bogleheads forum does not create a presumption that “he’s probably a shady character, till proved otherwise.” Even if he admits that his first financial goal was higher than $1000.

The forum is typically friendly and welcoming to newcomers but every once in a while a certain “small town” mentality surfaces.
Sorry for the spelling and grammar mistakes. I admit that I do not go back and proofread as much as I should. I guess I have been on facebook so long that I no longer expect perfect spelling, grammar, etc. If I can read it and understand it then I generally am happy.

Not sure about the toll business. Everything I have written is accurate.

Regardless I would like to think I have provided some sensible replies and arguments. Of course not everyone will agree with me. But that is why I am posting here: get to get input different from mine.

The biggest mistake we make IMO is not knowing what we don't know. I know about everything I have written. I know what I don't know. The danger is not knowing what you don't know. If you miss something because you have not thought it through. This is the biggest place people get messed up IMO. Cheers!
Last edited by JSnyder on Mon Dec 04, 2017 11:48 am, edited 1 time in total.

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randomizer
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Re: Reached 4M target. Taking money off table. Advice?

Post by randomizer » Mon Dec 04, 2017 11:07 am

Dottie57 wrote:
Fri Dec 01, 2017 11:41 am
If I were in Your position, I would take money off the table. Maybe a 50/50 allocation. Keep saving and investing.
Splendid advice. I would do the same.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 11:28 am

10YearPlan wrote:
Mon Dec 04, 2017 9:27 am
First of all, congratulations on reaching such an impressive milestone at a young age!

Second, I agree with a few of the other posters that paying down/off the mortgage is a good way to take some money off the table now, while also reducing income need in retirement. I think the big thing missing for me in this equation is - what does your wife want to do? You indicate you don't want her to stop working yet, but what is her opinion/desire on that? Also, you indicate you want to downsize, but sounds like she fell in love with the house you're in. You say you don't want to travel, but what does she want to do?
My wife is unhappy with her job. She wants to quit it. I told it is OK for her to get a different job or even a different career but I would like her to keep on working.

The problem IMO is once you are out you are out. Once you leave a corporate job for any duration of time, it is difficult to get a different corporate job. Especially when you are in your 50s and 60s.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 11:36 am

10YearPlan wrote:
Mon Dec 04, 2017 9:27 am
First of all, congratulations on reaching such an impressive milestone at a young age!

Second, I agree with a few of the other posters that paying down/off the mortgage is a good way to take some money off the table now, while also reducing income need in retirement.
Here is my thought about the mortgage. My interest rate is 3.25. I deduct my mortgage from my taxes, and it comes off the top. Of course taxes are progressive so it comes off the highest rate I pay. So I figure after the tax deduction I figure I pay an effective mortgage rate of 2.75%

My 10 year rate of return at Vanguard is 7.79. Now can I do that forever, not necessarily. But if I can make 7.79% at Vanguard and pay 2.75% for my mortgage then I netting 5% by investing instead of paying off my mortgage.

The second thing item is once I pay off my mortgage I would not be able to itemize on my federal taxes. So my charitable contributions would no longer be tax deductible. I do not recall what else I itemize, but there might be other things.

Now the tax laws are changing soon so this might change everything including my situation.

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HomerJ
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Re: Reached 4M target. Taking money off table. Advice?

Post by HomerJ » Mon Dec 04, 2017 2:41 pm

moghopper wrote:
Fri Dec 01, 2017 9:46 pm
Why retire? Retiring actually makes you die sooner
This is bad research. I'm amazed at the number of "scientists" who don't understand the difference between causation and correlation.
Last edited by HomerJ on Mon Dec 04, 2017 2:57 pm, edited 1 time in total.

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sergeant
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Re: Reached 4M target. Taking money off table. Advice?

Post by sergeant » Mon Dec 04, 2017 2:53 pm

smectym wrote:
Mon Dec 04, 2017 7:43 am
Sergeant,

No doubt trolling exists but not sure why you target OP.

