I'm retired, DW is retiring mid 2022. We are very happy with our portfolio positions and have recently worked on (with a FIDO rep, see my thread "Playing FIDO") a retirement expense budget that will go into effect mid 2023 after we sell one of our two homes. We have fattened it up nicely to be able to fund the travel and dining that we value.
But the near term challenge is to fund the ~7 year period after DW retires and before we start drawing SS. Once we are both on SS, it appears to be able to fund 75% of expenses, both essential and discretionary. And yes it is inflation adjusted. I'll spare you the numerical details, but once we get there, i't looks like we will need to pull only 1.5% off the portfolio to supplement SS.
The FIDO guy tried to sell us an annuity to fund that gap, it didn't take long to decide we didn't want that. So I started looking into the 3 bucket approach, with (just my first pass now) bucket one funding years 1-3 years of expenses (including taxes), with an AA of 0/100 and a mix of cash, fixed return investments and bonds. Right now on paper it would be around 12.5% of the portfolio (today's value).
To make the 7 year bridge, I spec'ed the 2nd bucket at 4 years, with a 30/70 AA with the securities probably being in diversified mutuals. 16.7% of today's overall portfolio.
The third bucket I haven't targeted and AA for yet, but I'd probably be happy with something like 70/30 or 80/20.
Having read a bunch of articles on the 3 bucket strategy, the bigger issue is how you balance/re-fill. I have some ideas, but let me leave it at this. Again, the goal is conservatism/immunity for that 7 year bridge, but not missing out on growth opps either. For perspective, our overall portfolio AA today is around 36/64. I had been targeting 30/70 but in need of a balance now. But I see no need to miss out on long term growth in bucket 3 if the first 2 buckets can give me the "pillow test" peace of mind.
Thoughts? Of course things can, and will change long term with regards to our expenses and lifestyle and we'll adjust as needed. But this seems pretty solid to me right now.
I did find this a useful read also:
https://www.forbes.com/sites/robert...is-broken-heres-a-better-way/?sh=7c7864a31b33
But the near term challenge is to fund the ~7 year period after DW retires and before we start drawing SS. Once we are both on SS, it appears to be able to fund 75% of expenses, both essential and discretionary. And yes it is inflation adjusted. I'll spare you the numerical details, but once we get there, i't looks like we will need to pull only 1.5% off the portfolio to supplement SS.
The FIDO guy tried to sell us an annuity to fund that gap, it didn't take long to decide we didn't want that. So I started looking into the 3 bucket approach, with (just my first pass now) bucket one funding years 1-3 years of expenses (including taxes), with an AA of 0/100 and a mix of cash, fixed return investments and bonds. Right now on paper it would be around 12.5% of the portfolio (today's value).
To make the 7 year bridge, I spec'ed the 2nd bucket at 4 years, with a 30/70 AA with the securities probably being in diversified mutuals. 16.7% of today's overall portfolio.
The third bucket I haven't targeted and AA for yet, but I'd probably be happy with something like 70/30 or 80/20.
Having read a bunch of articles on the 3 bucket strategy, the bigger issue is how you balance/re-fill. I have some ideas, but let me leave it at this. Again, the goal is conservatism/immunity for that 7 year bridge, but not missing out on growth opps either. For perspective, our overall portfolio AA today is around 36/64. I had been targeting 30/70 but in need of a balance now. But I see no need to miss out on long term growth in bucket 3 if the first 2 buckets can give me the "pillow test" peace of mind.
Thoughts? Of course things can, and will change long term with regards to our expenses and lifestyle and we'll adjust as needed. But this seems pretty solid to me right now.
I did find this a useful read also:
https://www.forbes.com/sites/robert...is-broken-heres-a-better-way/?sh=7c7864a31b33