3 Years Into Retirement

[LateToFIRE]

Everyone should have a strategy. There are many ways to manage it. I didn’t like the idea of just stashing cash because at the time, it paid nothing. I ultimately went with an individual bond tent per Kitces. See link below. I lucked out because bonds rose in yields rapidly and now they pay us about 145% of our income needs.

https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/

I'm starting to read up on the bond tent thing. Interesting observation the article highlights is how as your portfolio grows, the impact of contributions diminishes relative to impact of returns. I've certainly found that to be the case - shockingly so. I'm still saving, but the effort seems almost meaningless to the size of the portfolio as I near retirement.On the other hand, its surprising how small changes in modeling (return rates, expenses, etc.) have big impacts after 20-30 years.

 

[FREE866]

Man...Kitces is VERY smart, but if I followed this whole bond tent strategy I'd still be working! 10 years prior to retirement you're supposed to have 40% bonds? then at retirement you have 70%?! I guess if you hate volatility and have boatloads of money it really doesn't matter, but what a drag on the portfolio value!

 

[BruinBones]

I just passed my 3 year anniversary.
The money part has been pretty easy...

Also retired 3 years ago.
I just checked our 60/40 Portfolio.
Up 3% overall since then despite 5% annual withdrawal rate. Huh?

 

[COcheesehead]

Man...Kitces is VERY smart, but if I followed this whole bond tent strategy I'd still be working! 10 years prior to retirement you're supposed to have 40% bonds? then at retirement you have 70%?! I guess if you hate volatility and have boatloads of money it really doesn't matter, but what a drag on the portfolio value!

My goal was to maximize the success of my retirement, not maximize my portfolio.

 

[FREE866]

My goal was to maximize the success of my retirement, not maximize my portfolio.

Okay

My point was if I followed his strategy there would have been no retirement for me.
Not sure what that has to do with you maximizing your retirement.

 

[Yipper]

Okay

My point was if I followed his strategy there would have been no retirement for me.
Not sure what that has to do with you maximizing your retirement.

I don't think you fully understand what COcheesehead is saying... and your situation is far different apparently. The point here is that you were lucky and he had already "won" the game and decided to stop playing.

Had there been a significant downturn, COcheesehead would have been just fine and you would have been even worse off.

 

[FREE866]

You’re lucky. Not everyone can live in a rent controlled apartment AND pick a good non SORR retirement year.

hahaha
those are very fair points!!

 

[Yipper]

Man...Kitces is VERY smart, but if I followed this whole bond tent strategy I'd still be working! 10 years prior to retirement you're supposed to have 40% bonds? then at retirement you have 70%?! I guess if you hate volatility and have boatloads of money it really doesn't matter, but what a drag on the portfolio value!

BTW - using FIREcalc there's a (not really) surprisingly small difference when comparing an AA of 70/30 to 30/70 over the duration of a 30 year retirement at the lower end of the probability range... maybe ~$100K in the negative?

Plus, what Kitces is talking about is a glidepath back to a more balanced AA over the first 10 years of retirement when SORR is most dangerous.

 

[FREE866]

Had there been a significant downturn, COcheesehead would have been just fine and you would have been even worse off.

I don't know about this statement. Going into 40% bonds 10 years PRIOR to retiring greatly caps your growth potential for one. Secondly, as we all know the ability to lower your expenses can be a major tool to determine a successful retirement. I had and still have that ability. So even if we did have a downturn I would be okay. Even more so now.

 

[COcheesehead]

BTW - using FIREcalc there's a (not really) surprisingly small difference when comparing an AA of 70/30 to 30/70 over the duration of a 30 year retirement at the lower end of the probability range... maybe ~$100K in the negative?

Plus, what Kitces is talking about is a glidepath back to a more balanced AA over the first 10 years of retirement when SORR is most dangerous.

This is an interesting point. Some tools I have used will show a worse result as you increase equity exposure. In bad SORR years, without the benefit of consistent bond income, the success rate drops. The challenge is tools will show you multiple potential outcome lines, but we only get a chance to live one.

 

[Yipper]

I don't know about this statement. Going into 40% bonds 10 years PRIOR to retiring greatly caps your growth potential for one. Secondly, as we all know the ability to lower your expenses can be a major tool to determine a successful retirement. I had and still have that ability. So even if we did have a downturn I would be okay. Even more so now.

Does Kitces recommend going 40% bonds 10 year before retirement? I think it's more of a gradual AA change over the 10 years approaching retirement.

Also - there's been a few ERN posts about the realistic ability to reduce expenses... aka "flexibility is overrated" post: https://earlyretirementnow.com/2023/06/16/flexibility-swr-series-part-58/

 

[COcheesehead]

I don't know about this statement. Going into 40% bonds 10 years PRIOR to retiring greatly caps your growth potential for one. Secondly, as we all know the ability to lower your expenses can be a major tool to determine a successful retirement. I had and still have that ability. So even if we did have a downturn I would be okay. Even more so now.

Kitces suggested starting to increase your bonds 10 years out. It’s a ramp, not an immediate change to 40%. You may have missed that. I personally went from 100% equities to bonds about 5 years out.

