Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Question for those ER's that were 1 - 2 years out
Old 03-14-2017, 10:08 AM   #1
Confused about dryer sheets
 
Join Date: Mar 2017
Location: Mid Town
Posts: 2
Question for those ER's that were 1 - 2 years out

Ran the calculator and am feeling better under most if not all scenarios and resultant success rates. My plan is to call it quits in the next 24 months and have an AA over 85% equities.

At what point did you consider rebalancing toward an AA that would provide an income stream and protection from extrordinary market losses.
__________________

__________________
augam is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-14-2017, 10:13 AM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 36,452
Of course, it's up to you. Personally I started gradually moving from my accumulation phase AA towards my retirement AA about 3 years before I retired. That gave me some time to find out about how much my dividends would be, and what to expect from my new AA.
__________________

__________________


Retired in 2009 at age 61.

Mini-pension 13%, SS 20%, investments 67%.




W2R is online now   Reply With Quote
Old 03-14-2017, 10:20 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Jan 2011
Posts: 1,008
I don't remember what my exact pre-ER allocation was. But approximately 2 years out I had a call with my Vanguard adviser. I told him I knew I was financially good to go, so I didn't want anything to f&^% it up. We went to a 55/45 allocation based n my wishes and needs. YMMV.
__________________
mystang52 is offline   Reply With Quote
Old 03-14-2017, 10:28 AM   #4
Thinks s/he gets paid by the post
2017ish's Avatar
 
Join Date: Apr 2012
Posts: 1,439
I started buying some fixed income in 2013--about four years out. I keep trying to succeed at that, but sort of stuck between 20-25% right now. Still better than the 100% equity that we had up until 52/53, I guess. [maybe will get easier to buy FI once we quit this summer?]

Income stream hasn't been a concern to us--if it were, we'd have to be far heavier in FI than justified by DW's life expectancy. FI is protection; the amount we have now is sufficient for 10 years post retirement if we cinch our belts a bit, or 6 with travel spending. Either should get us past the worst of a crash.

____________
E.T.A.--FWIW, no pension; social at 70 to the extent that it might be there; big HELOC line set up just in case ...
__________________
OMY * 3 2ish
2017ish is offline   Reply With Quote
Old 03-14-2017, 11:26 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 17,131
I think people stress about this way too much. Even 85% in retirement I think is fine, if you are Ok with it.

People will say they don't want to sell stocks in a downturn - OK, don't. Let's say your portfolio kicks off 2.5% in divs, and you need 3.5%. In a 10 year downturn, you only need to pull ~ 1%/year from principal. So pull it from the fixed income side, and even over 10 years, you don't need to sell any equities, and you'd still have some fixed income buffer left, even at a starting point of 85% equities.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-14-2017, 11:32 AM   #6
Administrator
Gumby's Avatar
 
Join Date: Apr 2006
Posts: 9,556
I am two years out and have changed my after-tax savings to cash accumulation. Prior to this, we have been mostly fully invested and have carried very little cash. I expect to have at least a full year of expenses in cash when we do retire. Given that our pensions should cover our full expenses, an extra year in cash should be adequate to meet any exceptional expenses without a need to sell assets at a bad time.
__________________
Living an analog life in the Digital Age.
Gumby is online now   Reply With Quote
Old 03-14-2017, 11:41 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Nov 2009
Posts: 3,387
Quote:
Originally Posted by augam View Post
Ran the calculator and am feeling better under most if not all scenarios and resultant success rates. My plan is to call it quits in the next 24 months and have an AA over 85% equities.

At what point did you consider rebalancing toward an AA that would provide an income stream and protection from extrordinary market losses.
My AA change was very sudden and part of my overall ER plan. When I ERed in late 2008, I cashed out my company stock, which was about 1/3 of my total portfolio, and bought shares in a bond fund, instantly transforming my AA from a stock-oriented one to a bond-oriented one.

I have different AAs in the two parts of my portfolio now. My (rollover) IRA is about 45/55 S/B while my taxable account is about 37/63 S/B. I won't be touching the IRA for at least another 6 years (when I can withdraw from it in an unfettered manner) but I use my taxable account to generate income to cover my daily expenses. Two different investment objectives, 2 different AAs.
__________________
Retired in late 2008 at age 45. Cashed in company stock, bought a lot of shares in a big bond fund and am living nicely off its dividends. IRA, SS, and a pension await me at age 60 and later. No kids, no debts.