You imply his “writing skills are lacking” as if that’s a red flag signaling trolldom—a shaky assumption. At any rate, apart from minor typos, a few comma splices, failure to capitalize “Toyota” etc., don’t see major writing issues with OP’s post.

In general, floating “is this a troll” is a bad habit unless there is clear cause for concern. Being a first time poster on the bogleheads forum does not create a presumption that “he’s probably a shady character, till proved otherwise.” Even if he admits that his first financial goal was higher than $1000.

The forum is typically friendly and welcoming to newcomers but every once in a while a certain “small town” mentality surfaces.
Too many red flags to even discuss but how about the latest where he says he's going to borrow money from his parents for his kid's college costs? How many people with four million dollars actually borrow money from their parents for such a small (portfolio wise) expense?
Lincoln 3 EOW!

retireearly
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Re: Reached 4M target. Taking money off table. Advice?

Post by retireearly » Mon Dec 04, 2017 3:16 pm

HomerJ wrote:
Mon Dec 04, 2017 2:41 pm
moghopper wrote:
Fri Dec 01, 2017 9:46 pm
Why retire? Retiring actually makes you die sooner
This is bad research. I'm amazed at the number of "scientists" who don't understand the difference between causation and correlation.
Lazy journalism, some not wanting to think beyond one event/study, their own bias, etc - it's pervasive. At least 1-2 a month, I feel the need to point out correlation does not imply causation. I see some real bright colleagues try to implement policies based on outcomes that may or may not have been decided on the inputs.
Age: 44, Married kids 8/12. Over the last six months, moved from 100% stock to 67/33. Desired AA 50/50 Us/INT, with tilt to US SCV, Int SCV and EM.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 6:10 pm

sergeant wrote:
Mon Dec 04, 2017 2:53 pm
Too many red flags to even discuss but how about the latest where he says he's going to borrow money from his parents for his kid's college costs? How many people with four million dollars actually borrow money from their parents for such a small (portfolio wise) expense?
I invite you to go back and read the posting. The post was about asset allocation vs having enough in cash/short term securities/bonds to ride out a market downturn.

The point I was making was that instead of taping equities in a 50% market downturn, it would be a better financial decision to take up some student loans and wait for the market to recover. The current rate for student loans is 4.45%. But is deductible depending on your income.

My parents are 85 years old. They are classic children whose parents lived in the depression. They have way to much cash. In an extreme market downturn I would borrow their cash temporarily and pay them back. After all they are getting .5% interest at the bank. They would get more from me. But again this would only be in extreme market downturn.

Again I invite you to go back and read the message to fully understand the context.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 7:04 pm

snowox wrote:
Fri Dec 01, 2017 5:30 pm
Does your son have a business plan is or is this just something he said? Be interested in hearing more about that.

The thing I took the most from your post is you really like your job and thats great but I dont buy the bs the longer you work the longer you live. Like you, I have no desire to Travel abroad as I to have my fears BUT I do travel a ton around the 48 and have been slowly getting a taste going to further places like Canada, Hawaii and Mexico. I also think , at least based on your write up you need more interests that you like as much as your work. Just my observation.
Right now my son does not have a business plan. He is 19 years old and a sophomore in college. He is taking classes such as econ 101, business calc, acct 101, etc. Right now our best investment is in his education. Next fall is everything goes as planned he will take principles of real estate, principles of finance, principles of marketing and introduction to entrepreneurship. It will be interesting to see which (if any) of these courses interest him.

So far I have spent a lot of time taking care of my kids and my parents (they live close by). My hobbies are fixing things. I also like volunteering at Church. I lead a group of 5th grade boys. They are a riot. I joke that if I get the message across and nobody gets hurt than I feel I have been successful.

I also like reading Quora very much. I like going for long walks. Recently I have been thinking about getting into flying radio controlled airplanes.

