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Old 06-03-2016, 11:56 PM   #21
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First of all investing in a CD ladder is investing, and if we have negative interest rates for 20 years, your CD ladder is going to lose you a lot of money.

Inflation will kill your pile of cash, inflation can easily go to 12%, and there is nothing except belief to stop inflation going to 100% (where your pile of cash is worth 1/2 in a year). Other countries have had worse inflation.

As others have said, if you are shy of stocks (which are taxed very low or not taxed at all), then do 30% stock (broad based etf like VTI) and 70 interest and pay more in taxes.

Finally, I'm not sure you really are doing the math correctly, either you live like a pauper, or you miscalculated as you would need many millions to get by the next 30 years with your plan.

If you do have many millions then invest in VTI and you can live off the dividends and pay no FED income tax, and does not matter if stocks go up or down.
Example: 4 million * 2.08 Div yield = $83,200 tax free per year (actually will increase each year on avg.)
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Old 06-04-2016, 12:00 AM   #22
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Originally Posted by Seattle View Post
All of your feedback has been greatly appreciated. I think there are some very valid points that have been made and something I will consider.

If I was to boil it all down - I truthfully just don't trust the stock market in any way right now and I think everything is being manipulated. I don't buy into the "historic returns of the stock market" rhetoric because all things are not created equal. They didn't have the manipulation, the high speed trading, hedge funds, the debt, the Fed, negative interest rates, historic political instability and infighting, private equity limiting IPOs etc. in the 1920s that we are dealing with today. I agree with Bill Gross that the times have changed and in this case, history should be taken out of the mix.

I have worked very hard to accumulate a large amount of cash and I do not want to subject it to manipulation and significant loss which I think is a significant possibility...why do it when you don't have to?

So, that is the reason for my post - just came from utter frustration. I even think the conservative 50/50 portfolio is going to be in for a significant surprise by the combination of rising interest rates and stock market manipulation...but that's just me...maybe I just need a really good correction so I can have a better buy in price lol...

Keeping the powder dry for the time being and sleeping pretty good at night...

But thanks to all for the insight. I really need to digest and think about the comments because a lot of very good advice. Really appreciate it.

If you are really this paranoid about the market, then you can just stay out... it has worked for you so far...

For me, about 50% of the money I have is due to gains from the market (maybe more... actually, probably more)... I would not be 'retired' if not for my stock investments...

So far my horse has been winning for me.... I plan to keep riding it...


BTW, I do not think with the way you describe the market that you need to keep powder dry... there is little chance of you getting in no matter what level it is at... heck, in 2009 the market was really cheap... and it seems you did not buy at that time... you could have doubled your money... but, you got maybe a 20% gain (or less)....
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Old 06-04-2016, 12:44 AM   #23
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IMO, if you want to see a truly manipulated market, look to China, or to a lesser extent, Japan. For the US market, i see more good years than bad ahead, and so will remain anywhere from 40% to 60% in the market throughout my retirement. As others have said, tho, do what you are comfortable with. Because of inflation mainly, as I have only seven digits, not eight, i really have little choice, anyway, other than to remain in, to a degree.
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Old 06-04-2016, 12:59 AM   #24
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Would you still invest if you didn't have to? If so, why?

Thoughts?
We invest using more or less a liability matching strategy and do not have much in stocks:

https://www.bogleheads.org/wiki/Matching_strategy

For us actually in hindsight I would not have invested in stocks much if at all. I don't like the ups and downs. Well, the ups are okay. We made enough from our human capital and our run rate is low enough that I don't think we ever really needed to invest in stocks in order to be FI.

Bill Bernstein calls it the if you've won the game stop playing approach:
http://whitecoatinvestor.com/bernste...-win-the-game/
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Old 06-04-2016, 02:35 AM   #25
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My husband is in the same boat. His account is 25% stock and 75% G fund. I'll wait until I come back to the states before I make any change. But we do not depend on the stock market for living.
However I invest in stocks just in case. I'm still experimenting with ways to earn more than CDs with less risk.
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Old 06-04-2016, 03:59 AM   #26
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I truthfully just don't trust the stock market in any way right now and I think everything is being manipulated.
What Cash pays (and value of cash) is manipulated significantly more then returns of equities.

