Share your retirement cash flow plan

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gips
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Re: Share your retirement cash flow plan

Post by gips »

KlangFool wrote: Tue May 07, 2024 6:17 am
marcopolo wrote: Tue May 07, 2024 1:35 am
KlangFool wrote: Mon May 06, 2024 7:59 pm OP,

I keep 2 to 3 years of expense in cash all the times. So, I do not face any of your problems.

KlangFool
If you always keep it, its not cash flow.
What are you spending from?
I refill whenever it is tax efficient for me. Hence, it is not tied to the spending need.

I spend from my 2 to 3 years expense cash buffer.

KlangFool
We do the same thing, where do you keep the funds? We’ve been keeping them in vmfxx paying around 5% but I’m starting to think about a treasuries ladder.
KlangFool
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Re: Share your retirement cash flow plan

Post by KlangFool »

gips wrote: Wed May 15, 2024 4:38 am
KlangFool wrote: Tue May 07, 2024 6:17 am
marcopolo wrote: Tue May 07, 2024 1:35 am
KlangFool wrote: Mon May 06, 2024 7:59 pm OP,

I keep 2 to 3 years of expense in cash all the times. So, I do not face any of your problems.

KlangFool
If you always keep it, its not cash flow.
What are you spending from?
I refill whenever it is tax efficient for me. Hence, it is not tied to the spending need.

I spend from my 2 to 3 years expense cash buffer.

KlangFool
We do the same thing, where do you keep the funds? We’ve been keeping them in vmfxx paying around 5% but I’m starting to think about a treasuries ladder.
I used Treasury money market fund.

KlangFool
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RyeBourbon
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Re: Share your retirement cash flow plan

Post by RyeBourbon »

murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
Do you have a target AA? Sell and withdraw to maintain your AA.
Retired June 2023. LMP (TIPS Ladder/SS Bridge) 25%/Risk Portfolio 75%, AA = 70/0/30
dknightd
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Re: Share your retirement cash flow plan

Post by dknightd »

My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
That fits with the general tendency of retirees to not spend down their nest egg. Whatever they’ve got at retirement, there’s care taken to not have it dip meaningfully. Growing it is also common, in case it dips later on.
Being wrong compounds forever.
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

RyeBourbon wrote: Wed May 15, 2024 8:31 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
Do you have a target AA? Sell and withdraw to maintain your AA.
Yes. As mentioned above, that's what I do, but I'm more interested in what others do.
jebmke
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Re: Share your retirement cash flow plan

Post by jebmke »

Wanderingwheelz wrote: Wed May 15, 2024 9:23 am
dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
That fits with the general tendency of retirees to not spend down their nest egg. Whatever they’ve got at retirement, there’s care taken to not have it dip meaningfully. Growing it is also common, in case it dips later on.
Heh; I retired in December, 2007. It dipped meaningfully.
When you discover that you are riding a dead horse, the best strategy is to dismount.
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
My question is, where does the "earn" come from? For us, and most people who retire before taking SS, it requires selling assets and some sort of strategy.

My advice to those planning to retire is to develop and even write down that strategy before leaving work and project what it might look like into the future.
dknightd
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Re: Share your retirement cash flow plan

Post by dknightd »

Wanderingwheelz wrote: Wed May 15, 2024 9:23 am
dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
That fits with the general tendency of retirees to not spend down their nest egg. Whatever they’ve got at retirement, there’s care taken to not have it dip meaningfully. Growing it is also common, in case it dips later on.
I fully expect to die with less than money than I have today. But I could be surprised.

I'm "saving" in case I, or darling one, needs expensive care later in life. If we do not need expensive care, the kids will get money. If we do need expensive care we can afford to pay for it.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

jebmke wrote: Wed May 15, 2024 9:35 am
Wanderingwheelz wrote: Wed May 15, 2024 9:23 am
dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
That fits with the general tendency of retirees to not spend down their nest egg. Whatever they’ve got at retirement, there’s care taken to not have it dip meaningfully. Growing it is also common, in case it dips later on.
Heh; I retired in December, 2007. It dipped meaningfully.
I was right there with you. I wasn’t retired but I was definitely afraid for my job.
Being wrong compounds forever.
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

dknightd wrote: Wed May 15, 2024 9:39 am
Wanderingwheelz wrote: Wed May 15, 2024 9:23 am
dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
That fits with the general tendency of retirees to not spend down their nest egg. Whatever they’ve got at retirement, there’s care taken to not have it dip meaningfully. Growing it is also common, in case it dips later on.
I fully expect to die with less than money than I have today. But I could be surprised.

I'm "saving" in case I, or darling one, needs expensive care later in life. If we do not need expensive care, the kids will get money. If we do need expensive care we can afford to pay for it.
If you make it a point to spend less than you are earning, why would you expect to due with less money than you started with?

We all know the statistics about end of life care, and they’re not nearly as alarming as what many people plan for. I’m not advocating for trying to die with zero, I’m only bringing attention to the fact that only a small percentage of people die after a long expensive chronic condition that required depletion of a substantial part of the nest egg.

Anyway.. why do you expect to have less than you started with if you’re taking care to prevent it? The odds are overwhelmingly in your favor if that not happening.
Being wrong compounds forever.
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Hacksawdave
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Re: Share your retirement cash flow plan

Post by Hacksawdave »

murrays wrote: Wed May 15, 2024 9:38 am
dknightd wrote: Wed May 15, 2024 9:20 am My retirement cash flow plan is essentially the same as it was while I was working. We spend a little less than we earn. On average.
My question is, where does the "earn" come from? For us, and most people who retire before taking SS, it requires selling assets and some sort of strategy.

