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asset location and allocation
Old 02-11-2024, 04:21 PM   #1
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asset location and allocation

Working on hammering out some numbers for retiring in 2026 and could use the forums experience and input as I wade into trying to transition from saving to spending... It puts a lot of balls up in the air compared to pre-retirement mentality of saving as much as possible in a target fund....

Let's set the stage: married, no kids, no one to leave money to realistically but actively planning for long term care as part of the retirement strategy.

Me:
411k in work IRA/401k 20% Van Guard, 80% in work 401k
$530k in Roth (54% in Van Guard, 46% in work Roth 401k

Spouse:
$587k in IRA all Vanguard
$272k in Roth 64% Van Guard, 36% work IRA

Worked with a retirement planner (a well known one) in 2021 to figure out where we stood for possible early retirement... $8k for the full bore analysis with spreadsheet, tax optimization etc. with the option of AUM at over 1% with rates falling as portfolio value rises. The results were solid for a Fire at age 62 in 2025. I wasn't getting the warm fuzzy's and the AUM fee on top of the $8k was too much to handle so I didn't proceed .. I did unfortunately proceed with a recommended allocation about $400k to the Weselley fund for the fixed income side... That turned out not so well as share price is still down 18% on share price. About $80k down really is tough to swallow... I suppose if I had went with them and paid their fee they would have pulled me out of that fund as the interest rates started climbing... That loss would have paid for their fees for quite some time...

So here we are and I'm trying to get the finances located and allocated properly... Needing input on planning on a 60/40 split / bucket type system / rebalance once a year.

Simple is what we are looking for and plan to stay with Van Guard at this point in time and will roll all funds there when employment ends.

On the 60% growth side of the portfolio I was leaning towards 70% to VOO Van Guard S&P 500 ETF or their Total Stock Market Fund VYI with the balance of 30% in VBR small cap value. Or split that balance of 30% to 15% VBR small cap value / 15% VIOO small cap 600. I'd say 95% of the growth side can be located in Roth's...

The market continues to climb and want to get more of that action if it gets to be on a roll... I've already missed a lot of gains by avoiding making the necessary changes..

The 40% fixed side gets us out to age 70 yr 2033 by my work in progress spreadsheet calculations. Let me know what you think...
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Old 02-11-2024, 08:57 PM   #2
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Sometimes the simplest portfolio is the best one. For equities I’ve stuck with Vanguard’s VTSAX (Total Stock Market) and VTIAX (Total International Market). 70% VTSAX 30% VTIAX. This is the most common recommendation for a simple Boglehead portfolio.

I’m in at 55% equities / 45% fixed income but I’m already retired so I’m conservative. If you are still working you could go with 60% or even a little higher on equities.

For the fixed income it gets a little trickier. The previous wisdom was to go with bond funds. But bonds are not doing well now. And you can find bank CDs for 5%+. So you might want to spread the fixed income around a bit to diversify.
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Old 02-12-2024, 02:14 AM   #3
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Work a little longer and make up the $80k...
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Old 02-12-2024, 05:05 AM   #4
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Quote:
Originally Posted by Wile E. Coyote View Post
Work a little longer and make up the $80k...
SSSHHHHHH , this is the EARLY RETIREMENT FORUM
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Old 02-12-2024, 09:02 AM   #5
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Quote:
Originally Posted by kens450r View Post
Working on hammering out some numbers for retiring in 2026 and could use the forums experience and input as I wade into trying to transition from saving to spending... It puts a lot of balls up in the air compared to pre-retirement mentality of saving as much as possible in a target fund....

Let's set the stage: married, no kids, no one to leave money to realistically but actively planning for long term care as part of the retirement strategy.

Me:
411k in work IRA/401k 20% Van Guard, 80% in work 401k
$530k in Roth (54% in Van Guard, 46% in work Roth 401k

Spouse:
$587k in IRA all Vanguard
$272k in Roth 64% Van Guard, 36% work IRA

Worked with a retirement planner (a well known one) in 2021 to figure out where we stood for possible early retirement... $8k for the full bore analysis with spreadsheet, tax optimization etc. with the option of AUM at over 1% with rates falling as portfolio value rises. The results were solid for a Fire at age 62 in 2025. I wasn't getting the warm fuzzy's and the AUM fee on top of the $8k was too much to handle so I didn't proceed .. I did unfortunately proceed with a recommended allocation about $400k to the Weselley fund for the fixed income side... That turned out not so well as share price is still down 18% on share price. About $80k down really is tough to swallow... I suppose if I had went with them and paid their fee they would have pulled me out of that fund as the interest rates started climbing... That loss would have paid for their fees for quite some time...

So here we are and I'm trying to get the finances located and allocated properly... Needing input on planning on a 60/40 split / bucket type system / rebalance once a year.

Simple is what we are looking for and plan to stay with Van Guard at this point in time and will roll all funds there when employment ends.

