Where Do I Go From Here - Asset Location [2022 Update]

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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

4nursebee wrote: Sun Sep 19, 2021 1:36 pm
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am
4nursebee wrote: Sun Sep 19, 2021 4:44 am
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm I’m new to this forum, so please bear with me if I inadvertently break any rules. First of all, these are the best emojis I’ve ever seen, so clearly I’m in the presence of greatness here, no surprise.

Here’s the situation: Grew up poor, risk averse, put nose to grindstone, made mistakes, just coming up for air now and realize I need to learn more asap. Total NW $1.8, age 54, employed FT at 230,000. (290 if you count bonuses, matching, interest and 401k earnings). Spend 45k a year (38 during covid). Have no IRA or taxable brokerage.

TSP:
$215,000 G Fund
$63,000 C Fund
$5,000 S Fund
$6.5k I Fund

401k:
$45,000 State Street S&P 500 Index
$110,000 Baird Core Plus Bond Institutional Fund
$85,000 TRowe Stable Value Common Trust Fund

Banks: $650,000
Series I Bond: $10,000

Co-op: $600,000 no mortgage

I don’t have anyone to ask except forums, unfortunately. Reddit says invest in VTI and VTSAX...
Where do you want to go from here?
What are your goals?
My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.

I want to protect what I have from too much volatility, transition as smoothly as possible into retirement, protect myself from frivolous lawsuits, maximize tax breaks, keep it as simple as possible and not suffer shocks in older age. I would also like to potentially live a little more comfortably.
If your goal is to protect from volatility, I'd say you have done well having lots of cash, bonds.
I think 20-30 x annual spend is enough.
I can't tell you where you want to go, you get to decide that.
In other words, you have already arrived at where you want to be.
Love this - thank you.
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

I’m getting specifics about my pension and social security numbers this week. 😎 Thanks to the folks who suggested I concretize the numbers.

I opened the tIRA with Fidelity this week and funded it but its in a core govt bond fund now - may move to VTI. Plan to do a backdoor Roth conversion next week.

May open a taxable brokerage account with them too but not sure yet. If I do it would be the first time I ever had a taxable brokerage. Was thinking of setting up monthly $200 contributions to start, just to dip my toe in.

After all this I’m going to treat myself to some trinket for being so responsible and breaking the inertia. Cheers everyone! :beer
pwill112
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Re: Where Do I Go From Here

Post by pwill112 »

What is your proposed AA that you are moving towards?
What is your proposed AA at retirement? I am assuming your AA will be more conservative in retirement?

You mention your coop is not as pleasing as it once was. Is this mostly covid related? If so, I do believe that will pass. How far does your family live from you now? How far do you want to be from them? I mention this only because I care for a 91 year old elderly parent and proximity to them is critical. If you were to move now will you move again at age 58 upon retirement? Moving 2 times in 4 years is not easy.

Double check on your potential of working from home arrangement. Can you live anywhere or do you need to go to the office periodically?

Do all the other stuff like HSA, etc but that will all work itself out now that you are on top of things. One more idea is the potential for Roth conversions when you retire. Social Security should pay you more at 70 than it does at 67.

Your financial situation is good with the pension being key. I am just guessing but I think your job is stressful. I believe you could consider a less stressful job now and still be in good financial shape save perhaps working a few more years.

Your biggest considerations that you have posted about are AA, where to live, and a review of the stress on the current job.
SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ...
Goals:
$2.2 mil net worth at age 57 (in 3 years)
increase AA equity percentage to approx 25-30 percent
...
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
I'm not sure where you are getting your targets from, but $2.2M - $3.2M may be far more than you need.

As a reminder, the typical recommendations of save X * expenses really means residual expenses. That is any expenses not covered by income like social security and your deferred comp. Since you have an estimated $65k/year income and estimated expenses of up to $75k/year - you are effectively looking at $10k/year to cover from your portfolio (plus bridging the years before deffered comp and social security kick in.)

Assuming you haven't yet, recommend you take a look at tools like Firecalc. I've attempted to plug your numbers in (as best as I could understand them), and using $75k for annual expenses, 10% stocks (AA of 10/90), savings of $1.213M, and your estimated SS and deferred comp, with a 40 year retirement starting today it shows you are already at 100% success under all historical periods we've seen thus far. https://firecalc.com/index.php?wdamt=75 ... rsion=3.0&

Now, before you get too excited, you have some work to do:
  • Clarify your social security and deferred comp estimates (sounds like that was already underway). Would also recommend you get what they'd be if you quit working today, as that will help you determine how close you currently are to actually getting to 100% success.
  • Confirm your estimated retirement estimate of up to $75k includes everything, and doesn't exclude big ticket items like healthcare.
  • Ultimately, you are going to need to estimate taxes as well, assuming those will be in top of the (up to) $75k expenses. (See FRP below...)
  • Update Firecalc with the new data, and see the impact
  • Assuming you decide to keep working, update the "not retired" tab with relevant details for a more accurate picture
  • Use the "investigate" tab to see the impact of this like 1) your AA 2) your time line 3) your estimated spending level 4) your "starting balance"
I suspect you'll find you might be closer than what you suspected (assuming your numbers are accurate and I entered them correctly).

That said, I must caution - as others have (and sounds like you've acknowledged) your AA is likely too risky. If I calculated it correctly, your AA is roughly 10/90 right now. A good time tested piece of advice is never to have less than 25% stocks. As counterintuitive as it make sound, having a low exposure to stocks for a long retirement period is actually much more risky than a higher allocation to stocks. While the ride might be a bit more bumpy with a higher stock allocation, you have a far better chance to reach the destination vs. avoiding the bumps but finding out your tires had a slow leak (inflation) that eroded your ability to finish the race. Basically most people should keep their AA somewhere between 25/75 and 75/25. Assuming your revised numbers don't drastically change, what you've done has worked for you so I don't think you need to make crazy adjustments. But I think you'll likely be better served in the long run getting to at least 25% stocks - and again maybe counterintuitive - but have less risk as a result.

If it isn't obvious yet, the key remains in controlling spending. As entered, Firecalc says you can spend basicly $75k/year (inclusive of taxes). That may change (maybe go up) with your revised numbers, including the "not retired" page to add additional savings and delay withdrawals. But expenses are going to have the biggest impact to your outlook at this point.

Lastly, I'd recommend another tool to try out. Flexible Retirement Planner (FRP) is a free tool, conceptually similar to Firecalc, except it attempts to estimate your taxes for you (so you enter expenses without taxes for FRP, where taxes should be included when entered in Firecalc). To do so, it requires more info such as breaking down your $1.2M into pre-tax, Roth, taxable, etc. It also has more "investigate" type options, but they aren't necessarily as easy to find (it's a more complex tool). But seeing "your numbers" in front of you might give you more comfort than the words of strangers in the internet. https://www.flexibleretirementplanner.com/wp/

Congrats on your success thus far! :beer
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Since it’s clear that I need more exposure to equities, the next aspect is the mechanics: I could make bulk transfers in my 401k all at once to have the desired AA but this seems risky.

One way I thought of shifting into stocks was to increase my future allocation / new money to some of the equity funds in my 401k wTRowe and my brand new $7,000 😅tIRA w Fidelity.

