Hi, I could use some help and reassurance...

[MercyMe]

I agree, skip the REITs. You could consider munis in the taxable account - perhaps a ladder of individual bonds for now, and then simplifying to something like VWALX once we get to stable rates.

Hmmmm... seems like the consensus of opinion is to skip the REIT. I will look a bit further and make a decision soon.


We were heavily allocated to VWIUX (tax free intermediate bond fund) until late last year. I shouldn't have timed the market (worrying about rising interest rates), but I did and so I sold that fund to cash. It's still sitting there waiting. As they say, getting out of the investment is half the problem with market timing. The other half is timing to get back in.

 

[OldShooter]

Thank you. I've read 30+ books investing within the last few years thanks to our local library. Ferri, Bogle, Larimore, Zweig, Brennan, Malkiel, etc. That is largely why we have the investments we have..

I've not yet read Coffee House Investor yet. Thanks again.

Good job! Very impressive. Schultheis will be the first financial author who gives you a recipe for pumpkin pie!

I'll give you another that is off the beaten track a little bit: "Unconventional Success" by David Swensen. It's a little older but has lots of great information and is an easy read. Swensen is the recently deceased miracle man of the Yale endowment, writing for individual investors

Hmmmm... seems like the consensus of opinion is to skip the REIT. I will look a bit further and make a decision soon. ...

The real question IMO is whether you are an investor who wants to make sector bets or not. REITS are simply one of the sectors we own in any total market fund. You can decide to overweight or underweight any sector. Nothing special about real estate.

The quilt charts that I am sure you have seen make the futility of sector bets clear to me, but lots of people do it.

 

[MercyMe]

Good job! Very impressive. Schultheis will be the first financial author who gives you a recipe for pumpkin pie!

I'll give you another that is off the beaten track a little bit: "Unconventional Success" by David Swensen. It's a little older but has lots of great information and is an easy read. Swensen is the recently deceased miracle man of the Yale endowment, writing for individual investors

The real question IMO is whether you are an investor who wants to make sector bets or not. REITS are simply one of the sectors we own in any total market fund. You can decide to overweight or underweight any sector. Nothing special about real estate.

The quilt charts that I am sure you have seen make the futility of sector bets clear to me, but lots of people do it.

Thanks! I will look for a copy of "Unconventional Success".

I know that quilt chart all too well, but I'm still drawn to REIT's just a little.

 

[MercyMe]

3. I found a problem in FIRECalc. On the last tab, click on the radio button just to the left of Spending Level near the bottom of the Investigate Tab and then click on Submit. You need to open up the spigot and spend more... you worked hard and saved and invested well, now enjoy it.

Thank you.

Yeah, I know. I try not to look at that output. The $193k at a 100% success rate scares me. My spouse and I are a recipe for hyper conservativism (aka worry)... we both grew up at or near poverty, we both watched older family succumb to medical bankruptcy, and we're business owners. I read somewhere those factors tended to make people worry too much about money.

 

[imnontrad]

I think you have more than enough to retire now, especially if you can sell your business to someone else.
One advantage of retiring now is to have more time before you reach 63 to convert pre-tax accounts to Roth. This should not only lower future taxes but also decrease the probability of Medicare premium surcharge (IRMAA). This is especially important after one spouse dies - AND to any heirs.
Yes, you find that what you spend will change. Some expense categories may go up (travel, hobbies) and others go down (cooking at home vs restaurants, clothing budget).
You might even consider exploring the world by becoming Expats (full or part time) or travel by RV around the US/Canada.

you may find that it will take longer to sell your business than you expect And you may find out that you will not find a buyer until you lower your price. I even knew once a large, well known business that finally closed because they could not find any buyer interested. So you may want to contact an attorney/CA that works with small businesses to get all the books, etc. in order for a sale and start putting out the "for sale" sign.

 

[gooddog]

It is often the case when people first come on this board that they have been flying solo in thinking about retirement. The vast majority of the population does not think about it at all and they have no one to talk to about their hopes and dreams and fears. So when they first post, we may think their concerns odd or exaggerated. But that's because we have been members of this like minded community and have had the benefit of discussing our concerns with others who will consider them seriously at the least and who have likely faced and conquered them. So I try to cut our new posters some slack. I strongly advise that others do the same.

Agreed. Definitely true.

 

[imnontrad]

When I was told by the advisor where I had my accounts that I had enough to retire, I wasn't sure either.
then I got a budgeting app and kept track of all my expenses for a while. I found out two things:
1) There were ways that I was not spending my money wisely. I corrected this and used that "found" money" to finish paying off my last loan several years in advance. and
2) I was living way below income from my non-work sources.

