50% stocks
40% bonds
10% cash
Stock breakdown 30% S&P, 10% small cap/value, and 10% international.
Bonds are 20% each short term and intermediate term bond funds.
Cash is a mutual fund. Annually money will move from stocks to bonds to mutual fund to checking account as I rebalance after withdrawing.
Does this sound workable?
Not interested in chasing a sector.
RatherBFishin;
Looks like a good plan, and the 4% approach you follow makes sense to me. Not everybody is comfortable dialing up and down their spending to accommodate a bad year in the markets, so that is good if you have the flexibility in your budget to expand and contract like that.
I like your portfolio, though after reading Bernstein I am always looking for a few other asset classes that have low correlations with the main stock and bond markets. To that end, commodities, real estate, oil & gas, private equity and market neutral hedge funds are the ones I have picked, and together they make up 20% of the portfolio.
I would think you could drop your cash down to 4% or even zero, and just withdraw from your probably overly-generous short-term bond funds when and if you needed. You'll already be generating cash through the dividends, capgains distributions, interest from the FI, that sort of thing, (probably about 2-2.5% per year even without capgains distributions) with sales of appreciated assets culled at rebalance time to make up any cash shortfall.
That would free up your 10% cash right there for applying, say, to REITs and Commodities, although of course they will seem expensive to get into today, and I am not about to advise anyone on market timing issues for getting into a new asset class (except perhaps to suggest you nibble away at it over a year or two if you are really concerned until you reach your full allocation)
Since you have short term bonds at 20% you are already very conservative, making the need for cash even less in my opinion. You could take another bit out of that short term bond area, putting some of that into perhaps some other bond categories, GNMA, Junk, Foreign bond to get a little more yield.
At this point, 30% cash and short term bonds seems like asking to underperform. With 4% withdrawal you also need to set aside another 3% for inflation. That means you need 7% total portfolio expected return plus fees (say 7.5% overall to be safe). You might find that your current allocation doesn't quite reach that mark, I am not sure, and if not then you are actually set to slowly eat away at principal, on a historical expected returns basis, which is not a great thing.
Do you have expected returns data for your various asset classes? Then you can get a weighted average of them and decide whether the long run expected return on your portfolio is at least 7.5% Let me know if you need them and I can rustle something up. (When some people do these sorts of calculations, they substitute the actual prevailing yields in cash and short term bonds for the long term returns from those asset classes, since there is little to no chance that those returns will surprise on the upside, unlike stocks where you can get any return any year and the historical data are a useful guide.)
The value, small and international tilts on the equity side are good, imo, and the 50% equity feels good to me. Early retirees put a big premium on sleeping well at night.