I’m already in the State Street S&P 500 Index at an ER of 0.01 percent. I could up the percentage going into that.

There’s also a State Street Sm Mid Cap Idx Cl II with an ER of 0.02 percent. Is that a good option to get broader equity diversification? I don’t hear a lot about State Street funds and I know they plan to merge w Invesco. There’s also a State Street Global All Cp Ex US Idx at an ER of 0.05.

The TRowe target date funds all have ERs of .40. I don’t want to pay two sets of fees for a target date fund (since its a fund of funds structure).

In my TSP, I can shift investments around. I have a bunch of G Fund, with around 23 percent C (s&p) and under 5 percent S (small and midcap) and I (international).

As for the Fidelity IRA, many folks have mentioned VTI. Is that my best option?

I still haven’t opened my taxable brokerage but I guess I‘ll do that with Fidelity too. There I could just start putting in $500 or $1000 per month, dollar cost averaging into something - VTI? Other?

Once I have my pension and ss numbers I’ll do an updated post w everything laid out properly.

To all the brilliant folks commenting, I am truly in your debt. This has been absolutely amazing and enlightening.
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

SnowBog wrote: Sat Sep 25, 2021 3:44 am
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ...
Goals:
$2.2 mil net worth at age 57 (in 3 years)
increase AA equity percentage to approx 25-30 percent
...
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
I'm not sure where you are getting your targets from, but $2.2M - $3.2M may be far more than you need.

As a reminder, the typical recommendations of save X * expenses really means residual expenses. That is any expenses not covered by income like social security and your deferred comp. Since you have an estimated $65k/year income and estimated expenses of up to $75k/year - you are effectively looking at $10k/year to cover from your portfolio (plus bridging the years before deffered comp and social security kick in.)

Assuming you haven't yet, recommend you take a look at tools like Firecalc. I've attempted to plug your numbers in (as best as I could understand them), and using $75k for annual expenses, 10% stocks (AA of 10/90), savings of $1.213M, and your estimated SS and deferred comp, with a 40 year retirement starting today it shows you are already at 100% success under all historical periods we've seen thus far. https://firecalc.com/index.php?wdamt=75 ... rsion=3.0&

Now, before you get too excited, you have some work to do:
  • Clarify your social security and deferred comp estimates (sounds like that was already underway). Would also recommend you get what they'd be if you quit working today, as that will help you determine how close you currently are to actually getting to 100% success.
  • Confirm your estimated retirement estimate of up to $75k includes everything, and doesn't exclude big ticket items like healthcare.
  • Ultimately, you are going to need to estimate taxes as well, assuming those will be in top of the (up to) $75k expenses. (See FRP below...)
  • Update Firecalc with the new data, and see the impact
  • Assuming you decide to keep working, update the "not retired" tab with relevant details for a more accurate picture
  • Use the "investigate" tab to see the impact of this like 1) your AA 2) your time line 3) your estimated spending level 4) your "starting balance"
I suspect you'll find you might be closer than what you suspected (assuming your numbers are accurate and I entered them correctly).

That said, I must caution - as others have (and sounds like you've acknowledged) your AA is likely too risky. If I calculated it correctly, your AA is roughly 10/90 right now. A good time tested piece of advice is never to have less than 25% stocks. As counterintuitive as it make sound, having a low exposure to stocks for a long retirement period is actually much more risky than a higher allocation to stocks. While the ride might be a bit more bumpy with a higher stock allocation, you have a far better chance to reach the destination vs. avoiding the bumps but finding out your tires had a slow leak (inflation) that eroded your ability to finish the race. Basically most people should keep their AA somewhere between 25/75 and 75/25. Assuming your revised numbers don't drastically change, what you've done has worked for you so I don't think you need to make crazy adjustments. But I think you'll likely be better served in the long run getting to at least 25% stocks - and again maybe counterintuitive - but have less risk as a result.

If it isn't obvious yet, the key remains in controlling spending. As entered, Firecalc says you can spend basicly $75k/year (inclusive of taxes). That may change (maybe go up) with your revised numbers, including the "not retired" page to add additional savings and delay withdrawals. But expenses are going to have the biggest impact to your outlook at this point.

Lastly, I'd recommend another tool to try out. Flexible Retirement Planner (FRP) is a free tool, conceptually similar to Firecalc, except it attempts to estimate your taxes for you (so you enter expenses without taxes for FRP, where taxes should be included when entered in Firecalc). To do so, it requires more info such as breaking down your $1.2M into pre-tax, Roth, taxable, etc. It also has more "investigate" type options, but they aren't necessarily as easy to find (it's a more complex tool). But seeing "your numbers" in front of you might give you more comfort than the words of strangers in the internet. https://www.flexibleretirementplanner.com/wp/

Congrats on your success thus far! :beer
This is very encouraging, thank you so much! I’m going to post something more complete this coming week when I get my pension and ss estimates, but in the meantime I was thinking of posting my quite accurate and well worn budget to back up my expense numbers. I may not be great at investing, but I’m a samurai when it comes to keeping costs low.

If three or more people indicate to me that they want to see “Annette’s” Manhattan budget - how to live on 40-45k a year as a single person, and or my general cost cutting survival tips, I’ll post it. However, dollarstretcher has some and there are many sites about frugality, which most folks here do not need anyway.
SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sat Sep 25, 2021 9:57 am ... but in the meantime I was thinking of posting my quite accurate and well worn budget to back up my expense numbers. I may not be great at investing, but I’m a samurai when it comes to keeping costs low.

If three or more people indicate to me that they want to see “Annette’s” Manhattan budget - how to live on 40-45k a year as a single person, and or my general cost cutting survival tips, I’ll post it. However, dollarstretcher has some and there are many sites about frugality, which most folks here do not need anyway.
Honestly, I don't think anyone questions your budgeting skills, very impressive!

But it's more the thought exercise to validate if you "missed" anything that changes when you retire.

A common example is health insurance, as many of us get insurance coverage through our employers at a subsidized cost. So when you retire, you'll have a "new" cost to pickup, and will need to shop the market for plans /prices, figure out if you can engineer your income to qualify for ACA subsidies, etc.

Another common example is taxes. Today they are based on your income and come out of your income, and most people don't pay a ton of attention to them as you are focused on earning more not paying less taxes. But when you retire, taxes will be something that you are in more control. You can impact your taxes by where you get your money. Cash has no tax impact (other thrash the taxes you are paying on interest), neither do withdrawals from Roth or HSA (if for qualified medical). And there are massive differences in a taxable account between "long-term" and "short-term" gains when it comes to taxes owed. Then you throw in things like how much of your social security is subject to taxes... In short, for many they likely don't have a good grasp on the taxes they'll pay in retirement - as in essence this is a "new" expense as well. (Obviously taxes are not new, and experienced investors already know most of these mechanics, and might have been using them for TLH, TLG, etc. But for people who never really sold anything yet, it's a new muscle to build.)
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

SnowBog wrote: Sat Sep 25, 2021 10:11 am
AnnetteLouisan wrote: Sat Sep 25, 2021 9:57 am ... but in the meantime I was thinking of posting my quite accurate and well worn budget to back up my expense numbers. I may not be great at investing, but I’m a samurai when it comes to keeping costs low.

