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Old 06-21-2022, 11:19 AM   #21
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TIPS at 0% real return would provide a 3.33% safe withdrawal rate over 30 years. At 1.3% real = 4% SWR, 3% real = 5% SWR. Current real yields are between the 0% and 1.3% - United States Rates & Bonds - Bloomberg, and have been rising this year.

Even at a 3.33% SWR you have almost double your living expenses. You could also consider buying an inflation adjusted annuity. You've won the game. You can stop playing anytime you want.

Morningstar has predicted the new SWR is 3.33% for a 50 /50 portfolio, which is a lower SWR than TIPS would provide over 30 years at current yields.
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Old 06-21-2022, 11:22 AM   #22
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In today’s high inflationary environment, I would say no. The reason is your annual expenses will rise due to inflation while your portfolio’s real value erodes overtime. So it is a double whammy.

So you would need some sort of inflation hedge in part of your portfolio to offset at some inflationary risk, be it equity or real estate or whatever.

For reference, DW and I have now have around 15% of our NW in equity but about 80% in real estate. We fell into this AA % by accident but in this high inflationary environment it is a great hedge.
RE treated me well too, but everything I read and see says that market is about to follow everything else downward too.
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Old 06-21-2022, 11:34 AM   #23
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As others have said, you have won the game, and the amount of rick you choose to take is up to you. The way I look at it, anything I invest in the market is more likely to benefit my heirs than DW and I. While we are in the market, our desire retirement living and expenses are not dependent on its short term volatility.
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Old 06-21-2022, 01:07 PM   #24
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A buy write strategy on SPY, highly traded, when VIX is high will produce a nice income with limited upside. You simply roll out the option prior to expiration. You essentially collect the time weighted premium and give up the upside in favor of some downside coverage. Simply put, it allows you to participate in the market with a lower risk/return assuming you want to hold some % of equities anyway...

That's my theory. I can generate some income from writing call options to enhance the return during flat periods. Same as the OP, I have enough margin for safety that I don't need to run away from stocks. Of course, it also helps that I have SS waiting for me at 70.

I love stocks. The market up/down makes life more interesting. It gives me something to think about, instead of watching TV all day.
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Old 06-21-2022, 01:49 PM   #25
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I love stocks. The market up/down makes life more interesting. It gives me something to think about, instead of watching TV all day.
I agree. If the OP has "won the game" and has enough to last for a normal life span, including increasing withdrawals for inflation, and doesn't want to mess with bull and bear markets, going to zero or not much in equities is reasonable.

I like the excitement and would find 100% fixed income boring as heck. I'm also hoping to leave $$ to DS and DDIL. DS says they'll just keep it for the kids but that's my plan.
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Old 06-21-2022, 01:50 PM   #26
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I was in a very similar boat when I retired 10 years ago. Anticipated spend rates was a little more and I was a few years older than you. I created two buckets. Bucket one was my base that I never wanted to fall below and that I felt I could easily live on the rest of my life, if needed. That was invested in fixed income assets and still is. Bucket two was for everything else... Speculation investing/trading, hobbies, travels, base living expenses, etc. 10+ years later and it's working well for me but YMMV.

From my POV, once you have won the game, why risk it.
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Old 06-21-2022, 02:00 PM   #27
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RE treated me well too, but everything I read and see says that market is about to follow everything else downward too.
There has been a huge amount of froth in virtually every asset class, and RE is no exception, so correction is expected (and in fact welcomed to "normalize" the market). Froth aside, the underlying value should still hold up well in an inflationary environment and serve as an inflation hedge, as long as one is not exposed to risks of higher rates due to leverage.
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Old 06-21-2022, 02:06 PM   #28
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I was in a very similar boat when I retired 10 years ago.
Just to make sure I understand your point ... when you first retired you were a Boat-Guy and now you are a Car-Guy ...
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Old 06-21-2022, 02:18 PM   #29
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Just to make sure I understand your point ... when you first retired you were a Boat-Guy and now you are a Car-Guy ...
So you were/are a Funny-Guy... Actually I do have a boat but I don't use it very often. Every time I put it in the water, seems something needs to be fixed either before, during or after each use.
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Old 06-21-2022, 04:02 PM   #30
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So I know all about historical returns of the stock market over prolonged periods of time but also very familiar with turbulent times like we are experiencing now.

So question is there ever a point where it is ok to not try to maximize your nest egg but rather protect and preserve if you've met your financial goals?

So my scenario
- 56 years old
- $6M investable cash (40% IRA 60% non IRA)
- $100K a year living expenses
- Still fully employed (plan for next 4-5 years)

So if I can buy a 5 year US Treasury for 3.5% yield that would give me $210K interest which is well above annual living cost. But since I plan on working next 4-5 years that will just get added to nest egg for now.

So is there value in assuming stock market risk? I know that if you do invest in the market in balanced approach my nest egg will grow more but do I need more? Do I need to expose myself to that volatility?

I view the goal is not to die with as much money as possible but rather reach a point where you've been guaranteed to win the game.

Thoughts? I know a controversial approach.

For example, if you are 56 and have $6M investable assets (IRA and non IRA) and my living expenses are $100K per year and I can invest in US Treasury that gets me 3.5% = $210K per year. Is there a need to expose yourself to stock market risk? The $210K allows for inflation erosion and then SS kicks in down the road as well.
In your situation it is totally appropriate since you don't care to die with as much money as possible... you can invest $2m in a 20-year ladder of TIPS ($100k per rung) and the rest in a ladder of US Tresuries if you wish to and it will generate much more than you plan to spend.
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Old 06-21-2022, 04:06 PM   #31
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Everything I'ver ever read over on bogleheads forums indicates 30% minimum in equities as an inflation hedge....
But the OP's retirement is way overfunded so there is no need for any equities at all. The 30% is probably for a 3.5-4.0% WR and not a 1.7% WR.
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Old 06-21-2022, 04:08 PM   #32
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But the OP's retirement is way overfunded so there is no need for any equities at all. The 30% is probably for a 3.5-4.0% WR and not a 1.7% WR.
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Old 06-21-2022, 04:38 PM   #33
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Thoughts? I know a controversial approach.
Inflation and longevity seem be your risks. Your portfolio volatility would be limited with 30% equities. OTOH you see to be over funded so probably any approach will work.
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Old 06-21-2022, 06:46 PM   #34
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Half your stash will generate the income you need to cover your living expenses, so you could take a bit of risk with a portion of the other half. An equity allocation of 25-30% will give you plenty of inflation protection.
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