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Move to riskier AA?
Old 07-13-2020, 11:53 AM   #1
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Move to riskier AA?

Or mis to be realistic. Currently I am in a mix of SP500 and Nasdaq, some DJI...

Tempted to tilt much heavier to Nasdaq, QQQ/MGK...take like 80% of the folio as opposed to maybe 30% right now.

Me 39, DW 37

No debt. ~ 11yr left on Mtg.
Small Pension later with decent SS when we choose.
Inheritance of 1MM+ Easily later.

And a runway of at least 11 years until ER..and likely 16 years before we sell anything (provided we have no catastrophe like divorce and splitting assets very unlikely)

DF owns RE...a decent amount 1MM+ and he doesn't draw down any assets, essentially he is living off his RE and Pension Passive income...I feel this even further reduces generational dilution .

Basically we are looking at Multi millions of inheritance on each side of the family. I feel like I am being waaay too lenient with risk considering all of the above.

I understand the pigs get slaughtered mantra, but even this still seems like safe bet, is a QQQ/MGK folio ever going to get obliterated, I doubt it.

Any thoughts? I know, chasing 20-23% gains on the ride up...
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AA (Stock/Bond/Cash ): 97.5/0/2.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 07-13-2020, 12:05 PM   #2
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If I understand your post, it looks like funding your retirement years is covered, or will be. For me, this would mean less reason to take on additional risk. As a friend once told me, you won the race, have amassed funding for comfortable retirement and some to pass along, so find another race. What is to be gained from amassing a bigger pile ?



Of course you could have dreams of being part of net-jet crowd or collecting vintage cars or starting a charity to discover the hidden purpose of your navel. If you have dreams or needs above a comfortable retirement then it may make sense to shoot higher. If you want/need to leave to heirs shoot away.



I would stick with small adjustments and see how they impact the return. But then I'm a big chicken. I believe QQQ has outperformed recent spread with other indexes. I'm a believer that we will one day revert to the mean. May take a while but I believe it will happen so at some point QQQ will need to trail other indexes to get back to the normal spread.



YMMV
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Old 07-13-2020, 12:07 PM   #3
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Originally Posted by RetireBy90 View Post
If I understand your post, it looks like funding your retirement years is covered, or will be. For me, this would mean less reason to take on additional risk. As a friend once told me, you won the race, have amassed funding for comfortable retirement and some to pass along, so find another race. What is to be gained from amassing a bigger pile ?



Of course you could have dreams of being part of net-jet crowd or collecting vintage cars or starting a charity to discover the hidden purpose of your navel. If you have dreams or needs above a comfortable retirement then it may make sense to shoot higher. If you want/need to leave to heirs shoot away.



I would stick with small adjustments and see how they impact the return. But then I'm a big chicken. I believe QQQ has outperformed recent spread with other indexes. I'm a believer that we will one day revert to the mean. May take a while but I believe it will happen so at some point QQQ will need to trail other indexes to get back to the normal spread.



YMMV
Yeah the reversion to mean...that's what pushes me to 'scared camp" .

You make a valid point, there is literally no reason TO take more risk. But yeah, just dreamin of a better retirement.
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AA (Stock/Bond/Cash ): 97.5/0/2.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 07-13-2020, 12:13 PM   #4
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Just because I didn't really pay attention to it, medical insurance can be a gotcha if you retire before 65 and Medicare. It would have cost me over $1K/Month for Kaiser that I had through megacorp. I worked till DW was on Medicare and I went on Army health care called Tri-care. I had figured health care was an expense but was way to low on my estimated cost. Even Medicare with IRMAA for one still costs 2 times what my contribution was while working.



I'm sure most have figured this out and find an ACA policy that is better than the $1K but a cost to be real about and plan for.
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Old 07-13-2020, 12:15 PM   #5
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The inheritance should play zero role in determining your risk tolerance or investment or retirement plans.

Chasing the NASDAQ is folly. Write down a plan and stick to it.
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Old 07-13-2020, 12:16 PM   #6
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Originally Posted by RetireBy90 View Post
If I understand your post, it looks like funding your retirement years is covered, or will be. For me, this would mean less reason to take on additional risk. As a friend once told me, you won the race, have amassed funding for comfortable retirement and some to pass along, so find another race. What is to be gained from amassing a bigger pile ?

Of course you could have dreams of being part of net-jet crowd or collecting vintage cars or starting a charity to discover the hidden purpose of your navel. If you have dreams or needs above a comfortable retirement then it may make sense to shoot higher. If you want/need to leave to heirs shoot away.

I would stick with small adjustments and see how they impact the return. But then I'm a big chicken. I believe QQQ has outperformed recent spread with other indexes. I'm a believer that we will one day revert to the mean. May take a while but I believe it will happen so at some point QQQ will need to trail other indexes to get back to the normal spread.

YMMV

+1


IMHO the time to move to a "riskier" AA was in the late March-early April timeframe. The current rebound seems to have many thinking that it is time to increase their stock allocation (fear of missing out on any "further ride up"). But like RetireBy90 I am not getting greedy and am sticking to my post-retirement allocation.