If three or more people indicate to me that they want to see “Annette’s” Manhattan budget - how to live on 40-45k a year as a single person, and or my general cost cutting survival tips, I’ll post it. However, dollarstretcher has some and there are many sites about frugality, which most folks here do not need anyway.
Honestly, I don't think anyone questions your budgeting skills, very impressive!

But it's more the thought exercise to validate if you "missed" anything that changes when you retire.

A common example is health insurance, as many of us get insurance coverage through our employers at a subsidized cost. So when you retire, you'll have a "new" cost to pickup, and will need to shop the market for plans /prices, figure out if you can engineer your income to qualify for ACA subsidies, etc.

Another common example is taxes. Today they are based on your income and come out of your income, and most people don't pay a ton of attention to them as you are focused on earning more not paying less taxes. But when you retire, taxes will be something that you are in more control. You can impact your taxes by where you get your money. Cash has no tax impact (other thrash the taxes you are paying on interest), neither do withdrawals from Roth or HSA (if for qualified medical). And there are massive differences in a taxable account between "long-term" and "short-term" gains when it comes to taxes owed. Then you throw in things like how much of your social security is subject to taxes... In short, for many they likely don't have a good grasp on the taxes they'll pay in retirement - as in essence this is a "new" expense as well. (Obviously taxes are not new, and experienced investors already know most of these mechanics, and might have been using them for TLH, TLG, etc. But for people who never really sold anything yet, it's a new muscle to build.)
Oh I see - I think another thing that changes is without work to keep one engaged, one has to find fun activities and that often but not always means spending money. We had a retirement seminar at work recently and the outside retirement consultant outright recommended staying employed FT or going part time because as he said (more or less), it’s hard to replicate the sense of challenge, accomplishment, belonging and structure a job provides. Food for thought, always.
SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

Exactly! It's less about what you spend now. The hard part is figuring out what your are going to spend going forward.

Some of those expenses, like health insurance, are "essential" - and you want to make sure the numbers work to cover all of those needs.

Others like travel, hobbies, etc. are "discretionary", you want to have "enough" to ensure you enjoy life. As the saying goes "you have enough for anything, but you don't have enough for everything.

Given your history with controlling expenses, I'm sure you will learn to adapt just fine!

If you haven't yet, you may want to take a look at the Variable Percentage Withdrawal method. https://www.bogleheads.org/wiki/Variabl ... withdrawal There's a simple spreadsheet you can plug in your current age, your social security and deffered comp, and your current portfolio (excluding house value), and your AA.

It will give you a "recommended" withdrawal amount based on those inputs, which I effectively think of as my potential "gross" earnings - all of my expenses - including taxes need to fit into the number. Just like now while I'm working, I make more than I spend, I expect that number to be the same - higher than I'd likely spend anyway... And then you just update the numbers the next time you need to withdraw (such as annually).

The other critical thing to understand with VPW is since the withdrawal amount is "variable" and is based largely on your portfolio, it adjusts as your portfolio does. The idea is if we have a major market correction, your portfolio will go down (how much depends on your AA), thus the amount you can reasonably take out goes down. This is noted as the "required flexibility", and you want to make sure that covers all of your essential expenses and enough of the wants to keep life enjoyable (but maybe cut out big trips extra expenses in those years if needed).

If you have the flexibility to manage expenses (and it seems like you do), VPW can be a useful tool to think about "how much" you can safely withdraw.

On the working longer front, again validate your numbers, but you may not need to work much longer. Once you cross that threshold (I'm not there yet, but hopefully in a few more years), then it becomes more what do you want to do with your time.

Recently read The New Retirementality: Planning Your Life and Living Your Dreams...at Any Age You Want https://www.amazon.com/dp/1119611482/re ... 23V0QCSER9 which makes a case for never "retiring" in the modern sense, but instead "re-tiring" in the sense of putting new "tires" on your life and finding your passion and living the life you want. (Arguably, they make the case not to wait, to live your entire life that way. But in my practical nature, I need to earn money to secure the financial side first, then I'll pivot my to the what I "want" to do side.)

I thought it was a good way for me to think about things going forward, and where I'll "invest" my 168 hours each week when I no longer need to worry about money. I'm not sure I'd do well without something to occupy my thing, but I don't know yet what I want that to be long term. But now knowing that "retirement" isn't purely financial, I can spend my energy thinking about the non-financial aspects.
KlangFool
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Re: Where Do I Go From Here

Post by KlangFool »

SnowBog wrote: Sat Sep 25, 2021 3:44 am
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ...
Goals:
$2.2 mil net worth at age 57 (in 3 years)
increase AA equity percentage to approx 25-30 percent
...
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
I'm not sure where you are getting your targets from, but $2.2M - $3.2M may be far more than you need.
SnowBog,

FYI. His net worth includes at least 600K of home equity. For example, his portfolio is only 1.2134 million as of 8/31.

KlangFool
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SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

KlangFool wrote: Sat Sep 25, 2021 1:17 pm
SnowBog wrote: Sat Sep 25, 2021 3:44 am
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ...
Goals:
$2.2 mil net worth at age 57 (in 3 years)
increase AA equity percentage to approx 25-30 percent
...
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
I'm not sure where you are getting your targets from, but $2.2M - $3.2M may be far more than you need.
SnowBog,

FYI. His net worth includes at least 600K of home equity. For example, his portfolio is only 1.2134 million as of 8/31.

KlangFool
Even there, still not sure where the numbers came from...

Drop them by $600k to remove home equity, and it's still a portfolio range of $1.6M - $2.6M.

But with their low expenses, and solid social security and deferred compensation, both of those may be more than they need...

If they confirm their numbers, they may already have "enough" or be very close...
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

KlangFool wrote: Sat Sep 25, 2021 1:17 pm
SnowBog wrote: Sat Sep 25, 2021 3:44 am
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ...
Goals:
$2.2 mil net worth at age 57 (in 3 years)
increase AA equity percentage to approx 25-30 percent
...
AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
I'm not sure where you are getting your targets from, but $2.2M - $3.2M may be far more than you need.
SnowBog,

FYI. His net worth includes at least 600K of home equity. For example, his portfolio is only 1.2134 million as of 8/31.

KlangFool
KlangFool (my favorite name in this board btw) is correct. And of that, a bit over $600k is already taxed bank cash... which because it’s already taxed is kind of like having more than that in a pretax account, but also like having much less because it earns next to nothing and inflation is reducing that every day. Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week. 🤞🏻🤞🏻 Can’t wait to post them and concretize everything so I can find out if I’m fine or ... more likely... doomed!!!

I’m a she, originally, currently and for the foreseeable future although I’m using a pseudonym here.

I think the reality is I’d better keep working at least until 60.
KlangFool
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Re: Where Do I Go From Here

Post by KlangFool »

AnnetteLouisan wrote: Sat Sep 25, 2021 1:58 pm
Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week.
AnnetteLouisan,

1) I do not understand why do you get your social security number from HR. You have to download the social security estimate by yourself from social security government web site.

2) You probably have more than enough if your estimate about 45K annual expense is correct.

3) Are you single or married? That part is important too.

