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Overfunded Retirement Strategies
Old 11-29-2020, 07:53 AM   #1
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Overfunded Retirement Strategies

First, let me acknowledge I know none of us really know if we are/were overfunded until we hit the dirt nap. That said, I am curious if/how/what those of you who may have some confidence in being overfunded do as it relates to managing the designated excess? If as an example all the calculators say $1M at a 60/40 AA gives you 100% probability of funding your desired retirement and you have $2M, do any of you separate the extra $1M and run it as a separate portfolio doing any of the following?

- Go extremely conservative and put in cash to just "blow the dough" or pump up the early giving/charity?
- Go relatively conservative and put it in fixed investments to minimize loss/volatility since you "won the game"?
- Let it ride in equities for legacy reasons or just to run up the score because you can?
- Just keep it in the mix with your first $1M, same AA, just pulling a lower WR?
- Some hybrid of the above, other?

Again, I know it's a personal and "depends" and I can see all scenarios being a valid way to approach any excess. I'm just scratching an itch here...
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Old 11-29-2020, 08:21 AM   #2
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Once we hit our number we started donating anything over what we need to live on. What we have invested is all invested the same.
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Old 11-29-2020, 08:28 AM   #3
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Right now I am just letting it all ride. Too early to start giving it away. I still have kids at home. I've been thinking about moving a portion to more conservative investments. Hard to pull any out of the market the way thinks have been going. Guess I will have to wait it out if "another" black swan event occurs.
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Old 11-29-2020, 08:41 AM   #4
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Right now I am just letting it all ride. Too early to start giving it away. I still have kids at home. I've been thinking about moving a portion to more conservative investments. Hard to pull any out of the market the way thinks have been going. Guess I will have to wait it out if "another" black swan event occurs.
Good point which raises the followup question... what age did you feel comfortable earmarking any "excess" thinking you were over the real sequence of return risk?

Launching my kids (4th one launched officially earlier this year) was the last major hurdle I wanted to clear before launching myself. The picture gets clearer once the heavy lifting is done.
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Old 11-29-2020, 09:05 AM   #5
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Letting it ride 60/35/5. I'm uncomfortable with the probability of facing health issues later on. We have pre existing conditions, mine kidney and cancer related which can be extremely expensive. I'm very healthy now, following daily time restricted fasting. HC in this country is a crapshoot. We don't know from one year to the next what's going to happen.
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Old 11-29-2020, 09:35 AM   #6
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Good point which raises the followup question... what age did you feel comfortable earmarking any "excess" thinking you were over the real sequence of return risk?

Launching my kids (4th one launched officially earlier this year) was the last major hurdle I wanted to clear before launching myself. The picture gets clearer once the heavy lifting is done.
Both have launched here, last was about 3-5 years ago. Sorta! We're mid 60's.

We are going through a "normal" retirement process, with me out (as of early 2020) and her on the job for another year. So your early retirement has specifics we're not familiar with, since we are not E-R'd.

But it may feel like the following. There are decisions about what we feel are excess funds. The primary indicator is that bank cash balances are still growing, with no need to tap any retirement funds.

We're not conceding large amounts, though. We have upped charitable this year, and have no problem with $500 presents for children. OTH they don't need anything, by their own words.

To solve this long term, we have a brokerage account (a/k/a Family Bank) set aside. It holds inherited stocks and ETFs, as well as stock gifted to us. We feed the bank a little each month. The auto-investing comes from the checking acct where paycheck goes. The total balance is 15% of total invested.

Both children know of this "bank" and may borrow and pay back or not (within reason). It's a work in progress, and it's working for us so far.

It is an option one could take, to set aside a portion and manage for the next generation. Of course you want to retain ownership for now, as something significant could happen and you'd need the money. At the end of each future year, depending on how invested and the market, you'll see growth, dividends, and will likely see a gift amount you're comfortable with.

This is all a nice problem to have, and I wish you well finding a path you're comfortable with.
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Old 11-29-2020, 09:49 AM   #7
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With “once you’ve won the game, why keep playing” in mind, I’ve just ratcheted back risk instead of separating the portfolio as the OP describes - has essentially the same effect. I was 100% equities and entirely comfortable with it until age 51, current AA below (though I’ll deploy more cash next dip).
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Old 11-29-2020, 10:07 AM   #8
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We took a portion of our stash and funded a 10-year bond fund ladder as a contingency and possibly for LTC. That has been great for peace of mind. Other funds are invested mostly in equities. We are somewhat conservative by nature so it's been hard to spend our income. Getting used to it though, and it's a nice problem to have. If there's something we want to do then we just do it, as long as it's not ridiculous.
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Old 11-29-2020, 10:15 AM   #9
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I'm 65 and haven't cut back on my AA, I'm about 80/20, not including home. We are also at 47x spending, with SS coming in the future. I'm mostly invested for the kids inheritance now. Although, if things work out as hoped, they will be in their 50s and an inheritance won't matter.
I think we've raised them to save.


btw, do they every really get out on their own? We recently finished paying tuition on our son and still have 3 more large payments on our daughter. My son moved back in with us, this was kind of a goodby visit between college and marriage, but then Covid, a long distance engagement that got broken and he is staying. I'm not complaining, I'm enjoying and glad to have him here. We did a lot of projects together at home. I recently helped him with a work project, that is now complete. He wants me to learn a little ukulele to accompany him. I think I'm to slow to pick it up, he played guitar and borrowed a ukulele and progressed fast. But, I'll probably try.
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Old 11-29-2020, 10:18 AM   #10
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My stash is currently 40x my planned yearly expenses, but might be more than that...or less. It's hard to tell after this first year as our expenses have been surprisingly low, what with trips cancelled and purchases postponed because of Covid. WRT expenses, I don't feel like I'm into a true retirement scenario yet so I haven't made any moves with excess funds. We don't have kids to gift to, but I do have a niece and grandniece I plan to help out, and there are a couple organizations I'll give to. But I'll wait a few years to see how our expenses pan out. In the meantime, I'm letting it ride.
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Old 11-29-2020, 10:36 AM   #11
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btw, do they every really get out on their own?
Can't a guy just enjoy the moment!