Fed and World central banks pretty much decide such things And don't expect from then any help in next 10 years. By then your pile of cash will shrink by 20-30 percent courtesy of inflation.

Those guys will first worry about companies which employ people and only after that they will care about Grandpas CD rate.
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Old 06-04-2016, 06:33 AM   #27
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Since you are talking about a CD ladder vs purely cash, you should be able to keep up with most inflation. The one risk I would worry about is that if some expenses (medical) are going up much more rapidly than CPI (and therefore CD rates) and you are a bigger consumer of that item.

I guess I would play around with some scenarios of negative real rates and see how much of a buffer you have. You have worked hard to get to retirement, if it helps you enjoy retirement, I say go for it with eyes open.


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Old 06-04-2016, 07:09 AM   #28
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I would invest but just at a lower percentage. In fact, over the many years I moved from close to 90% equities to currently around 43%. Once I retire I may reduce that to around 35%. Given a current high salary and low expenses it is easy to cover losses losses through savings, so investment losses are not a great impact, but that will change after I retire.

I understand the market ups and downs, have invested through the 87 crash, early 90s recession, early 2000s bubble, and 2008 meltdown, so I'm used to it. I just look at "how much am I willing to lose and still be comfortable, and it is work the risk?" to determine my investment level. I'll certainly lower it over time but will always willing to take a risk and have some percentage invested.
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Old 06-04-2016, 07:31 AM   #29
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Quote:
Originally Posted by daylatedollarshort View Post
We invest using more or less a liability matching strategy and do not have much in stocks:

https://www.bogleheads.org/wiki/Matching_strategy

For us actually in hindsight I would not have invested in stocks much if at all. I don't like the ups and downs. Well, the ups are okay. We made enough from our human capital and our run rate is low enough that I don't think we ever really needed to invest in stocks in order to be FI.

Bill Bernstein calls it the if you've won the game stop playing approach:
Bernstein Says Stop When You Win The Game | The White Coat Investor - Investing And Personal Finance Information For Physicians, Dentists, Residents, Students, And Other Highly-Educated Busy Professionals
I'm in Bernstein's camp. I did invest in stocks when I was young, somewhere around 80/20 up into my early 40's. Then gradually cut back as I reached retirement. I'm more like 20/80 now. I could invest more in stocks and still have enough in 'safe' stuff to take me to the house, but my current allocation is my sweet spot for sleeping well.
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Old 06-04-2016, 07:33 AM   #30
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With a 40-50 year time horizon and inflation currently running around 3% officially* (and many of our personal expenses increasing at a higher rate), putting my assets in cash or short term debt instruments yielding less than the rate of inflation is deliberately choosing to lose money. I would need one humungous nest egg to accept this kind of investment proposition.

Over the longer term, I sleep much easier with exposed to market risk associated with equities and real estate.


* inflation is a bit higher out here in HK than in the US and inflation linked securities are not readily available.
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Old 06-04-2016, 07:41 AM   #31
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This question seems to come up from time to time in one way or another by a brave individual willing to ask.

Did a quick search.

Check out this link.

How Much Is Enough for Game Over Won!!
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Old 06-04-2016, 08:20 AM   #32
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First of all investing in a CD ladder is investing,
+1. I think a laddered portfolio of CD's would be accurately characterized as a high-quality, fixed-rate bond portfolio with maturity dates ranging from zero (true cash) to 10 years.

Here's an article that the OP might find interesting, using 100% TIPS:
Higher Safe Withdrawal Rates from a 100% Bond Portfolio? | Investing For A Living

Taxes would be a non-trivial issue with the TIPS approach. I understand an annual tax is due on any appreciation of the principal value.
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Old 06-04-2016, 08:28 AM   #33
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I don't like lazy money, and cash is lazy money.
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Old 06-04-2016, 08:41 AM   #34
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Inflation is the killer. If you can find a way to hedge inflation such as purchasing cost of living adjusted annuities, your plan will definitely work.
I agree- COLAed annuities! It's not what I'd do personally (for many of the reasons already mentioned), but it will achieve the OPs objectives. Well worth it if that's what lets them sleep best at night!
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Old 06-04-2016, 08:43 AM   #35
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Would you still invest if you didn't have to? If so, why?
Yes. But I would approach from a different angle: making the future happen by doing angel investment or capital allocation to improve society. Or charitable giving.

