ShokWaveRider
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Is it wise to go All In (40 - 60% depending on allocation) into equities right now when the stock market is at an all time high?
If it's adding to your equity allocation, I'm a chicken and would dollar cost average in over some period of time.
If it is money already in equities but your changing funds or companies, I'd go all in ASAP.
The way I handle tax in FireCalc is to add it on to my spending assuming I am paying a certain amount of taxes based on SS and assumed RMDs. So if I assume 20% average tax rate (not marginal) for federal and state taxes, and $90K real spending, then the actual spending I enter on the first page of FireCalc might be closer to $110K. Is this correct?Well the $90K spending is pretax, correct? So if I have $2M and $500K of that will be taxed (401K) and the rest is tax free withdrawals - and then social security will come a few years down the road which will be taxed, what would you use as the tax percentage to use in the scenarios? I usually put in 20% to be safe but if alot of the withdrawals have already been taxed, can I lower that 20%? To what number?
Deb
The idea of including taxes in spending for Firecalc is sensible, but 20% is probably way too much. What I would suggest is inputting your expected no discretionary income in Taxcaster, then add IRA distributions until your income less taxes is equal to your annual spending, then use the IRA distribution amount as your annual withdrawal amount in Firecalc.
Now, I'm curious as to how some of you have such low taxes.... I think maybe I'm missing something. A big portion of my withdrawals will have already been taxed. So I will pay tax on any withdrawals from my 401K (about 1/4 of my portfolio) and any social security, right?
I think I need to find some posts on what taxes I will likely pay in retirement.
Deb
Is it wise to go All In (40 - 60% depending on allocation) into equities right now when the stock market is at an all time high?
Okay, alot of good information here. I still have SO MUCH to learn. So if the actual "spend" I'm shooting for is around $75,000 yearly, me putting $90,000 in the spend category will allow for about 18% taxes. So if my taxes will be much lower than that - due to withdrawing monies already taxed and no state income on social security in Florida, I can lower my "spend" figure. I'm trying to net around $72K yearly.
Now, I'm curious as to how some of you have such low taxes.... I think maybe I'm missing something. A big portion of my withdrawals will have already been taxed. So I will pay tax on any withdrawals from my 401K (about 1/4 of my portfolio) and any social security, right?
I think I need to find some posts on what taxes I will likely pay in retirement.
Deb
The highest success rate is actually your lowest risk approach, so as has been said already, think of retirement risk, not portfolio ups and downs.
....I think I need to find some posts on what taxes I will likely pay in retirement.
Deb
Portfolio risk is a matter of individual comfort level. The Dow went down 54% in the great recession. Some people are okay with that. Others are not.
Personally, with a $2.1M portfolio with Social Security and a paid for house, I would call that already having won the game and not risk a 54% loss or greater with a large equity position.
I would say to think of ups and downs, and how much income do you really need to live on to be happy and live relatively worry free?
The Dow going down 54% and having a 54% loss are two very different things. The only people who would have a 54% loss from that would be those foolish enough to sell at the bottom. I doubt that many here would advocate that. If you don't sell at the bottom and simply buy and hold (rebalancing as called for) then someone whose equities went down 54% would not have ever actually realized any loss whatsoever. That it, it isn't a loss until you sell....
I'm also not sure I find it helpful to talk about how much income some "needs" to live on. Retirement is not solely about need, but also about what you want. In her case, she wants to net $72k a year and what someone thinks she might "need" is beside the point.
Of course, I do agree that if, for example, she felt that she would be happy on living on $40k with a $2.1 million portfolio then needing to do much to protect against inflation is unnecessary so long as you don't care about preserving the value of your estate.
The OP says she wants to downsize, live more simply and will have a paid for house. She is selling her business so that isn't likely to be a reversible decision if she finds she need more money in retirement.
I don't usually use Firecalc, so perhaps I am not doing it right, but I put in $70K a year total spending with her SS numbers and portfolio number, 20 percent large stocks and 80 percent long commercial bonds. There is no TIPS option in Firecalc so that would have to be calculated with a spreadsheet.
The results I saw were 100% success rate, lowest balance $1.1M and highest $7.8M, avg of $2.6M.
If you want to take more risk with your portfolio for higher returns, so be it. That is certainly your choice. But large equity positions are not a sleep well at night option for everyone, as Bill Bernstein found out with his clients. The OP is retiring now due to stress. She has said she is risk averse.