Good problem, but how would you setup AA

[target2019]

Quote:

Originally Posted by DFA Here is the situation(both retired, no kids) Expenses 83K/yr; Expenses include all, but travel Current retirement income 103K/COLA adjusted each year Additional income: SS/both and two additional pensions totaling 60k/yr within 5 yrs Current AA is 85%Eq/13%FI/2%Cash Is our AA right for us, ages myself 60, DW 57 since don't have a need for it currently, that may change later if we have an unexpected life event.

I would drop to next range down for equities (60-75%?). Would also consider how equities are invested. For example, heavy on conservative stocks (cap gains significant) or is it a few mutual funds?

1) The problem is that 85% equities may be cut in half by next recession, and how would you feel?
2) I take it you're looking at the investments as self insurance. In that case, I am guessing comparable institutions would be at 60-40 as a matter of policy. Make sense?

[Golden sunsets]

Quote:

Originally Posted by DeborahB I really don’t have a SWR. I withdraw cash when I need it... I have a lot of investments that together with SS kick off enough dividends and interest to easily cover my expenses. I stopped re-investing dividends a couple of years ago so some cash would accumulate. I try to move cash from non-qualified accounts into Ally. There always is enough money. As I said, it’s a very unorthodox approach that I don’t recommend to everyone. My assets grow each year. I don’t budget and I don’t take a set amount per month or year out to spend. I am single with no kids. And I have a large amount in investments, not counting my house. If I want something, I buy it but my wants aren’t that much. I lived way below my means for many years to get to this point. Just did a little math. I spend a little over 4% of my assets, rough estimate.

Thank you for sharing Deborah. If you spend a bit more than 4% of your investment assets each year and don't have any income sources other than your dividends and interest, then your WR is over 4% which is not necessarily safe as a long term approach. However if you have SS, or a pension, or investment RE that throws off income, or expect SS or a pension in the future, then being a bit above 4% may be fine. As a general statement though spending more than 4% of your investment assets each year, (net of revenue sources) other than Dividends and Interest, is not a very safe withdrawal rate. What is your AA, if I may ask?

[ERD50]

Quote:

Originally Posted by DeborahB ... I have a lot of investments that together with SS kick off enough dividends and interest to easily cover my expenses. I stopped re-investing dividends a couple of years ago so some cash would accumulate. I try to move cash from non-qualified accounts into Ally. There always is enough money. As I said, it’s a very unorthodox approach that I don’t recommend to everyone. My assets grow each year. ...

It doesn't sound so unorthodox to me. If you have a diversified portfolio, and you can meet expenses from SS and the divs from your portfolio, it sounds like you are in good shape.

It seems like you should have some idea of your AA in that portfolio though. But history says portfolio success is not very sensitive to AA (pretty flat between about 40/60 and 95/5), so it probably isn't all that important anyhow.

Quote:

Originally Posted by DeborahB ... Just did a little math. I spend a little over 4% of my assets, rough estimate.

Not sure what to make of that number. Spending 4% of your assets doesn't say anything about the long term safety of your portfolio, if some of that spending is funded from SS or another income stream.

Regarding the portfolio, it is the withdraw from the portfolio that matters. If you really are well diversified, and not focused on high-yield (possibly 'risky') investments, and only taking divs, that's probably ! 2.5%, which should be very safe.

-ERD50

[DeborahB]

Quote:

Originally Posted by ERD50 It doesn't sound so unorthodox to me. If you have a diversified portfolio, and you can meet expenses from SS and the divs from your portfolio, it sounds like you are in good shape. It seems like you should have some idea of your AA in that portfolio though. But history says portfolio success is not very sensitive to AA (pretty flat between about 40/60 and 95/5), so it probably isn't all that important anyhow. Not sure what to make of that number. Spending 4% of your assets doesn't say anything about the long term safety of your portfolio, if some of that spending is funded from SS or another income stream. Regarding the portfolio, it is the withdraw from the portfolio that matters. If you really are well diversified, and not focused on high-yield (possibly 'risky') investments, and only taking divs, that's probably ! 2.5%, which should be very safe. -ERD50

I am well diversified in mostly dividend paying stocks. I have a moderate amount in other stuff like REITs. I take a long term view of my portfolio and don’t trade much any more. If my cash grows too large I buy something.

