Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 08-23-2011, 09:52 PM   #41
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,278
Quote:
Originally Posted by golfnut View Post
Just curious, do you take cap gains from your equities as well?

Golfnut
I comply with the tax code to the best of my ability.

What's that got to do with it? You'll take cap gains (if they exist) refilling a bucket, won't you?

-ERD50
__________________

__________________
ERD50 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-23-2011, 09:57 PM   #42
Recycles dryer sheets
Aeowyn's Avatar
 
Join Date: Jan 2011
Location: Scotts Hill, TN
Posts: 105
Quote:
Originally Posted by youbet View Post
For you bucketeers........

It seems like deciding on dollar amounts to hold in each category (expressed in years of expenses) is easy at the beginning. But no one is commenting on how you will withdraw and/or replinish categories vs. equity and bond market performance or after emergency expenses, periods of high inflation, etc.
I have a minimum and maximum on each of my buckets. Money flows between my buckets in different ways.

Starting with my conservative buckets, if one of them falls below it's minimum amount it will pull money from the next bucket up until it is also at it's minimum amount. If I need to I'll keep going up each bucket level to fund my lower buckets. If I manage to have all my buckets at the minimum level, I'll start spending down my lower buckets completely.

Coming from a more positive angle, when my more aggressive buckets exceed their maximums, they spill over into the buckets beneath them. If all my buckets are maxed out, I have the choice to either stash the extra in my more aggressive bucket, increase my draw rate (this will increase the min and max on the buckets), put the money aside for a major purchase or an opportunity, or find a good cause to give the money to.


Quote:
If you go for a decade or more without replinishing from the equity category due to market performance and the cash and bond categories decline to very low levels due to spending, are you OK with having your AA extemely heavy in equities as a geezer?
Actually I'd be comfortable with 100% equities. I don't particularly like bonds. I think of them more as insurance against a down market than I do as an investment. I guess I'm a bit more optimistic/comfortable with the market. I really don't think we'll have 10+ consecutive years of down market. I guess if we do, we'll have to tighten our budget.

Also how old do you have to be to obtain geezer status? 50? 80? 110? I have no idea how long I (or DH) will live. I always thought it strange that a standard bond allocation was tied to age since there is no way of knowing how long the money will need to last. That's why I like the bucket approach.

Quote:
I manage my FIRE portfolio with an AA outlook (Current target = 50/45/5 at age 64). But if I were a Lucia devotee as some here seem to be, I'd focus on understanding how I would sell and replinish over time and through various market and inflationary scenarios. Determining starting values would be the easy part.
I'm not really a Lucia devotee. I was developing my buckets before I knew they were called buckets (had never heard of Lucia). After someone pointed out that I had buckets, I did read Lucia's Buckets of Money book. I agreed with some, disagreed with some - but mostly it made me think more about my bucket strategy and I did make some modifications.
__________________

__________________
Aeowyn is offline   Reply With Quote
Old 08-23-2011, 10:07 PM   #43
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,278
I wish FIRECALC had a "bucket withdraw" option. It would be interesting to see how it compared to B&H&ReBal.

-ERD50
__________________
ERD50 is offline   Reply With Quote
Old 08-23-2011, 10:12 PM   #44
Full time employment: Posting here.
 
Join Date: Dec 2006
Location: chicago burbs
Posts: 559
Quote:
Originally Posted by ERD50 View Post
I comply with the tax code to the best of my ability.

What's that got to do with it? You'll take cap gains (if they exist) refilling a bucket, won't you?

-ERD50
Thanks for the response Just asking. Note I am not with IRS.
__________________
golfnut is offline   Reply With Quote
Old 08-23-2011, 10:25 PM   #45
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by Aeowyn View Post
I always thought it strange that a standard bond allocation was tied to age since there is no way of knowing how long the money will need to last. That's why I like the bucket approach.
It sounds like you're saying that with the so-called "bucket system" you know how long you're going to live. Quite an unexpected benefit, if you call knowing your death date apriori a benefit.

In any case, it's clear your concept of a "bucket system" is quite fundamentally different from Lucia's and others posting about it on this thread. I guess that's what makes discussing it challenging. There doesn't seem to be a clear definition of what it is we're talking about.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 08-23-2011, 10:40 PM   #46
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by ERD50 View Post
I wish FIRECALC had a "bucket withdraw" option. It would be interesting to see how it compared to B&H&ReBal.

-ERD50
To do that, you'd have to define a "bucket withdraw" system. Lucia doesn't. He leaves rebalancing bucket replinishing guidelines pretty much up to the individual and much flexibility in the amount to be in each bucket.