So there came a time when there was a good "stopping point" where my job was being transferred and I needed to spend more time with my mother who was in declining health.
That was 4 years ago. I still have not bothered to tap any of my retirement accounts (other than Roth conversions)and even a 4% withdrawal of these would be several times above what I need for expenses. And no, I am not just staying home either. My expenses included 5 weeks in Europe plus an ocean cruise. And now I am planning an 8 week trip through New England plus Italy in the fall. And I know I will still have more than enough for the rest of my life.
AND I have less assets tan the two of you have.

You might consider having some sessions with a fee-only Certified Financial Planner who has 10 years or more experience and specializes in retirement to draw up a multi-year retirement plan. This type of CFP provides advice only for an hourly fee and does NOT handle your investments. Also you do not want one that charges based on AUM . This eliminates the possibility of bias based on how much commission they would make for their suggestions.

 

[USGrant1962]

Hmmmm... seems like the consensus of opinion is to skip the REIT. I will look a bit further and make a decision soon.

...

Just a comment on REITs. The rationale for owning REITs is to get closer to a market-based exposure to real estate (see Rick Ferri's Core Four). Google tells me that in 2021 US total stock market was worth about $53T and total bond market was worth about $48T. US residential real estate is about $30-40T, and with commercial real estate the market totals $50-70T.

Some of the commercial RE is already incorporated into TSM through corporate RE holdings and the ~3% (I believe) in REITs. But you can approximate the three major asset classes - equities, debt, real estate - at each around $50T in the US market, so a 33/33/33 asset allocation might represent the market for investable assets (with returns, sorry gold).

Many people already have exposure to real estate through ownership of their home, and others have direct ownership of investment RE. The latter is a job with the title Landlord. These are both great and should be considered in your asset mix. Total Stock Market has ~3% REITs, and the value of many companies includes their real estate holdings so that is in the mix as well, but it is nowhere near 1/3 of the value.

So an allocation to REITs is one way (not the only way) to move your real estate exposure closer to the total investment market.

https://core-4.com/portfolios/

 

[target2019]

Thanks! I will look for a copy of "Unconventional Success".

I know that quilt chart all too well, but I'm still drawn to REIT's just a little.

I'm drawn to tech stocks and their huge out-performance. As I'm deploying cash in my RolloverIRA-used-to-be-401ks I am buying a growth fund - SCHG.

If you pull a maximum chart from Yahoo for VGSIX, the graph may surprise you. It is your 401k, though. That is pretty cool, but one more piece does not necessarily add to your long-term future returns.

 

[OldShooter]

... The rationale for owning REITs is to get closer to a market-based exposure to real estate ...So an allocation to REITs is one way (not the only way) to move your real estate exposure closer to the total investment market. ...

I understand the math but I don't understand the rationale. "Real estate" is a pretty broad term. Would the proponents of this strategy also identify the % that is residential real estate and be sure that % is represented in the real estate tranche? Shopping center %? Center-city offices %? Farm land %? Timber land ... Lots of cats and dogs sleep under the real estate umbrella, which is much larger than what REITs cover.

And what about bonds? Should all portfolios have a % in bonds that represents bonds' share of the total investment market? That seems as logical as picking out the real estate sector for such treatment.

REITs are an opportunity for a sector bet that might be attractive to the OP, but to argue that it should be the largest bet in the portfolio doesn't seem prudent to me even if the REIT assets could approximate the total RE investment market, which they really can't.

 

[Rosedala]

MercyMe....START RIGHT NOW YOU, YOUR SPOUSE AND CHILDREN IF ANY, TO ENJOY LIFE FOR GOODNESS SAKE!!! Do not leave for tomorrow what you SHOULD do today!!! Go! Enjoy! Life is a whole lot shorter than anyone can think of! Happy New Leaf Journey for hard working you and your spouse!

 

[Koolau]

MercyMe....START RIGHT NOW YOU, YOUR SPOUSE AND CHILDREN IF ANY, TO ENJOY LIFE FOR GOODNESS SAKE!!! Do not leave for tomorrow what you SHOULD do today!!! Go! Enjoy! Life is a whole lot shorter than anyone can think of! Happy New Leaf Journey for hard working you and your spouse!

Best advice I've seen so far.

My take: You've won the game so you can stop playing now. I'd be more concerned about preserving what you have over trying to maximize your investment results. YMMV

 

[Rianne]

A big hello to everyone on this incredible forum!




Debt: [/B]None
Children: None

Plan to Die with: [/B]$ZERO (otherwise, assets will go to a local charity)
Life Expectancy: 85 him/87 her (but planning for 92 for us both)

Welcome, MercyMe! These items you posted stand out for me. My family came within an inch of bankruptcy and my mother homeless. Your financials, as everyone said are perfect. Your conservative way of thinking is key. My father was, successful but the debt was his downfall. It became out of control in the 70's. As you well know, interest rates and inflation skyrocketed, and his situation grew grim.

