Won the Game/Moving the Goalposts?

[Montecfo]

Hope everyone's year is off to a great start.

I was mulling my FIRE journey. Currently I am FI but not RE yet.

When I set out, I had 3 targets for investable assets: Low, Mid and High. Since we do not have pensions (except for still-working DW's "latte" pension) the investable assets are the key. The mid target is 25% higher than the low, and the high is 50% higher than the low.

We surpassed the Low target a few years ago, the Mid target 2 years ago, and the high target could be withing reach in weeks or months.

So i find myself thinking about 2 things:

1. Won the Game! Spike the Football. Prepare for a more conservative AA (though I have plenty of $ in my "conservative" bucket)
2. Move those goalposts!

As I consider moving the goalposts, I also see the threads about tax torpedoes. With 65% of investable assets in traditional IRAs/401k, taxes are an issue.

But then moving the goalposts means more to the taxman. Don't want my encore job to be working for the taxman!

Thoughts welcome

 

[audreyh1]

If you make more money, you pay more taxes. Is that a reason not to make more money? I don’t think so.

The tax torpedo discussions are about whether it’s better to pay more taxes now or later and totally depends on each individual case.

In the tax torpedo situation people pay more taxes because they are getting more taxable income: SS and RMDs. And the discussions are about whether taking SS early and/or doing Roth conversions before RMD age can improve the situation.

 

[Independent]

I'm not sure what "moving the goalposts" means here. Do you mean that you're changing your retirement date because you want to get more conservative with your planning?

 

[Montecfo]

If you make more money, you pay more taxes. Is that a reason not to make more money? I don’t think so.

The tax torpedo discussions are about whether it’s better to pay more taxes now or later and totally depends on each individual case.

In the tax torpedo situation people pay more taxes because they are getting more taxable income: SS and RMDs. And the discussions are about whether taking SS early and/or doing Roth conversions before RMD age can improve the situation.

I do not think I in any way am misunderstanding the nature of taxation or how Roth conversions work.

But taxation reduces the incentive to work, and higher taxation reduces it more, which was my point.

 

[Montecfo]

I'm not sure what "moving the goalposts" means here. Do you mean that you're changing your retirement date because you want to get more conservative with your planning?

Moving the goalposts refers to setting higher targets, and leaving current AA intact.

Retirement timing is not tied to this per se, as I am already FI, but continuing to work for other reasons.

 

[Danmar]

Depends on a number of things. Can you productively spend more money than your plan in retirement? How do you feel towards your job? If you dont want to spend more or hate your job, stay the course. Retire sooner.

In my case I surpassed my plan by a wide margin and in the end was quite happy I had more funds available.

 

[audreyh1]

I do not think I in any way am misunderstanding the nature of taxation or how Roth conversions work.

But taxation reduces the incentive to work, and higher taxation reduces it more, which was my point.

Meh - being financially independent reduces the incentive to work. So the big question is do you have way more than enough? If so, why continue to work unless you love it?

 

[Bigdawg]

Depends on a number of things. Can you productively spend more money than your plan in retirement?

Productively? I can ALWAYS spend more money. Robbie help me out here.

 

[timo2]

There are a lot of people trying to move the goalposts all the time. Besides your own potential moving of them, there are the pensions that people expected that were cut or eliminated, there are various schemes by politicians at revising social security, medicare, or the ACA. Then there is the goal post destroyer: our own health issues.

 

[Danmar]

Productively? I can ALWAYS spend more money. Robbie help me out here.

I’m with you but there are many people on this site that profess they can’t.

 

[Texas Proud]

Do not think that there is only a tax issue with IRAs.... my taxable account has big gains if I sell anything... like 60% of whatever I sell will be a gain...

Since I am trying to keep income low for ACA credit and lower deductible I have a problem with this... plus of course the tIRAs and 401(k).....

I am actually using ROTH funds at times so I do not lose the HC benefits...

 

[Montecfo]

Meh - being financially independent reduces the incentive to work. So the big question is do you have way more than enough? If so, why continue to work unless you love it?

For me, that is not the big question, since I answered it already with my targets.

And working is not the question, since obviously I am working despite being FI (for reasons not tied to FI, and not at issue here).

The question is:

1. Won the game/Spike the Football/ more conservative on AA OR
2. Move the Goalposts-leave AA as is.

No one can answer this but me, but I am sure there are some valuable perspectives.

 

[walkinwood]

Re: having a more conservative asset allocation. Bengen and others have shown that SWR varies very little over a wide asset allocation spectrum, so if a more conservative asset allocation will make you feel better, it probably is a good idea. It comes at the expense of lower median end value of the portfolio, but it doesn't affect SWR that much.

But taxation reduces the incentive to work, and higher taxation reduces it more, which was my point.

I question this truism that I hear so often. Maybe it is true when you hit marginal rates are very high. But with today's tax regime that hardly seems to be the case to me - except at the very low end of the income spectrum, which is an absolute shame. It didn't affect my incentive to work at all. FI, on the other hand, did.

 

[Montecfo]

Do not think that there is only a tax issue with IRAs.... my taxable account has big gains if I sell anything... like 60% of whatever I sell will be a gain...

Since I am trying to keep income low for ACA credit and lower deductible I have a problem with this... plus of course the tIRAs and 401(k).....

I am actually using ROTH funds at times so I do not lose the HC benefits...

