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24 Months and lining up the ducks
Old 09-13-2013, 01:13 PM   #1
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24 Months and lining up the ducks

Hello all,

I have been a member for some time now, but have rarely posted. I am very appreciative of the wealth great information freely exchanged by like minded individuals. The information obtained on this site is far superior to that of most financial planners. I am getting my ducks in a row preparing for retirement in August of 2015 when my current business contract expires. I would leave tomorrow but I would be leaving too much on the table if I do. I recently transferred ½ of my equity portfolio, (approximately 1,250,000) into Vanguard with the intention of eventually transferring the balance before the big day. I plan to avail myself of Vanguards portfolio analysis and structure my long term positions accordingly. I will probably keep my FUNDX portfolio as I do believe in the value of the discipline and feel the long term returns may compliment the Vanguard approach.


Firecalc has confirmed a 100% success probability based on a 3% or $120,000 annual withdrawal rate. (Let’s hope it holds up) The thought is to buffer the withdrawal plan with 3 years of cash and cash equivalents (Short term bond funds) in order to smooth out the volatility of the equity market. All dividends and distributions will be deposited into my cash position to draw upon monthly. 2/3 of my bond positions are in a SEP which I will be putting off distributions on until required. The thought here is to draw down the equity position from 70% to 60% with a half point annual glide path shift toward bonds. Reducing the equity position may or may not reduce my tax rate. I suppose that is anyone’s guess. I haven’t factored in SS as I am sure it will be means tested by then. If not I would postpone filing and hope the good Lord allows me time to enjoy it. I think the plan is fairly comprehensive, but I would love to hear from anyone that may offer any additional insight. Thanks in advance for your thoughts. Additional information:

Age 55 DW 54 ER planned in 24 months
1 Son freshman in college (30 k per year)
60 k living expense although budgeting for 120k
Looking to pull the plug in Aug 2015

$2,500,000 stock funds
$1,157,000 bond funds
$160,000 cash
$150,000 business
$50,000 cash value life insurance
$27,000 LLP

Bonds in SEP
Equity Funds in Scottrade discount brokerage
No debt

Home worth about 650k paid. Upgraded to solar power essentially eliminating electric bill. Converted from oil to gas and replacing roof and septic system. (We plan on sticking around a while)
Investment strategy for equities is split between Vanguard indexing and FUNDX model portfolio. Bond strategy is FUNDX Flexible income model. 1/3 bond investment in individual Non-AMT Muni Bonds. (New York Taxes are killers) Current allocation: 66% equities 30% bonds 4% cash.
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Old 09-13-2013, 02:26 PM   #2
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Welcome,
your numbers look very good
Quote:
Originally Posted by Islandtraveler View Post
60 k living expense although budgeting for 120k
Even if your numbers did not look solid (but they do) - this makes it really bullet proof.

Quote:
Bonds in SEP
Do I understand it correctly, that you have Non-AMT muni bonds in SEP?
I thought SEP is a tax-deferred retirement and you pay ordinary income taxes at withdrawal. If that's the case, why muni bonds? You are going to pay taxes on them anyway?

What's your asset allocation for equities?
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Old 09-13-2013, 10:39 PM   #3
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Yes, two thirds of my bond funds are in the SEP. The one third that is outside of SEP is in munis. Thanks for your thoughts.
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Old 09-14-2013, 08:02 AM   #4
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I suspect you could retire tomorrow without a sweat. It seems that you made several especially conservative assumptions, neglecting SS (try to divide your expected SS income by 3% or 4%, and you'll see this has a LOT of value!), and using 3% market returns. Notably with a budget prediction that can easily oscillate between $60k and $120k.

Firecalc is rather misleading in my opinion, because it tends to make you focus on the few worst possible years (e.g. start in 1929, 1965/66, etc). While if you start on a more regular years, you'll see that your portfolio goes up a LOT, hence you could have spent more (or retired earlier).

If you develop a slightly more sophisticated plan, with a variable spending model (Guyton-Klinger, Hebeler, something like that), and factor in SS as add'l income (say post 70), you will probably find that you can retire today, while spending more money than what you had anticipated. Sure, you have to accept the spending variations year-over-year depending on market gyrations, but in your situation, this seems fine, actually even desirable.
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Old 09-14-2013, 08:22 AM   #5
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Islandtraveler, your numbers do look good. There is only so much you can plan for, you seem have that covered with conservative assumptions. Executing your plan is likely to be the most important thing now.
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Old 09-14-2013, 08:29 AM   #6
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Islandtraveler, your numbers do look good. There is only so much you can plan for, you seem have that covered with conservative assumptions. Executing your plan is likely to be the most important thing now.
+1. You seem to be mighty well prepared. Just how ironclad is that business contract that's keeping you working til 2015 ?
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