Our last thread on Lucia and buckets ended with the bucket devotees seeming to take the position that Lucia had built in safeguards for all eventualities. And bucket doubters seeing Ray's "system" as a clearly defined starting point that degrades into fuzziness due to lack of detail and clarity of actionable events over extended periods of time.

Lucia's system has been around for quite a while now. I wish someone who followed it in ernest would be willing to walk us through how it's gone the past several years.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 08-24-2011, 12:02 AM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
clifp's Avatar
 
Join Date: Oct 2006
Posts: 7,450
Quote:
Originally Posted by youbet View Post

Lucia's system has been around for quite a while now. I wish someone who followed it in ernest would be willing to walk us through how it's gone the past several years.
As ERD50 a bucket option would be nice for FIRECalc but even just an explanation of how it would have worked from 1999 to 2011 would be beneficial. E.g. from 1999-2002 I withdraw money from Bucket 1, and Falling interest rates caused spillage of $X dollars from Bucket 2 to Bucket one in 2005, higher stock market would cause Bucket 3 to refill the other buckets by $A and B$.

Dividing money into 3 buckets is easy, it is the flows from the buckets to the bills over time that is difficult to describe.
__________________
clifp is offline   Reply With Quote
Old 08-24-2011, 03:54 AM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
i find the best thing to do in the short term like this past decade is to just keep buckets 1 and 2 primed and full whenever markets are up.

we seem to be in this tight range and there is no telling when we may actually have a nice juicy bull run again.

you give up some gains in the long term but you will at least always have a full tank. its kind of always topping off your gas tank in case disaster strikes and you cant get gas but once that tank is empty your just as scewed.

there is no magic here folks as you all know. lets face it a really long down market and low rates will take its toll on future success just like any other system for withdrawing

while the truth is you dont have to worry about selling equities at a loss for as long as 15 years the reality is the stock bucket just may not grow enough to support the future refills very well.

more and more as i said thats why im researching the studies that show introducing some immeadiate annuities into the mix can really improve things.. im looking into other products too like longevity insurance.
i like to say un-conventional times may call for un-conventional investing and products to battle through it.

no one ever figured in their plan we would be living that 10% failure rate the last 12 years we always thought was the long shot in these calculators..
__________________
mathjak107 is offline   Reply With Quote
Old 08-24-2011, 07:01 AM   #49
gone traveling
 
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
Quote:
Originally Posted by mathjak107 View Post
i find the best thing to do in the short term like this past decade is to just keep buckets 1 and 2 primed and full whenever markets are up.

we seem to be in this tight range and there is no telling when we may actually have a nice juicy bull run again.

you give up some gains in the long term but you will at least always have a full tank. its kind of always topping off your gas tank in case disaster strikes and you cant get gas but once that tank is empty your just as scewed.

there is no magic here folks as you all know. lets face it a really long down market and low rates will take its toll on future success just like any other system for withdrawing

while the truth is you dont have to worry about selling equities at a loss for as long as 15 years the reality is the stock bucket just may not grow enough to support the future refills very well.

more and more as i said thats why im researching the studies that show introducing some immeadiate annuities into the mix can really improve things.. im looking into other products too like longevity insurance.
i like to say un-conventional times may call for un-conventional investing and products to battle through it.

no one ever figured in their plan we would be living that 10% failure rate the last 12 years we always thought was the long shot in these calculators..
Exactly. I agree with your comments since I've always said that in retirement, cash flow is everything.

Sure, you may not pursue "possibilities" since you've diverted some of your portfolio to cash/cash-like instruments (including an SPIA, which DW/me have) to maximize your possible gains. But that's the difference in the accumulation (when you're trying to "hit your number") and decumulation (when you're trying to protect/use "your number), along with ensuring cash flow for immediate retirement income needs.
__________________
rescueme is offline   Reply With Quote
Old 08-24-2011, 07:16 AM   #50
Recycles dryer sheets
Aeowyn's Avatar
 
Join Date: Jan 2011
Location: Scotts Hill, TN
Posts: 105
Quote:
Originally Posted by youbet View Post
It sounds like you're saying that with the so-called "bucket system" you know how long you're going to live. Quite an unexpected benefit, if you call knowing your death date apriori a benefit.
The bucket system does't know how long you live, it just doesn't care how long you live. The buckets are the same no matter how old you are. If I reach the age of 100, I still want to plan for the contingency that I reach 150. I have no intention of trying to do that with 100% bond/cash.

