Investing $2 million in today’s market for a 4.5% safe withdrawal rate ?

[Sunset]

FBALX looks fine, but only in a tax sheltered account. Or a person is going to pay huge taxes on the declared capital gains now and then.
At a price of just $30.77 a person would have a lot of shares.

 

[2HOTinPHX]

FBALX looks fine, but only in a tax sheltered account. Or a person is going to pay huge taxes on the declared capital gains now and then.
At a price of just $30.77 a person would have a lot of shares.

View attachment 53287

Good point thanks. Looking at simplifying our TIRA account so no worries there right?

 

[pb4uski]

This very interesting, thanks for posting it. Does it pertain just to OP's situation or is this in general for everyone?

General.

 

[NanoSour]

FBALX looks fine, but only in a tax sheltered account. Or a person is going to pay huge taxes on the declared capital gains now and then.
At a price of just $30.77 a person would have a lot of shares.

View attachment 53287

Bear in mind that capital gains has its own tax bracketing with 0% tax up to 94,050 of income for a joint filer. If your only living on 90K it would be rare that cap gains tax would be an big issue even in a taxable account.

 

[twirler]

How would you invest $ 2 million in cash over the next few months for a 4.5% withdrawal rate over approximately 30 years ?

That depends a lot on risk profile, but with a portfolio of that size why not just dump it into the S&P and forget about it? It really depends on your age/risk tolerance/when you expect to need the money among other things. The short answer is the S&P 500 without any further information. To give a real response we need more info.

 

[Gallaher]

Broad diversification

 

[2HOTinPHX]

Gotta love me some Chat GPT. Take a look at the 2000, 2001 & 2002 returns for VTSMX (Total Market Index) and FBALX. This explains why I went with FBALX. The CAGR for VTSMX since 2000 in 7.59 vs 8.25 for FBALX. With less volatility to boot.

To me there's magic in one fund to rule them all, especially when a non-investment interested spouse is in the consideration.

Hmmm, so doing more research on this one fund idea and I just found this video and there is a stark difference in the two funds mention above performance since 2000. Interested to get others input on it.

 

[2HOTinPHX]

How would you invest $ 2 million in cash over the next few months for a 4.5% withdrawal rate over approximately 30 years ?

Hello OP,
Lot of good Ideas in this thread. I have been following up on some of the suggestions. I posted a link to a video from a new guy who just showed up in my youtube videos. I just watched this video he has that pertains to your original question regarding 2 million dollars. It has some good charts on it you might find helpful.

 

[Al18]

FBALX is a balanced fund with 60% stock/40% fixed income. A comparable Vanguard balanced fund is Wellington VWELX. Over the past 10 years, FBALX is better in my opinion, with a CAGR of 9.81%, while VWELX has a CAGR of 8.53%, according to portfoliovisualizer.com

 

[Sunset]

Bear in mind that capital gains has its own tax bracketing with 0% tax up to 94,050 of income for a joint filer. If your only living on 90K it would be rare that cap gains tax would be an big issue even in a taxable account.

The problem is like many funds when they declare capital gains, of say $90K , it doesn't mean you get any money. It can be gains generated by the fund from other people selling, and the fund needing to realize gains to pay out the $$, then capital gains are then "shared" by everyone.

We have had this issue in the past in a taxable fund causing an sudden income boost without actual cash, meaning lots more taxes to pay.

A couple is probably going to have income from sources like interest, pension, ss, etc, so they don't really have a space of $94K to fill as some is already filled.

 

[Sunset]

Hmmm, so doing more research on this one fund idea and I just found this video and there is a stark difference in the two funds mention above performance since 2000. Interested to get others input on it.

This makes me think, since this fellow could only do the video after the 23 years, it would have been more helpful if he had done it in the year 2000.

Since I can't predict which fund will do better than some other fund I generally spread the money amongst various funds as is much safer than picking 1 single fund and praying it's the right one.

There is some cherry picking going on in the videos by this fellow.
This fellow uses the Vanguard balance investor fund with a 5% withdrawal in this video to show it runs out of money, but in another video on this site, he used 4% withdrawal and the Vanguard balance Admiral fund

 

[Fielding]

Wow that sight you linked to feels like drinking from a fire hose. Is there a good summary somewhere on there?

The ~3.25% rate is the most terse summary of The Safe Withdrawal Series that I can come up with. I know that's cheeky, but the value of the series is the detail in which it treats just about every nuance and alternate take.

Pick just about any magic bullet solution offered to increase your withdrawal rate without risk, and he'll break down in compassionate but merciless detail why it might fail, where the risk has been hidden/misrepresented/misunderstood/hand waved away, etc.

This detail has been very valuable for me, so I have a ready rebuttal (or, at least the memory that there is one, and where to find it) for any get-a-larger-withdrawal-rate-quick scheme that gets suggested to me.

I suggest picking an article that treats some aspect of the SWR problem you find interesting, and reading that. The series is repetitive, and you certainly don't have to read the whole thing. He also cross-links to prior treatments of topics, so if you start in an interesting place, then move around a bit following leads, you'll learn a lot.