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Ideal account set-up on Day 1 of FIRE?
Old 06-22-2008, 04:39 PM   #1
Confused about dryer sheets
Join Date: Nov 2005
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Ideal account set-up on Day 1 of FIRE?

Hello - long-time lurker here (former regular on Fool REHP board). I've been following for a long time and my family started toward FIRE about 5 years ago. I absolutely love Firecalc and all the great people on the boards. 30 years old, married, 2 kids

I have a quick question about asset location during FIRE. Assume we have a 75% S&P500/25% FI asset allocation (75% Vanguard S&P 500 Index, 21% Vanguard Short-term Corporate Bond Fund, and 4% Vanguard Prime Money Market Fund). Let's also wildly imagine we are going to FIRE on 1/1/09 (that would be so year is 2014). The 4% in the MMF is for 2009 living expenses, correct? And the 21% in the bond fund is to round out the 25% FI allocation, right? My main question is, do you want the 4% MMF money in a taxable account and then draw it down throughout the year? Then on 12/31/09 sell some taxable S&P and/or SEPP to replenish the 4% MMF and then spend throughout 2010? The 21% short-term corporate bond fund always stays in tax-deferred space, correct?

Or do you keep the entire 25% FI in a tax-sheltered account and sell stocks monthly from a taxable account and re balance in tax-sheltered.

Sorry for such a basic question.

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Old 06-22-2008, 06:02 PM   #2
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Generally you want to put equity index funds in taxable, and bond funds that have a lot of taxable yield in your retirement accounts.

I would put the MM account in taxable, since you plan for that to be holding your year's expenses. Balance your portfolio when it needs it.

Maybe some others that are more savvy investors will have more to say on this topic. I am not retired yet so take what I say with a grain of salt.

Also I would suggest reading from the Boglehead's book list.

Hope this helps!
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Old 06-23-2008, 08:56 PM   #3
Confused about dryer sheets
Join Date: Nov 2005
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Thank you so much for the speedy response. That is what I was thinking too, but wanted to be sure.

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