On the 60% growth side of the portfolio I was leaning towards 70% to VOO Van Guard S&P 500 ETF or their Total Stock Market Fund VYI with the balance of 30% in VBR small cap value. Or split that balance of 30% to 15% VBR small cap value / 15% VIOO small cap 600. I'd say 95% of the growth side can be located in Roth's...

The market continues to climb and want to get more of that action if it gets to be on a roll... I've already missed a lot of gains by avoiding making the necessary changes..

The 40% fixed side gets us out to age 70 yr 2033 by my work in progress spreadsheet calculations. Let me know what you think...
I would NOT assume that your FA would have bailled on Wellesley when it was apparent that the Fed was raising interest rates and helped you avoid that $80k paper loss. I think it is foolhardy to focus on a single position rather than your portfolio as a whole. Also, the problem wasn't Wellesley, it was bonds in general, any 40/60 portfolio would have fared badly but have since mostly recovered.

If you're looking for simple, I'd stay with VOO or VTI for domestic equities and VCIT and VGIT for fixed income. For tax efficiency, put fixed income in traditional IRAs and 401ks and equities in Roth IRAs and Roth 401ks.
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Old 02-12-2024, 09:03 AM   #6
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wellesly got stuck having to much in long term bonds and it hurt.

they have reduced them from the over 20% they were
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Old 02-12-2024, 10:30 AM   #7
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Simple is good. 95% of our equity position is in one fund.

Quote:
Originally Posted by pb4uski View Post
... I think it is foolhardy to focus on a single position rather than your portfolio as a whole. ...
Wise advice.

Also remember that you are in this for the long haul. This isn't the last year in which your portfolio will move by $80K, either. For portfolio management, I like the copilot checklist: (1) Sit down, (2) Shut up, (3) Hang on.
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Old 02-12-2024, 11:30 AM   #8
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Quote:
Originally Posted by mathjak107 View Post
SSSHHHHHH , this is the EARLY RETIREMENT FORUM

He's distraught over his loss. If you set yourself to pay penance it helps psychologically. Just a thought for him to recover and he can take it or leave it.
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Old 02-13-2024, 12:27 AM   #9
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Quote:
Originally Posted by kens450r View Post
Working on hammering out some numbers for retiring in 2026 and could use the forums experience and input as I wade into trying to transition from saving to spending... It puts a lot of balls up in the air compared to pre-retirement mentality of saving as much as possible in a target fund....

Let's set the stage: married, no kids, no one to leave money to realistically but actively planning for long term care as part of the retirement strategy.

Me:
411k in work IRA/401k 20% Van Guard, 80% in work 401k
$530k in Roth (54% in Van Guard, 46% in work Roth 401k

Spouse:
$587k in IRA all Vanguard
$272k in Roth 64% Van Guard, 36% work IRA

Worked with a retirement planner (a well known one) in 2021 to figure out where we stood for possible early retirement... $8k for the full bore analysis with spreadsheet, tax optimization etc. with the option of AUM at over 1% with rates falling as portfolio value rises. The results were solid for a Fire at age 62 in 2025. I wasn't getting the warm fuzzy's and the AUM fee on top of the $8k was too much to handle so I didn't proceed .. I did unfortunately proceed with a recommended allocation about $400k to the Weselley fund for the fixed income side... That turned out not so well as share price is still down 18% on share price. About $80k down really is tough to swallow... I suppose if I had went with them and paid their fee they would have pulled me out of that fund as the interest rates started climbing... That loss would have paid for their fees for quite some time...

So here we are and I'm trying to get the finances located and allocated properly... Needing input on planning on a 60/40 split / bucket type system / rebalance once a year.

Simple is what we are looking for and plan to stay with Van Guard at this point in time and will roll all funds there when employment ends.

On the 60% growth side of the portfolio I was leaning towards 70% to VOO Van Guard S&P 500 ETF or their Total Stock Market Fund VYI with the balance of 30% in VBR small cap value. Or split that balance of 30% to 15% VBR small cap value / 15% VIOO small cap 600. I'd say 95% of the growth side can be located in Roth's...

The market continues to climb and want to get more of that action if it gets to be on a roll... I've already missed a lot of gains by avoiding making the necessary changes..

The 40% fixed side gets us out to age 70 yr 2033 by my work in progress spreadsheet calculations. Let me know what you think...

Forgive me for asking, but did your $8K professional evaluation provide you a reasonable spend level per year in retirement? Does it approximate the so-called 4% rule? Have you tried FIRECalc from this site? Is the estimated spend level (Withdrawal rate) enough to cover your retirement needs?


I think in terms of 1) How much do you need to live on? 2) What sources of income will you have like pension and SS? 3) How much more does your particular asset allocation have to provide you from your "stash?" 4) Do those numbers w*rk for you?


Before specific Asset Allocation, I think those are important questions to answer but YMMV.
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Old 02-13-2024, 06:11 AM   #10
Confused about dryer sheets
 
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Burn rate is a fair bit higher initially than 4% but levels off to 2% as we have family related income streams coming online later...

the spreadsheet figures uses a 5% return on tax deferred funds and 6% on Roth for the duration of our life spans. the wife's out to age 95 , mine to 90... It's shows present values of all investments staying at around $1.75m and start climbing around age 70 when the wife's SS starts up.