I hear ya... there is no telling if they are ever really off the payroll. I have knocked out 2 weddings, but have 2 more girls to go. Plus, we have 1 granddaughter and 2 more grandkids due in Jan/Mar so my wife has created a new expense category for us!
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Old 11-29-2020, 10:41 AM   #12
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Can't a guy just enjoy the moment! ...
Don't bother putting flowered wallpaper in the boys' bedrooms. They come back anyway.
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Old 11-29-2020, 10:48 AM   #13
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Don't bother putting flowered wallpaper in the boys' bedrooms. They come back anyway.
Funny... after each one of my kids left the house I told them their bedrooms were getting new labels and were no longer theirs... Guest Room #1, #2, etc. They don't seem to believe me when they come back and find out a guest has been sleeping in "their room" and they act all possessive... "hey, that's my room!"
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Old 11-29-2020, 10:52 AM   #14
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Weíve stepped up our giving this year since so many charities are hurting. We have provided townhomes for each of the boys and their families, which are in our name, but will be theirs when we pass. The 529 plans for our three grandkids have also been funded and will continue to be. We planned on doing a major remodel, but with my FIL living with us it just isnít the right time. Iím considering splurging on a 2021 MB E-450, but havenít pulled the trigger yet. If the nest egg keeps growing beyond our needs, weíll start gifting more to the boys so they can learn investing on their own.
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Old 11-29-2020, 10:53 AM   #15
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Don't bother putting flowered wallpaper in the boys' bedrooms. They come back anyway.
Might flowered wallpaper in "their" bedroom keep them away?
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We've been lucky. DD launched easily. During the summer between her junior and senior years she lived near her school and was doing an internship. One time we visited and took her out to lunch and in the course of the conversation I mentioned somethign about her being "off the dole" in 10 months... she had never earned the term before so I explained it and we had a good laugh.

DS was a little harder. He was in and out of numerous jobs and lived at home for different periods and it was stressful... DW would be pushy and he woudl be resistant. I finally convinced him that it waas best for him to move out and he ultimately got a job about an hour from home and moved out after a couple months and is self sufficient. He's not making a lot but he is LBYM and actually saving money... so all is good.
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Old 11-29-2020, 11:02 AM   #16
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Once we hit our number we started donating anything over what we need to live on. What we have invested is all invested the same.

Thank you. Ditto on both parts. Regarding donating, DW and are are changing our mindset to be comfortable giving more and more while we're still around to see it do some good. Regarding investing, no changes to our asset allocation. My thought is that all the SWR analysis and whatnot assumes that the future will not be worse than the worst of the past. If the future is worse, nobody knows what asset allocation will be best, so might as well stay the course.
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Old 11-29-2020, 11:09 AM   #17
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do any of you separate the extra $1M and run it as a separate portfolio doing any of the following? [...]
No, I just regard everything as one portfolio.

My only child was launched about 20 years ago and has never asked for a dime. And she wonders why I am so proud of her! Yes I am.
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Old 11-29-2020, 11:10 AM   #18
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We Just keep it in the mix with your first $1M, same AA, just pulling a lower WR.

Reasons are:
  • Currently supporting a relative, and will be for years.
  • Have very elder relative, may need some large $$ help, currently just helping a tiny amount.
  • We have no LTC insurance, so need to keep reserve to insure for that and not be a burden on kids.
  • Never know just how bad the future will be, so it's relaxing to have extra.
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Old 11-29-2020, 11:12 AM   #19
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We are overfunded. Last six or seven years of employment and investment did it. We only realized after a few years of retirement and saw how much we were drawing down to supplement our pensions.

We now keep 60-65 percent in equities, and that is increasing. The monies will stay in equities. We plan to leave a healthy education fund for each of our grandchildren and hope to eventually provide enough money for each of two children's retirement. Chances are they will not have the same retirement pension or earnings as we have enjoyed. Those objectives both have a longer time horizon and are well suited to equity investment at the moment.
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Old 11-29-2020, 11:26 AM   #20
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We are more likely than not to be overfunded (meaning that in retrospect I may have worked longer than I really needed to.

If one of us has a long nursing home stay while the other is still living at home then I think we'll be ok but there will be a lot less redundancy.

Legacy desires are a small factor in deciding my AA. We've told the kids that if there an inheritance then it is estimating error on my part... while not totally true we prefer that be their expectation so if there is an inheritance it is a bonus.

It wouldn't surprise me that once we are collecting SS if there is still a significant redundancy that we might be more aggressive investing for their sake. Also, it is likely that I'll receive a significant inheritance sometime and I have given some thought about perhaps disclaiming part of it if it would result in what I would otherwise receive going to my kids (and not my siblings).
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