50% VG Wellesley 50% VG Star & Get on with ER

[Hydroman]

Well I have about burnt myself out on all the asset allocation and slice and dice portfolio scenarios and SWR calculations. In the end we all just need to place our bets.I am about to just split my early retirement portfolio 50/50 between Vanguard Wellseley and Vanguard Star. Then set the ER date for 2 years from now (age 51) and get on with life. No pension.

If anyone has an opinion on why this is not going to be a credible plan for 4% SWR during retirement, please let me know now.

Thanks,

 

[Spanky]

No. Simplicity is great. I read somewhere in the Diehard forum that someone actually compares return among various portfolios, i.e., 100% Wellington, sliced and diced, Coffee House, etc. The 100% Wellington did quite well in comparsion with the others.

 

[REWahoo]

I don't see any problem. In addition to having 2-3 years expenses in cash, I also chose a simplified approach with three primary funds: Vanguard Wellesley, D&C Balanced, and D&C International. Very similar to what you are proposing.

 

[yakers]

I like it, my wife's IRA will look something like 60% Wellesley 40% Star when the final transfers from her 403b are complete. The only other issue is we have a decent cash buffer in a credit union account. So I would add some kind of cash source to your two funds to round things out.

 

[sgeeeee]

Sounds good to me. I often read posts where someone publishes an asset allocation plan with about a dozen different asset classes and asks what posters think. I seldom respond, but usually I think it's naive and misguided. Once you get beyond 2 or 3 of the broadest asset classes, the correlations of the past are not likely to be indicative of the correlations of the future. Why add assets that would have worked over the past decade? And how do you rebalance a dozen asset classes? That has to be a nightmare.

The number of assets in an asset allocation plan is not indicative of financial sophistication. Simple works.

 

[setab]

I also opted for simple. I have 85 percent in Vanguard Target 2015, 5 percent in MM Prime and 5 percent in Wellesley. My stress level has been lowered significantly.

setab

 

[justin]

I also opted for simple. I have 85 percent in Vanguard Target 2015, 5 percent in MM Prime and 5 percent in Wellesley. My stress level has been lowered significantly.

This might increase your stress level, but you have 5% unaccounted for in your allocation plans.

 

[REWahoo]

This might increase your stress level, but you have 5% unaccounted for in your allocation plans.

Wouldn't it decrease your stress level if you knew your portfolio was actually 5% higher than your numbers showed? Don't knock it until you've tried it!

 

[justin]

Wouldn't it decrease your stress level if you knew your portfolio was actually 5% higher than your numbers showed? Don't knock it until you've tried it!

I was thinking of it in the opposite manner. If I had, say, $1,000,000, and I suddenly "lost" 5% of it ($50,000), my stress level might jump a little bit.

 

[Dawg52]

I was thinking of it in the opposite manner.  If I had, say, $1,000,000, and I suddenly "lost" 5% of it ($50,000), my stress level might jump a little bit.   

Don't worry.........it showed up in my Fidelity account. 

 

[Nords]

Sounds like a good plan, Hydro. You're the guy who has to sleep at night with it, including the part where it might drop a couple percent in the next month or two. I don't think you'll have any sleep issues if it rises a few percent.

Sounds good to me.  I often read posts where someone publishes an asset allocation plan with about a dozen different asset classes and asks what posters think.  I seldom respond, but usually I think it's naive and misguided.  Once you get beyond 2 or 3 of the broadest asset classes, the correlations of the past are not likely to be indicative of the correlations of the future.

When I see asset allocations with numbers like "3%" I wonder "Gee, where would you rebalance? 3.6%? 3.9%?" Why bother?

 

[Hydroman]

Sounds like a good plan, Hydro. You're the guy who has to sleep at night with it, including the part where it might drop a couple percent in the next month or two. I don't think you'll have any sleep issues if it rises a few percent.

Thanks Nords. Sleep at night is important. I guess if I really wanted to be conservative I would leave the 200K I have in my previous employers 401K where I could invest in a guareteed fund paying 6.5% APR through the end of the year. Probably a fair chance that will be a better return in the near term then the VG funds, but then I would just be timing the market. I decided it is time to cut those strings and roll the funds to an IRA invested consistent with the rest of my portfolio and get on with life. I already have 2 years living expenses in CDs.

 

[GolferAndy]

You could do a lot worse... but when I entered this in Morningstar it showed your equity exposure would be almost 50% large-cap value with almost no small-cap exposure at all. IMO a retirement at age 51 would call for a more even exposure to the market. You could somewhat remedy this (and add almost no complexity) by investing 1/3 (instead of 1/2) in each of the funds you mentioned and dividing the remaining third between a total market index fund and a total market bond fund. You would still have the 50/50 allocation you seek and you would be more evenly invested in the market as a whole. In addition your fund expense would drop slightly as well.

Also... a 4% SWR is a little aggressive for such an ER. Between 3 to 3.5% would be a whole-lot safer long-term.

Good luck. By the way.. do you just hate your job or something? (ER at 51?)

 

[tiredofwork]

By the way.. do you just hate your job or something? (ER at 51?)

Well, this is the "EARLY" retirement forum . . .

 

[d]

Simple works.

and might work better than a "sophisticated" portfolio where there is always the danger of shooting oneself in the foot.