Investing in Retirement

[philly17]

Looking for how folks manage their investments once they FIRE and are living off savings for annual living expenses.

I haven't FIRE'd yet (54 years old) even though all calculators say it is 100% success rate. I can't mentally let go. Therefore looking how people manage their portfolio allocation when the FiRE.

I've just reached $5M in investable assets with 60% being in taxable accounts and 40% in IRA accounts.

Our expenses are about $100K per year not counting about $20K we'd have to spend on health insurance when I leave corporate America. This doesn't account for any taxes I'd have to pay on interest or dividend income on my investments.

Right now I'm opportunistically aggressive at times but once retired I want lower risk.

Thank You.

 

[chassis]

What is your stock exposure today?

 

[RetireeRobert]

Looking for how folks manage their investments once they FIRE and are living off savings for annual living expenses.

I've just reached $5M in investable assets with 60% being in taxable accounts and 40% in IRA accounts.

Our expenses are about $100K per year not counting about $20K we'd have to spend on health insurance.

I think you will get answers all over the place, that is a wide spread of different strategies. People have such different individual circumstances, and different investing philosophies, and different risk tolerances.

That said, you are in a very good position, in my opinion. Using a very conservative "3% withdrawal" rate from investments, gives you $150,000. Well above your stated expenses level. And that does not take into account any dividend income you might have in those investment accounts.

So when your calculations suggested you will have a 100% success rate, yes I heartily agree.

Just for a toss-out allocation suggestion, not knowing your risk tolerances, you could do this:

1) In your tax deferred IRAs: 50% to an ETF, DGRO, which is a stocks with growing dividends ETF, and the other 50% to VFIIX, a Vanguard GMNA ETF

2) In your taxable accounts, some investments more oriented to capital appreciation (as opposed to the above income producing ideas): 33% to RYH, an equal weighted healthcare industry ETF; 33% RYT an equal weighted technology industry ETF; and 33% to XSLV a small cap low volatility ETF. This second portfolio gives good diversification but tilted to some of the faster growing segments of the stock market over long time periods.

The two ideas split investments between your (1) IRA's 40% of your total with more stable income producing vehicles, and (2) your taxable accounts 60% of your total with the more capital appreciation oriented vehicles.

Those two sub portfolios (1) and (2) also split the vehicles to provide some degree of tax efficiency.

Just some thoughts for starters.

Welcome and good luck.

 

[Perryinva]

It’s funny how hard so many people find it is to “let go” when they are still working, and yet everyone wishes they had retired sooner than they did as long as finances are solid when they are retired for even a few months! (Myself included). I couldn’t figure out “what” IT was I was waiting for, and I was no where as well off as you are with similar expenses. Luckily, an ERP forced my hand, and now been retired since 6/1/19 with zero regrets of any kind. I went more conservative due to covid/politics/retirement and still am net positive on portfolio, even had I been withdrawing as needed. (but full disclosure, we have pensions & DW SS covering most everything, & Covid killed all planned travel plan expenses plus had severance through July of 2020, so no actual need to draw down)

Do it. You will not regret it.

 

[RetireeRobert]

I haven't FIRE'd yet (54 years old) even though all calculators say it is 100% success rate. I can't mentally let go.

Yes, I agree with previous poster I don't think you will regret retiring (and letting go) "now".

I myself retired at 54 with three kids then ages 7, 11, and 17. I spent my early retirement years ferrying kids to and from school while stay-at-home DW got a much deserved "catch her breath" phase weekday mornings and afternoons.

When I quit it took me about 20 minutes to adjust. I never looked back and never regretted my decision.

As Nike slogan says---"Just do it"!

 

[mrfeh]

Choose the AA that let's you sleep at night and either stick with it, or have a plan for how it will change over time.

You have plenty of money, so you have a wide range available to you; IMO, anywhere from 20/80 to 80/20 would be fine.

We are 60/40 and plan to keep that ratio forever.

