EnjoyIt wrote: ↑
Wed Sep 25, 2019 8:37 am
Can we look a little closer at your reality? How in the red are you every year? How bad would it be if you switched to a 30 year mortgage? Have you taken SS at 70 into account? If you are pulling some cash out of your $2 million portfolio, what percent is it every year? Is it sub 4%? If so, there is a very reasonable chance that money will continue to grow over the next 20 years. Have you tried running your data in cfiresim, putting in your expenditures and future SS and trying different withdrawal rates? Unless you're in the red by $100k/yr, you are in much better shape than you think.
Excellent point. I did a bit of a deeper dive last night that I probably should have done before I posted. I need to input it all into my Excel spreadsheet - which I used to do quarterly, but haven't in five years. I'm running about a $5,000/mo deficit. It would be less if I realized all my income instead of maxing out 401K at $25,000 a year. But, its beneficial as I get a very generous 12% match on the first 5% of earnings, and the remainder reduces my taxes in the 35% fed. bracket and 6% state.
I am in better shape than I thought. Current invested assets are $2.4M. So, if I move that to a 60/40 allocation at 8.5% expected return, its growing by a little more than $200,000 a year, plus the additional contributions of around $30,000. I don't have to sell equities to make up the monthly deficit, but am using the dividends the after-tax funds throw off and cash I have on hand. Its a slow drift down of those assets, and I'd prefer to be reinvesting the dividends rather than spending them.
Since I'm not living paycheck-to-paycheck, the monthly "deficit" is not a big deal IMO. All money is fungible. So, while I could take out a 30 year vs. 15 mortgage, I'd be paying a higher rate for much longer. Its just optics on the monthly balance sheet, and at the end of the day less financially adventagous. Same if I decreased 401K contributions. Yes, at some gut level it bothers me to be spending more on a monthly basis than I earn, but if you look behind the curtain its not that bad.
As noted, over time the assisted living and child support will go away, and income is likely to increase. I was one step away for the C-suite at a fortune 500 company before the fall from grace, but rebuilding quickly. A $100K increase, which is realistic, will wipe out the deficit.
Worst comes to worst, I have multiple "bail out" options including moving to my family home in New England or Panama. But, I like being in the game and enjoy challenges. With a very young future wife, I don't want to sit at home with the dog and play golf just yet. I want to leave a legacy for my kids and for her. The topic of a third child has already come up . . .
This thread has been very helpful in thinking my way through it. I'm inclined now towards a 60/40 asset allocation. 70/30 is the most I'd feel comfortable with. 50/50 is too conservative. So, splitting the difference at 60/40 seems right.