Also... I am glad there is an inheritance in your future, but IRL I have seem it blow up in people's faces too many times for me to be comfortable depending on that as part of a retirement plan.
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Old 07-13-2020, 12:33 PM   #7
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I decided to take a break from this and listen to a little Vaughn Monroe, and read a little Chernof's Hamilton.

Screw the FOMO. I'll stick to the plan.
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AA (Stock/Bond/Cash ): 97.5/0/2.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 07-13-2020, 12:37 PM   #8
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Screw the FOMO. I'll stick to the plan.
+1

I'm far more concerned about NOMO than FOMO.
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Old 07-13-2020, 02:08 PM   #9
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The inheritance should play zero role in determining your risk tolerance or investment or retirement plans. ...
Why would you say that? The OP said that there would be significant estate in excess of retirement funding needs. Of course that must be factored into his plans. Re risk, their scenario is intrinsically risk tolerant in that they could lose millions without any effect on their life style.

Our situation is similar. Our AA is 75/25 and we believe that the 25% is more than enough to cover our retirement needs. So the 75% is invested for the beneficiaries of our estate. This is longer term money, hence equity money.

My only comment on the OP is that he has proposed making some sector bets. A quick study of a quilt chart ( https://www.callan.com/periodic-table ) should lead him to the conclusion that betting on sectors is essentially gambling. The money is theirs to gamble, of course, and it is not critical to their financial situation but it seems to me that the best strategy is a passive one including both total US market and total International market stocks either as two funds or, as in our case, a total world fund.
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Old 07-13-2020, 02:16 PM   #10
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Why would you say that? The OP said that there would be significant estate in excess of retirement funding needs. Of course that must be factored into his plans.
It's standard guidance around here not to factor inheritances into any retirement planning. Bird in the hand, and all that.

People rewrite wills, or live to be 110, or all kinds of things. It's (generally) best to treat it as a windfall, and adjust, after the inheritance is realized, vs. shuffling things around before it happens.
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Old 07-13-2020, 02:26 PM   #11
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^ Or decide to leave all/most of their assets to a charity, a trophy wife/husband, the dog (think Leona Helmsley), or see the will tied up in lawsuits for years. Way too many ways for that "sure thing" to turn out to be something entirely different.
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Old 07-13-2020, 02:30 PM   #12
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It's standard guidance around here not to factor inheritances into any retirement planning. Bird in the hand, and all that.

People rewrite wills, or live to be 110, or all kinds of things. It's (generally) best to treat it as a windfall, and adjust, after the inheritance is realized, vs. shuffling things around before it happens.
Of course. All of those factors certainly have been considered. I assume my folks will live to 95 but likely not the case... if so, we are richer than money can provide if health is fair.

Its just a consideration. Someone who has no inheritance might want to plan different than someone who has a sizable one, maybe they want to plan exactly the same but I doubt it.
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AA (Stock/Bond/Cash ): 97.5/0/2.5% MIX (Small/Mid/Large): 25/25/50% BLEND(US/Foreign): 100/0%, REIT (Real Estate Equity): ~50% of Assets

FIRE in 2031 @ 50yrs old (+/- 2yrs) w/ a hypothetical $2.5mil portfolio, 3 appreciated homes worth $1.0mil and rental income to fund my gap years until RMD. Assets will go to an inherited IRA where I plan on watching the investments grow until I die or the trust gets executed.
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Old 07-13-2020, 03:39 PM   #13
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Of course. All of those factors certainly have been considered. I assume my folks will live to 95 but likely not the case... if so, we are richer than money can provide if health is fair.

Its just a consideration. Someone who has no inheritance might want to plan different than someone who has a sizable one, maybe they want to plan exactly the same but I doubt it.
I have a sizable inheritance from a sick parent. I plan for none of it. Maybe she gets married and leaves it all to the new husband. Maybe she writes me out of the will and gives it all to the grandkids. Who knows. If I planned on it, I would retire tomorrow.
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Old 07-13-2020, 03:53 PM   #14
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It's standard guidance around here not to factor inheritances into any retirement planning. Bird in the hand, and all that. ...
Got it. I read the OP a little too quickly I think. (Sorry, OP) My impression was that the inheritances were on top of substantial assets -- I guess from the way the OP was talking I assumed that he already had something substantial.

But with 11 years to retirement and a 16 year horizon I would stick to my recommendation anyway. The rationale would vary some, though.
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Old 07-13-2020, 06:27 PM   #15
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Quote:
Originally Posted by Aerides View Post
It's standard guidance around here not to factor inheritances into any retirement planning. Bird in the hand, and all that.

People rewrite wills, or live to be 110, or all kinds of things. It's (generally) best to treat it as a windfall, and adjust, after the inheritance is realized, vs. shuffling things around before it happens.
+1 I have a dear friend who was counting on an inheritance for his retirement.... he had a falling out with the trustees and ended up with half of what he was counting on.
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Old 07-14-2020, 04:50 AM   #16
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Mom left us a bit of money. I didn't count on it but planned for it to be part of our AA. Something could have happened where it would not have been inherited so our plans had us saving enough to support retirement without it. We used it to pay off the mortgage which of course put us in better position without that monthly expense.
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