53, maybe ER at 55... what would you change?

[baseman250]

See attachment.

This is pretty much everything. I feel I'm weak in understanding when it comes to the "bond" side of things, and I'm ~11% in MM. The Roth IRAs are heavy in MM because they were moved into Vanguard last year and I've been waiting for an opportunity to shift into VTTVX and/or VTHRX. I feel like I'm missing out on returns by being MM heavy, but maybe this is a good thing right now...?

I also started contributing ROTH dollars inside my 401K this year. I wish I would have done that sooner. Anyway...

I estimate another $75K will hit these accounts over the next two years. Question isn't if I can retire in two years, but if I do, would you change AA?

--Baseman250

 

[USGrant1962]

Your AA is remarkably close to mine, including some excess cash looking for an opportunity. I retired 2 years ago at 55 with an AA target of 55/41/4 and plan on slowly increasing to 60% equities as a bit of SORR avoidance, bond tent, and market timing. So IMO you are fine.

Things to watch for:

• As you mention, your high MM allocation will be a drag on performance.
• With bonds make sure you understand how much of your portfolio is corporate versus government. Corporate bonds are not as good a diversifier as government, but arguably make up for it in yield.
• Most folks suggest that equities are best in Roths to maximize long-term returns. So as a first cut, bonds in tIRA, equities in Roth and taxable accounts.

 

[pb4uski]

Are the MM mostly VMMXX? VMMXX is pretty good IMO.... currently yielding 1.76% APR.... decent but a tad lower than online bank yields.

Looks like most bonds are bond funds in 401k or IRAs... fine... I got some nice 3.5% and 3.0% 5-year credit union CDs earlier in the year but it is slim pickings now.

Looks like some repositioning would increase tax efficiency.... as USGrant1962 says... put bond allocation in tIRA and 401k and equities in Roth and taxable accounts.

If you decide to keep some bonds in taxable account consider muni MM fund if you are in a high tax bracket.

 

[baseman250]

Currently, all Bonds are inside the VG age-based funds and VG ETFs to mirror an age based fund. In the new year, I'll be doing the Roth IRA contributions. If the market doesn't really change much between now and then (no correction), I'm not sure where to put it. Keep it in MM or just go into the age-based fund?

Yeah, I've thought about going more into equities in the Roth accounts, and more into bonds on the money I'll likely be using first to maintain a 60% equities balance. That's why I'm here; to peel off the layers of understanding and hone in the plan.

 

[baseman250]

Actually no. My MM dollars are sitting in the VG Federal MM Fund, which looks about the same performance, unless I'm missing something. Should I change that?

Are the MM mostly VMMXX? VMMXX is pretty good IMO.... currently yielding 1.76% APR.... decent but a tad lower than online bank yields.

Looks like most bonds are bond funds in 401k or IRAs... fine... I got some nice 3.5% and 3.0% 5-year credit union CDs earlier in the year but it is slim pickings now.

Looks like some repositioning would increase tax efficiency.... as USGrant1962 says... put bond allocation in tIRA and 401k and equities in Roth and taxable accounts.

If you decide to keep some bonds in taxable account consider muni MM fund if you are in a high tax bracket.

 

[pb4uski]

.... Yeah, I've thought about going more into equities in the Roth accounts, and more into bonds on the money I'll likely be using first to maintain a 60% equities balance. That's why I'm here; to peel off the layers of understanding and hone in the plan.

No need to have bonds in the money you are using first.

Let's say that you plan to use taxable first and it is all equities and bonds are all in 401k.... just sell equities in taxable to raise needed cash and then sell bonds and buy equities in 401k to rebalance... just beware of wash sale losses when you sell equities in taxable and you'll be all set.

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

 

[pb4uski]

Actually no. My MM dollars are sitting in the VG Federal MM Fund, which looks about the same performance, unless I'm missing something. Should I change that?

VMFXX is fine... I just prefer higher-yielding VMMXX... capitalist pig that I am.

 

[baseman250]

Well, I would like to keep things simple, but not too simple. (I don't want to start dealing with bond investments individually, but will if it makes a big difference.)