My advice to those planning to retire is to develop and even write down that strategy before leaving work and project what it might look like into the future.
In my case, I view ‘earn’ as investment distributions. Knowing what each holding produces gives me the information on which source to pick for annual budgeting. I have no pension and SS is quite aways off. I do not need to sell any equities or bonds and I already have 2025 mapped out.

A simple spreadsheet with each holding listing what is distributed, when, and its taxation effects gives one flexibility to choose based upon the plan for the following year. In my case, due to higher municipal distributions of income some of my 2025 annual 401k distribution will be taken as a partial rollover and Roth converted. I never planned on Roth conversions, but this opportunity for 2025 is just too sweet to pass up. Flexibility is an important key.
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HomerJ
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Re: Share your retirement cash flow plan

Post by HomerJ »

murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

HomerJ wrote: Wed May 15, 2024 11:46 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
I would contend that the further out in front you get, the more you can let your equity allocation run. Arguably, that’s what you SHOULD do if you have goals beyond having enough for yourself. As long as you’re sufficiently ahead of your anticipated retirement needs (net worth), it’s likely that 25 or 30 percent in cash/fixed income will get the same goals accomplished as a substantially higher percentage in cash and fixed income. If you have no heirs or meaningful bequest wishes, then I guess it makes no difference whether you’re 30/70 or 70/30 if you’re of retirement age. It’s well understood any equity allocation between 30% and 70% is fine for well prepared retirees.

The reason most well prepared retirees or near retirees keep more than 30% in “safe assets” is due to fear of volatility or “SWAN” as some people call it. Becoming too attached to the top number on their log in screen.
Being wrong compounds forever.
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

HomerJ wrote: Wed May 15, 2024 11:46 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
That sounds more or less like what I do, but with several bond funds of various durations and multiple classes of index funds with allocations for each fund. Our taxable account has 14 funds and I have some formulas that dictate how much of the top performing funds to sell each month based on percentage of portfolio rebalancing. Kind of harvesting from the trees that are producing the most fruit each month. I like it because it makes logic sense and has simple rules vs. the "bucket" strategy that requires arbitrary rules for when to not sell funds and when to replenish the cash/fixed income buckets.

How frequently do you sell?
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

Wanderingwheelz wrote: Wed May 15, 2024 12:01 pm
HomerJ wrote: Wed May 15, 2024 11:46 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
I would contend that the further out in front you get, the more you can let your equity allocation run. Arguably, that’s what you SHOULD do if you have goals beyond having enough for yourself. As long as you’re sufficiently ahead of your anticipated retirement needs (net worth), it’s likely that 25 or 30 percent in cash/fixed income will get the same goals accomplished as a substantially higher percentage in cash and fixed income. If you have no heirs or meaningful bequest wishes, then I guess it makes no difference whether you’re 30/70 or 70/30 if you’re of retirement age. It’s well understood any equity allocation between 30% and 70% is fine for well prepared retirees.

The reason most well prepared retirees or near retirees keep more than 30% in “safe assets” is due to fear of volatility or “SWAN” as some people call it. Becoming too attached to the top number on their log in screen.
Root Financial had a podcast on this and it does make sense to have a fixed dollar amount for cash/bonds, though I prefer simple logic of depleting the cash/bonds a bit in down markets. A percentage allocation achieves that keeping in mind that percentages can and should be adjusted periodically.
marcopolo
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Re: Share your retirement cash flow plan

Post by marcopolo »

murrays wrote: Wed May 15, 2024 1:42 pm
Wanderingwheelz wrote: Wed May 15, 2024 12:01 pm
HomerJ wrote: Wed May 15, 2024 11:46 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
I would contend that the further out in front you get, the more you can let your equity allocation run. Arguably, that’s what you SHOULD do if you have goals beyond having enough for yourself. As long as you’re sufficiently ahead of your anticipated retirement needs (net worth), it’s likely that 25 or 30 percent in cash/fixed income will get the same goals accomplished as a substantially higher percentage in cash and fixed income. If you have no heirs or meaningful bequest wishes, then I guess it makes no difference whether you’re 30/70 or 70/30 if you’re of retirement age. It’s well understood any equity allocation between 30% and 70% is fine for well prepared retirees.

The reason most well prepared retirees or near retirees keep more than 30% in “safe assets” is due to fear of volatility or “SWAN” as some people call it. Becoming too attached to the top number on their log in screen.
Root Financial had a podcast on this and it does make sense to have a fixed dollar amount for cash/bonds, though I prefer simple logic of depleting the cash/bonds a bit in down markets. A percentage allocation achieves that keeping in mind that percentages can and should be adjusted periodically.
I have been thinking along these lines as well.
I am nominally a 60/40 investor. But, that is closer to 64/36 at his point.
I do sell from the equity side to support our spending, but that does not seem to be bringing me back to the 60/40 target.
I have been thinking i have more than enough in fixed income, so perhaps time to adjust the target percentage a bit.
Curious how you go about adjusting that?
Once in a while you get shown the light, in the strangest of places if you look at it right.
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

murrays wrote: Wed May 15, 2024 1:42 pm
Wanderingwheelz wrote: Wed May 15, 2024 12:01 pm
HomerJ wrote: Wed May 15, 2024 11:46 am
murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
I'm 45/55 stocks/bonds... I plan to spend from bond/cash side until I'm back to 50/50.

And then after I'll just sell the side that is doing best.