I appreciate all the concern but I’ve looked at this with various professionals and i really don’t want to share my net worth. I’ve got plenty of money. It’s irrelevant to me what the math looks like. At the end of the year I compare what I have with what I expected to have and it’s always higher. I do have a giant spreadsheet that started before I retired. And Quicken which I use solely to keep track of my total portfolio.

I think I have to say that I have enough money, net worth, to not have money worries. I’ve never believed that formulas explained anything about the stock market. It’s all built on psychology, fear and expectations. It is affected by world events, of course. But I’ve never found a technical way to play with the stock market that made sense to me. And it always bounces back eventually.

Long ago I was a financial planner for a while and have an MBA. I have a firm grasp on how money works. I’m just not technical about it.

My yield from all my investments, meaning dividends and interest, is $45K and I get $15K from SS. That’s more than enough for me. I have too much in cash right now, not earning. This is from memory, I didn’t recheck the figures. It could be $55K from investments. My asset base is growing every year. I have a recent 30 year mortgage at 4.125% which gives me deductible interest. I make more than that on investments.

Long winded! But truly this works for me and there is absolutely no way I end up poor.

[Fedup]

I think SWR is for 30 year horizon, if you are already 70, you are reasonable safe regardless, even if you live till 100.
I too don’t worry about my withdrawal rate, I withdraw what I need, and if it’s more than 4-5%, so be it. I might run out of life than run out of money. This is why I delay taking SS until I’m 70. A bit of a buffer in case I’m wrong.

[DFA]

So the basic question was, if you have twice the income (pensions and SS) to cover ALL your expenses (including med, dental, vision, life insurance, etc.).

And no need to withdraw money from investments, what would your AA thoughts be with investments over $1M, still adding to it too.

My self retired for 5 yrs and DW retired for 2 yrs, no kids and no withdrawal from investments and no need to withdraw. Though about putting it all into cash or some FI investment.

[Fedup]

How did you do in 2008? Did you panic? Can’t sleep without sleeping aid? If not follow the same pattern. You know yourself best.

[DFA]

Quote:

Originally Posted by Fedup How did you do in 2008? Did you panic? Can’t sleep without sleeping aid? If not follow the same pattern. You know yourself best.

Both were still working and we have never sold into a dip since we started to invest in 1988, we kept on buying, saw a lot of losses, but they have all recovered higher then in dot.com bust and 2008. No panic and no sleepless nights.

[Fedup]

Well then I think you can be aggressive with your portfolio. Your current AA maybe right for you.

[target2019]

Quote:

Originally Posted by DFA So the basic question was, if you have twice the income (pensions and SS) to cover ALL your expenses (including med, dental, vision, life insurance, etc.). And no need to withdraw money from investments, what would your AA thoughts be with investments over $1M, still adding to it too. My self retired for 5 yrs and DW retired for 2 yrs, no kids and no withdrawal from investments and no need to withdraw. Though about putting it all into cash or some FI investment.

This page tells all...max drawdown or losing years? Something else?
https://personal.vanguard.com/us/ins...ations?lang=en

[Golden sunsets]

Our situation is similar to yours. Retired. Income from Pensions and SS exceeds expenses including discretionary items. We have withdrawn between 1/2 and 1% the last couple of years for one off expenses that were in the vein of home improvement/auto/wedding and will continue that very minimal WD for 2 more years, but after that we won't withdraw any funds and will be adding new money to our investments. We like to SWAN, so our AA this year is 53/42/5. Next year we will go to 52/43/5 and so on until we reach 50/45/5. There we plan to stay indefinitely. Being more aggressive would just increase the legacy that we leave. In the 2007-2009 debacle we held firm and even invested at the nadir, but we were still working then. I don't really want to experience that much volatility again, thus a conservative WR and conservative AA.