Quote:
Originally Posted by Seattle View Post
So the fundamental question is "why invest if you don't have to?" I just love the idea of pulling out cash every year to live comfortably and never having to look at the market again
You can invest and not look at the market. In fact, you'll probably do better than most that way. If you have plenty of buffer that'll work.

I don't get why you would lose sleep with equities, and not with CDs. The main enemy you are dealing with in your context is inflation. CDs don't give you that protection, especially if you are only invested in one currency.

TIPS may do so, equities too, REITs, ..
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Old 06-04-2016, 08:48 AM   #36
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I agree- COLAed annuities! It's not what I'd do personally (for many of the reasons already mentioned), but it will achieve the OPs objectives. Well worth it if that's what lets them sleep best at night!
I wouldn't do that at all in this situation.

Instead of losing sleep over the stock market or inflation you should now lose sleep over counterparty risk.

Not to mention bad deals you'll get at a young age, with high overhead costs.
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Old 06-04-2016, 09:00 AM   #37
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History has not been especially kind to those that put all their eggs into one basket, especially when that basket is fixed income. The same holds true for poker players. The best way to reduce risk in a portfolio is not by increasing fixed income or indexing, it is through diversification.
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Old 06-04-2016, 09:21 AM   #38
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Originally Posted by Sunset View Post
....

If you do have many millions then invest in VTI and you can live off the dividends and pay no FED income tax, and does not matter if stocks go up or down.
Example: 4 million * 2.08 Div yield = $83,200 tax free per year (actually will increase each year on avg.)
Really? We have rental and interest income that gets taxed, but are you saying dividends aren't taxed if you have no other income?
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Old 06-04-2016, 09:23 AM   #39
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I have worked very hard to accumulate a large amount of cash and I do not want to subject it to manipulation and significant loss which I think is a significant possibility...why do it when you don't have to?

So, that is the reason for my post - just came from utter frustration. I even think the conservative 50/50 portfolio is going to be in for a significant surprise by the combination of rising interest rates and stock market manipulation...but that's just me...maybe I just need a really good correction so I can have a better buy in price lol...

Keeping the powder dry for the time being and sleeping pretty good at night...

But thanks to all for the insight. I really need to digest and think about the comments because a lot of very good advice. Really appreciate it.
I'm in a similar situation with annual WR<0.5% and unlike many here I have no issues with gradual depletion, so if inflation stays flat, it should last the next three decades even at today's CD rates. But I still invest mostly in small cap stocks, and I continue to work full time. For me life would be boring without the stimulus from watching the market action in between the proverbial fighting fires on the work front. I guess I'm a shopaholic but not into stuff or experiences, I like to buy shares. It's a kind of virtual garden but where all the work is in the selection. My biggest shortfall is in harvest timing...

I wonder whether the utter frustration you mentioned suggests that you don't actually intend to stay out of the stock market for the rest of your life? And your use of the term "dry powder" sounds like you really want in, but at a lower price than today? Would a repeat of the 2008/2009 correction make the stock market more trustworthy at the bottom? If what I'm suggesting is involved, then you're committing one of the cardinal sins on this board -- namely 'market timing' and doing this in a binary manner (as opposed to fractionally via 'asset allocation') will likely make your returns an outlier, for better or worse. Most retirees don't care about top returns but are strongly averse to hitting bottom-- so they tilt towards the middle. An undiversified all cash portfolio implies a lot of faith in greenbacks.

As far as trust goes, my own experience in rising living expenses over time doesn't match the headline inflation numbers-- and it's definitely not lifestyle creep. I'm not claiming manipulation, just that my basket is probably different than most, or whatever. If we ignore historical views, how can we be sure we have enough going forward to walk away from investment returns? Or our W2 wages for that matter? Having CDs as sole breadwinner sounds less secure to me.
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Old 06-04-2016, 09:24 AM   #40
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I wouldn't do that at all in this situation.

Instead of losing sleep over the stock market or inflation you should now lose sleep over counterparty risk.

Not to mention bad deals you'll get at a young age, with high overhead costs.
True, but you can mitigate that risk by using several providers.
If you truly have enough cash and you don't worry about leaving anything to your heirs, then it won't matter if you get a "bad deal" - s long as that deal guarantees to cover your needs.
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