 

[LOL!]

Strangely, I manage the portfolio the same way after retirement as I did before retirement.

 

[racy]

...I haven't FIRE'd yet (54 years old) even though all calculators say it is 100% success rate. I can't mentally let go. Therefore looking how people manage their portfolio allocation when the FiRE....Right now I'm opportunistically aggressive at times but once retired I want lower risk...

At only 54 you'll likely have a long time span of retirement if you retire soon. Thus, you could be fairly aggressive, if you choose, and still ride out stock market dips. Only you can determine what "less risk" means to you.

As for me, since you asked, I'm in my late 60s with a 45% allocation to equities diversified among US, Int'l, Emerging. 45% in bonds diversified among US Govt, US Corp, Int'l, Emerging. 8% in real estate equities & debt. And, 2% in cash. But, this is not a recommendation for you

 

[Dtail]

It’s funny how hard so many people find it is to “let go” when they are still working, and yet everyone wishes they had retired sooner than they did as long as finances are solid when they are retired for even a few months! (Myself included). I couldn’t figure out “what” IT was I was waiting for, and I was no where as well off as you are with similar expenses. Luckily, an ERP forced my hand, and now been retired since 6/1/19 with zero regrets of any kind. I went more conservative due to covid/politics/retirement and still am net positive on portfolio, even had I been withdrawing as needed. (but full disclosure, we have pensions & DW SS covering most everything, & Covid killed all planned travel plan expenses plus had severance through July of 2020, so no actual need to draw down)

Do it. You will not regret it.

Big +1
Will say again on how many posts do we see where the poster wishes they retired later, especially with a less than 3%WR?
Many of us had challenging and rewarding careers, but enjoy retirement even more.

 

[PaunchyPirate]

Looking for how folks manage their investments once they FIRE and are living off savings for annual living expenses.

I haven't FIRE'd yet (54 years old) even though all calculators say it is 100% success rate. I can't mentally let go. Therefore looking how people manage their portfolio allocation when the FiRE.

I've just reached $5M in investable assets with 60% being in taxable accounts and 40% in IRA accounts.

Our expenses are about $100K per year not counting about $20K we'd have to spend on health insurance when I leave corporate America. This doesn't account for any taxes I'd have to pay on interest or dividend income on my investments.

Right now I'm opportunistically aggressive at times but once retired I want lower risk.

Thank You.

My allocation was 60/40 stock/bonds prior to my retirement at age 56. Upon retirement, I eased it to 55/45, but with the rise in the markets, I've let it slip back up to almost 59/41. I will likely leave it in these ballparks for the rest of my life.

My portfolio is about 66% taxable and 33% IRA. I live off dividends from my taxable account plus withdrawals from a savings account that I built up prior to retirement. I will continue that for another year or 2 until the savings account dries up. At that time, I will sell something from the taxable account to replenish it. Since my dividend income is low enough, I can keep my overall income low enough to qualify for ACA subsidies to help keep my health insurance more affordable. But it is still my biggest expense in retirement.

You don't mention if there are children involved or not, but your nest egg seems quite ready to pull the plug whenever you can get over the mental hurdle. I had no problem with that hurdle and do not regret my decision one bit. Life is too short.

 

[RunningBum]

Choose the AA that let's you sleep at night and either stick with it, or have a plan for how it will change over time.

You have plenty of money, so you have a wide range available to you; IMO, anywhere from 20/80 to 80/20 would be fine.

We are 60/40 and plan to keep that ratio forever.

+1, that's where I'm at.

 

[philly17]

What is your stock exposure today?

I'm about 70-80 percent in stocks. I'm not a day trader but more active than the buy and hold strategy as have core of holdings i will be relative active on.