KlangFool
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SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

KlangFool wrote: Sat Sep 25, 2021 2:46 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 1:58 pm
Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week.
AnnetteLouisan,

1) I do not understand why do you get your social security number from HR. You have to download the social security estimate by yourself from social security government web site.

2) You probably have more than enough if your estimate about 45K annual expense is correct.

3) Are you single or married? That part is important too.

KlangFool
Regarding # 3, it was in OP:
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ... filing status: single, no dependents...
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

KlangFool wrote: Sat Sep 25, 2021 2:46 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 1:58 pm
Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week.
AnnetteLouisan,

1) I do not understand why do you get your social security number from HR. You have to download the social security estimate by yourself from social security government web site.

2) You probably have more than enough if your estimate about 45K annual expense is correct.

3) Are you single or married? That part is important too.

KlangFool
I had some issues getting my social security statement even though I have a mysocialsecurity account set up. Seemed there was a password issue. I’ll call them next week.

45k is all in except taxes, but I assume that will increase to 75k over time in retirement. Im single, no dependents- not divorced or widowed, so I don’t pay or receive alimony or a widow’s pension. Don’t have to worry about childcare costs or putting someone through school.
KlangFool
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Re: Where Do I Go From Here

Post by KlangFool »

SnowBog wrote: Sat Sep 25, 2021 2:54 pm
KlangFool wrote: Sat Sep 25, 2021 2:46 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 1:58 pm
Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week.
AnnetteLouisan,

1) I do not understand why do you get your social security number from HR. You have to download the social security estimate by yourself from social security government web site.

2) You probably have more than enough if your estimate about 45K annual expense is correct.

3) Are you single or married? That part is important too.

KlangFool
Regarding # 3, it was in OP:
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ... filing status: single, no dependents...
My apology!

KlangFool
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SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sat Sep 25, 2021 3:06 pm I had some issues getting my social security statement even though I have a mysocialsecurity account set up. Seemed there was a password issue. I’ll call them next week.
You actually don't want the statement... By default they assume you continue to work /earn what you make now until your full retirement age (presumably 67).

So unless that matches how long you intend to work, it's not accurate...

You'll ultimately need to get to your earnings history (which I think is on the statement, or can be accessed from the site once you can log in). I'd recommend taking that info and going to https://ssa.tools to better understand "your" numbers. You can use it to see what your benefits are now, and the impact of working longer, claiming earlier/later, etc.
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

KlangFool wrote: Sat Sep 25, 2021 3:10 pm
SnowBog wrote: Sat Sep 25, 2021 2:54 pm
KlangFool wrote: Sat Sep 25, 2021 2:46 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 1:58 pm
Current invested assets are only $603,000....... 😫😩😢

Actual numbers including pension and ss are coming from HR next week.
AnnetteLouisan,

1) I do not understand why do you get your social security number from HR. You have to download the social security estimate by yourself from social security government web site.

2) You probably have more than enough if your estimate about 45K annual expense is correct.

3) Are you single or married? That part is important too.

KlangFool
Regarding # 3, it was in OP:
AnnetteLouisan wrote: Sat Sep 18, 2021 10:37 pm ... filing status: single, no dependents...
My apology!

KlangFool
Nothing to apologize for - how does that affect the plan? I consider it riskier because my household isn’t dual income, and my taxes and certain costs (security, transp) can be higher, but it also means I control the costs and there’s no spouse or inlaws w gambling problems etc.
KlangFool
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Re: Where Do I Go From Here

Post by KlangFool »

AnnetteLouisan wrote: Sat Sep 25, 2021 3:25 pm

Nothing to apologize for - how does that affect the plan? I consider it riskier because my household isn’t dual income, and my taxes and certain costs (security, transp) can be higher, but it also means I control the costs and there’s no spouse or inlaws w gambling problems etc.
AnnetteLouisan,

1) A couple's social security benefits would be 30K to 40K per year. In your case, it is probably around 20K per year.

2) <<there’s no spouse or inlaws w gambling problems etc.>>

I am highly appreciative of my spouse's willingness to put up with me. I hope that I am worth the trouble.

KlangFool
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SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

From a "financial" perspective, I'd view the opposite - I think it simplifies lots of things...

You don't need to plan for providing for others after you are gone. You don't need to worry as much about LTC costs leaving someone else broke. You don't need to try to optimize social security claiming to maximize the income the surviving spouse will receive. You don't need to worry about an unplanned divorce that cuts your assets in half, nor a spouse who either isn't (or becomes) not aligned with your spending controls.

So long as you can cover your needs (unless you specifically "want" to leave a large inheritance to someone/something), it doesn't really matter if you have $1 or $1M on the day you die. You just need to ensure you have enough to live the life you want.

Not that one should make decisions on marriage based solely on the finances... But that wasn't the question...
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Re: Where Do I Go From Here

Post by SnowBog »

KlangFool wrote: Sat Sep 25, 2021 3:31 pm I am highly appreciative of my spouse's willingness to put up with me. I hope that I am worth the trouble.
+1 - although I should amend mine as "most days"... :beer
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Re: Where Do I Go From Here

Post by Duckie »

AnnetteLouisan wrote: Sat Sep 25, 2021 8:27 am Since it’s clear that I need more exposure to equities, the next aspect is the mechanics: I could make bulk transfers in my 401k all at once to have the desired AA but this seems risky.

One way I thought of shifting into stocks was to increase my future allocation / new money to some of the equity funds in my 401k wTRowe and my brand new $7,000 😅tIRA w Fidelity.
Doing it this way will take years. You need to do it faster. If you don't want to switch everything at once, do it 25% to 33% over the next three or four months.
I’m already in the State Street S&P 500 Index at an ER of 0.01 percent. I could up the percentage going into that.
That would help.
There’s also a State Street Sm Mid Cap Idx Cl II with an ER of 0.02 percent. Is that a good option to get broader equity diversification?
500 Index is about 80% of US stocks, mid-caps are around 6% and small caps around 14%. Since the 500 Index has tracked the total stock market almost exactly in the past I don't see a need for a separate mid-cap fund.
I don’t hear a lot about State Street funds and I know they plan to merge w Invesco.
I know nothing about the merger but State Street is one of the top mutual fund companies. They, along with BlackRock, are a huge market in employer 401k and 403b plans.
There’s also a State Street Global All Cp Ex US Idx at an ER of 0.05.
That is an excellent international stock option.
The TRowe target date funds all have ERs of .40. I don’t want to pay two sets of fees for a target date fund (since its a fund of funds structure).
Technically, you only pay the cost for the individual funds but 0.40% is not a low cost and you obviously have better options.
In my TSP, I can shift investments around. I have a bunch of G Fund, with around 23 percent C (s&p) and under 5 percent S (small and midcap) and I (international).
You could add more stocks to the TSP but you need to figure out what you want your AA to be. The TSP is the best place for all your bonds using the F and G funds. If you need more bonds than the TSP holds then a muni fund in taxable would be suitable.
As for the Fidelity IRA, many folks have mentioned VTI. Is that my best option?
In a Fidelity IRA you can use ETFs like VTI, SCHB, ITOT, or IVW. You can also use mutual funds like FSKAX or FZROX.