Put it into numbers... Say one has $500,000 in stocks, $500,000 in bonds/cash.

Stocks are up 4% this year, bonds are flat, you're at $520,000 and $500,000.

you need an extra $10,000 over and above the interest/dividends you're already getting from the two sides, so you sell stock shares.

$510,000/$500,000.

Next year stocks drop 10%, bonds drop 2%, now you're at $459,000 stocks and $490,000 bonds. You sell bond shares.

And so on. With a 50/50 allocation, just sell from the side that has the most money. Natural rebalancing.

With a different allocation, you'll have to do some math, but pretty simple... If your target allocation is 70/30, and you are at 72/28, sell from the stock side. If you are at 67/33, sell from the bond side.
I would contend that the further out in front you get, the more you can let your equity allocation run. Arguably, that’s what you SHOULD do if you have goals beyond having enough for yourself. As long as you’re sufficiently ahead of your anticipated retirement needs (net worth), it’s likely that 25 or 30 percent in cash/fixed income will get the same goals accomplished as a substantially higher percentage in cash and fixed income. If you have no heirs or meaningful bequest wishes, then I guess it makes no difference whether you’re 30/70 or 70/30 if you’re of retirement age. It’s well understood any equity allocation between 30% and 70% is fine for well prepared retirees.

The reason most well prepared retirees or near retirees keep more than 30% in “safe assets” is due to fear of volatility or “SWAN” as some people call it. Becoming too attached to the top number on their log in screen.
Root Financial had a podcast on this and it does make sense to have a fixed dollar amount for cash/bonds, though I prefer simple logic of depleting the cash/bonds a bit in down markets. A percentage allocation achieves that keeping in mind that percentages can and should be adjusted periodically.
My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.

As long as you can dial back on expenses (if you so choose), having a 70/30 allocation in retirement is probably most sensible in my view. Or some fixed amount in cash and treasuries, like 10 years of anticipated expenses. That’s not what a guy like Bernstein would recommend but he’s belt and suspenders to the extreme.
Being wrong compounds forever.
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HomerJ
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Re: Share your retirement cash flow plan

Post by HomerJ »

marcopolo wrote: Wed May 15, 2024 2:17 pm I have been thinking i have more than enough in fixed income, so perhaps time to adjust the target percentage a bit.
Curious how you go about adjusting that?
Nothing wrong with the idea of a fixed amount of fixed income.

If you started with 60/40, and $2 million, and over time, your accounts grew to $3 million, I can see how one might think I don't really need to be at 60/40 anymore. Once your fixed side passed $1 million, I could see saying to yourself. "That's a pretty good floor for the fixed side, I'll just let the stock side float from there."

So now at $3 million, you might be 66/33, and your rebalancing bands are based around keeping the fixed side steady at $1 million.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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HomerJ
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Re: Share your retirement cash flow plan

Post by HomerJ »

Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Wanderingwheelz
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

HomerJ wrote: Wed May 15, 2024 2:36 pm
Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
I did say it might be a better route (for some, not all), and it’s almost certainly a better route for those who are going to benefit from your excess savings when you croak.

It’s probably more common now that in some periods than the past, but find an 80 year old with a solid retirement plan who isn’t far more wealthy than they ever thought they’d be on the day they retired. I know my parents hit an all time high today in their 80s. My next door neighbors aren’t quite 80, and they did too. It may not be unusual for fold their age to have their kitchen remodeled and having some other job to the exterior, but m maybe it is? Trust me when I say their kitchen looks great as is and so does the exterior. He told me he ran it by his kids and they said go for it, since two of the three have an interest in keeping the house when they’re gone since it’s well located in a beach resort town. “It’s coming out of their inheritance” is how he worded to to me, so he ran it by them as a courtesy.
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Re: Share your retirement cash flow plan

Post by marcopolo »

HomerJ wrote: Wed May 15, 2024 2:36 pm
Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
I rebalanced to maintain my AA most of my investing life, locking in gains as you describe .

But, we are now at something like 15x-20x of expenses (expenses vary) in fixed income. That feels like enough, and I don't think we need any more to feel safer.

At this point rebalancing into fixed income would be more about banking some money to redeploy to equities when the next crash happens. But, this seems like the classic "saving dry powder" that I have always felt was fruitless market timing. So, I am more inclined to just spend from whatever is below my AA and not do any active rebalancing. The thing I am debating is whether to adjust my AA to be more stock heavy.
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Re: Share your retirement cash flow plan

Post by Wanderingwheelz »

marcopolo wrote: Wed May 15, 2024 3:02 pm
HomerJ wrote: Wed May 15, 2024 2:36 pm
Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
I rebalanced to maintain my AA most of my investing life, locking in gains as you describe .

But, we are now at something like 15x-20x of expenses (expenses vary) in fixed income. That feels like enough, and I don't think we need any more to feel safer.

At this point rebalancing into fixed income would be more about banking some money to redeploy to equities when the next crash happens. But, this seems like the classic "saving dry powder" that I have always felt was fruitless market timing. So, I am more inclined to just spend from whatever is below my AA and not do any active rebalancing. The thing I am debating is whether to adjust my AA to be more stock heavy.
At far more than 10x in cash and bonds we’re not buying stocks right now. My wife just gave me a good size deposit and for the first time I invested none of it. I considered exUS but I’m already at the 20% of equities I try to adhere to. At 76% equities overall I m already feel like I’ve already overstepped the Benjamin Graham line in the sand. Perhaps my views will evolve, but I’ve always felt like 75% equites is plenty at any age. My IPS when it was written years back says to be 70/30 for life, but like so many other people we’ve exceeded what we figured we’d have come age 50. I should probably update it before I go gambling excess cash on Gsmestop.