"I want my money working for me instead of me working for my money!"
scrabbler1 is offline   Reply With Quote
Old 03-14-2017, 11:53 AM   #8
Thinks s/he gets paid by the post
SecondCor521's Avatar
 
Join Date: Jun 2006
Location: Boise
Posts: 2,062
I moved from 100/0 to 90/10 on 6/2/2016, which was about 3 months after I officially retired and about 6 months after I stopped working. It worked out fine for me, but reallocating in the years before FIRE is much more prudent.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
SecondCor521 is offline   Reply With Quote
Old 03-14-2017, 12:39 PM   #9
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,250
I started reducing my AA about 2 years out, from 82% to 61% now. I'm 2.5 weeks to RE.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 03-14-2017, 04:56 PM   #10
Dryer sheet wannabe
 
Join Date: Jan 2017
Posts: 24
~2 years out assuming I can make it that long. Some days this site is primary source of sanity for me while at w*rk.

Currently at 55/0/5 (s/b/c) and the remaining 40 in rental properties. Planning to transition gradually to 85/12/3 after ER to minimize tax impact of divesting the rental property.

Quote:
Originally Posted by ERD50 View Post
I think people stress about this way too much. Even 85% in retirement I think is fine, if you are Ok with it.

People will say they don't want to sell stocks in a downturn - OK, don't. Let's say your portfolio kicks off 2.5% in divs, and you need 3.5%. In a 10 year downturn, you only need to pull ~ 1%/year from principal. So pull it from the fixed income side, and even over 10 years, you don't need to sell any equities, and you'd still have some fixed income buffer left, even at a starting point of 85% equities.

-ERD50
Similar to @ERD50's thoughts, we have set a FIRE target WR of 3.5%. The 12/3 in short-term fixed income/cash plus dividends should conservatively allow at least 6 years before selling equities in a major market downturn. This "bookending" approach where AA is allowed to float within a range (even to 100/0 in a very bad market if necessary) and only rebalanced to a target of ~85/15 when times are good seems to have a lot of merit.

James Cloonan's newest book Investing at Level3 has an example of this approach on pp 166-7. He ignores dividends, but does show how a year-end 80/20 AA (in a normal market, you start the year with 75/25) with a 5% WR (n.b., I do NOT advocate a 5% WR, but this was in Cloonan's example) would have survived in the 2008/09 recession and have recovered to the original value by 1/1/2013.

Here's a shortened version of Cloonan's example, scaled to an initial 1000 total portfolio value with S portion in an S&P 500 index fund, B portion in safe assets returning 4%, and yearly spend of 50:
Start of Year S B Total
2008 750* 250 1000
2009 473 158* 762
2010 598 114* 817
2011 688 69* 775
2012 702 22* 837
2013 675* 112 1010
* indicates source of cash on Jan 1 for yearly spending

Haven't yet taken the time to look at other challenging historical periods.
__________________
DrBrisket is online now   Reply With Quote
Old 03-19-2017, 05:02 PM   #11
Thinks s/he gets paid by the post
 
Join Date: May 2014
Location: Utrecht
Posts: 1,838
Is that inflation adjusted?
__________________
Totoro is offline   Reply With Quote
Old 03-19-2017, 07:06 PM   #12
Recycles dryer sheets
 
Join Date: Apr 2016
Posts: 153
I am in the middle of a five year (or thereabout) gradual shift from about 70/30 toward about 45/55, with a goal to retire at that allocation, roughly. As much as possible I'm doing this by investing new dollars on the fixed income side, rather than selling stock. (Trying to minimize capital gain). The buoyant stock market is a complication, in my effort to shift in the direction of fixed income, though of course a welcomed one.

I'm tempted to move a little bit further in the direction of fixed income, or at least move to my goal little bit faster. I am sure I am leaving some value on the table. But, as a wise friend of mine told me, "there is no reason for you to continue to play the game once you have won it." At this point, I'm thinking that it does not make sense for me to take much more risk than I need to.
__________________
medved is online now   Reply With Quote
Old 03-19-2017, 07:13 PM   #13
Full time employment: Posting here.
 
Join Date: Dec 2010
Location: SoCal
Posts: 852
I'm almost in the same situation, i.e. about 24 - 36 months from ER or S-ER by choice. I've started to look closer to my desired asset allocation, which is high in stocks.