To be clear, when you mention an IRA you do mean a Roth IRA correct? You should be making a non-deductible contribution to the TIRA putting the money into the settlement fund. After you quickly convert to the Roth IRA you should invest in the stock fund/ETF of your choice.
I still haven’t opened my taxable brokerage but I guess I‘ll do that with Fidelity too. There I could just start putting in $500 or $1000 per month, dollar cost averaging into something - VTI? Other?
One of the above (except FZROX) that is not held in the IRA. Because of potential tax-loss harvesting you don't want to hold the same thing in taxable as in the IRA. You can, but it complicates things.
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Thank you, yes, I opened a tIRA just this week and funded it asap. This week I plan to convert to a backdoor Roth IRA to start growing gains tax free, with the idea of adding to it every year the same way and using it in retirement.

Is the state street intl fund I mentioned superior to the TSP I fund (ER 0.049)?

Why is the TSP a better place for my bonds, because of the lack of interest rate risk since the G Fund (ER 0.049) is not a marketable security?

One thing is for sure, the Baird core plus institutional bond fund (ER 0.30) has got to go.
Last edited by AnnetteLouisan on Sun Sep 26, 2021 5:23 pm, edited 1 time in total.
Carousel
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Re: Where Do I Go From Here

Post by Carousel »

Annett, I hope you do post on keeping expenses down in NYC.
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Re: Where Do I Go From Here

Post by Carousel »

Carousel wrote: Sat Sep 25, 2021 4:56 pm Annette, I hope you do post on keeping expenses down in NYC.
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AnnetteLouisan
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Carousel wrote: Sat Sep 25, 2021 4:56 pm
Carousel wrote: Sat Sep 25, 2021 4:56 pm Annette, I hope you do post on keeping expenses down in NYC.
Well, I would love to because there I actually know what I’m talking about. And yet, this topic is pretty sensitive and potentially controversial because psychology is involved. So are values and longevity expectations. And we all differ on all of those. We all value different things and have different needs. I would never purport to tell others what to do. And obviously it’s easier to rein in the budget when you don’t have to...
Last edited by AnnetteLouisan on Sun Sep 26, 2021 1:37 pm, edited 1 time in total.
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sat Sep 25, 2021 4:48 pm Why is the TSP a better place for my bonds, because of the lack of interest rate risk since the G Fund (ER 0.049) is not a marketable security?
I don't know anything about the TSP, or it's funds... Hopefully others will have recommendations there.

But in a more generic sense, the usual recommendations is to keep bonds in tax-deferred accounts, as the interest/dividends they generate are not taxed favorably. However, given your AA, and very large cash position, this is something you already deal with. If you are getting 0.5% on your $600k cash, that's throwing off $3k/year which you pay taxes on... Same idea with bonds in taxable, you'll pay taxes as though it was income whether you want fi spend that money or not.

If you had stocks in taxable instead, after you've held them long enough (1 year), their dividends shift from being taxed as normal income to "qualified dividends" which are taxed at the lower capital gains rate (at least federally, not sure how NY handles them).

Your particular challenge in finding the right balance. While maxing out your tax-deferred options with bonds is the best for taxes, it would make rebalancing taxable as you'd be forced to do it in a taxable account. Ideally, you'd hold enough bonds and stocks in your tax-deferred accounts to be able to rebalance there without tax impact.

If you aren't familiar with rebalancing, here's a quick overview. First, you have a "target" asset allocation - I'll use 25% stocks and 75% bonds (yours is currently closer to 10/90). Many people rebalance if their allocation is off by > 5%. For example, let's say stocks have a rally and you find yourself with 35% stocks. You'd "sell" enough stocks to get back to 25% and "buy" enough bonds to get back to 75%. If we have a market crash, let's say you're stocks drop to 15%, again you'd sell enough bonds to bring them down to 75% and buy enough stocks to get back to 25%. If you think about this, it's forcing you to "buy low and sell high" - which is ideally how we'd do things.

So ideally you'd have "enough" of both stocks and bonds in your tax-deferred accounts so you could do these transactions entirely there - no taxes (since they are in pre-tax).

With your AA, and the amount of bonds you have, that likely means you are going to be forced to hold bonds (or other fixed income) in taxable. As I said, balance...

I'd focus on the "big picture" pieces first, get those in place, then figure out details like how much bonds, what type, etc. to hold.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

SnowBog wrote: Sat Sep 25, 2021 5:30 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 4:48 pm Why is the TSP a better place for my bonds, because of the lack of interest rate risk since the G Fund (ER 0.049) is not a marketable security?
I don't know anything about the TSP, or it's funds... Hopefully others will have recommendations there.

But in a more generic sense, the usual recommendations is to keep bonds in tax-deferred accounts, as the interest/dividends they generate are not taxed favorably. However, given your AA, and very large cash position, this is something you already deal with. If you are getting 0.5% on your $600k cash, that's throwing off $3k/year which you pay taxes on... Same idea with bonds in taxable, you'll pay taxes as though it was income whether you want fi spend that money or not.

If you had stocks in taxable instead, after you've held them long enough (1 year), their dividends shift from being taxed as normal income to "qualified dividends" which are taxed at the lower capital gains rate (at least federally, not sure how NY handles them).

Your particular challenge in finding the right balance. While maxing out your tax-deferred options with bonds is the best for taxes, it would make rebalancing taxable as you'd be forced to do it in a taxable account. Ideally, you'd hold enough bonds and stocks in your tax-deferred accounts to be able to rebalance there without tax impact.

If you aren't familiar with rebalancing, here's a quick overview. First, you have a "target" asset allocation - I'll use 25% stocks and 75% bonds (yours is currently closer to 10/90). Many people rebalance if their allocation is off by > 5%. For example, let's say stocks have a rally and you find yourself with 35% stocks. You'd "sell" enough stocks to get back to 25% and "buy" enough bonds to get back to 75%. If we have a market crash, let's say you're stocks drop to 15%, again you'd sell enough bonds to bring them down to 75% and buy enough stocks to get back to 25%. If you think about this, it's forcing you to "buy low and sell high" - which is ideally how we'd do things.

So ideally you'd have "enough" of both stocks and bonds in your tax-deferred accounts so you could do these transactions entirely there - no taxes (since they are in pre-tax).

With your AA, and the amount of bonds you have, that likely means you are going to be forced to hold bonds (or other fixed income) in taxable. As I said, balance...

I'd focus on the "big picture" pieces first, get those in place, then figure out details like how much bonds, what type, etc. to hold.
25 percent equity allocation I can totally live with!!

Wondering if I should wait to 10/2 to post all my deets including ERs, 9/30/2021 numbers and pension, ss etc. I’m really looking at this entire situation with new eyes. Then it will be more obvious what to move where and when.