All kidding aside, who knows what the right thing to do is?
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Re: Share your retirement cash flow plan

Post by murrays »

marcopolo wrote: Wed May 15, 2024 2:17 pm I have been thinking along these lines as well.
I am nominally a 60/40 investor. But, that is closer to 64/36 at his point.
I do sell from the equity side to support our spending, but that does not seem to be bringing me back to the 60/40 target.
I have been thinking i have more than enough in fixed income, so perhaps time to adjust the target percentage a bit.
Curious how you go about adjusting that?
FYI, here's the YouTube video I was thinking of: https://www.youtube.com/watch?v=1mCXOq4n0F8

James discusses three types of rebalancing:
-Calendar
-Threshold (aka percentage of portfolio)
-Constant Proportion Portfolio Insurance (https://www.investopedia.com/terms/c/cppi.asp)

I changed to threshold after looking into a bit more and apply it to multiple asset classes, not just stocks/bonds as the examples do. At this point, we're a bit below where we started since retiring in 2022 so I'll keep our current AA and withdrawal/rebalance strategy, but I'd be interested in learning more details of how to implement a CPPI strategy.
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Re: Share your retirement cash flow plan

Post by GaryA505 »

I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
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Re: Share your retirement cash flow plan

Post by murrays »

GaryA505 wrote: Wed May 15, 2024 3:36 pm I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
See my earlier post: viewtopic.php?p=7857566#p7857566
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Re: Share your retirement cash flow plan

Post by GaryA505 »

murrays wrote: Wed May 15, 2024 4:00 pm
GaryA505 wrote: Wed May 15, 2024 3:36 pm I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
See my earlier post: viewtopic.php?p=7857566#p7857566
Thanks, but the only thing I see there that suggests a cash flow plan is:
"sell a bit of 2-3 funds every month based on most over allocated to keep our cash balance at a determined amount"

Are these funds in tax-deferred, taxable, or Roth?
Where does the cash go to, checking account?
What about an emergency fund or savings for large purchases (i.e. "lumpy" spending)?
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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HomerJ
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Re: Share your retirement cash flow plan

Post by HomerJ »

Wanderingwheelz wrote: Wed May 15, 2024 2:56 pm
HomerJ wrote: Wed May 15, 2024 2:36 pm
Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
I did say it might be a better route (for some, not all), and it’s almost certainly a better route for those who are going to benefit from your excess savings when you croak.
That I agree with. :sharebeer
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Re: Share your retirement cash flow plan

Post by HomerJ »

marcopolo wrote: Wed May 15, 2024 3:02 pm
HomerJ wrote: Wed May 15, 2024 2:36 pm
Wanderingwheelz wrote: Wed May 15, 2024 2:23 pm My point was if your retirement spending is $100,000 and you’ve got $5MM invested (it’s not uncommon around here to have 50x+), then it might be a better route to let your equities run and only rebalance the other way if you want to- when stocks get crushed, sell bonds and buy more equities. Focus on a fixed amount in “safe assets” and forget about percentages. Deploy some when we get to that paint we all know when all the scared folks are saying they’re going to back up the truck when… and then don’t.
Not sure why it's a "better route". Is it always about making more more more? With a (tiny probably, but non-zero) chance of a big loss?

The better route for me is to only rebalance the opposite direction from stocks to bonds in retirement. Then I'd feel safer spending a bit more for fun, since I "locked in the gains" by rebalancing the stock gains to safer bonds/cash.
I rebalanced to maintain my AA most of my investing life, locking in gains as you describe .

But, we are now at something like 15x-20x of expenses (expenses vary) in fixed income. That feels like enough, and I don't think we need any more to feel safer.

At this point rebalancing into fixed income would be more about banking some money to redeploy to equities when the next crash happens. But, this seems like the classic "saving dry powder" that I have always felt was fruitless market timing. So, I am more inclined to just spend from whatever is below my AA and not do any active rebalancing. The thing I am debating is whether to adjust my AA to be more stock heavy.
I hear you... I'm at the same point, in the 15x-20x in fixed income.

Makes sense to me to lock in that point... I mean 20x of fixed income will last a LONG time right now with interest rates at 4%-5%. We're almost getting enough in interest alone for 1x, so we really don't even have to drawdown either side very much.

For me, if I ever get 20x/20x 50/50 stocks/bonds, I'm probably going to just start spending or giving away the extra money.
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Re: Share your retirement cash flow plan

Post by bloom2708 »

53/54 currently.

Wife currently only working 10-15 hours per week. Take home $6k/month combined.

Plan at 55/56 - Kids 1 and 2 fully launched. Kid 3 enters college (college funds in place), downsize home and/or possibly rent.

Income plan:

72T him: $3k/month (5 years)
72T her: $3k/month (5 years)
Taxable: $3k/month

We'd have emergency type funds and his/her Roths for something lumpy.

SS her: ~$1.8k at 62
SS him: ~$3.5k at 67 to 70

We don't need to do that much. We've both traveled quite a bit. Our biggest desire is to plain and simple, not work. :wink:

Not factoring in any inheritance as hopefully that holds off. My parents are 79/75. Her remaining parent is 82.

