FI (not sure) RE (sure) and 2 questions.

[dandetour]

The megacorp told me I am gone as of Feb 23. This is a large layoff,
but still secret in the mainstream news. 16,000 to 20,000 they say.

This is bittersweet news to me. It was killing me, body, mind, and
soul to continue working there. I think I am FI, but not sure since
I learned the details of the retirement medical offerings. I won't
bore all with the details, but to put it bluntly, the medical coverage
(not dental or vision, just medical) will now cost me roughly half of
the pension I was counting on. There are no other options for me.

Even so, I can't force myself to be sad... I find myself doing the
Happy Dance.

One question is about rebalancing. I had avoided it due to a fear
from the 2008 performance. But now, I am going to move a
large chunk of my fortune from a 401k to an IRA at Vanguard.
Currenty I am way low in stocks. I like 50/50. What say the
wizards here? Is this move when I should get back to 50/50?

The second question is about my son's college. He is 16.
I have set aside enough in CD's and Savings Bonds. But I am
very confused as to how that should or should not be calculated
into the 50/50. It will be needed in 2 thru 6 years out.
?Include as part of the fixed allocation, or leave it out of the
spreadsheet calculations?

Dan (ER in a month)

 

[JPatrick]

Tough news, but I'm glad you are receiving it with a semi smile.
50/50, sure at some time, but this is a tough market to call as most of us have not been there done that.
I'd tiptoe into it with a dollar cost averaging plan.
The college cash is secure, and if you feel your new circumstances will not cause a need to tap it for other than college, then just leave it out of your planning for retirement (and be happy you planned ahead.)

Best of luck, you'll get some good info and support here.

 

[W2R]

Hi, Dan, and welcome to the ER Forum.

Sorry to hear about the layoff but glad to hear that it may not be all bad in your case.

Probably different people treat college funds different ways as far as asset allocation, so I would suspect you may get some different answers here. As for mine, I would regard the college funds as something separate from your 50:50 asset allocation (AA), since their purpose is for a specific objective within the next 6 years. In other words, I'd consider them as being "already spent", even though you haven't actually sent them to the university.

Similarly, I have some funds in reserve for my move to a new retirement location, plus possible renovations and redecorating after I get there. I don't include this in my AA as I consider them to be already spent. If there is any left over, then that will go into my AA at that time.

As for rebalancing, I think JPatrick's suggestion is very good - - I'd DCA (dollar cost average) into the market since it is so uncertain. I did that myself last year when coming into some money and did not regret it. Others told me at that time that I should put all of it in as a lump sum, and opinions vary wildly on this issue as well.

 

[TromboneAl]

Dan,

A little more info would help. If you really are FI, and confident that you won't need much of your money for years, there's no good excuse for not rebalancing now. If you believe in rebalancing and asset allocation, and do not believe in market timing, then you should rebalance. Otherwise you may end up buying high and selling low.

I can see W2R's point, but I would include every dollar of your money in your asset allocation. That's the only way to take advantage of the research and advice available. For example, you'll be able to gauge what kind of risk you are being exposed to.

So, instead of saying "I have a 50/50 allocation (whisper: but I actually have tons more money in CDs for temporary use, shhh!)," say "I temporarily am going to go with a 35/65 allocation until after college is done."

 

[NotReady4Purple]

Hi Dan,

Welcome!

I wanted to comment on one side issue from your post. You may want to look at COBRA for your dental and vision. While COBRA medical is usually too expensive, I found that COBRA vision and dental were reasonable and that provides 18 months of coverage that I wasn't expecting.

Best of luck.

 

[youbet]

One question is about rebalancing. I had avoided it due to a fear
from the 2008 performance. But now, I am going to move a
large chunk of my fortune from a 401k to an IRA at Vanguard.
Currenty I am way low in stocks. I like 50/50. What say the
wizards here? Is this move when I should get back to 50/50?

Don't let the move from your 401k to a Vanguard IRA determine your AA. This is simply an administrative move, not a determiner of your equity/fixed/cash ratio. Move the money and immediately invest in an AA similar to what you have now. Then, at a pace only you can decide based on your prognosis of where the market will go from here, move money into equities to meet your AA goal.

In other words.......

Step one - move the money
Step two - DCA into your goal AA at a pace you decide on

Don't let step one overly influence step two. Don't go into equities faster than you're comfortable with just as a convenience "while you're moving the money anyway."

I agree with JP. Keep your son's college money as cash/near cash/short term fixed and not as part of your AA. Too short a time until those college bills start arriving to have to worry about significant variation in returns. (Looking at T Al's post...... if you're comfortable having the mindset of including your son's college money in your AA but having a larger allocation to cash/near cash/short term fixed, that's fine too. Same thing really.......)

Welcome aboard!

 

[dandetour]

Thank you all for the welcome and well-thought-out advice. Actually,
I have been here for perhaps a year. I just find myself reading more
than posting - on any board I frequent. Maybe that will change soon
when I am not doing the 9 to 5.

Al asked for a little more info. Well I think one important bit of info
that I left out is that due to the wisdom I read here and another board...
I actually have a CD ladder that along with the severance will keep the
family living as we are used to, for 4 years. So there will be no
immediate need to sell stocks or dip into IRAs.

Thanks again to all,
Dan

 

[JPatrick]

I actually have a CD ladder that along with the severance will keep the
family living as we are used to, for 4 years. So there will be no
immediate need to sell stocks or dip into IRAs.

I read that as a reason to quicken your allocation to stocks.

 

[Animorph]

Do a planned DCA, add to stocks if they reach new lows, or do it all when it's convenient, but do rebalance.

I would leave the college money outside your AA so that you can pull the significant cash amounts out without disturbing your AA tracking. There is no need to be replacing the college cash by selling stocks when rebalancing your portfolio, and no need for extra cash in the AA when college is done. You don't want to have to adjust your AA cash percent down after every semester. It's separate money. I might invest it alongside your retirement portfolio rather than keep a separate account if that looked easier.

That said, I run closer to 100% equities (with a cash buffer) and do just pull college funds out of the retirement portfolio (as planned!) and include them in the AA.