NB, that is the first time I’ve ever used the term deets. I joined Reddit about six weeks ago and.... 😂
Last edited by AnnetteLouisan on Sat Sep 25, 2021 5:45 pm, edited 2 times in total.
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Re: Where Do I Go From Here

Post by Duckie »

AnnetteLouisan wrote: Sat Sep 25, 2021 4:48 pm Is the state street intl fund I mentioned superior to the TSP I fund (ER 0.049).
The TSP I Fund is only EAFE developed markets, roughly 75% of the international market. The State Street fund is a complete international fund. It has the missing emerging markets, Canada, and small caps that the EAFE fund does not.
Why is the TSP a better place for my bonds, because of the lack of interest rate risk since the G Fund (ER 0.049) is not a marketable security?
The G Fund is what we call a free lunch. It pays intermediate rates with only short-term risk and is guaranteed not to lose money.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Duckie wrote: Sat Sep 25, 2021 5:39 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 4:48 pm Is the state street intl fund I mentioned superior to the TSP I fund (ER 0.049).
The TSP I Fund is only EAFE developed markets, roughly 75% of the international market. The State Street fund is a complete international fund. It has the missing emerging markets, Canada, and small caps that the EAFE fund does not.
Why is the TSP a better place for my bonds, because of the lack of interest rate risk since the G Fund (ER 0.049) is not a marketable security?
The G Fund is what we call a free lunch. It pays intermediate rates with only short-term risk and is guaranteed not to lose money.
Ok, this is pretty good news overall. Since my pretax accounts are already bond heavy, and that is where bonds should be (super good news -I had wondered), I can just be like ok, the tasks of bond investing and hoarding up cash have been completed for the most part.

I can add equities to my taxable account that I will be opening and just route some portion of my paycheck into that for a bit, as well as direct my new money to equities in the 401k.

Does that make sense? The shame is buying equities in a frothy market, but I don’t want to market time and I need more equities.

Have I understood correctly? You all are incredible for giving all this great info at the cost of your weekend time!!!

The crazy part about earning 290 and spending 45 (38 during covid) is my bank statements look crazy... lots coming in, very little going out and what goes out is divided among 3 banks, this appearing like even less...

Once I get everything set up on autopilot I can forget about it for a while and just stay the course.
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Re: Where Do I Go From Here

Post by LilyFleur »

Hi, Annette!
A couple of things:
1. Health insurance can be a large expense. I first retired at age 57 and had COBRA (from my divorce), a very good group PPO plan at $850/month. Now, I pay about $1700/month for a similar Blue Shield PPO on the open market (my pension disqualifies me for subsidies). I do have the platinum plan because of some pre-existing health conditions.

2. When I retired at 57, I was engaged and ended up doing some international travel for the first time in my life. I also had time to spend with my mother, who was failing. Fast forward to 2018. My mother died and there was a breakup. I was at loose ends and sad. I began working a part-time job. I needed the social interaction and I liked the feeling of being productive. That job went away during Covid, and I took painting classes online and then got a better work-from-home job. That job pays for my health insurance, and I am grateful for the money and for the interaction with my boss, a wonderful human being. It feels good, at age 61, to be living on my pension and my part-time job and not to have to be dipping significantly into my savings yet.

3. If you decide you'd like to open a brokerage account, shop around first. Call the brokerages and see what they would offer you to move your money there. I'm at Schwab and I could get you a $500 friends and family bonus (no money to me, but I have sent some people to Schwab who have been very happy). I helped another Boglehead go to Schwab, and they have told my that my advisor is a "dream." But you might be able to do better. Schwab will also provide you with free complimentary financial planning visits if you have I think at least $250,000 there. I find that very helpful, as the plan gives me an estimated "spend" for 30 years which already has taxes taken off the top. I also study the forum here, and have done two Roth conversions based on advice I've received here.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Thank you Lily!

Funnily enough, I’d had a roughly 30 percent equity allocation in my 401k until around 2019, when I gradually started reducing it to derisk as I approached retirement. I also felt it made sense to hold the stock indexes I already bought, but not to buy them at historically high prices. Thus I was trying to time the market, a big no no for Bogleheads (but buy low sell high in the non BH universe).

Sorry you dealt with a divorce... they are the worst... but it’s great you came through it well.

I’m not going to fund my taxable account all at once, but gradually from my paycheck to dollar cost average in, so boni for big investment amounts won’t apply to me. I was going to consider waiting until next year to open it, since what with rebalancing, changing my future allocation in my 401 and opening TD and IRA accounts for the first time ever, its been an eventful year financially. I also reduced my term life insurance coverage.

One of my first jobs was at a major brokerage that failed not too long ago. Risk of loss, which pervades almost all investments, is really unappealing to me. I can’t afford it. Plus like everyone I think a significant downturn is a near certainly in the next five years - crucial years for my retirement.
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sat Sep 25, 2021 6:01 pm ...The shame is buying equities in a frothy market, but I don’t want to market time and I need more equities...
AnnetteLouisan wrote: Sat Sep 25, 2021 8:23 pm ...I’m not going to fund my taxable account all at once, but gradually from my paycheck to dollar cost average in, so boni for big investment amounts won’t apply to me...
One of my first jobs was at a major brokerage that failed not too long ago. Risk of loss, which pervades almost all investments, is really unappealing to me. I can’t afford it. Plus like everyone I think a significant downturn is a near certainly in the next five years - crucial years for my retirement.
Some food for thought...

I - for one - do not think a significant downturn is a near certainty in the next five years... And likely many on Bogleheads will say the same... Ultimately we take a view that "we don't know anything", do our best to "tune out the noise" (media and financial industry trying to drive their own agendas), invest for the long term, and "stay the course".

That isn't to say a crash can't happen... And it might even happen in the next 5 years... But it also might not happen for 10 years or more, we just don't know... But its good to "know ourselves" - and know the risk tolerance we can accept - and factor that into our long term plans so - when the crash eventually happens - we can trust our plan to work...

I'd also offer that your "risk of loss" might actually be creating more risk than you realize. What we do know is you need to ensure that your savings last the reminder of your life. And there's a good chance that we'll continue to have some level of inflation over the reminder of your lifetime (federal "target" is 2% - who knows if we'll be above/below that). Cash is basically guaranteed to lose value to inflation, bonds ideally "keep up" (maybe, maybe not), so the only real option you have to "beat inflation" is to [in your mind "take risk"] by investing in stocks. So you are effectively comparing the "known risk" of your money becoming less and less useful (as its eroded by inflation) vs. a "perceived risk" that you'll lose money in the markets by investing in stocks.

Let's take that a little farther - a stock is very risky. Companies go out of business all the time - as you yourself experienced. No one is (or should be) recommending you purchase individual stocks. The recommendations on BH are generally for a broadly diversified index fund. Put differently, a "total stock market index fund" essentially owns a piece of every publicly traded company in America. Will some of those companies fail and go out of business - you bet. Will new business start from their ashes (or out of thin air) - you bet. Will the next "Amazon" or "Tesla" arrive someday - yep and you'll own them! Will the "big tech" companies fall out of favor and be replaced by the next "hot" industry - historically yes - and again you'll already own that next "hot" industry (along with everything else). So for a "total stock market" type investment to implode - you'd have to believe that America (or the world - if you use a fund that expands to the world) is basically going to cease to function, that no one will get up tomorrow and go to work, that no one will have a "bright idea", that no one will find a way to make things cheaper/faster/better, that no one will care about earning a living and providing for their family. Since I don't believe society will get to that point (at least not while I'm alive), I'm not concerned about investing in broadly diversified index funds...

