Ideal account set-up on Day 1 of FIRE?
Hello - long-time lurker here (former regular on Fool REHP board). I've been following theretireearlyhomepage.com for a long time and my family started toward FIRE about 5 years ago. I absolutely love Firecalc and all the great people on the boards. 30 years old, married, 2 kids
I have a quick question about asset location during FIRE. Assume we have a 75% S&P500/25% FI asset allocation (75% Vanguard S&P 500 Index, 21% Vanguard Short-term Corporate Bond Fund, and 4% Vanguard Prime Money Market Fund). Let's also wildly imagine we are going to FIRE on 1/1/09 (that would be so sweet...target year is 2014). The 4% in the MMF is for 2009 living expenses, correct? And the 21% in the bond fund is to round out the 25% FI allocation, right? My main question is, do you want the 4% MMF money in a taxable account and then draw it down throughout the year? Then on 12/31/09 sell some taxable S&P and/or SEPP to replenish the 4% MMF and then spend throughout 2010? The 21% short-term corporate bond fund always stays in tax-deferred space, correct?
Or do you keep the entire 25% FI in a tax-sheltered account and sell stocks monthly from a taxable account and re balance in tax-sheltered.
Sorry for such a basic question.