What about this:
Put Roth money in a 2030 or 2035 target fund and taxable money in a 2020 or 2025 target fund or whatever target fund it takes to maintain a 60/40 AA. I can move $$$ around inside the IRAs & 401K at no cost, and I can adjust the equity/bond balance in the VG brokerage account by just buying the right ETFs (VTI, VXUS, BND, BNDX) to get where I want to be.

Is this a reasonable strategy (keeping longer term, non-taxed money more in the "game" while being a little more conservative with dollars I will likely be using first)?

No need to have bonds in the money you are using first.

Let's say that you plan to use taxable first and it is all equities and bonds are all in 401k.... just sell equities in taxable to raise needed cash and then sell bonds and buy equities in 401k to rebalance... just beware of wash sale losses when you sell equities in taxable and you'll be all set.

https://www.bogleheads.org/wiki/Tax-efficient_fund_placement

 

[baseman250]

Again, I wouldn't start drawing down anything for at least another two years.

Well, I would like to keep things simple, but not too simple. (I don't want to start dealing with bond investments individually, but will if it makes a big difference.)

What about this:
Put Roth money in a 2030 or 2035 target fund and taxable money in a 2020 or 2025 target fund or whatever target fund it takes to maintain a 60/40 AA. I can move $$$ around inside the IRAs & 401K at no cost, and I can adjust the equity/bond balance in the VG brokerage account by just buying the right ETFs (VTI, VXUS, BND, BNDX) to get where I want to be.

Is this a reasonable strategy (keeping longer term, non-taxed money more in the "game" while being a little more conservative with dollars I will likely be using first)?

 

[Retiree_Having_Fun]

Assuming 4% rate of withdrawl = 1.3 mill is about $52k.

How do your expenses compare? Will you be provided health care when you retire, if not, at $52k MAGI - no subsidies), you could pay $18,000 in health care plus be at risk for a $6k deductible in years where things are bad. So your health care spending plan is important.

I would download the Bogleheads Retire Portfolio model and spend some time with it.

https://www.bogleheads.org/wiki/Retiree_Portfolio_Model

 

[baseman250]

Thanks for the reply.

Whether or not I can ER in two years is another topic. This thread is more about AA strategy with the different accounts I have, if I should maintain a higher equity balance for "long" dollars (Roth) and a lower equity balance for "short" dollars, or not worry about it. I'm also 11% in MM, so wondering if waiting for an opportunity is prudent considering my timing hasn't been great in the past...

BTW, I thought ACA subsidies dropped off at $65K. Also, planning on SS at 67. Firecalc looks pretty good, but on the early side of the ER analysis.

Assuming 4% rate of withdrawl = 1.3 mill is about $52k.

How do your expenses compare? Will you be provided health care when you retire, if not, at $52k MAGI - no subsidies), you could pay $18,000 in health care plus be at risk for a $6k deductible in years where things are bad. So your health care spending plan is important.

I would download the Bogleheads Retire Portfolio model and spend some time with it.

https://www.bogleheads.org/wiki/Retiree_Portfolio_Model

 

[baseman250]

Here's my first thread where I provided more detail and possible ER at 55 was discussed:

http://www.early-retirement.org/forums/f26/getting-excited-in-pa-100340.html

 

[pb4uski]

Well, I would like to keep things simple, but not too simple. (I don't want to start dealing with bond investments individually, but will if it makes a big difference.)

What about this:
Put Roth money in a 2030 or 2035 target fund and taxable money in a 2020 or 2025 target fund or whatever target fund it takes to maintain a 60/40 AA. I can move $$$ around inside the IRAs & 401K at no cost, and I can adjust the equity/bond balance in the VG brokerage account by just buying the right ETFs (VTI, VXUS, BND, BNDX) to get where I want to be.

Is this a reasonable strategy (keeping longer term, non-taxed money more in the "game" while being a little more conservative with dollars I will likely be using first)?