Which then switches to the "but I don't want to overpay" and/or "I don't want to buy at all-time high prices and lose money." I had these same thoughts when I found my way to BH a few years ago. I had a lot of "fear" at investing my hard earned dollars into the market - convinced as soon as I did so that we'd have a crash... ("Just my luck - right...")

Ultimately, what helped me is two things:
  • If you look at the history of the stock market (or something like the S&P 500) over time - the vast majority of time - its "at market highs"... Over say an 80 - 100 year time period, there are typically only a few times that it falls (and/or stays flat), the rest its "up and to the right." So again, being worried about investing basically means you think that the world is going to no longer want to go "up and to the right"...
  • I met Bob. https://thereformedbroker.com/2020/12/2 ... ket-timer/ This was insightful for me to realize that the "worlds worst market timer" - who only bought right before market crashes - repeatedly - but was able to "stay the course" turned out quite well.
Again, we will have crashes in the market, maybe even the day you invest. You might see your stocks drop by as much as 50% of their value (maybe even more) during these crashes. And those who take on more risk (as expressed usually through their Asset Allocation to stocks) than they are comfortable with - even when they know they shouldn't - can feel that they need to sell out "to protect what's left". A personal friend of mine - who is otherwise a fairly savvy investor - and definitely knew not to panic sell and invest for the long term capitulated in February 2020. They were convinced we were entering dark days, markets were going to implode, and they "had to get out". And for a month - they felt great as they saw the markets plummet. But as things recovered, they didn't get back in... As things did better than recover, they still weren't back in... Ultimately their "fear of loss" caused them to lose - not only compared with where they started - but significantly if compared against where they could have been had they simply "stayed the course".

But ideally you'll keep working on your outlook - try to put the failure of the brokerage behind you - and view things in a broader context. You need to accept markets will crash - and you aren't going to get advance notice. You need to have your "plan" ready - which includes things like having enough cash/bonds to ride out the crash (I believe historically most crashes recover within 5 years) and let your stocks recover. And realize that things like rebalancing can help in that recovery - as you are basically buying stocks on sale during a recovery (using bond funds which are probably at their highs as people flee to safety) - so as things start to recover you'll have "cheap" shares helping you bounce back even quicker (and eventually causing you to rebalance by selling stocks as the recover to return your balance).

Like I said, work on getting a better feeling for the "big picture" - and then ideally the details are going to start to click.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Point taken on the need to inform myself: on top of all the great posts and educational links offered by the group here, I just discovered the Bogleheads Investment Podcast!

Fortunately, all my investments are indexes currently. I would never invest in an actively managed fund or grant investment discretion. I actually own and read in the 90s one of John Bogle’s books and his teachings were quite often mentioned in the wsj, Barrons and Louis Rukeyser, among other places. So I was loosely familiar with his approach, such that it kept me out of serious trouble when 401k investing.

In 2005-07 I interviewed active managers from Morgan Stanley, UBS and Allianz Wealth Management (and poss Northwestern Mutual?) but decided to pass. More recently I had discussions with BNY Mellon and Bessemer. I passed on BNY, and I don’t have enough assets for Bessemer.

I surprised myself with my reaction to Feb 2020- I was mildly annoyed but had no trouble staying the course. Of course, it was a very brief one. Ive never been invested in a major correction so I can only speculate how I would react. But I doubt Id sell.
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Re: Where Do I Go From Here

Post by BarbBrooklyn »

Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
+1
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
HomeStretch
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Re: Where Do I Go From Here

Post by HomeStretch »

AnnetteLouisan wrote: Sun Sep 19, 2021 10:06 pm … However, thanks to everyone’s input I see that I need to invest some of my cash into a low ER broad based stock fund at one of the big 3 reputable brokerages, open an IRA and convert, do the HSA, put another 10k in the I bonds in January and sell some of the Baird Fund. I will also focus on my portfolio rather than NW and up my equity percentages while respecting my risk tolerance. …
Welcome to the forum!

A few comments on your (very good) proposed plan:

1. Increase your equity % (30% minimum) to help your portfolio keep up with inflation. As scary as market fluctuations can be, inflation in your expenses can quietly and insidiously undermine your portfolio longevity.

2. Assuming your new $7k Fidelity tIRA was a non-deductible contribution, convert the balance to a Roth IRA in 2021 to start the 5-year clock as of 1/1/21 for your initial Roth IRA.

3. Consider opening your new Roth IRA/Taxable accounts at Fidelity or moving all your accounts to Schwab. I like and use both Fidelity and Vanguard. Fidelity wins out over Vanguard for me these days due to, among other things, a local office, better service and a wider array of products (including a cash management account, free wires/ATM, donor-advised fund for charitable giving and a no-fee HSA account).

4. HSAs are a great tax-free savings tool. But first make sure that the HDHP/HSA is the right cost-effective healthcare plan choice for you. See which HSA provider(s) your company uses for HSA contributions withheld through payroll (you don’t pay FICA taxes on HSA contribution withholdings). If that HSA charges fees, you can periodically transfer the HSA balance to a no-cost Fidelity HSA with a wide range of available low-ER funds/ETFs/MMFs. At age 55+ there is a HSA catch-up contribution ($1k for 2021).

5. You can also purchase an additional $5k in I-Bonds with a Federal tax refund.

6. If you are going to transfer significant funds to Fidelity (or Schwab), talk with a rep first about a new account bonus, reimbursing you for an any account closure fees from your old financial institution and waiving any purchase fees on Vanguard funds.

7. To help fine tune your retirement planning, obtain additional information on your pension and SS benefits, such as whether the pension receives COLA increases and the estimated pension/SS $ you will receive at various ages.

8. To help fine tune your retirement planning, continue to track your expenses and the impact of any major changes. The biggest changes are likely to be:
A) state and local income taxes if you move
B) how healthcare costs will change over time - cost now, cost in retirement pre-Medicare and cost on Medicare,
C) your housing costs (move, rent or buy, etc.).
sachatur
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Re: Where Do I Go From Here

Post by sachatur »

Just scanned the post and replies, so please forgive me if this was already discussed.

If you are single and have no dependents, why do you need term life insurance?
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

sachatur wrote: Sun Sep 26, 2021 7:49 am Just scanned the post and replies, so please forgive me if this was already discussed.

If you are single and have no dependents, why do you need term life insurance?
I don’t need it, but since when I joined my employer it was super cheap and I thought I could afford it, my intent was to give my sibling a windfall and extra liquidity if needed when I pass. I had around $880,000 in term, now its $220,000.
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Re: Where Do I Go From Here

Post by smitcat »

KlangFool wrote: Sat Sep 25, 2021 3:31 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 3:25 pm

Nothing to apologize for - how does that affect the plan? I consider it riskier because my household isn’t dual income, and my taxes and certain costs (security, transp) can be higher, but it also means I control the costs and there’s no spouse or inlaws w gambling problems etc.
AnnetteLouisan,

1) A couple's social security benefits would be 30K to 40K per year. In your case, it is probably around 20K per year.

2) <<there’s no spouse or inlaws w gambling problems etc.>>

I am highly appreciative of my spouse's willingness to put up with me. I hope that I am worth the trouble.

