60, solo, and pulled the ER trigger

[BarbWire]

I have been lurking on this forum for years, and have learned a lot. And I've slowly been correcting some of my early investing mistakes (eg, thinking I needed to apply my AA separately to tax-advantaged and taxable accounts rather overall ) as I invest and rebalance each year. So thanks for that.

I am 60, solo, no debt and no dependents.

I started planning for ER in my late 30s (LBYM) intending to pull the trigger at 55. Well, I did that, sold my house, and jumped right into .... four (unanticipated) years of eldercare and subsequent estate execution. That all wrapped up in October 2016, and I have been a nomad-by-choice since then, by campervan in North America and by backpack elsewhere.

I've been letting the dust settle in the year since all wrapped up, and thinking rather than doing anything rash.

I suspect I will travel for all of 2018, and then lease a place to live in my tentative "forever" town for 2019 to test it, possibly buying in 2020 if it works out.


Current status:

Applying the 4% rule to my net worth, I am more than comfortable. In fact, that pre-tax number is 60% higher than what I earned in my final years at MegaCorp. [Alas, health insurance will probably take care of that windfall :-( ]

Approx 80% of my assets are invested at Vanguard with AA of 65:35 + some cash, mostly in ETFs but with some Wellington and Wesley in the IRAs and inherited IRAs.

The remaining 20% -- several $100K --- is sitting at Fidelity in cash (see #2 below).

I *think* I will be comfortable with about 2 years of cash on hand.

Now I have two issues to work through:

1. How to generate my annual cash -- and I will post my ideas and questions about that on another thread (which subforum?)

2. What to do with the significant amount of cash I got in October 2016 when I sold two inherited houses. I put it in cash (Dow at 18000), thinking I should not do any investing til I had a plan, and sat and sat and sat .... and now I am reluctant to invest it with the Dow at 23000, so I am in analysis paralysis. Anyway, I will post a thread about that elsewhere (which subforum?)

Again, thanks to everyone here for the information over the past few years, and hello!

(And to any Young Dreamers who are reading this -- dream and plan for 20 years and you can do it!)

BarbWire

 

[Cassius King]

Congratulations and enjoy the travel!

 

[brokrken]

Congrats on a well executed plan!

 

[Rianne]

I admire your true free spirit! Sounds like you just have a few loose strings to tie up. We have 3 years of cash/bonds, waiting for SS, pension to kick in. Probably won't touch investments for 4-5 years. If you have an idea of your expenses, why not just keep the cash to live on until you need your investments?

 

[MBAustin]

Welcome, Barbwire and congratulations on your freedom - 4 years of eldercare is a major investment in your family. Leasing in your potential "forever" city is an excellent idea, IMHO.

Your specific detailed questions are best for the FIRE and Money forum. With inherited IRAs in the mix, you are obviously already generating some cash from the RMDs. One thing many of us do is to stop reinvesting distributions on our taxable accounts and put the capital gains and dividends into our cash budget for the year.

Personally, I'd keep 2 years in cash (or near-cash - I use Vanguard Limited Term Tax-Exempt which is low volatility but better returns than MM) plus any buffer you need for possible major expenses (in your case, perhaps furnishings and a car?).

Glad to have you joining in the conversation!

 

[thumbs]

Way to go Barbwire! Well done, enjoy what lies ahead.

 

[FrugalLady]

Congratulations! Sounds like you have a very sound plan. Enjoy!

 

[SamuelLigert]

Welcome to the forum! Congratulations!

 

[Mdlerth]

Welcome to the board.

You have an awesome screen name! Can't wait to see your avatar!

 

[misshathaway]

Same age and life circumstances, although I retired 2 years ago. Welcome.

Why invest the inherited cash if you have already "won the game" ?

 

[BarbWire]

Thank you to everyone for the kind words.

Welcome, Barbwire and congratulations on your freedom - 4 years of eldercare is a major investment in your family. Leasing in your potential "forever" city is an excellent idea, IMHO.

Your specific detailed questions are best for the FIRE and Money forum. With inherited IRAs in the mix, you are obviously already generating some cash from the RMDs. One thing many of us do is to stop reinvesting distributions on our taxable accounts and put the capital gains and dividends into our cash budget for the year.