But it is true that as my kids get older I have more time on my hands. I do need additional things that interest me.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 7:10 pm

123 wrote:
Fri Dec 01, 2017 6:25 pm
You don't indicate a particular direct interest in investing or picking stocks but over 80% of your portfolio is individual stocks. How many different individual stock holdings do you have to monitor? How did you get them? Are you/have you been involved with a financial adviser? Do you pay an AUM fee? How much of your current portfolio is embedded taxable gains in taxable accounts? How much of your portfolio is in tax-deferred IRA or 401k accounts? (I would suspect not much unless your employer has a 401K that has a brokerage link). How much time do you want to spend with your investments, are you interested ion transferring to a multi-fund portfolio instead of individual stocks? Would you be content with market level returns? Do you feel your present investment returns are at least equal to the market average?

Edited to add:
If you pass away before your spouse will she be able to manage the portfolio and how would she handle it?
I am almost 100% in vanguard mutual funds. Primarily the S&P 500, some Primecap, some Capital Opportunity, quite a bit of Vanguard Healthcare. I have a few (less than 5) individual stocks. I am not a very good stock picker. I am probably OK at knowing when to buy but lousy knowing when to sell.

I am every happy to get market level returns. In fact I have been getting them. My 10 year return at Vanguard is 7.79% which I think is close to the return of the S&P 500.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Mon Dec 04, 2017 7:58 pm

mad_pear wrote:
Fri Dec 01, 2017 8:30 pm
OP, you might also want to read this:

http://blogs.sciencemag.org/pipeline/ar ... he-numbers

which has some rather unpleasant numbers, and as a scientist in the industry, I can't say I disagree. I'm not saying there isn't the possibility for continued growth and success, but tilting into an industry with "black swan" type risks pushes your portfolio into unchartered terrain, and historical S&P 500 index data no longer applies.
Well first off I want you to know I did read your article. And I read it, I did not just skim it. Yes overweight on healthcare is a concern. Frankly when I thought Hilary Clinton would be the next president I thought it would mean bad things for my Vanguard healthcare (I do not want to get into politics here, that is an open pit with lots of strong feelings). My point is that I was concerned. And I accordingly I have not invested in Vanguard Healthcare in quite a while.

However, progress tends to occur not exponentially but in leaps. There is a big leap forward and then a slowing incline as society figures how to use the new technology to is fullest. So while molecular pharmaceuticals IMO is doomed, I feel pretty good about immunotherapy and CRISPR. I also like the use of big data for medicine. I went for a physical last year. Twenty years ago at my age, weight, and physical activity I would have probably been given a statin. However, the doctor put a bunch of my data into the computer and told me that my chance of a heart attack is 3%. I assume this is using big data to determine its conclusions.

I would also argue that the S&P 500 itself has also become a "black swan". There is such a high percentage of the U.S. market now in the S&P 500 through mutual funds and ETFs that it is susceptible to a large scale sell off. If the market tanked and the baby boomers all left the S&P 500 at the same time, there would be an artificial sell off causing the indexes to turn prematurely negative.

Bogle talks about this in the article below.

https://www.marketwatch.com/story/john- ... 2017-06-01

snowox
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Re: Reached 4M target. Taking money off table. Advice?

Post by snowox » Tue Dec 05, 2017 6:12 am

JSnyder wrote:
Mon Dec 04, 2017 7:04 pm
snowox wrote:
Fri Dec 01, 2017 5:30 pm
Does your son have a business plan is or is this just something he said? Be interested in hearing more about that.

The thing I took the most from your post is you really like your job and thats great but I dont buy the bs the longer you work the longer you live. Like you, I have no desire to Travel abroad as I to have my fears BUT I do travel a ton around the 48 and have been slowly getting a taste going to further places like Canada, Hawaii and Mexico. I also think , at least based on your write up you need more interests that you like as much as your work. Just my observation.
Right now my son does not have a business plan. He is 19 years old and a sophomore in college. He is taking classes such as econ 101, business calc, acct 101, etc. Right now our best investment is in his education. Next fall is everything goes as planned he will take principles of real estate, principles of finance, principles of marketing and introduction to entrepreneurship. It will be interesting to see which (if any) of these courses interest him.