 

[philly17]

It’s funny how hard so many people find it is to “let go” when they are still working, and yet everyone wishes they had retired sooner than they did as long as finances are solid when they are retired for even a few months! (Myself included). I couldn’t figure out “what” IT was I was waiting for, and I was no where as well off as you are with similar expenses. Luckily, an ERP forced my hand, and now been retired since 6/1/19 with zero regrets of any kind. I went more conservative due to covid/politics/retirement and still am net positive on portfolio, even had I been withdrawing as needed. (but full disclosure, we have pensions & DW SS covering most everything, & Covid killed all planned travel plan expenses plus had severance through July of 2020, so no actual need to draw down)

Do it. You will not regret it.

You are right the mental aspect doesn't allow me to do it even though I have very little enjoyment from my sales career any longer and more often feels like it is taking years off of my life. I want to be able to live a FAT Fire not that it would be that extravagant just don't want to have to scrimp in retirement.

 

[philly17]

Choose the AA that let's you sleep at night and either stick with it, or have a plan for how it will change over time.

You have plenty of money, so you have a wide range available to you; IMO, anywhere from 20/80 to 80/20 would be fine.

We are 60/40 and plan to keep that ratio forever.

Thank you. Based on size of my savings I'd be happy if I could just generate 4-5% return. I guess at some point I have to trust the data with respect to market returns and just position it so I can handle the down turns.

 

[philly17]

My allocation was 60/40 stock/bonds prior to my retirement at age 56. Upon retirement, I eased it to 55/45, but with the rise in the markets, I've let it slip back up to almost 59/41. I will likely leave it in these ballparks for the rest of my life.

My portfolio is about 66% taxable and 33% IRA. I live off dividends from my taxable account plus withdrawals from a savings account that I built up prior to retirement. I will continue that for another year or 2 until the savings account dries up. At that time, I will sell something from the taxable account to replenish it. Since my dividend income is low enough, I can keep my overall income low enough to qualify for ACA subsidies to help keep my health insurance more affordable. But it is still my biggest expense in retirement.

You don't mention if there are children involved or not, but your nest egg seems quite ready to pull the plug whenever you can get over the mental hurdle. I had no problem with that hurdle and do not regret my decision one bit. Life is too short.

I have daughter finishing graduate school this year and a son that is freshman in high school. College is funded for him so no concerns there. The reality is I'll always work to make $2-4K a month so that preserves nest egg even more. I'll probably wake up one day and just realize now is the time to do it.

 

[ncbill]

Looking for how folks manage their investments once they FIRE and are living off savings for annual living expenses.

I haven't FIRE'd yet (54 years old) even though all calculators say it is 100% success rate. I can't mentally let go. Therefore looking how people manage their portfolio allocation when the FiRE.

I've just reached $5M in investable assets with 60% being in taxable accounts and 40% in IRA accounts.

Our expenses are about $100K per year not counting about $20K we'd have to spend on health insurance when I leave corporate America. This doesn't account for any taxes I'd have to pay on interest or dividend income on my investments.

Right now I'm opportunistically aggressive at times but once retired I want lower risk.

Thank You.

With $3 million in taxable couldn't you manage your mAGI (e.g. sell "specific lots") to qualify for ACA subsidies?

 

[OldShooter]

... Right now I'm opportunistically aggressive at times but once retired I want lower risk. ...

Are you sure? What do you mean by "risk?" (Hint: volatility is not the same as risk) You have plenty of assets to ride out the point where risk and volatility intersect: SORR.

That said, then what is the purpose of your stash? Is it to insure to five nines that you will never run out of money? Is it to build an estate for family and/or charity? In our case it's the latter, so the equity portion is in the 70-80% range; those stocks will eventually end up in trusts for DS and the grands -- definitely long term money with a time horizon of over ten years. YMMV, of course. That's the point of deciding on a purpose before you decide on methods to achieve what you've decided that you want.

You have enough money that part of the purpose of the stash might be to give to charities while you're still alive and can enjoy the satisfaction.

 

[FREE866]

Strangely, I manage the portfolio the same way after retirement as I did before retirement.