My personal details that I've considered:

- Rental income and cash in taxable accounts to weather a downturn without adjusting my family's lifestyle, so I'll probably keep a high stock %
- My SWR is targeted at or below 3.0%
- My current job skills allows for contract work at $75 +/ hr pay so if I have to return to work vs selling stocks, I can/might
- In 2 years, I'll be 50 years old, so 12 years from a small pension and 17 for SS, so I'm not counting on it.
- Kids' college funds should be fully funded within 24 months, but they are still young
- Potential assistance to aging parent

With the above, I think I'll stay in in the 75 - 85% stocks, but it's probably 65% of my NW.
__________________
Aiming_4_55 is offline   Reply With Quote
Old 03-19-2017, 07:15 PM   #14
Thinks s/he gets paid by the post
Ready's Avatar
 
Join Date: Mar 2013
Location: Southern California
Posts: 1,369
I cut back to 60% equities as I got close. I would not feel comfortable with 85% equities if I was within a few years of retirement, but everyone has a different tolerance for risk.
__________________
Ready is online now   Reply With Quote
Old 03-19-2017, 07:59 PM   #15
Recycles dryer sheets
Dd852's Avatar
 
Join Date: Jul 2013
Location: In the long process of moving to UK
Posts: 178
I'm five years into ER - we've moved from between 65-70% equities to about 55%. My big moves were at the end of last year and the beginning of this as I've felt the election-related jump is going to have a sharp pullback. If I'm wrong and equities go back up to 60% I'm fine with that too but I wanted to have a bigger margin of safety. Fundamentally we don't need to add to our stash, just keep up with inflation at this point.
__________________
Dd852 is offline   Reply With Quote
Old 03-20-2017, 12:07 AM   #16
Recycles dryer sheets
 
Join Date: Mar 2014
Location: Shelton, Washington
Posts: 56
I am three years into ER, had an allocation of 65/10/25 equity/bonds/cash and have largely stuck with it since around 8 years ago, ER'd at 52
__________________
Jaded salami is offline   Reply With Quote
Old 03-20-2017, 08:28 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 14,292
Quote:
Originally Posted by augam View Post
Ran the calculator and am feeling better under most if not all scenarios and resultant success rates. My plan is to call it quits in the next 24 months and have an AA over 85% equities.

At what point did you consider rebalancing toward an AA that would provide an income stream and protection from extrordinary market losses.
I didn't care about an income stream.. and still don't... I'm a total return investor. I hold fixed income to provide stability... not for income.

I was 100% equities until my 40s and then started putting new money (contributions) into fixed income until I reached my 60/40 AA target.

If you start putting new money into fixed income that would be a start.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is offline   Reply With Quote
Old 03-20-2017, 08:41 AM   #18
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
harley's Avatar
 
Join Date: May 2008
Location: Following the nice weather
Posts: 6,173
I was 75% equities/25% cash when I retired. Due to some real estate transactions I ended up about 40/60 a few years into retirement. It's taken awhile, but I'm now about 50% equities, 5% bonds, 15% cash, and 30% rental real estate. That's the direction I took for creating an income stream. It's worked out pretty well, but I'm going to be selling one of the places this summer. Once I get that money invested I should be around 65/5/10/20, which is a better AA for me. Still enough income to minimize my withdrawals from my equity portfolio, without being too heavily locked into real estate.
__________________
"Good judgment comes from experience. Experience comes from bad judgement." - Will Rogers
DW and I - FIREd at 50 (7/06), living off assets
harley is online now   Reply With Quote
Old 03-20-2017, 09:16 AM   #19
Recycles dryer sheets
 
Join Date: Aug 2013
Posts: 90
We were 80/20 for the most of our accumulation years, went to 70/30 4 years ago, and went to 60/40 in Nov 2016. We are 12-18 mos from retirement.
Although, I think we may be a bit too conservative since DH will have a $45k pension at retirement, we could probably move to 65/35.
__________________
whatnot is online now   Reply With Quote
Old 03-21-2017, 11:36 AM   #20
Dryer sheet wannabe
 
Join Date: Jan 2017
Posts: 24
Quote:
Originally Posted by Totoro View Post
Is that inflation adjusted?
I assume you are asking about the table in my earlier post in this thread.

The short answer is no, the withdrawals are not inflation adjusted in Cloonan's example. Inflation was relatively mild during the Great Recession linky:

Year Inflation (%)
2008 3.8
2009 -0.4
2010 1.6
2011 3.2
2012 2.1
2013 1.5

I agree that inflation should be taken into account, but in this example, it would not have made a huge difference.
__________________

__________________
DrBrisket is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
"Those were the days...." Lcountz Other topics 10 06-02-2016 03:58 PM
To those of you who are/were self employed laurence FIRE and Money 11 04-14-2006 09:55 PM
Are you better of than you were 4 years ago? GTM FIRE and Money 8 01-08-2005 06:30 AM

 

 
All times are GMT -6. The time now is 07:25 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.