So far I have spent a lot of time taking care of my kids and my parents (they live close by). My hobbies are fixing things. I also like volunteering at Church. I lead a group of 5th grade boys. They are a riot. I joke that if I get the message across and nobody gets hurt than I feel I have been successful.

I also like reading Quora very much. I like going for long walks. Recently I have been thinking about getting into flying radio controlled airplanes.

But it is true that as my kids get older I have more time on my hands. I do need additional things that interest me.

Thats Great to hear. Interesting, I have a son thats a Freshman in College thats actually taking Economics and we are in the same position of doing alot with our kids (4) and another graduating High School early leaving January 5th for college. I was walking 8-10 miles every morning till about 2 weeks ago my knee needs a rest but all out time is chasing kids for sports. Being retired I have more time but it never seems to be enough and would like to do more hobby stuff. Good Luck to you!

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HomerJ
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Re: Reached 4M target. Taking money off table. Advice?

Post by HomerJ » Tue Dec 05, 2017 11:40 am

JSnyder wrote:
Mon Dec 04, 2017 6:10 pm
The point I was making was that instead of taping equities in a 50% market downturn, it would be a better financial decision to take up some student loans and wait for the market to recover.
This is why you should have some of your OWN money in cash.

I plan to have 5 years of living expenses in CDs when I retire. So 20% of my money (using 4% withdrawal rates). That might only be 10%-15% for you since you are using 2%-3% withdrawal rates.

Anyway, for me... I will be 40/40/20 stocks/bonds/cash.

Every year I will cash out a CD, and buy a new 5-year CD using money from the 40/40 stocks/bonds portion. If the market is up, I will mostly sell stocks. If the market is down, I will mostly sell bonds.

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Re: Reached 4M target. Taking money off table. Advice?

Post by n00b590 » Tue Dec 05, 2017 12:54 pm

JSnyder wrote:
Mon Dec 04, 2017 11:36 am
Here is my thought about the mortgage. My interest rate is 3.25. I deduct my mortgage from my taxes, and it comes off the top. Of course taxes are progressive so it comes off the highest rate I pay. So I figure after the tax deduction I figure I pay an effective mortgage rate of 2.75%

My 10 year rate of return at Vanguard is 7.79. Now can I do that forever, not necessarily. But if I can make 7.79% at Vanguard and pay 2.75% for my mortgage then I netting 5% by investing instead of paying off my mortgage.
That's not a fair comparison though. The mortgage is essentially a negative bond, so you should compare it to the bond portion of your portfolio. You're paying 2.75% on the mortgage, but only getting 2.4% in the Vanguard total bond index - so paying off the mortgage would be a smart move.
JSnyder wrote:
Mon Dec 04, 2017 11:36 am
The second thing item is once I pay off my mortgage I would not be able to itemize on my federal taxes.
You're thinking about this wrong - this is actually a good thing. Itemizing deductions means you miss out on the value of the standard deduction. So not having to itemize shifts the numbers even more in favor of paying down the mortgage.

rhornback
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Re: Reached 4M target. Taking money off table. Advice?

Post by rhornback » Tue Dec 05, 2017 1:14 pm

user_id=127484 wrote:You're thinking about this wrong - this is actually a good thing. Itemizing deductions means you miss out on the value of the standard deduction. So not having to itemize shifts the numbers even more in favor of paying down the mortgage.
Interesting food for thought. I had not considered this. Thanks.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Tue Dec 05, 2017 1:37 pm

HomerJ wrote:
Tue Dec 05, 2017 11:40 am
JSnyder wrote:
Mon Dec 04, 2017 6:10 pm
The point I was making was that instead of taping equities in a 50% market downturn, it would be a better financial decision to take up some student loans and wait for the market to recover.
This is why you should have some of your OWN money in cash.
The upside of keeping cash is just like what you say. When stocks are down, you don't have to sell them at lower prices for your cash needs. And you can even use some of the cash to buy more stock.

