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12-16-2014, 11:51 AM
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#1
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 5,991
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2015 launch plan
As our ER date nears, I am starting to hoard cash. We have to sell our house next year and I want to have money available for repairs if required by the buyer (not too familiar with how all of this works as this is our first sale). The home is paid off but I assume it takes awhile before you get the check.
This of course leads to a bit of market timing, as I am collecting near 6 figures in cash across accounts to attend to house needs and also to provide us with income while working, since I plan to direct 100% of earned income in 2015 toward 401K, after tax 401k ($20,000), two Roths, and HSA contribution. Pretty much it will be 3 months of working with paychecks of $0.
After sale of our home we will have a decent chunk of cash which will need to be invested.
I am thinking of keeping 4 years living expenses in cash (perhaps a CD ladder) and putting the rest in the market lump sum. Four years sounds excessive but I think the ability to lower our MAGI for a great subsidized silver ACA plan outweighs any small amount of interest gained by locking up money in longer term investments.
Do you think 4 years is enough? We will be mid 40s and quite a distance from SS. I plan on keeping our 401K and IRAs 100% in the stock market.
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12-16-2014, 12:43 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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You'll probably get different viewpoints on this. I've come to the conclusion there's more right way to do it.
I'm going to follow Otar's suggestion of keeping 2 years expenses in cash, 3 years in short-term bond funds, and the rest in bonds/stocks funds. When I withdraw expenses annually, I'll use rebalancing to refill the cash and short-term bond fund buckets. It's been called mental accounting but it's also been called peace of mind.
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12-16-2014, 12:52 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Feb 2014
Location: Williston, FL
Posts: 3,925
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Quote:
Originally Posted by Fermion
The home is paid off but I assume it takes awhile before you get the check.
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You will get a check at closing. You can cash (and spend) it that day.
Good Luck!
__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
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12-16-2014, 04:37 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2006
Location: west coast, hi there!
Posts: 8,797
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Maybe try exploring this in the VPW app. I'm guessing you are comfortable with spreadsheets. VPW has a bonds %. Go in and modify this for what you think cash will do. Maybe take the 3 month Tbill (see Fed data for this or ask me for a link). Then add something to this 3 mo Tbill yield to take into account your expected cash yield. Or look for CD data.
This will be more accurate then asking here for people's presonal opinion.
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12-18-2014, 08:56 AM
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#5
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,871
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Quote:
Originally Posted by Fermion
Do you think 4 years is enough? We will be mid 40s and quite a distance from SS. I plan on keeping our 401K and IRAs 100% in the stock market.
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What will your overall AA be?
Planning on retiring at 50 - we will have 3 or 4 years of expenses in short-term investments (CDs, I Bonds, short term bond funds). Probably no more than 1 year in actual cash, however.
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12-18-2014, 09:43 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 5,991
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Quote:
Originally Posted by mrfeh
What will your overall AA be?
Planning on retiring at 50 - we will have 3 or 4 years of expenses in short-term investments (CDs, I Bonds, short term bond funds). Probably no more than 1 year in actual cash, however.
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Overall will be about 70% stocks, 30% short term (Ibond, CD) I don't believe in normal bonds at these interest rates.
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12-18-2014, 09:49 AM
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#7
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Thinks s/he gets paid by the post
Join Date: Jul 2013
Posts: 1,871
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Quote:
Originally Posted by Fermion
Overall will be about 70% stocks, 30% short term (Ibond, CD) I don't believe in normal bonds at these interest rates.
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I assume you've used the various calculators to see if things should work out?
70% equities would make me a little nervous, but I don't know the size of your portfolio or annual expenses. Be wary of a bad sequence of returns.
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12-18-2014, 10:23 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2012
Location: Seattle
Posts: 5,991
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Quote:
Originally Posted by mrfeh
I assume you've used the various calculators to see if things should work out?
70% equities would make me a little nervous, but I don't know the size of your portfolio or annual expenses. Be wary of a bad sequence of returns.
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Because of our relatively young age (mid 40s) I feel we need the larger exposure to stocks to combat future inflation. If it fails, it fails.
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12-18-2014, 11:11 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,866
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Quote:
Originally Posted by Options
You'll probably get different viewpoints on this. I've come to the conclusion there's more right way to do it.
I'm going to follow Otar's suggestion of keeping 2 years expenses in cash, 3 years in short-term bond funds, and the rest in bonds/stocks funds. When I withdraw expenses annually, I'll use rebalancing to refill the cash and short-term bond fund buckets. It's been called mental accounting but it's also been called peace of mind.
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+1
__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11
ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
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