I like having the plan out there. It doesn't help the daily werk grind, but a carrot out there. Make plans and then adjust when you get punched in the mouth.
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Re: Share your retirement cash flow plan

Post by marcopolo »

GaryA505 wrote: Wed May 15, 2024 4:11 pm
murrays wrote: Wed May 15, 2024 4:00 pm
GaryA505 wrote: Wed May 15, 2024 3:36 pm I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
See my earlier post: viewtopic.php?p=7857566#p7857566
Thanks, but the only thing I see there that suggests a cash flow plan is:
"sell a bit of 2-3 funds every month based on most over allocated to keep our cash balance at a determined amount"

Are these funds in tax-deferred, taxable, or Roth?
Where does the cash go to, checking account?
What about an emergency fund or savings for large purchases (i.e. "lumpy" spending)?
I'll play.

We are retired couple age 57, retired for a little over 6 yrs.

We get about half our expenses from dividend distributions in our taxable account.
These get automatically transferred to our Fidelity CMA account that serves as our hub for spending.

We pay for as much as possible with credit cards, this gives us a float of a month, and also gives us a heads up of how much money we need in the short term. We keep about 1-2 months worth of expenses in the CMA.

When we need more money to spend, it comes from selling some equities in our taxable account which is all equities.
When we do this, we typically will raise about 3 months worth of expenses
We have US TSM, exUS, and some SCV in our taxable account. We sell whichever is over-weighted relative to our target.

If it turns out we should have sold fixed income to maintain our desired asset allocation, then we sell some bonds in our tIRA and buy an equivalent amount of equities that we just sold in our taxable account. This has the effect of spending from fixed income without having to keep fixed income assets in a taxable account.

No need for an emergency fund. My opinion is that is for job loss during accumulation. In retirement, its all just spending.
Lumpy expenses are treated the same, we withdraw money as needed, using same rules.

A very minor modification starting next year:
A couple years ago i built a TIPS ladder in our tIRA that will take us from next year out to age 70 (planned soc sec claiming age for me). Each rung is roughly the amount we need in addition to dividends in taxable to fund our expenses. When each TIPs rung matures, i will check to see if we are likely to need to spend from our fixed income allocation (has not happened yet since we created the ladder). If so, we would purchase equities in the tIRA with the proceeds, later selling equities in taxable to raise the spending money. If not we would rollover the maturing ones to the long end of the ladder.

Hope that gives you at least one detailed answer. Feel free to ask if i missed any pertinent detail.
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Re: Share your retirement cash flow plan

Post by murrays »

GaryA505 wrote: Wed May 15, 2024 4:11 pm
murrays wrote: Wed May 15, 2024 4:00 pm
GaryA505 wrote: Wed May 15, 2024 3:36 pm I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
See my earlier post: viewtopic.php?p=7857566#p7857566
Thanks, but the only thing I see there that suggests a cash flow plan is:
"sell a bit of 2-3 funds every month based on most over allocated to keep our cash balance at a determined amount"

Are these funds in tax-deferred, taxable, or Roth?
Where does the cash go to, checking account?
What about an emergency fund or savings for large purchases (i.e. "lumpy" spending)?
Right now, we’re pulling expenses from our taxable account, though I plan to pull from our tIRA after we stop Roth conversions next year.

Cash is held in a municipal MM where we hold ~$100k to cover “lumpy” expenses and replenish by selling a portion of 2-3.

Does that make add some clarity?
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Re: Share your retirement cash flow plan

Post by GBGilbert »

We have four passive incomes: Navy retirement, both of our social security benefits, and royalties from a software company. All together we gross about $86.5K/yr. Because the royalties are unpredictable in both amount and receipt, each check we receive is deposited into a savings account to be our emergency fund. We manage the other three incomes with a program that I wrote which automatically projects our entire cash flow for twelve months. (The program is for our personal use. It is not available anywhere for download or sale.)

Image

We see our net cash flow twice monthly for the coming year. The image is our budget as of now after I paid bills this morning. The negative net cash flow numbers reflect the purchase of a couple big ticket items over the past couple of months. There is plenty in our reserve fund to cover the shortfall.
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Re: Share your retirement cash flow plan

Post by 22twain »

diy60 wrote: Tue May 14, 2024 1:18 pm I went into retirement needing to fund about an 8 year gap from retirement to maximum deferred SS. I was very non-BH and had about 7 years of US Treasuries in my taxable account for that purpose. I recognized this was not optimal from a tax perspective but it worked fine for me. I primarily spent from those funds and allowed the AA to drift substantially upward as a result of this spending source. I don't mind the AA drift, but in retrospect I would have been better off going all equities in my taxable and utilizing cap gains to my advantage.
I followed a rather similar path. I had a 7 year gap between retirement at age 63 and SS at 70. My retirement package included enough deferred compensation to cover a year's expenses (spread out over 3 years), so I had to cover only 6 years worth of expenses. I took it all from Vanguard Total Bond Market ETF in taxable, selling shares once per year to supplement the dividends. I left the proceeds in my settlement fund, and transferred a fixed-size "paycheck" once a month to my checking account. I gave myself "raises" a couple of times to cover inflation and other increased expenses.

My portfolio started out with about 58x annual expenses and 50% stock. Now, a few months after starting SS, my portfolio has about 58x expenses and 65% stock. I view the increased stock allocation as partly compensating for my wife's much more conservative portfolio. She started SS and RMDs five years ago. She has somewhat more than I do, but it's only about 20% stock. Our combined portfolio is now about 40% stock.