The downside is that the cash you keep isn't invested, and you don't get the returns you would if invested in stock--not the dividends, and not the capital gains from when the market is going up (which is most of the time).

Does the upside (the benefits) outweigh the downside (the costs)? Has anyone run numbers on this, using historical data to backtest scenarios?

I've wondered about this, and have at times kept cash as "dry powder". But I suspect that over the long run this was costing me more then it was gaining me. But I suspect it's like casino gambling. The gains (when you hit a "jackpot" --investing at a market dip and then see rapid appreciation) are very obvious and feel very rewarding, leading to much self-congratulation and promises to keep on doing this. While the losses (the money you would have gained from being 100% invested during market run-ups) are invisible and don't register.

But that's just my suspicion--and that's why I'm wondering if anyone has done number crunching on this.

JSnyder
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Re: Reached 4M target. Taking money off table. Advice?

Post by JSnyder » Tue Dec 05, 2017 7:09 pm

Finridge wrote:
Tue Dec 05, 2017 1:37 pm
I've wondered about this, and have at times kept cash as "dry powder". But I suspect that over the long run this was costing me more then it was gaining me. But I suspect it's like casino gambling. The gains (when you hit a "jackpot" --investing at a market dip and then see rapid appreciation) are very obvious and feel very rewarding, leading to much self-congratulation and promises to keep on doing this. While the losses (the money you would have gained from being 100% invested during market run-ups) are invisible and don't register.

But that's just my suspicion--and that's why I'm wondering if anyone has done number crunching on this.
Over the years I have tried to time the market. I kept cash waiting for a 10% decline. Ever once in a while there would be a 5% decline, 8% etc. Rarely a 10%. Yes I know they could happen and someone could find me a chart for how often they occurred...

Anyway, I decided I am not that smart. If you can time the market that is awesome. But my experience is I am terrible at it.

Instead my position is to keep enough in cash, short term and long term bonds, to cover a downturn in the market.

moghopper
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Re: Reached 4M target. Taking money off table. Advice?

Post by moghopper » Wed Dec 06, 2017 12:50 am

supersharpie wrote:
Mon Dec 04, 2017 8:43 am
moghopper wrote:
Fri Dec 01, 2017 9:46 pm

Its threads like these that make me wonder why I'm here.

Why retire? Retiring actually makes you die sooner, and then if I'm not retired, I won't have to worry about an "only" 82% success rate at $160K. Based on what I hear sometimes, I may as well stay working - then I never have to spend principal. I want to thank all the posters who consistently attempt to prove to me, that it isn't worth it because I should only spend 1% of my nest egg.
I sincerely doubt that retirement itself leads to earlier death. It is likely that, on average, retirees lead a less healthy lifestyle than during their working years. Furthermore, keep in mind that many people retire because they are in poor health to begin with, which certainly skews the numbers.

Logic would dictate that if you spend your extra 50 hours of weekly free time exercising and remaining engaged in activities you enjoy then retired life will lead to greater longevity.
I had intended that as hyperbole. My apologies.

Finridge
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Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Wed Dec 06, 2017 1:42 am

JSnyder wrote:
Tue Dec 05, 2017 7:09 pm
Finridge wrote:
Tue Dec 05, 2017 1:37 pm
I've wondered about this, and have at times kept cash as "dry powder". But I suspect that over the long run this was costing me more then it was gaining me. But I suspect it's like casino gambling. The gains (when you hit a "jackpot" --investing at a market dip and then see rapid appreciation) are very obvious and feel very rewarding, leading to much self-congratulation and promises to keep on doing this. While the losses (the money you would have gained from being 100% invested during market run-ups) are invisible and don't register.