It's a pretty impressive I must say and it has a lot going on... Unfortunately and I am sure on purpose they converted to a .pdf so i don't have the formulas. Bummer...

They broke the complete investments into a 60% growth / 40% fixed breakdown from there. No large cap at all... I waded into their guidelines a bit which had probably 20 plus investments using Van Guard but the wife wasn't fully onboard with transitioning her funds... So with us halfway in on the recommendations are results have been less than stellar... I got started on the fixed income recommendations pretty solidly but wish I wouldn't have even bothered after the very large allocation to Wellesely dropped like a rock and likely won't every recuperate by the time I need to sell it for my income stream it was allocated to cover...ar the buy in price that perfectly coincided with the peak cost per share in about August 2021... Thinking surely they know best and trying to believe staying with it as initially recommended was correct has cost me two years worth of hard earned savings over one mistake... Not sure how everyone makes peace with those... This one will has left a permanent scar on my ego and has to be added to my list of life's worst mistakes list. Trying to do the right thing was the wrong thing to do... As mentioned the wife wasn't quite onboard with the transition to the recommendations so her target date funds had meanwhile shifted to a much higher bond allocation a bit before the interest rate hikes so we took a good hit there too.... Implementing some of the recommended guidelines like the significant investments into Wesseley cost us dearly and inaction in not reducing our bond exposure in the balance of the portfolio cost us a lot too... I'm not sure how we can have done any worse...
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Old 02-13-2024, 10:09 AM   #11
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Use firecalc to see if your portfolio will survive with your planned spending.



Using a single future return value for investments in a spreadsheet will give you a very false sense of the future. Read about Sequence of Return Risk which is probably the most significant risk to your portfolio in retirement.


I recommend reading the Bernsetin's Four Pillars of Investment or one of Bogle's books. Having a baseline knowledge of the historical performance of investments will serve you well. Those books will also illustrate why index funds & asset allocation are recommended.
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Old 02-13-2024, 10:47 AM   #12
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I don't hold Wellesley anymore because I moved to more aggressive SPY-like things as my asset base grew and I could take more downside risk. They are a well-managed fund with a reasonable expense ratio. Rates killed them beginning around Oct 2021 but long term it should perform better as they made adjustments.

Quote:
Originally Posted by mathjak107 View Post
wellesly got stuck having to much in long term bonds and it hurt.

they have reduced them from the over 20% they were
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Old 02-15-2024, 01:23 AM   #13
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Quote:
Originally Posted by kens450r View Post
Burn rate is a fair bit higher initially than 4% but levels off to 2% as we have family related income streams coming online later...

the spreadsheet figures uses a 5% return on tax deferred funds and 6% on Roth for the duration of our life spans. the wife's out to age 95 , mine to 90... It's shows present values of all investments staying at around $1.75m and start climbing around age 70 when the wife's SS starts up.

It's a pretty impressive I must say and it has a lot going on... Unfortunately and I am sure on purpose they converted to a .pdf so i don't have the formulas. Bummer...

They broke the complete investments into a 60% growth / 40% fixed breakdown from there. No large cap at all... I waded into their guidelines a bit which had probably 20 plus investments using Van Guard but the wife wasn't fully onboard with transitioning her funds... So with us halfway in on the recommendations are results have been less than stellar... I got started on the fixed income recommendations pretty solidly but wish I wouldn't have even bothered after the very large allocation to Wellesely dropped like a rock and likely won't every recuperate by the time I need to sell it for my income stream it was allocated to cover...ar the buy in price that perfectly coincided with the peak cost per share in about August 2021... Thinking surely they know best and trying to believe staying with it as initially recommended was correct has cost me two years worth of hard earned savings over one mistake... Not sure how everyone makes peace with those... This one will has left a permanent scar on my ego and has to be added to my list of life's worst mistakes list. Trying to do the right thing was the wrong thing to do... As mentioned the wife wasn't quite onboard with the transition to the recommendations so her target date funds had meanwhile shifted to a much higher bond allocation a bit before the interest rate hikes so we took a good hit there too.... Implementing some of the recommended guidelines like the significant investments into Wesseley cost us dearly and inaction in not reducing our bond exposure in the balance of the portfolio cost us a lot too... I'm not sure how we can have done any worse...

Sounds like a plan - at least in terms of withdrawal rate.



Also, I wouldn't bet against Wellesley. It's always bounced back before. BUT trimming exposure to any one investment, sector or stock is often a good idea. Just be certain it's consistent with your overall plan and asset allocation. I suggest not making a major decision because of a brief downturn or set back. BUT you gotta do what lets you sleep, so YMMV
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Old 02-15-2024, 12:46 PM   #14
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$8k,. No underlying details and they put you into a widely held well known balanced find for debt allocation.

Nice, very wise to pull the plug.

The KISS method makes a lot of sense. Given your approach, broad based funds or indexes probably make the most sense.

Not clear what you own in those work related plans.
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