I am now in a position to actually spend more, because I have retained more, with likely never having to reduce expenses.

 

[FREE866]

BTW - using FIREcalc there's a (not really) surprisingly small difference when comparing an AA of 70/30 to 30/70 over the duration of a 30 year retirement at the lower end of the probability range... maybe ~$100K in the negative?

Plus, what Kitces is talking about is a glidepath back to a more balanced AA over the first 10 years of retirement when SORR is most dangerous.

Not sure how you entered the numbers but I see a HUGE ending balance difference in 70/30 vs 30/70...
and if it you go to 100/0 you're talking astronomical difference

 

[Yipper]

Not sure how you entered the numbers but I see a HUGE ending balance difference in 70/30 vs 30/70...
and if it you go to 100/0 you're talking astronomical difference

I put in $40k of spend and $1M of savings and looked at the differences between 70/30 (total market and 5 year treasuries) vs. 30/70 (same investments)... the difference on the lower end is ~$36k.

Again, to COcheesehead's point, they said "My goal was to maximize the success of my retirement, not maximize my portfolio".

 

[COcheesehead]

Not sure how you entered the numbers but I see a HUGE ending balance difference in 70/30 vs 30/70...
and if it you go to 100/0 you're talking astronomical difference

It depends on what you start with and is likely inconsequential for most unless you start on the edge and need the added risk.

 

[FREE866]

Does Kitces recommend going 40% bonds 10 year before retirement? I think it's more of a gradual AA change over the 10 years approaching retirement.

Also - there's been a few ERN posts about the realistic ability to reduce expenses... aka "flexibility is overrated" post: https://earlyretirementnow.com/2023/06/16/flexibility-swr-series-part-58/

The graph in this article in the middle.
https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/


Correct me if I'm wrong, but 10 years before retirement he is suggesting 40% bond exposure and at retirement 70% and even 15 years into retirement you're at 40% bonds........


and I know my flexibilty potential....not doing Roth conversions alone takes 20% off my expenses due to not paying taxes I do

 

[Yipper]

The graph in this article in the middle.
https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/


Correct me if I'm wrong, but 10 years before retirement he is suggesting 40% bond exposure and at retirement 70% and even 15 years into retirement you're at 40% bonds........


and I know my flexibilty potential....not doing Roth conversions alone takes 20% off my expenses due to not paying taxes I do

Here's his graph:

 

[COcheesehead]

The graph in this article in the middle.
https://www.kitces.com/blog/managing-portfolio-size-effect-with-bond-tent-in-retirement-red-zone/


Correct me if I'm wrong, but 10 years before retirement he is suggesting 40% bond exposure and at retirement 70% and even 15 years into retirement you're at 40% bonds........


and I know my flexibilty potential....not doing Roth conversions alone takes 20% off my expenses due to not paying taxes I do

Read the text of the article. He expands on the suggested percentage.
Final word from me on the topic.
If you don’t like the strategy, don’t use it. I personally feel it was a great benefit to me retiring at a market high and experiencing two bear markets in three years.

 

[FREE866]

I put in $40k of spend and $1M of savings and looked at the differences between 70/30 (total market and 5 year treasuries) vs. 30/70 (same investments)... the difference on the lower end is ~$36k.

Again, to COcheesehead's point, they said "My goal was to maximize the success of my retirement, not maximize my portfolio".

the avg balance on 70/30 is 1.7 million
the avg balance on 30/70 is $689K
the avg balance on 100/0 is 2.7 million


and stocks are more tax efficient


what am i missing here?

 

[wmackey]

Passed 3 years on 7/10. We have been living of savings the entire time (No pensions) and DWs SS (small). We have ~ 5% more than when we started. So far, I do not know where we found time to work.

 

[nvestysly]

...The only hard part is I now realize I have 3 less years to enjoy the best years of my life.

Yep, I know what you mean. The past 12 years have flown by for us! I guess that means we're 12 years closer to the end. Thank goodness we were not working and instead enjoyed that time doing what we want - travel, leisure, home projects, built a new house, volunteering. Retirement has been great. Weathered the market downturns, we used a reasonable withdrawal rate and have more assets now than when we retired in 2011.

Pretty soon we'll be wondering how to blow that dough!

 

[COcheesehead]

the avg balance on 70/30 is 1.7 million
the avg balance on 30/70 is $689K
the avg balance on 100/0 is 2.7 million


and stocks are more tax efficient


what am i missing here?

Reread Yippers post. You are twisting his words. He said on the low side, not average.

 

[Yipper]

the avg balance on 70/30 is 1.7 million
the avg balance on 30/70 is $689K
the avg balance on 100/0 is 2.7 million


and stocks are more tax efficient


what am i missing here?

My last comment on this topic: I think you're missing the point of what COcheesehead was saying... it's not about maximizing the portfolio it's maximizing the SUCCESS of the portfolio.

 

[FREE866]

Here's his graph:

Im talking about the bond tent graph, which was how Kitces first got introduced in this thread
the graph you posted isnt it

 

[COcheesehead]

Im talking about the bond tent graph, which was how Kitces first got introduced in this thread
the graph you posted isnt it

Welcome to ignore. I will no longer see any of your posts. Hope you understand if I don’t reply.