Our combined SS now more than covers our current normal expenses, so we expect to withdraw from our portfolios only for large one-off expenses like a new car, or increased medical expenses, or a move from our paid-off house to a CCRC or something similar. We're sensitive to the possibility of high end-of-life costs because her mother spent her last eight years in a nursing home. Fortunately she had enough money to cover it all without resorting to Medicaid, and even managed to leave some to my wife.

Our path was obviously not very tax-efficient, and I still have my own RMDs coming in three years. After they start, I estimate we'll be in the vicinity of the top of the current 22% tax bracket. Nevertheless, we have enough that we can pay the taxes without impacting our lifestyle. We have no kids or other close relatives, so anything we have left will go to charity.
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Re: Share your retirement cash flow plan

Post by LadyGeek »

GBGilbert wrote: Wed May 15, 2024 10:49 pm We have four passive incomes: Navy retirement, both of our social security benefits, and royalties from a software company. All together we gross about $86.5K/yr. Because the royalties are unpredictable in both amount and receipt, each check we receive is deposited into a savings account to be our emergency fund. We manage the other three incomes with a program that I wrote which automatically projects our entire cash flow for twelve months. (The program is for our personal use. It is not available anywhere for download or sale.)

Image

We see our net cash flow twice monthly for the coming year. The image is our budget as of now after I paid bills this morning. The negative net cash flow numbers reflect the purchase of a couple big ticket items over the past couple of months. There is plenty in our reserve fund to cover the shortfall.
Welcome! The forum software is displaying "image" because the image size is too large (1200 px X 1200 px max). The image link is here: https://drive.google.com/file/d/13_NnTY ... Wvzdj/view

You are linking to an image file, not the program itself. Please supply a link to the Google Drive file itself with the permissions set to "Anyone with a link can view."
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Re: Share your retirement cash flow plan

Post by hudson »

murrays wrote: Mon May 13, 2024 9:22 am Just to repeat the original question I had, how do retirees here turn a portfolio into cash flow? More specifically, how do you decide which assets to sell if dividends and other income aren’t sufficient to pay the bills?

Follow-up question, the emotion of saving and accumulating in volatile markets is fairly easy, how was it transitioning into selling funds, particularly in down markets like 2022?
My holdings are all fixed and mostly taxable, so the cash flow comes from interest.
RMDs throw a little cash into my taxable account.
If I needed to buy a car or make a large purchase, I'd sell something in my taxable account...probably short treasuries. I try to plan for large purchases well in advance, but that doesn't always work.

If I had to fund a big trip in a few months, that would be like a car purchase; I'd have to sell some treasuries or hope that a CD was maturing. As you know a credit card gives one some wiggle room.
I've known about my pending vacation expenses for a year, so interest payments aren't reinvested; they go to my checking account so I can pay my vacation credit card bill.

Would I tap into a Roth or a regular IRA? no way
Last edited by hudson on Thu May 16, 2024 7:45 am, edited 1 time in total.
rkhusky
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Re: Share your retirement cash flow plan

Post by rkhusky »

GaryA505 wrote: Wed May 15, 2024 4:11 pm
murrays wrote: Wed May 15, 2024 4:00 pm
GaryA505 wrote: Wed May 15, 2024 3:36 pm I see a lot of talk here about asset allocation, balancing, and cash reserves, but not to much detail on the actual Retirement Cash Flow Plan.

Let's see the details!
See my earlier post: viewtopic.php?p=7857566#p7857566
Thanks, but the only thing I see there that suggests a cash flow plan is:
"sell a bit of 2-3 funds every month based on most over allocated to keep our cash balance at a determined amount"

Are these funds in tax-deferred, taxable, or Roth?
Where does the cash go to, checking account?
What about an emergency fund or savings for large purchases (i.e. "lumpy" spending)?
We sold from taxable first, which was all stocks, in a tax efficient manner, and rebalanced in tax-advantaged.

We are now withdrawing from tax-deferred from whatever asset class is over its allocation. And rebalance as necessary.

We have an automated monthly withdrawal from the taxable settlement fund to our bank, and manually withdraw more if needed. Keep 2-6 months of expenses in the settlement fund for the transfers and manually replenish as necessary.

No emergency fund and no buckets for lumpy expenses - it all comes out of the retirement portfolio.
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Re: Share your retirement cash flow plan

Post by Clever_Username »

A theme I'm becoming aware of, and that I see referenced in this thread, is the idea of a fixed amount of fixed income in retirement. I am likely a few years from hitting 25x, so I have some time, but I've added it to my list of things I need to think about before they happen, so I can plan what I'll be doing.
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Re: Share your retirement cash flow plan

Post by murrays »

Clever_Username wrote: Thu May 16, 2024 9:09 am A theme I'm becoming aware of, and that I see referenced in this thread, is the idea of a fixed amount of fixed income in retirement. I am likely a few years from hitting 25x, so I have some time, but I've added it to my list of things I need to think about before they happen, so I can plan what I'll be doing.
We barely have 25X our current annual expenses across ALL accounts and asset classes (which will go up in the coming years when we stop Roth conversions, Medicare kicks in and SS starts).

25X expenses in fixed income seems like an extremely overly conservative target to shoot for unless I'm missing something.
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Re: Share your retirement cash flow plan

Post by murrays »

rkhusky wrote: Thu May 16, 2024 8:44 am We sold from taxable first, which was all stocks, in a tax efficient manner, and rebalanced in tax-advantaged.

We are now withdrawing from tax-deferred from whatever asset class is over its allocation. And rebalance as necessary.

We have an automated monthly withdrawal from the taxable settlement fund to our bank, and manually withdraw more if needed. Keep 2-6 months of expenses in the settlement fund for the transfers and manually replenish as necessary.

