Boom! - Now what?

[jschner]

Happy 4th of July!

Sorry if this is long.

I'm 57 worked for the same employer for over 30 years. Started a 401k in 1989 and put in what I could right away. Eventually got up to 10% and today I'm at max at about 18%. Wife is stay at home, one son 17 still living with us for another year or so.

In my 401K I tried everything, growth, small cap, being diversified in large, small and international and finally settled on S&P500 Index. But that has not been all that great IMO. The S&P500 from 1989 to 2000 were great years. 2000 to 2013, those years no so great. 2013 to today things seem to be back on track again, so it seems like I lost 13 years there of flat gains.

Since 2017 we are debt free. Even after 28 years of 401K contributions, my whole portfolio was around $800k which was disappointing to me. I was maybe 7 times my yearly income. It honestly looked like I was working until 70 and that kind of woke me up. I had a good job, good pay, good benefits, totally secure, but what I was doing for retirement was not working, so I went for it in 2018. I found a handful of stocks that were top performers, that had charts with a good trajectory, that beat earnings, and dove in. ROKU, ENPH, APPS, BLNK and now I'm blown away I'm at $3.4M in all of my accounts. About 25 times my current annual salary. It has happened so quick, I'm caught flat footed how to make the next step, wait until 59 1/2 or retire now and and enjoy life. We have been living some what frugal for decades so retiring is appealing to me. I guess I'm looking for options right now, but in my mind there are some serious hurdles like healthcare, steady income, the unknown.

Here is where we stand as of today.
Current job $135k with 401k, no pension. No benefits afterwards except 3yrs of cobra for $30k a year. OUCH!

Fidelity: $3.4M - Funny that Fidelity called me out of the blue and assigned me an advisor.
CASH Brokerage Account $606k = $603k ENPH LTCG, $3.7k BLNK
ROTH IRA: $1.9M = $1.27M ENPH, $147K APPS, $28k BLNK
Trad IRA: $259K APPS.
401K: $640K = $170k S&P50, $466k ENPH, $3.7k BLNK

SSI at 70 $3900, Spouse 50%

Own our home about $470k.
Expenses around $60k - $70k.
Debt about $35K, mostly a car but interest rate is around 2% so I keep the money invested rather than pay it off.

Yes I realize, not very diverse, lol From Jan 21 I think I was down $1.7M from my portfolio ATH, but it is now almost all back, maybe down $350k. I'm fairly disconnected from risk at the moment, big drops do not phase me much if at all. I actually kick myself when things drop, I think, Oh I could have sold and then bought back in lower and owned more shares. But I have tried to time the markets and I usually guess wrong. Buy a good company and hold is my main way of investing, although BLNK was just sort of an impulse buy, but that is up around 800%.

So here are my hurdles, this all happened rather quickly. Thinking of retiring at the end of this year. No pension, need an income stream for expenses, healthcare, some fun we missed out earlier in life, and a buffer. I think for that I would probably not qualify for ACA credits.

The Fidelity advisor is pushing the three bucket system, but that would bug me if half the funds are not really working for me. Trying to read a lot and look at various ideas, I'm open for suggestions.

Some things I have been thinking about:

1) Try to find a plan to retire at the end of this year.
--- Three bucket system
--- Learn Spanish and move to Mexico Cancun area for inexpensive private insurance for a couple years.

2) Wait until I am 59 1/2 then do something like this:
ROTH: $1.5M into QYLD for around $12k to $15k a month in income.
ROTH: $400k into S&P500/ aggressive growth / stocks
Taxable: $900k in SCHD for growth and some additional dividend income.
CASH: $606K - Flexible.
Healthcare: Some sort of basic ACA healthcare along with some sort of Christian Healthshare.Good health, but my wife seems to go to the doctor often.

Anyway, feeling a little overwhelmed with all the ways to go here.

 

[finnski1]

Congratulations on such a huge increase in 3 years. As you pointed out you are, IMHO, way too concentrated in certain stocks. Obviously ENPH , though it has done incredible, would concern me to have that large a percentage(69%) of my portfolio in one stock.