With a bucket system, you have a separate risk tolerance portfolio for each bucket (e.g. emergency money, short term money, mid term money, and long term money). I don't intend to ever empty all my buckets (but if the doom and gloomers are right I have that option). My more aggressive buckets should spin off enough to keep my conservative buckets going and keep up with inflation. What remains in the buckets after I die is my legacy.
__________________
Aeowyn is offline   Reply With Quote
Old 08-24-2011, 07:19 AM   #51
Dryer sheet wannabe
 
Join Date: Dec 2010
Location: Grand Rapids
Posts: 17
Quote:
Originally Posted by rescueme View Post
Exactly. I agree with your comments since I've always said that in retirement, cash flow is everything.

Sure, you may not pursue "possibilities" since you've diverted some of your portfolio to cash/cash-like instruments (including an SPIA, which DW/me have) to maximize your possible gains. But that's the difference in the accumulation (when you're trying to "hit your number") and decumulation (when you're trying to protect/use "your number), along with ensuring cash flow for immediate retirement income needs.
+1

Protection and cash flow. With the possiblity of (some growth) with what is left in buckets 2 and/or 3.
__________________
Dances With Fire is offline   Reply With Quote
Old 08-24-2011, 07:49 AM   #52
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
Quote:
Originally Posted by Aeowyn View Post
The bucket system does't know how long you live, it just doesn't care how long you live. The buckets are the same no matter how old you are. If I reach the age of 100, I still want to plan for the contingency that I reach 150. I have no intention of trying to do that with 100% bond/cash.

With a bucket system, you have a separate risk tolerance portfolio for each bucket (e.g. emergency money, short term money, mid term money, and long term money). I don't intend to ever empty all my buckets (but if the doom and gloomers are right I have that option). My more aggressive buckets should spin off enough to keep my conservative buckets going and keep up with inflation. What remains in the buckets after I die is my legacy.
live like you will die tomorrow but plan like you will live forever
__________________
mathjak107 is offline   Reply With Quote
Old 08-24-2011, 10:42 AM   #53
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by Chuckanut View Post
Regarding the 8 years of balance funds--- does that refer to a balanced fund such as Vanguard Wellesly or Wellington? If not, what does it refuere to? Thanks.
Yes, any balance fund (part stocks/part bonds).
TJ
__________________
teejayevans is online now   Reply With Quote
Old 08-24-2011, 10:49 AM   #54
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by ERD50 View Post
No he didn't change it, but yes he did?
In other words, he didn't change how it works, just provided additional options, I think he calls them bucket 3A and bucket 2B or something like that.
You gotta sell books somehow ?
TJ
__________________
teejayevans is online now   Reply With Quote
Old 08-24-2011, 10:57 AM   #55
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by clifp View Post
As ERD50 a bucket option would be nice for FIRECalc but even just an explanation of how it would have worked from 1999 to 2011 would be beneficial. E.g. from 1999-2002 I withdraw money from Bucket 1, and Falling interest rates caused spillage of $X dollars from Bucket 2 to Bucket one in 2005, higher stock market would cause Bucket 3 to refill the other buckets by $A and B$.

Dividing money into 3 buckets is easy, it is the flows from the buckets to the bills over time that is difficult to describe.
Worst case and what I would use if doing simulations is just to wait for the bucket 1 to empty and then move B2 into cash. It's been 7 years so you 2nd bucket should be worth more than you started. Continue until year 15, replenish both buckets.
In reality, if you do rebalancing anytime you feel your bucket 3 has grown and its time to take profits off the table, you'll be better off. If you don't like to go by "feel" or want to do simulations, then "if B3 has grown by X%, replenish buckets" would be a good easy formula to follow.
TJ
__________________
teejayevans is online now   Reply With Quote
Old 08-24-2011, 11:07 AM   #56
Thinks s/he gets paid by the post
teejayevans's Avatar
 