Our economy is good but these issues cannot be ignored. Stay the course of no debt. My mother, we saved her and she lived to 93 on SS and income from a small rental property. She traveled and ended up living a wonderful life.

These are hard-learned lessons and because of those lessons we are RE and even in these scary times confident.

The questions you asked are for the financial experts on this forum. But this is my .02.

 

[MercyMe]

I'd be more concerned about preserving what you have over trying to maximize your investment results.

What do you suggest for preserving?

 

[Koolau]

What do you suggest for preserving?

The easy one is I-bonds to start.

TIPS

Then CDs, MYGAs - to lose less buying value.

 

[MercyMe]

Thanks. If one believes that the Fed will get inflation under control within the next 12 months, would that make TIPS (or TIPS funds) a bad idea for now?

 

[Koolau]

Thanks. If one believes that the Fed will get inflation under control within the next 12 months, would that make TIPS (or TIPS funds) a bad idea for now?

Heh, heh, sounds like a trick question. NO one believes the FED will get inflation under control within 12 months. Seriously, there is no magic bullet to deal with the current situation. I think the old idea of diversification is what is important. Many (maybe most?) here haven't nibbled at TIPS so far. I'm seriously considering some kind of TIPS play and definitely adding to my I-bonds. Is that the right move - ask me in a couple of years or three. It's a play toward perceived safety from inflation, but it's not guaranteed to work. YMMV

 

[MercyMe]

Heh, heh, sounds like a trick question. NO one believes the FED will get inflation under control within 12 months. Seriously, there is no magic bullet to deal with the current situation. I think the old idea of diversification is what is important. Many (maybe most?) here haven't nibbled at TIPS so far. I'm seriously considering some kind of TIPS play and definitely adding to my I-bonds. Is that the right move - ask me in a couple of years or three. It's a play toward perceived safety from inflation, but it's not guaranteed to work. YMMV

Each year, we max out our ability to buy i-bonds. TIPS confuse me, though not in terms of what they do, but more about how to know if they are worthwhile as a diversification strategy in today's world.

 

[Koolau]

Each year, we max out our ability to buy i-bonds. TIPS confuse me, though not in terms of what they do, but more about how to know if they are worthwhile as a diversification strategy in today's world.

Yeah, I'm with you there. My only foray into TIPS in the past has been through a mutual fund - and results were mixed at best. I no longer invest in that fashion with TIPS. BUT this year, I'm strongly considering TIPS either at auction (never done it) or on secondary market (never done that with TIPS). SO, I too am confused and trying to learn here about TIPS. YMMV

 

[OldShooter]

Each year, we max out our ability to buy i-bonds. TIPS confuse me, though not in terms of what they do, but more about how to know if they are worthwhile as a diversification strategy in today's world.

Yeah, I'm with you there. My only foray into TIPS in the past has been through a mutual fund - and results were mixed at best. I no longer invest in that fashion with TIPS. BUT this year, I'm strongly considering TIPS either at auction (never done it) or on secondary market (never done that with TIPS). SO, I too am confused and trying to learn here about TIPS. YMMV

We've held serious 6 figures in TIPS since 2006. Our view:

1)As an investment they are not a particularly good investment in low inflationary times. Equivalent government bonds pay better. TIPS are a hedge and hedging costs money.

2)Traditionally "diversification" involves buying weakly correlated or negatively correlated assets to reduce volatility and risk in a portfolio. As riskless assets, government securities of any kind don't quite fit this model, though they can certainly reduce volatility in many cases.

3)Where TIPS shine is as inflation insurance. They are far from perfect since the government taxes the nutrition-free inflation growth but at least we go backwards more slowly.

4)A small TIPS position provides very small inflation protection, 5% for example is negligible IMO. I would not bother. We have several years of spending in TIPS, big enough to reduce our lifestyle vulnerability to high inflation.

5)We were not so smart 15 years ago that we saw this coming. We lived through late 70s/early 80s though and concluded that high inflation was our main risk in retirement. So we hedged the risk. Truthfully, we would rather have low/zero inflation and not need our hedge.

6)In terms of trading there is nothing at all special about TIPS. Buy on the auctions or in the secondary market, sell into the secondary market or hold to maturity. Same as any govvie. Nothing to worry about. (That said, YTM numbers for TIPS are pretty much bogus because the calculation necessarily adopts the fiction of zero inflation going forward. This makes them look less attractive than they really are.)

HTH