Spanky said:
I am not sure about budgeting for a kid's wedding.
Well, ideally the kid is related to you. And if we want to invite a bunch of freeloading guests to watch our kids get married, then perhaps helping to pay for it is the polite thing to do. I'll subsidize our kid's first car, too, but it sure won't be a Bentley. And if the kid wants to use the wedding-party budget for bedroom furniture or money for a house down payment, then I can support that worthy goal.
The point is that many retirees fail to adequately capitalize their retirement portfolios because they don't consider the surprises. No one can. I could have brought up charitable contributions, replacing GE appliances every 11 months, or other scary capital expenses but very few retirees consider all the ways in which their retirement spending will change. The only way to handle surprises is to keep an "overcapitalized" portfolio that has more than you think you'll need.
Mister Bill said:
Be it 100% TIPS or a simple couch potato portfolio or the slightly more complicated "four pillars", I just want to put my retirement into some sort of investment and forget about it.
We all want to do that-- especially the retirees in the steel & airline industries who want their old pensions back. But being taken care of worries me far more than taking care of myself-- and if I'm gonna worry then I want to do it constructively. (Preferably with the helpful suggestions of this board's members.) Handling my own investments, or finding someone trustworthy to do it for me, controls that worry. Probably the best compromise is to pick an asset allocation and only rebalance when it really gets out of whack.
Mister Bill said:
I know that no projection of expenses is perfect, but I do feel I have a good handle on it since it is modeled on my expenses of the past 30 years factoring in additional costs due to aging. If anything, my standard of living may improve. My projected SWR will never exceed 2%. I've been retired for several years now and my actual withdrawal rate is negative (i.e. I'm still putting money into savings each year).
Well, past isn't necessarily prologue but a negative SWR will certainly cover that issue.
I have over 100,000 Quicken transactions covering a couple decades of spending, but it's worthless at predicting the future. (All I'm asking for is one set of quotes from tomorrow's market in today's news!) It sure can't forecast what new child-raising expenses we'll encounter or where our property taxes will go or whether one of us will need lifelong prescription medication & dialysis.
Mister Bill said:
Will I go broke with 100% TIPs at 1.75% yield and a withdrawal rate below 2%?
Well, yeah, you know the answer to that one. FIRECalc only guarantees withdrawals that exceed yields for a finite number of years. Hopefully your lifespan doesn't exceed that either, but do you really want to risk being wrong? Not invading principle principal will work just fine... but only if you have the opportunity to control your expenses. Life would be great without all those surprises.
Mister Bill said:
If there is a worry about inflation growing faster than the CPI, should I sit on cash til the yields on TIPs go back to 2.25% or 2.50% keeping the yield I receive higher than my portfolio withdrawal rate? (Cash sounds good to me!)
Well, you could do that, but then you'd have to keep an eye on the TIPS yield and time your entry successfully. Most of us don't care to do that, and I don't think you would either.
Mister Bill said:
If I don't need stocks, I don't want stocks.
We hear ya. But we're not trying to get you to buy stocks-- we're trying to persuade you of the benefits of asset allocation & diversification. That does not necessarily have to include stocks-- but it should include different types of bonds or bond funds of different maturities & qualities. It should probably also include REITs or REIT mutual funds, CDs of different maturities/yields, and commodities (or their mutual-fund equivalent).
Heck, it could even include krugerands-- I know a guy whose portfolio is 25% gold bullion, 50% commodities, and the rest in CDs. (He sold his home three years ago because the market was overpriced.) He probably buys shotgun shells, bottled water, & freeze-dried rations, too, but he doesn't have to agonize over the stock market. And he's diversified enough to take pleasure in watching some portion of his portfolio rise in value no matter what kind of day the world has.
There's a portion of a Four Pillars chapter where Bernstein designs different portfolios for different investors. You don't have to adopt one of those portfolios, but you can apply Bernstein's logic & methods to your own personal preferences to develop your own personal diversified portfolio. And then you only have to mess with it when it no longer meets your personal preferences.
Mister Bill said:
With a SWR of less than 2% and TIPS yielding 2%, will it work?
Well, again yes, but only if your expenses don't invade the principle and you don't outlive the decline. Rotsa ruck.
But, hey, I may not be the most credible source for this discussion. After all, I'm only 44 and I'm hoping to be tracking my expenses for at least another 60 years. But I do know a couple of credible sources-- go over to the
Vanguard Diehards discussion board and wave your 100% TIPS portfolio in front of SamBro (age 92), Taylor Larimore (age 80+), Mel Lindauer (retired and a big fan of bonds), & "Ol' Meph" (an expert on annuities). They may not be able to predict your future, either, but they can sure tell you what the roadmap looks like.