Same here.



OP--your time horizon if you're in good health and barring a tragedy is 30+ years.



Like stated above, you def have the $$$! If seeing a 30-40% decline in portfolio will destroy you mentally then have 30-40% in fixed income. If you're fine with volatility then 80%+ stock over the long term will do you just fine.

 

[FREE866]

It’s funny how hard so many people find it is to “let go” when they are still working, and yet everyone wishes they had retired sooner than they did as long as finances are solid when they are retired for even a few months! (Myself included). I couldn’t figure out “what” IT was I was waiting for, and I was no where as well off as you are with similar expenses. Luckily, an ERP forced my hand, and now been retired since 6/1/19 with zero regrets of any kind. I went more conservative due to covid/politics/retirement and still am net positive on portfolio, even had I been withdrawing as needed. (but full disclosure, we have pensions & DW SS covering most everything, & Covid killed all planned travel plan expenses plus had severance through July of 2020, so no actual need to draw down)

Do it. You will not regret it.

Perry I didn't know you retired? awesome. I remember you helping me back in 2016 when I was on fence. Congrats! Years are just flying by ....scary

 

[audreyh1]

Strangely, I manage the portfolio the same way after retirement as I did before retirement.

I changed my allocation from a very aggressive well over 95% company stock to more like 60/40 AA in broadly diversified mutual funds during the year before and after retiring.

Many people make a major change in their AA as they approach retirement. Made sense to me as I had no salary or SS/pension to count on, and would suddenly have to live 100% off my investments.

 

[firewhen]

Strangely, I manage the portfolio the same way after retirement as I did before retirement.

Same here. We are very heavily invested in stocks, about 90%, and have no intention of ever changing that, though they are "conservative" in that they are in Vanguard broad-based index funds. Though this is not as risky to us as it seems since the dividends are probably about twice our living expenses. Also much of our assets are in taxable accounts and any shifting would generate significant capital gains taxes, both federal and state.

In terms of FIRE, I have never felt so at peace since pulling the plug, sometimes I have to pinch myself to know it is real. You should be about there, financially anyway.

 

[DrRoy]

I manage the portfolio the same way after retirement as I did before retirement.

+1. I have reduced my AA over the last 5 years as the market has risen. I went from 63% equities to 57% now. I sell any investments as needed annually to raise my spending cash for the next year.

 

[audreyh1]

+1. I have reduced my AA over the last 5 years as the market has risen. I went from 63% equities to 57% now. I sell any investments as needed annually to raise my spending cash for the next year.

But you did change your AA. Some would consider that changing the management of their portfolio due to retirement.

 

[vrijheid]

Same here. We are very heavily invested in stocks, about 90%, and have no intention of ever changing that, though they are "conservative" in that they are in Vanguard broad-based index funds. Though this is not as risky to us as it seems since the dividends are probably about twice our living expenses. Also much of our assets are in taxable accounts and any shifting would generate significant capital gains taxes, both federal and state.



In terms of FIRE, I have never felt so at peace since pulling the plug, sometimes I have to pinch myself to know it is real. You should be about there, financially anyway.

Agree. The stock market is currently the best place to be invested long term. I have no intention of touching my investments until I’m forced to take RMDs so I let it ride. [emoji41]

 

[phil1ben]

You are right the mental aspect doesn't allow me to do it even though I have very little enjoyment from my sales career any longer and more often feels like it is taking years off of my life. I want to be able to live a FAT Fire not that it would be that extravagant just don't want to have to scrimp in retirement.

No one on their deathbed has ever said, "I should have spent more time in the office". Once I determined it was time, this truism pushed me to start a new chapter by putting my business life behind me.

I sold my business and retired 4 years ago at 56. I have been able to spend more time with my grown children than I did when they were children. Prior to COVID we traveled when and where we wanted. That will soon return. It has been wonderful. Only you know when the time is right.