No emergency fund and no buckets for lumpy expenses - it all comes out of the retirement portfolio.
This describes our plan as well. One question, how many asset classes do you have to choose from when deciding which is over allocated?

We have around two dozen which allows me to be more precise in selling vs. a three fund portfolio which requires selling a bit of everything when VTI is over allocated for example.
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Re: Share your retirement cash flow plan

Post by Clever_Username »

murrays wrote: Thu May 16, 2024 9:32 am
Clever_Username wrote: Thu May 16, 2024 9:09 am A theme I'm becoming aware of, and that I see referenced in this thread, is the idea of a fixed amount of fixed income in retirement. I am likely a few years from hitting 25x, so I have some time, but I've added it to my list of things I need to think about before they happen, so I can plan what I'll be doing.
We barely have 25X our current annual expenses across ALL accounts and asset classes (which will go up in the coming years when we stop Roth conversions, Medicare kicks in and SS starts).

25X expenses in fixed income seems like an extremely overly conservative target to shoot for unless I'm missing something.
Thank you; that was poor phrasing on my part. I'm likely a few years from hitting a total portfolio (excluding home equity) of 25x annual expenses; fixed income is a little more than a third of my portfolio. My current fixed income is maybe 7-8x my expected annual expenses in retirement.

I'm not retired, and maybe I should have said that in my comment earlier today. I'm reading this thread realizing I don't have an idea as to what my cash flow plan in retirement is going to be, and that's on my list of things I need to figure out before retiring (no date set at the moment).
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Re: Share your retirement cash flow plan

Post by GaryA505 »

It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
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Re: Share your retirement cash flow plan

Post by jebmke »

GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
When you discover that you are riding a dead horse, the best strategy is to dismount.
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
I believe I've covered this multiple times.
GaryA505 wrote: Thu May 16, 2024 10:15 am2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
All of the above.
GaryA505 wrote: Thu May 16, 2024 10:15 am3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
Taxable assets/dividends → Municipal MM → Checking → Credit Cards/Bill Payments

We have twice monthly automatic transfers from the MM to our checking account which feels like a paycheck. We try to keep the checking balance at a minimum since it doesn't pay any interest.
GaryA505 wrote: Thu May 16, 2024 10:15 am5. How is the flow monitored and adjusted?
We use Quicken to monitor all of our expenses and account balances including all investment accounts. I export portfolio reports to Excel for asset allocation analysis, capital gains/dividend monitoring and tax estimates. I also have projections for the next 40 years for taxes, total expenses, income, withdrawal rates, etc.
GaryA505 wrote: Thu May 16, 2024 10:15 amI might also add to #5, "who will perform the monitoring and adjustment?".
We both monitor Quicken, I do all of the investment monitoring and transactions.

In 2026, I plan to stop Roth conversions and take income from our tIRAs likely to an IIRMA threshold with the goal of keeping the balances in check prior to RMDs in 2035.

That's more detail than I was looking for in my OP, but I think it's important to consider all of them before you walk out the work door the last time.
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murrays
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Re: Share your retirement cash flow plan

Post by murrays »

jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
GaryA505
Posts: 3153
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Location: New Mexico

Re: Share your retirement cash flow plan

Post by GaryA505 »

murrays wrote: Thu May 16, 2024 10:46 am
jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
I absolutely agree that #1 is critical. However, since income sources can be exhausted in retirement, I think #2 needs more focus.

In our case, we haven't distinguished between types of expenses as yet, while I'm still working. However, when the paycheck stops, we will be quantifying our base spending (we call it NORMAL spending) and our discretionary spending (we call it EXTRA spending) separately. I believe this is important to a successful retirement cash flow plan. Flow for our NORMAL spending needs to be fairly constant, while flow for our EXTRA spending can vary. Separating these two types of spending helps with the important question, "how much can we spend to get the most out of our money without risking running out?". This also relates to withdrawal strategy and withdrawal rate of course, but that's another thread.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
jebmke
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Re: Share your retirement cash flow plan

Post by jebmke »

GaryA505 wrote: Thu May 16, 2024 11:16 am
murrays wrote: Thu May 16, 2024 10:46 am
jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
I absolutely agree that #1 is critical. However, since income sources can be exhausted in retirement, I think #2 needs more focus.

In our case, we haven't distinguished between types of expenses as yet, while I'm still working. However, when the paycheck stops, we will be quantifying our base spending (we call it NORMAL spending) and our discretionary spending (we call it EXTRA spending) separately. I believe this is important to a successful retirement cash flow plan. Flow for our NORMAL spending needs to be fairly constant, while flow for our EXTRA spending can vary. Separating these two types of spending helps with the important question, "how much can we spend to get the most out of our money without risking running out?". This also relates to withdrawal strategy and withdrawal rate of course, but that's another thread.
True; but it may depend on how close to the edge of the abyss you set up your tent. I can probably find quite a few threads on "why am I having trouble letting go and spending more" but I will leave that exercise to another day.

Some might argue that the key to not having to live on the edge in retirement is paying close attention to #2 during the accumulation years so there are adequate savings to fund retirement in the style you wish to live.
When you discover that you are riding a dead horse, the best strategy is to dismount.
marcopolo
Posts: 8720
Joined: Sat Dec 03, 2016 9:22 am

Re: Share your retirement cash flow plan

Post by marcopolo »

GaryA505 wrote: Thu May 16, 2024 11:16 am
murrays wrote: Thu May 16, 2024 10:46 am
jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
I absolutely agree that #1 is critical. However, since income sources can be exhausted in retirement, I think #2 needs more focus.