TexasProud, good point and yes I understand that. I am considering that same strategy up till Medicare. Definite balancing act.

 

[Texas Proud]

For me, that is not the big question, since I answered it already with my targets.

And working is not the question, since obviously I am working despite being FI (for reasons not tied to FI, and not at issue here).

The question is:

1. Won the game/Spike the Football/ more conservative on AA OR
2. Move the Goalposts-leave AA as is.

No one can answer this but me, but I am sure there are some valuable perspectives.

As long as you are working I would leave the AA the same.... no need to change what has been working...

 

[Montecfo]

Re: having a more conservative asset allocation. Bengen and others have shown that SWR varies very little over a wide asset allocation spectrum, so if a more conservative asset allocation will make you feel better, it probably is a good idea. It comes at the expense of lower median end value of the portfolio, but it doesn't affect SWR that much.

I question this truism that I hear so often. Maybe it is true when you hit marginal rates are very high. But with today's tax regime that hardly seems to be the case to me - except at the very low end of the income spectrum, which is an absolute shame. It didn't affect my incentive to work at all. FI, on the other hand, did.

I have read that regarding SWR. This has lead me to view that a 70%+ allocation to equities makes sense.

On taxation and FI, agree, both come into play. But as you move up in tax brackets, your efforts return less. The more you already have, the greater the disincentive.

 

[Mdlerth]

You've answered your own question

For me, that is not the big question, since I answered it already with my targets.

And working is not the question, since obviously I am working despite being FI (for reasons not tied to FI, and not at issue here).

The question is:

1. Won the game/Spike the Football/ more conservative on AA OR
2. Move the Goalposts-leave AA as is.

No one can answer this but me, but I am sure there are some valuable perspectives.

Re: having a more conservative asset allocation. Bengen and others have shown that SWR varies very little over a wide asset allocation spectrum, so if a more conservative asset allocation will make you feel better, it probably is a good idea. It comes at the expense of lower median end value of the portfolio, but it doesn't affect SWR that much.

As walkinwood points out, the SWR outcome is similar over a large range of AAs. So, as you are continuing to earn, it sure looks as if you've already decided to move the goalposts, creating a new target of "Very High".

Good for you! I know this forum strongly supports the early part of ER, but as long as you aren't tired of the j*b, I don't see anything wrong with wanting the retirement part of ER to be a bit more plush.

 

[ejman]

After such a long period of significant market gains the feeling of "I've won the game" is probably shared by many but I would advise that the feeling dissipates quickly once one is in the middle of a big long bear, the news are relentlessly bad and there is no bottom in sight.

At such times a more conservative AA helps a lot on the sleep at night department. Since SWR studies have shown that allocations of about 40-70% equities are roughly equivalent I moved my AA from about 80/20 to 50/50 as I ER'd 15 years ago. Although the 2008-2009 period was unpleasant, I did not sell during the period and therefore it was not a significant event in the scheme of things. People with very heavy equity positions that liquidated holdings however were permanently damaged.
It's easy to think now one would not panic and sell. Not so easy in the middle of the muddle.

 

[RobbieB]

I'm another that fails to understand why people don't want to make more dough because they have to pay more taxes.

 

[GravitySucks]

Move the goal posts and keep paying into SS.
Thank You.

 

[Montecfo]

As walkinwood points out, the SWR outcome is similar over a large range of AAs. So, as you are continuing to earn, it sure looks as if you've already decided to move the goalposts, creating a new target of "Very High".

Good for you! I know this forum strongly supports the early part of ER, but as long as you aren't tired of the j*b, I don't see anything wrong with wanting the retirement part of ER to be a bit more plush.

Well, the working is not part of the question. it is an independent variable. The question here is asset allocation.

 

[Sunset]

I wonder how OP will feel if next month the market enters a bear, say bonds drop 20% and stocks drop 40%.

Is OP close to the high target simply due to the sudden rise of the market or actual contributions ?

There is another choice for OP, if savings are great enough, and work is fun, how about making vacations more fun by really splurging on them ?

 

[Montecfo]

I wonder how OP will feel if next month the market enters a bear, say bonds drop 20% and stocks drop 40%.

Bear markets are part of investing. If not ok with that, then exit the markets.

Is OP close to the high target simply due to the sudden rise of the market or actual contributions ?

Saving and investing. Nothing heroic. Nothing sudden.

There is another choice for OP, if savings are great enough, and work is fun, how about making vacations more fun by really splurging on them ?

No plans to work longer tied to investments.

 

[Travelwanted]

For me, that is not the big question, since I answered it already with my targets.

And working is not the question, since obviously I am working despite being FI (for reasons not tied to FI, and not at issue here).

The question is:

1. Won the game/Spike the Football/ more conservative on AA OR
2. Move the Goalposts-leave AA as is.

No one can answer this but me, but I am sure there are some valuable perspectives.

Won the game means FIRECALC says you are good to go right? But, at what asset allocation? Make sure you run it with a lower AA if that is your plan.

**The default AA on FIRECALC is 70% equities

 

[FIREd_2015]

I chose to spike the football. All of my liquid assets are in cash or CDs. I still have a large market exposure though since my real estate holding (primary residence + 1 rental) account for about 50% of my NW. In the last couple of downturns the real estate market and the stock market have gone in tandem - at least in the SF bay area so I think of my allocation as 50% cash and 50% in the market.