Personally, I'd keep 2 years in cash (or near-cash - I use Vanguard Limited Term Tax-Exempt which is low volatility but better returns than MM) plus any buffer you need for possible major expenses (in your case, perhaps furnishings and a car?).

Glad to have you joining in the conversation!

Yes, following what I have read here, and using 2017 to get a plan in place: For 2018 I will be using the RMDs from the inherited IRAs to pay myself a monthly income, which covers fixed costs. And in 2016 I stopped reinvesting dividends in my taxable accounts, and will use the 2017 proceeds for the 2018 cash budget. And I will have 2 years of cash sitting in a separate "pot."

Thank you for pointing me to the Limited Term Tax-Exempt fund for cash. I have not yet researched low volatility "safe"-ish alternatives to MM funds.

Same age and life circumstances, although I retired 2 years ago. Welcome.

Why invest the inherited cash if you have already "won the game" ?

And that is indeed a very good question which I have been asking myself, and part of the analysis paralysis. It feels irresponsible to have a substantial chunk of cash sitting around rather than invested. But that is an emotional, not analytical response.

 

[Doc0]

I don't quite understand what you wrote. You seem to have a bunch of "portfolios" instead of one portfolio. You seem to have "65:35" except for several hundred K sitting in cash which you intended to invest but never got around to it and now the market seems to have gotten away from you, which would imply you are not 65:35. So my question is are you really 65:35 with your money viewed as a single portfolio?

The worst thing you can do is not understand your portfolio as a whole. If you don't understand it as a whole you can't understand the risk you are taking. Also there is no reason to take a 4% SWR, I take 3% and am perfectly happy on that. If I want to buy a car one year, I slice a little more off the taxable roast, but I could just as easy finance it with some of those low interest deals. I can make that decision because I know precisely what I have. From what I've read someone who FIRE'd needs a higher long terem risk profile than someone who retires at full retirement because the money has to grow longer, BUT performance in early retirement should be conservative, so retirement can be looked at as 2 or 3 stages. Maybe 50:50 for 5 years, then 60:40 for 5 years, and 65:35 thereafter or even more aggressive, the point being as your portfolio ages it needs to carry you through less and less time. Use Personal Capital to understand your portfolio.

First analyze your entire portfolio. Choose a overall risk for early retirement your comfortable with and make that happen. You also have to plan for when your age 70 IRA's RMD. Your tax bill will be based on SS income and RMD income so if your getting RMD income from several sources plus SS it all adds up. The way to deal with that is to convert IRA to Roth IRA

What I am doing is I converted several hundred K to cash from my taxable account and put it into a short term muni bond fund. You already have cash so you can skip this step and just stick it in a muni bond fund or CD ladder or something. I choose muni bonds because they should be more responsive to inflation and are tax free. I therefore live off this cash tax free. In the mean time I am converting IRA to Roth IRA up to the top of the 15% tax level (about 75K per year or a little more for 2 people, you'll have to adjust), plus a little to pay the taxes on the conversion. Once in the Roth I invest to make my AA a little more aggressive. I'm not taking SS till 70. By the time I hit 70 and RMD a lot will have been removed from my IRA's so the RMD will be smaller and the tax bill on what I moved was only 15%. In the mean time I'm living off the muni's. The muni's give my portfolio that conservative tilt during early retirement, but as I spend them down my AA automatically readjusts to more aggressive. My tilt now is 58:42 with the bonds and will be about 70:30 once the muni bonds are spent, depending on how the market does the next 5 years. The rest of the portfolio I just leave alone for now, and in 5 years I will re-evaluate, sorta re-retire based on portfolio size and how much I have to RMD vs my needs. The other thing I do is meticulously track expenses using MINT.

So I have a substantial chunk of cash sitting around AND a rational plan why it is sitting around. Mine is a plan based on 5 year epochs so I don't have 10 years of cash sitting around. Beyond my 5 yr living cash, it is all invested. 3 or 4 year epochs might be something that fits your need. I sleep fine at night and so far my portfolio generates return at about 3 times what I spend, but this is a season of prosperity. The taxable aspect of my portfolio is in things that don't generate much tax, so it just grows unmolested and reinvested. I have harvested some LT cap loss I can apply to the cap gains whenever I need to cash in some post tax stock.

 

[street]

Welcome. I like your maverick ways and I'm also your same age.

 

[Nature Lover]

Congratulations and welcome!