While I am a fan of target date funds and have recommended them to my son, I would probably use the underlying stock and bond funds for a situation like yours.... stock funds in taxable and tax-free and both stock and bond funds in the 401k since your 401k balance exceeds your bond target.

Other than taxable liquidity that is in a 1.8% online savings account, our taxable accounts are in equities, both domestic and interrnational. The international equities generate foreign tax credits for foreign taxes paid that exceeds the ordinary tax on international fund non-qualified dividends, so my entire taxable equity portfolio actually results in a net tax credit that can be used to offset tax on my ordinary income.

Tax-free Roth and HSA accounts are all domestic equity funds for tax-free growth.

tIRA is where all my fixed income is... mostly CDs but also a "play" portfolio of high-quality, good yielding preferred stocks... plus some equities.

My normal AA target is 60/35/5 and I have religiously adhered to that for 2012-2018.... in 2019, I gourged out on some 3.5% and 3.0% 5 year credit union CDs in the spring/summer which moved me to my current 53/42/5. I'll live off of fixed income and let equities drift back up to my 60/35/5 target over the next year or so.

 

[Drake3287]

Not to be a downer but I retired at 54 with almost the same investment amount, difference with me is that I have a hefty pension along with paid medical for life. Depending on your housing and medical costs along with where you live, I won't be comfortable with that amount lasting me forever, even with SS down the road.

With all of us supposedly hating Trump but loving his economy, one change next November could have lasting affects on everyone's future retirement plans.

 

[baseman250]

Dude, I completely agree. If I were 55 today & considering ER, I think I’d still be waiting at least a year to see how this pans out.

Not to be a downer but I retired at 54 with almost the same investment amount, difference with me is that I have a hefty pension along with paid medical for life. Depending on your housing and medical costs along with where you live, I won't be comfortable with that amount lasting me forever, even with SS down the road.

With all of us supposedly hating Trump but loving his economy, one change next November could have lasting affects on everyone's future retirement plans.

 

[baseman250]

I made some minor changes. Not all the changes I'd like to make, as I don't want to create a big taxable event...

Anyway, in the Roths at VG, I switched from age-based funds to VTSAX & VBTLX with an AA weighted towards VTSAX. No change in the VG brokerage, but I am considering changing 401K to a more conservative VG age-based fund. (That's all I really have available inside the 401K.) I can then adjust balance in the Roths to arrive at my target 60/40.

Currently running at about 56/30/14, so sitting on some "cash" in MMs, but think that isn't a bad place to be at the moment.

While I am a fan of target date funds and have recommended them to my son, I would probably use the underlying stock and bond funds for a situation like yours.... stock funds in taxable and tax-free and both stock and bond funds in the 401k since your 401k balance exceeds your bond target.

Other than taxable liquidity that is in a 1.8% online savings account, our taxable accounts are in equities, both domestic and interrnational. The international equities generate foreign tax credits for foreign taxes paid that exceeds the ordinary tax on international fund non-qualified dividends, so my entire taxable equity portfolio actually results in a net tax credit that can be used to offset tax on my ordinary income.

Tax-free Roth and HSA accounts are all domestic equity funds for tax-free growth.

tIRA is where all my fixed income is... mostly CDs but also a "play" portfolio of high-quality, good yielding preferred stocks... plus some equities.

My normal AA target is 60/35/5 and I have religiously adhered to that for 2012-2018.... in 2019, I gourged out on some 3.5% and 3.0% 5 year credit union CDs in the spring/summer which moved me to my current 53/42/5. I'll live off of fixed income and let equities drift back up to my 60/35/5 target over the next year or so.

 

[baseman250]

Update...

I don't know how many of you that participated in this thread will see this, but here's an update. After making some suggested changes almost two years ago, overall "portfolio" has grown over $500K!!! .... and the company I work for was just purchased by a much larger company, so when that deal officially closes in about 6-9 months, I'm actually hoping they make me an "early retirement" offer.

 

[RxMan]

Congrats baseman! That’s a lot of growth in just a couple of years. Good luck- hopefully you’ll get that early retirement package. Maybe it could include medical coverage for a while?