Join Date: Sep 2006
Posts: 1,221
Quote:
Originally Posted by clifp View Post
You have 500K your long term bucket in total stock market VTSMX. The other 500K is split in what ever conforms with the system.
Would somebody walk through the process of withdrawing 40K a year indexing it for inflation (2.8%/year from 1999 to 2010).
It works the other way, simplified version:
  • Figure out how much you need, say 40K/yr
  • 40K*7 years = $280 in B1. (for simplicity we'll assume inflation rate=CD rate)
  • 40K + 7 years of inflation, assume its now 50K/yr
  • 50K*8yrs = 400K, but you assume you will have some growth (dividends, etc), the number required today will be less, ie it will grow to 400K, so you may put in 300K into B2 if you think you will conservatively get 33% return over next 8 years
  • The rest goes into B3
That's basically it, again you start with how much you need to withdrawal and work from there. I have a spreadsheet that does it but Ray likes to sue anybody who even mentions the word bucket , so I won't post it.
TJ
__________________
teejayevans is online now   Reply With Quote
Old 08-24-2011, 02:58 PM   #57
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by teejayevans View Post
In other words, he didn't change how it works, just provided additional options, I think he calls them bucket 3A and bucket 2B or something like that.
You gotta sell books somehow ?
TJ
+1

Yep, as exceptions to "the system" crop up, afterthought alternative solutions (bucket 1A, 3V, 7H, etc.) magically appear and all is well.

I just can't buy into a system that sells itself by boasting of giving detailed instructions on how to withdraw during retirement but then suggests flexibility and vague decision making guidelines as variables occur over time. It's not really a system, it's just book selling jargon that helps people understand and deal with existing concepts.

There are lots of good ideas from the world of retirement finances used in the bucket system. For example, having cash or cash equivalents available for near term spending is great. I certainly do that. I'm just comfortable not calling that part of my AA "bucket #1."
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 08-24-2011, 03:09 PM   #58
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Quote:
Originally Posted by Aeowyn View Post
The bucket system does't know how long you live, it just doesn't care how long you live. The buckets are the same no matter how old you are. If I reach the age of 100, I still want to plan for the contingency that I reach 150. I have no intention of trying to do that with 100% bond/cash.

With a bucket system, you have a separate risk tolerance portfolio for each bucket (e.g. emergency money, short term money, mid term money, and long term money). I don't intend to ever empty all my buckets (but if the doom and gloomers are right I have that option). My more aggressive buckets should spin off enough to keep my conservative buckets going and keep up with inflation. What remains in the buckets after I die is my legacy.

I don't see a single thing here that's different from an AA system, other than the jargon.

You may be incorrectly assuming that using some sort of AA system during retirement (ie., not using Lucia's bucket system) requires using the age suggestion to determine your percentage of fixed allocation. Not true at all. Here's a thread for your review where we discuss various methods people use to come up with a fixed allocation and also some critique of the age suggestion. Note that no one mentions that you must either use the age suggestion or Lucia's bucket system. There is a world of other possibilities.

how do most of you determine your bond allocation?

edit: I note you participated in that thread. Your comments there don't seem congruent with you being a "buckets" fan. Especially your comfort with having relatively low cash and high equity allocations. Ray would roll over in his grave (wishful thinking) if he saw that kind of high equity percentage in a FIRE portfolio beginning retirement.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 08-24-2011, 03:29 PM   #59
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
HFWR's Avatar
 
Join Date: May 2005
Location: Lawn chair in Texas
Posts: 12,964
Buckets 1, 2a-d, 3.1-3.7 are all leaky.
__________________
Have Funds, Will Retire

...not doing anything of true substance...
HFWR is offline   Reply With Quote
Old 08-24-2011, 05:35 PM   #60
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jul 2005
Posts: 5,408
Quote:
Originally Posted by youbet View Post
I don't see a single thing here that's different from an AA system, other than the jargon.

You may be incorrectly assuming that using some sort of AA system during retirement (ie., not using Lucia's bucket system) requires using the age suggestion to determine your percentage of fixed allocation. Not true at all. Here's a thread for your review where we discuss various methods people use to come up with a fixed allocation and also some critique of the age suggestion. Note that no one mentions that you must either use the age suggestion or Lucia's bucket system. There is a world of other possibilities.

how do most of you determine your bond allocation?

edit: I note you participated in that thread. Your comments there don't seem congruent with you being a "buckets" fan. Especially your comfort with having relatively low cash and high equity allocations. Ray would roll over in his grave (wishful thinking) if he saw that kind of high equity percentage in a FIRE portfolio beginning retirement.

tthe way i use my buckets they differ from a traditional AA in these ways.

the major difference is the structured well defined time frames of money..

the way investments are handled such as dividends are not used directly to fund safe money buckets but only re-invested .

the biggest difference is rebalancing . traditional aa rebalances by performance or date . the buckets are rebalanced by years of money needed.

if my buckets are pretty full and markets take off i can let them run . a traditional system usually has a performance based number that triggers a rebalance or a date.
__________________

__________________
mathjak107 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


 

 
All times are GMT -6. The time now is 04:08 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.