Forget idea #1 That just sounds impulsive and unnecessary given your assets.
You could easily manage your retirement income down to a level to get pretty good ACA credits. You could get a silver plan for as low as a few hundred dollars or so for the next 8 years by utilizing the after tax cash brokerage monies and your present companies 401k by utilizing the "rule of 55" and avoid any early 10% penalty on withdrawals.
I don't think those health care sharing pools are very good from what I have read.
As far as where exactly to put your money, I have no idea but I know I would want to diversify more.
IF your expenses are truly only 60-70k then you seem good to go. That's only a 2% WR. You could splurge and spend another 30-40k per year and still be only at a 3% WR.
I think you are good to go whenever you want!

 

[Dtail]

If your expenses are solid, you are good to go. How long and how closely have you tracked your expenses?
IMHO, too much concentration in the stock area.
You should look heavily into the ACA costs in your area, as it sounds like you should be able to stay under the cliff and get receive some tax subsidies. This is where use of your taxable monies comes into play. Should be reasonably less cost than 30k yearly.

 

[beernutzbob]

$10,000 invested in a SP500 index in 2013 would be worth about $35,000 today. If you bought it in 1989 it would be worth about $67,000.

You can check yourself using the dqydj.com calculators but I would guess your net worth is in the top 4% of US net worths.

 

[ATXFIRE2034]

Probably for a different part of the forum but I am interested in how you picked those stocks specifically when you realigned your portfolio for more growth?

 

[NW-Bound]

Congrats on the stock picks.

You now have to decide if these stocks will continue their climb to the moon. It's a personal decision that only you can make.

 

[JRon]

You only get the gain in those stocks when you sell them so maybe do that and diversify your holdings? A book I like on the 3 bucket system is “You can retire sooner than you think” by Wes Moss. As others have said look into ACA for health insurance and remember to add large future one time expenses into your expense totals, ie. new cars, vacations, house remodel/repair/replacement, etc. Your situation looks good to me.

 

[Dash man]

I agree you need to diversify. We also made much of our money on a few great stocks. We chose to diversify and it has paid off. The stocks we made our biggest gains with either stalled or pulled back. Broadening our holdings kept our net worth growing with much less risk. We now don’t allow any one stock to be more than 5% of our equity investments. When you’ve won the game, why keep playing? Hogs get slaughtered.

 

[Sniggle]

Congrats...you are a far smarter and braver (and luckier man than me. As others have said, it is time to walk away from the table, or at least move a large chunk of the 'winnings' into conservative, safer investments. Maybe keep a million on the table to continue to play with.

Picture what the stock market would do if China attacked Taiwan or Japan, and plan accordingly.

 

[ivinsfan]

With all the things you have going on cheap HI is the least of your worries. My BIL was a millionaire on paper with his shares of the company he worked for.


It was telecom stock in the early 2000s, straight up until it wasn't. He never sold any of it either. Need I say more?


You're fairly disconnected ATM? Do you feel bulletproof?

 

[jschner]

Thanks everyone for the comments.

First - idea #1 for a couple years does seem cool and so retirement like. Practical, maybe not, but not to be fully ruled out. See Two Expats Mexico on Youtube.
Serious, top 4%? That has to be an old stat.

I think we all agree I need to diversify. However, I will admit, I am having a difficult time letting go of these types of gains. Especially, when I think ENPH after dropping is set to fly after bouncing off the 200 MA. Check the four year chart with the 50 and bouncing off the 200 MA the previous 4 times. It looks like good times for the next few months.

But we all know I need an exit plan, for some reason I do not have that buffer in my mind that I really have won the game. Probably something most people go through and what I'm having trouble coming to grips with too.

It is confirmed, the expenses are between $60k and $70k, been tracking it in MINT. Payoff the debt and we are closer to $60k, but still living somewhat frugal.

Diversify and come up with a few income plans, although the one posted does sound very reasonable.