In our case, we haven't distinguished between types of expenses as yet, while I'm still working. However, when the paycheck stops, we will be quantifying our base spending (we call it NORMAL spending) and our discretionary spending (we call it EXTRA spending) separately. I believe this is important to a successful retirement cash flow plan. Flow for our NORMAL spending needs to be fairly constant, while flow for our EXTRA spending can vary. Separating these two types of spending helps with the important question, "how much can we spend to get the most out of our money without risking running out?". This also relates to withdrawal strategy and withdrawal rate of course, but that's another thread.
Expenses are expenses.
In the unlikely event we have to cut back spending, it will be complex combination trimming various things, and shifting others. It is very unlikely to be as simple as "reduce EXTRA spending".
Once in a while you get shown the light, in the strangest of places if you look at it right.
jebmke
Posts: 26339
Joined: Thu Apr 05, 2007 2:44 pm
Location: Delmarva Peninsula

Re: Share your retirement cash flow plan

Post by jebmke »

marcopolo wrote: Thu May 16, 2024 11:42 am
GaryA505 wrote: Thu May 16, 2024 11:16 am
murrays wrote: Thu May 16, 2024 10:46 am
jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
I absolutely agree that #1 is critical. However, since income sources can be exhausted in retirement, I think #2 needs more focus.

In our case, we haven't distinguished between types of expenses as yet, while I'm still working. However, when the paycheck stops, we will be quantifying our base spending (we call it NORMAL spending) and our discretionary spending (we call it EXTRA spending) separately. I believe this is important to a successful retirement cash flow plan. Flow for our NORMAL spending needs to be fairly constant, while flow for our EXTRA spending can vary. Separating these two types of spending helps with the important question, "how much can we spend to get the most out of our money without risking running out?". This also relates to withdrawal strategy and withdrawal rate of course, but that's another thread.
Expenses are expenses.
In the unlikely event we have to cut back spending, it will be complex combination trimming various things, and shifting others. It is very unlikely to be as simple as "reduce EXTRA spending".
I will also note that in my experience, NORMAL spending (whatever that means) is not fairly constant. This year we had to drill a new well. Not really a lot of alternatives and it is something that will last another 30+ years so will not be repeated in my lifetime absent some bizarre change in the water tables.
When you discover that you are riding a dead horse, the best strategy is to dismount.
GaryA505
Posts: 3153
Joined: Wed Feb 08, 2017 1:59 pm
Location: New Mexico

Re: Share your retirement cash flow plan

Post by GaryA505 »

jebmke wrote: Thu May 16, 2024 11:21 am
GaryA505 wrote: Thu May 16, 2024 11:16 am
murrays wrote: Thu May 16, 2024 10:46 am
jebmke wrote: Thu May 16, 2024 10:29 am
GaryA505 wrote: Thu May 16, 2024 10:15 am It seems to me that a "retirement cash flow plan" should address cash flow, so should include at least:

1. What are the income sources?
2. What are the types of expenses (base/floor/living, discretionary, emergency, etc.)?
3. What are the accounts and what are they used for?
4. What is the flow into accounts (income inflow), between accounts, and out of accounts (expense outflow)?
5. How is the flow monitored and adjusted?

I might also add to #5, "who will perform the monitoring and adjustment?".
As a general statement that is true. Although many of these are not unique to retirement. I took the OP to mean "now that you don't have a job, how are you producing cash to pay the bills."
This. The only thing that changed when we left work is #1 and is important to resolve ahead of time.
I absolutely agree that #1 is critical. However, since income sources can be exhausted in retirement, I think #2 needs more focus.

In our case, we haven't distinguished between types of expenses as yet, while I'm still working. However, when the paycheck stops, we will be quantifying our base spending (we call it NORMAL spending) and our discretionary spending (we call it EXTRA spending) separately. I believe this is important to a successful retirement cash flow plan. Flow for our NORMAL spending needs to be fairly constant, while flow for our EXTRA spending can vary. Separating these two types of spending helps with the important question, "how much can we spend to get the most out of our money without risking running out?". This also relates to withdrawal strategy and withdrawal rate of course, but that's another thread.
True; but it may depend on how close to the edge of the abyss you set up your tent. I can probably find quite a few threads on "why am I having trouble letting go and spending more" but I will leave that exercise to another day.
My motivation for doing my plan this way relates to the psychology of retirement spending. It's been often stated that most retirees underspend due to fear of running out of money in their old age. Having a good spending plan can go a long way to help with that. I believe that, ay least in our case, quantifying base spending separately from discretionary spending is critical. For example:

Case 1:
You don't distinguish base spending from discretionary spending. Everything flows into a single checking (or CMA) account, from which all spending is done. Base cash flow is comingled with discretionary cash flow. Checking balance varies wildly due to market conditions. Base cash (checking) inflow is not matched to outflow and balance varies from $5k-$50k. Discretionary cash (CMA) How do you know when you can buy that new car or gift money to a child for a down payment on their house? Just guess!

Case 2:
You distinguish base spending from discretionary spending. Base cash is fixed and flows into a checking account, using a fixed recurring monthly withdrawal from investment account(s). Checking balance varies from $5k-$10k. Discretionary cash is variable and flows into a CMA account. Discretionary cash (CMA) flow is not matched to anything and varies, as it comes from RMDs and dividends. How do you know when you can buy a new car or gift money to a child for a down payment on their house? If you have enough money in the CMA!
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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