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Old 08-27-2011, 09:16 AM   #101
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yep, its no longer about growing richer. now its all about not growing poorer.
I would agree (since I'm retired).

However, for much younger folk in the accumulation stage, their focus is not to protect their "number", but just to achieve it...

Retirement planning (in the financial sense) means achieving your goal and then protecting your goal achieved. There are different methods, depending on your age, your success in achieving "your number", and planning for post-retirement years.

Hopefully, you've achieved your number before your retirement (for whatever reason). IMHO, those are the folks that face the greatest risk by combining the two periods of life. That is, they are retired but not yet hit their number. That means that you have to take abnormally high risks (e.g. investments, without having a current source of income - e.g. a j*b) to try to get to the level of assets they should have been at the day they retired.

Those that enter a "forced retirement" (for whatever reason) have an uphill battle...
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Old 08-27-2011, 10:48 AM   #102
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Non Traded REITS
His plan seemed to call for using the quarterly distributions from the REITS in Bucket 3A to fund the ongoing living expenses served by Bucket 1. I understood it to be something like 1/2 of what you needed for expenses would come from the REITS.

Nobody mentioned any of that in this Forum.
Because
  • They have high fees, which takes away from their advertised 5-6% returns.
  • The price is not determine by the market, its determine by REIT administrator, there have been cases where the price does not reflect the actual value.
  • you are locked in for ~10 years...
I would buy VGSLX instead.
TJ
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Old 08-27-2011, 03:44 PM   #103
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stay away from them. they look great until they arent. im involved in a class action suit against one of the top ones now. they are totaly un-transparent...... ours was putting on our statements the origional 10 bucks a share even though the value fell far from it.

they were very quietly making up shorftfalls in the dividend with loans and your own money that should have been invested.
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Old 08-27-2011, 04:15 PM   #104
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In going back to the bucket conversation, it seems to me that there are many (complicated) ways of handling this, but assuming you have an AA that suits your needs and risk tolerance, then I still favor a simple total return strategy during retirement. Take some funds from the allocation group (i.e., stocks or bonds) that did the best in the past year and fund your cash position. Move as little as possible in bad years and more in good years. I also have dividends and LT cap gains from my taxable account filling my cash bucket throughout the year (as long as these are taxed at 15%). I keep about 3 years of expenses in safe investments (i.e. cash), to ride out the longer storms.

I catagorize all my expenses as essential and discretionary. In bad years, discretionary expenses are significantly reduced - in good years I'll spend a bit more. The combination of income and expense adjustments soften the pain of poor markets.
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Old 08-27-2011, 04:20 PM   #105
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Remember the story about the couple who followed their GPS on some Nevada back roads? They got hopelessly lost, stranded, spent seven weeks in their car and, I think, only the wife was rescued. They put complete trust in the GPS, and did not question it until the darkness came and it was to late.


Bucketing, AA, when to balance etc, are like the GPS. They work great much of the time, but at other times they may lead us astray. We must look out the window and ask 'Does this make sense? Do I seem to be going where I want to end up?'
It was interesting being a passenger in Vegas recently with my friend and my realtor with their GPS equipped cars. My friend has excellent sense of direction, but wasn't familiar with Vegas. So he ended up trusting the GPS except for the one time it insisted we take a non-existent freeway exit. (Roads in Vegas change a lot.). This was true even when his instincts say we should turn left not go straight. We never got lost trusting the GPS. In contrast my realtor, has a lousy sense of direction (almost as bad as mine), but since she had did a lot of driving in Vegas in the last 10 years she often would ignore or not a pay attention to her GPS. Consequently we got slightly lost a lot. The score was roughly GPS 15 realtor 1.

The lack of rules on re-balancing is the most troubling aspect of the buckets, and I am afraid that when I asked some simple question about refilling bucket in 2006 and 2011 and got generality and not specific answers, leads me to believe that bucket folks haven 't formulated rules.

When it comes to investing, study after study has shown that peoples gut is wrong. They think when stocks (or houses for that matter) are going up they will continue to go up, and when they are going down they'll keep going in the direction. The beauty of AA with rebalancing either on a yearly basis or when the AA gets out whack by more than 5-10%, is that if you followed it you do something that is counterintuitive. In particular you have sold stocks in early 2008 and bought stocks in early 2009.

One of my smartest bosses, told me that it was only ok to break rules, when you a had a very thorough idea of why the rule existed, and what harm the rules was trying to prevent. Certainly my realtor would have been better following her GPS. I think this applies double to investing rules.
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Old 08-27-2011, 04:47 PM   #106
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Certainly my realtor would have been better following her GPS. I think this applies double to investing rules.
I love stories with a moral.
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Old 08-27-2011, 07:22 PM   #107
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I would buy VGSLX instead.
TJ
I don't have a problem turning my back on the NonTraded REITS. What I'm not getting is the issue about drawing $$ out of Bucket 3 to cover annual living expenses.

It seems to me most people imply that they are just letting bucket 3 grow thru good times and bad and by the time it's needed then it will be available.

Even with rebalancing I thought the Lucia theory included drawing income off of bucket 3 throughout the course of retirement.

Willift
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Old 08-28-2011, 02:01 PM   #108
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he leaves that up to you .. you can do it the conservative way which would be rebalance by years of money whenever you can. or roll the dice, hope that history is always correct and wait 15 years letting your equities grow for longer periods of time. .
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Old 08-28-2011, 03:53 PM   #109
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In going back to the bucket conversation, it seems to me that there are many (complicated) ways of handling this, but assuming you have an AA that suits your needs and risk tolerance, then I still favor a simple total return strategy during retirement. Take some funds from the allocation group (i.e., stocks or bonds) that did the best in the past year and fund your cash position. Move as little as possible in bad years and more in good years. I also have dividends and LT cap gains from my taxable account filling my cash bucket throughout the year (as long as these are taxed at 15%). I keep about 3 years of expenses in safe investments (i.e. cash), to ride out the longer storms.

I catagorize all my expenses as essential and discretionary. In bad years, discretionary expenses are significantly reduced - in good years I'll spend a bit more. The combination of income and expense adjustments soften the pain of poor markets.
+1 for me buckets are NOT an investment strategy only a way to organize your portfolio in your mind. I stick with a total return approach, but organize my money into buckets just for cash flow.
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Old 08-31-2011, 08:36 AM   #110
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Some more thoughts for the OP, FWIW:

A Strategy for a Lifetime of Income
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Old 08-31-2011, 10:01 AM   #111
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...Unfortunately, the last time I asked my Magic Mirror (mirror, mirror on the wall....) which way the market would go over the next 5-30 years, it just stared back at me and told me to be more careful when I shave....
I will have to remember this quote! Love it.
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Old 08-31-2011, 11:05 AM   #112
 
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I don't understand the need for buckets. I don't have to withdraw any money from my portfolio to supplement SS & pensions so my AA of 35/65 is strictly long term for me. I have 2 years of income in a CD ladder and 1 year's income for emergency funds and large purchases (if needed). Much less complicated for me.
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