As for stock picks:
Screen the top 20 - 30 performers for the year.
Check the 1yr or 2yr chart - is it a steady climber or a one hit wonder? Steady
Is it in a growing industry? Yes
Did it beat earnings at least the last three quarters? Yes
Does it have good volume so you can get in get out? Yes
Is the news good or bad? Good
Are there a lot of short sellers talking about this company? Not a lot of short chatter.

There are probably more but that reduces a lot of the risk if this is a good growth company to hang onto when things drop 30% or more. They all do it, but which ones do you hang on to? Chances are even through the volatile swings it will continue the upward overall chart trend, beat earnings the next quarter, and continue to grow. And this is partly why I have a difficult time selling these yet, all those things still apply to what I own.

 

[jschner]

With all the things you have going on cheap HI is the least of your worries. My BIL was a millionaire on paper with his shares of the company he worked for.

It was telecom stock in the early 2000s, straight up until it wasn't. He never sold any of it either. Need I say more?

You're fairly disconnected ATM? Do you feel bulletproof?

Good wake up call, thanks.

I owned $10k of Charter, lost all of that, saw it coming, thought they might pull it out, but too late. Could that happen to any of the stocks I own, yep, if they get too far into debt, cook the books or whatever. it is definitely a risk.

ATM? No not bullet proof. If my accounts go to complete ZERO, which is unlikely, I start over again, try to build it back in the next 11 to 14 years.

 

[captain3d]

If you have already crossed the finishing line successfully no need to keep racing at dangerous speeds.

Take pride in securing your prize money forever by diversifying.

Maybe you need more?

 

[rodi]

First - welcome to the forum.
Second - congrats on accumulating that nest egg. Pretty sweet!!!

I agree with the others that the lack of diversification would make me *very* nervous. I think you need to figure out a plan to pull at least some of the money out to more diverse funds - or at least more diverse sectors of the market. (Admittedly - I am a huge fan of index funds - diversity in one stop shopping.)

Your market gains are impressive - you beat the market... but the overall market has been amazingly friendly to those of us invested... I get big smiles on my face when I check my portfolio... Vs the 2008 time frame when I wanted to cry when I checked my portfolio.

Does your spending number include taxes and health insurance? Since you have a nice chunk of after tax money - consider some of that in the early years (pre SS) to get ACA tax credits for your health insurance. If you keep your taxable income low enough (but not too low) you can get a silver plan with cost sharing for very inexpensive. The too-low part is what kicks you onto medicaid. (Depending on your geographical area - medicaid may be problematic.)

Another question - just a nit-picky thing... you say you are 'at max' for 401k contributions at $18k. Since you are over 50 you can get catch up contributions. Base is $19k this year- with the $6500 catch up you are at $25500 as you max contribution.

Anyway - welcome to the forum

 

[jschner]

First - welcome to the forum.
Second - congrats on accumulating that nest egg. Pretty sweet!!!

I agree with the others that the lack of diversification would make me *very* nervous. I think you need to figure out a plan to pull at least some of the money out to more diverse funds - or at least more diverse sectors of the market. (Admittedly - I am a huge fan of index funds - diversity in one stop shopping.)

Your market gains are impressive - you beat the market... but the overall market has been amazingly friendly to those of us invested... I get big smiles on my face when I check my portfolio... Vs the 2008 time frame when I wanted to cry when I checked my portfolio.

Does your spending number include taxes and health insurance? Since you have a nice chunk of after tax money - consider some of that in the early years (pre SS) to get ACA tax credits for your health insurance. If you keep your taxable income low enough (but not too low) you can get a silver plan with cost sharing for very inexpensive. The too-low part is what kicks you onto medicaid. (Depending on your geographical area - medicaid may be problematic.)

Another question - just a nit-picky thing... you say you are 'at max' for 401k contributions at $18k. Since you are over 50 you can get catch up contributions. Base is $19k this year- with the $6500 catch up you are at $25500 as you max contribution.

