After a great year of returns, second guessing AA

[PoorOldCountryBoy]

Quote:

Originally Posted by DawgMan At the end of of every year I update all of my investment accounts to reflect their changes in value, update my overall NW, write out an annual and multi-year plan showing where projected balances will hopefully be in the future based on relatively conservative/realistic return expectations, and then do my once a year rebalance. While I obviously look at my accounts during the year, I like to wait until the end of the year to "surprise" myself (hopefully pleasantly surprised) to see if I hit my plan from 12 months prior. This year was off the charts positive which has me rethinking my AA going forward. I would love to get some feedback from you all and am guessing some of you may be asking yourself similar questions. Here is my situation... - My plan is to RE in 2yrs (last kid out of 4 will have graduated college) at which time I will be 55. Self-employed, job currently very lucrative/flexible and generally enjoyable, but cyclical and see it potentially becoming more like work again in another couple of years. All my RE income will come from my investments (no pensions, annuities, not counting on SS at this point). - I have run some projected RE budgets a few ways including A) SHTF very basic expenses, B) Very reasonable budget doing basically what I think I want to do/afford, and C) Budget B ++++. My expenses/budgets would probably be perceived as excessive by many on this site and are driven by wants, not needs (no debt). My plans have me basically underwriting the 4% rule for budget C), however, budget B) is closer to 3.3% and budget A) would be sub 3%. - I have been running with a 60/40 AA and my original plans were to stay the course at 60/40 throughout RE, however, I am starting to rethink this after this crazy positive run in 2017 and looking at some big balances (bigger they are, bigger they fall!). Technically, I have "won the game" now and could shut the doors today, but perhaps for OMY reasons, near term market drop fears, and what I noted above, I am inclined to stay the course for the next 2 years. Additionally, I am still exploring my "retire too" ideas. For those of you who have "won the game" particularly in your younger 50's (or younger), how conservative are you going with your AA? Obviously, you in theory have less volatility and upside going to say 50/50 from 60/40, but then again, you have longer time horizon to fund. Tools such as FireCalc are obviously very helpful to providing some confidence as also I suppose mentally keeping X years of expenses earmarked to run through recessions/down markets can help. I realize everyone has their own risk tolerance that has to taken into account and its easy to over analyze here, but it none the less begs the question as to how conservative of an AA will really get the job done?

RE at 50, now 53. For me 3% withdrawals were the goal. Even in todays market you can get 3% off long term investments. I've divided things into 6 buckets, approx. the same. I can live off the first 2 for at least 15 years at a 3% withdrawal rate. #3, Social security will take care of the shortfall as time goes on. The other 3 are "insurance". My guess is that something bad will happen and one of them will be needed, and the last 2 will be the "extra".


1 Taxable accounts to get DW and I through to 59.5
2 Rollover IRAs that are on 72t withdrawals until 59.5
3 Social Security starting at 63 +/-
4 IRAs for Long term retirement.
5. A TIAA/CREF conservatively managed fund (40% annuities, 15% Real estate, 25% Stocks, 20% bonds). The annuities are more like CDs paying 3.9%, which I could get out of. This is a great deal through a previous employer of mine.
6. Real estate - live in it but it is the final "firewall" for LTC issues, etc. I could sell and live in a small place or apartment. This is a great inflation hedge.

Also worth mentioning is that I started an HSA when retiring, and hope that will cover most of our LTC needs. I assume approx. 3 years in a nursing home is about right, you can drive yourself nuts worrying about catastrophic care issues, but those are really 1% possibilites

[Golden sunsets]

Quote:

Originally Posted by DrRoy I RE'd last year at 57. With a pretty free budget DW and I only need a WR of 1.5%, so we 'won the game'. Over the year I dropped my AA from 61 to 59 as the market rose. My plan is to drop another 1% for each 250 point rise in the S&P 500, to 55% as a floor.

We are in a similar situation. SWR of 1.2% last year. We have a bond ladder in our IRA's that match our RMD's out 8 years at this point. We have been reducing our AA equity portion by 1% each year until we reach 50%. Three more years to go.


Sent from my iPad using Early Retirement Forum

[phil1ben]

I am 57. I sold my business in June 2016 and fully retired in January 2017. We have two sons. One has left the nest and is gainfully employed and the other is a junior in college. It has been 1 year since I fully retired. Suffice it to say, I do not miss running a business. It was the right time for me to let it go. I had never had more than 5 days of vacation in a row since I finished my education (less than 2 weeks per year). This past year we were away 64 days (not in a row).

I have a very conservative asset allocation and have throughout my life. Despite my retirement, I will not need any of the income from my assets for 3 1/2 more years because I am still receiving a payout from the Buyers for the sale. Thereafter, although my expenses are also high, I will only need about 50-60% of the income generated by the below portfolio. Excluding primary residence and vacation homes my asset allocation is:

Individual Stocks: 26%
Individual Municipal Bonds: 28%
Cash (MM and CDs): 26%
Investment Real Estate: 20%

[CyclingInvestor]

Quote:

Originally Posted by Montecfo Cycling, thanks for the response. How many positions do you hold in this category of dividend royalty?

A lot more than I used to. While I was still trying to "win the game" I usually had about a dozen. Currently I own 39 stocks, all of the same "growing dividend" type"