But that's just my suspicion--and that's why I'm wondering if anyone has done number crunching on this.
Over the years I have tried to time the market. I kept cash waiting for a 10% decline. Ever once in a while there would be a 5% decline, 8% etc. Rarely a 10%. Yes I know they could happen and someone could find me a chart for how often they occurred...

Anyway, I decided I am not that smart. If you can time the market that is awesome. But my experience is I am terrible at it.

Instead my position is to keep enough in cash, short term and long term bonds, to cover a downturn in the market.
I'm not talking about trying to time the market, but rather just what you are dong (and what I have done at times also) keeping cash to cover a downturn in the stock market. When we do this, and there is a downturn and we get to buy near the dip, we get to revel in how smart we were and engage in self-congratulation--or at least I've been guilty of that on occasion. But, like I said, the downside of this strategy are the invisible losses that we don't notice--the opportunity cost resulting from partially sitting out the stock market for waiting for the downturns. I question whether the hidden opportunity costs outweigh the very visible gains we realize from this.

Finridge
Posts: 118
Joined: Mon May 16, 2011 7:27 pm

Re: Reached 4M target. Taking money off table. Advice?

Post by Finridge » Wed Dec 06, 2017 1:46 am

Finridge wrote:
Wed Dec 06, 2017 1:42 am
JSnyder wrote:
Tue Dec 05, 2017 7:09 pm
Finridge wrote:
Tue Dec 05, 2017 1:37 pm
I've wondered about this, and have at times kept cash as "dry powder". But I suspect that over the long run this was costing me more then it was gaining me. But I suspect it's like casino gambling. The gains (when you hit a "jackpot" --investing at a market dip and then see rapid appreciation) are very obvious and feel very rewarding, leading to much self-congratulation and promises to keep on doing this. While the losses (the money you would have gained from being 100% invested during market run-ups) are invisible and don't register.

But that's just my suspicion--and that's why I'm wondering if anyone has done number crunching on this.
Over the years I have tried to time the market. I kept cash waiting for a 10% decline. Ever once in a while there would be a 5% decline, 8% etc. Rarely a 10%. Yes I know they could happen and someone could find me a chart for how often they occurred...

Anyway, I decided I am not that smart. If you can time the market that is awesome. But my experience is I am terrible at it.

Instead my position is to keep enough in cash, short term and long term bonds, to cover a downturn in the market.
I'm not talking about trying to time the market, but rather exactly what you are dong (and what I have done at times also) keeping cash to cover a downturn in the stock market. When we do this, and there is a downturn and we get to buy near the dip, we get to revel in how smart we were and engage in self-congratulation--or at least I've been guilty of that on occasion. But, like I said, the downside of this strategy are the invisible losses that we don't notice--the opportunity cost resulting from partially sitting out the stock market for waiting for the downturns. I question whether the hidden opportunity costs outweigh the very visible gains we realize from this. I wonder if anyone has tried to quantify this.

inbox788
Posts: 4190
Joined: Thu Mar 15, 2012 5:24 pm

Re: Reached 4M target. Taking money off table. Advice?

Post by inbox788 » Wed Dec 06, 2017 11:16 am

JSnyder wrote:
Sat Dec 02, 2017 12:40 pm
My goals for the short term:
1. 50K in 2018 and 2019 for my son's eduction
2. 50K in 2021 and 2022 for my daughter's eduction
3. 3 years (300K) in my cash equivalent fund (vanguard admiral corporate short term bonds)
Depending on how you're saving and whether you're transferring the education funds, you might want to keep to the $14k individual ($28k couple) annual limit. For example, putting $50k into a 529 2 consecutive years is asking for additional compliance requirements and possible reduction in lifetime transfers. Putting $25k for 4 consecutive years is simpler, and achieves mostly same result, no?

If you're keeping it in your own account, it might not matter as much, but you give up potential benefits. Wealth transfer is an area that's full of opportunities if you know what you're doing or find the right adviser, but sorting out the right ones from the AUM fee collectors is difficult. And unless you're talking about a lot of wealth, chances are the savings aren't going to overcome the high fees.

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