Anyway - welcome to the forum

Thanks,

I'm a big fan of index funds as well, I understand what they are about, but I will say one of the more significant periods of 13 years of my growth years was a net negative to inflation. That period cost me 13 years of compounding. : ( Check the performance between 2000 and 2013. This will probably happen again when the millennials go from buying stuff to aggressively saving for retirement in mass. Probably start around 2030-2035. Something to watch for.

My expenses do not count healthcare / dental. Probably figure out some combination of 401k 55 rule as mentioned earlier if that still applies and sell ENPH stock in my cash brokerage account this year. That would probably do what you are talking about for the next couple years.

18% maxes out my 401k contributions, including the catch up. Good thing to ask though.

 

[Letj]

Congratulations and best wishes to you. Truly impressive. Just curious. You mentioned you saved steadily in your 401K from 1989-2017. How were you able invest in stocks so much in such a short period of time on your salary or did you just have phenomenal growth? Did you liquidate some of your 401K and paid taxes and penalty? Do you mind sharing your basis in the stock?

 

[captain3d]

Thanks,

I'm a big fan of index funds as well, I understand what they are about, but I will say one of the more significant periods of 13 years of my growth years was a net negative to inflation.

I did a quick calc here... https://dqydj.com/sp-500-periodic-reinvestment-calculator-dividends/

S&P 500 Jan 2000 - Dec 2013

$100k start + $1000 a month (increasing with inflation). Ignore Fees, Taxes
Annual return = 5.67%

Zero start and $1000 a month = 7.93%
Not the best but not that bad either if you were saving regularly.

phil

 

[jschner]

Congratulations and best wishes to you. Truly impressive. Just curious. You mentioned you saved steadily in your 401K from 1989-2017. How were you able invest in stocks so much in such a short period of time on your salary or did you just have phenomenal growth? Did you liquidate some of your 401K and paid taxes and penalty? Do you mind sharing your basis in the stock?

Good question, the company I'm with sold, merged a few times creating new 401k accounts. One of those I converted into a couple ROTH's which I merged, another stayed as a traditional IRA. I should have converted that one too because that will cost me in taxes. Those were converted to brokerage accts. The latest 401k added a feature called Brokeragelink, that too allows for trading of some of the 401k funds. Cost basis is flat on that one, just bought in before the rotation out of tech, it is slightly ahead as of Friday, but the S&P500 is beating that YTD by a lot.

As for cost basis, they are kind of not accurate as I sold some accounts when covid was tanking the market in March 2020 then bought back in rather late in June 2020. The ROTH is at around $430k. Before that the ROTH total value as a whole was $90k in Dec 2018. You read that right. There were some gains there. If I remember it was ROKU, then ENPH and APPS in that one. The Trad IRA is $24k and the cash account is around $150k basis, but that account was started with $37k in Dec 2017.

If you read above how I picked the stocks, it isn't anything special. I just decided to go for it and embrace the volatility holding through a lot of crazy drops like APPS dropping 12% on Friday for no real reason. Still a good company.

 

[mystang52]

Thanks everyone for the comments.



I think we all agree I need to diversify. However, I will admit, I am having a difficult time letting go of these types of gains. Especially, when I think ENPH after dropping is set to fly after bouncing off the 200 MA. Check the four year chart with the 50 and bouncing off the 200 MA the previous 4 times. It looks like good times for the next few months.

But we all know I need an exit plan, for some reason I do not have that buffer in my mind that I really have won the game.

I am naturally cautious, including with my personal finances. I recognize everyone is different, but I still have difficulty with this approach, in your situation. The value of your holdings is, in a sense, meaningless if the value can also go down. There's no guarantee, and since you've done so well and apparently can now RE, maybe you should rethink your approach and reduce some of your exposure.

ATM? No not bullet proof. If my accounts go to complete ZERO, which is unlikely, I start over again, try to build it back in the next 11 to 14 years.

Objectively this likely would work. But how would you feel, emotionally, about starting over when you already won the game?

If you have already crossed the finishing line successfully no need to keep racing at dangerous speeds.

Take pride in securing your prize money forever by diversifying.

Maybe you need more?

+1