KlangFool
"1) A couple's social security benefits would be 30K to 40K per year. In your case, it is probably around 20K per year."
Based on her income it is likely twice that - as you say its best if she looks it up on in her own account and then adjusts for retiring early if that is a potential goal.
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Re: Where Do I Go From Here

Post by jaqenhghar »

BarbBrooklyn wrote: Sun Sep 26, 2021 6:46 am
Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
+1
+2
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

jaqenhghar wrote: Sun Sep 26, 2021 1:02 pm
BarbBrooklyn wrote: Sun Sep 26, 2021 6:46 am
Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
+1
+2
I’m considering whether broad themes or detailed specifics would be most useful and whether it should be a PM, a reply here or a post under Consumer. I’m also considering how best to avoid sounding presumptuous, preachy or clueless. For example, “don’t get diabetes” would not be helpful, and many of my savings presuppose decent health, no dependents and good insurance, which many folks don’t have. And many people do not want to give up their gym membership, opera subscriptions or flat screens, nor should they as far as I’m concerned. Life is short. I could post my budget and if any line item jumps out we could discuss it. However, I don’t know that there is general interest in that on this forum - Good Housekeeping this ain’t.

Elsewhere I’ve noted that I grew up (relatively) poor (by American standards), that my parents were depression era and that I live like a college student, which pretty much sums its up. I can tell you what kind of coffee to buy and where (Pilon, Walmart), how to save money on energy costs (buy power strips) or answer specific questions you have, but I am not living a great lifestyle and do not have all the answers, as everyone already knows. Walmart delivers, and that’s a big piece of the answer.

Let me know what y‘all (plural is „all y’all,“ I‘m told) prefer.
SnowBog
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Re: Where Do I Go From Here

Post by SnowBog »

AnnetteLouisan wrote: Sun Sep 26, 2021 1:19 pm
jaqenhghar wrote: Sun Sep 26, 2021 1:02 pm
BarbBrooklyn wrote: Sun Sep 26, 2021 6:46 am
Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
+1
+2
I’m considering whether broad themes or detailed specifics would be most useful and whether it should be a PM, a reply here or a post under Consumer. I’m also considering how best to avoid sounding presumptuous, preachy or clueless. For example, “don’t get diabetes” would not be helpful, and many of my savings presuppose decent health, no dependents and good insurance, which many folks don’t have. And many people do not want to give up their gym membership, opera subscriptions or flat screens, nor should they as far as I’m concerned. Life is short. I could post my budget and if any line item jumps out we could discuss it. However, I don’t know that there is general interest in that on this forum - Good Housekeeping this ain’t.

Elsewhere I’ve noted that I grew up (relatively) poor (by American standards), that my parents were depression era and that I live like a college student, which pretty much sums its up. I can tell you what kind of coffee to buy and where (Pilon, Walmart), how to save money on energy costs (buy power strips) or answer specific questions you have, but I am not living a great lifestyle and do not have all the answers, as everyone already knows. Walmart delivers, and that’s a big piece of the answer.

Let me know what y‘all (plural is „all y’all,“ I‘m told) prefer.
Unless you feel its relevant to your questions here (as in are you asking for input on your budget as it relates to your broader plans), my "vote" would be as a separate post. Could be something like "how I live in NYC on $x a year..."

While BH isn't to the level of Mr. Money Mustache (MMM) - where they are looking for every possible life hack to reduce spending... One of the core Bogleheads principles is "live below your means", and your insights could help others review their own budgets and see if there are things that stand out to them.

But as you say, its ultimately very subjective... We make choices with our money to spend on the things we feel are important to us...
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22twain
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Re: Where Do I Go From Here

Post by 22twain »

AnnetteLouisan wrote: Sun Sep 19, 2021 6:14 am My goal was $2.2 million NW and retiring around age 58. Recently I heard I need closer to 3.2, or around 72 times annual spend.
Where did you hear that, and what is the rationale behind it?

72x expenses is a very high figure, by the standards of this forum. Our usual starting point for discussion is 25x for a 30-year retirement. It follows from the "4% rule" which you may have seen discussed here already. (If not, do a forum search for it and you'll find bazillions of threads.)

Your earlier goal corresponds to 50x, or a 2% withdrawal rate, which is generally considered here to be very conservative.

[added] Now I've seen in another post that your net worth figures include your home equity. The 25x and 50x figures I cited above do not include home equity; only those assets that you can actually spend from.

Your "spendable assets" amount to about $1.2 million, which appears to be about 27x your current expenses. (1.2/3.2 * 72x). That fits within the 25x guideline, although you should arguably have a bit more (work a few more years) to provide a bigger cushion against the unexpected, since your expenses are already apparently rather low for NYC.

Then again, you apparently haven't figured Social Security into your numbers, yet. This depends on when you start to collect, and there is a lot of debate here on this topic.
Last edited by 22twain on Sun Sep 26, 2021 4:30 pm, edited 1 time in total.
Meet my pet, Peeve, who loves to convert non-acronyms into acronyms: FED, ROTH, CASH, IVY, ...
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

SnowBog wrote: Sun Sep 26, 2021 2:43 pm
AnnetteLouisan wrote: Sun Sep 26, 2021 1:19 pm
jaqenhghar wrote: Sun Sep 26, 2021 1:02 pm
BarbBrooklyn wrote: Sun Sep 26, 2021 6:46 am
Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
+1
+2
I’m considering whether broad themes or detailed specifics would be most useful and whether it should be a PM, a reply here or a post under Consumer. I’m also considering how best to avoid sounding presumptuous, preachy or clueless. For example, “don’t get diabetes” would not be helpful, and many of my savings presuppose decent health, no dependents and good insurance, which many folks don’t have. And many people do not want to give up their gym membership, opera subscriptions or flat screens, nor should they as far as I’m concerned. Life is short. I could post my budget and if any line item jumps out we could discuss it. However, I don’t know that there is general interest in that on this forum - Good Housekeeping this ain’t.

Elsewhere I’ve noted that I grew up (relatively) poor (by American standards), that my parents were depression era and that I live like a college student, which pretty much sums its up. I can tell you what kind of coffee to buy and where (Pilon, Walmart), how to save money on energy costs (buy power strips) or answer specific questions you have, but I am not living a great lifestyle and do not have all the answers, as everyone already knows. Walmart delivers, and that’s a big piece of the answer.

Let me know what y‘all (plural is „all y’all,“ I‘m told) prefer.
Unless you feel its relevant to your questions here (as in are you asking for input on your budget as it relates to your broader plans), my "vote" would be as a separate post. Could be something like "how I live in NYC on $x a year..."

While BH isn't to the level of Mr. Money Mustache (MMM) - where they are looking for every possible life hack to reduce spending... One of the core Bogleheads principles is "live below your means", and your insights could help others review their own budgets and see if there are things that stand out to them.

But as you say, its ultimately very subjective... We make choices with our money to spend on the things we feel are important to us...
OK peeps - just posted under Personal Consumer issues. LBYM.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

Carousel wrote: Sat Sep 25, 2021 4:56 pm Annett, I hope you do post on keeping expenses down in NYC.
Done and done! - posted on the Personal Consumer Issues Board (LBYM).
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ram
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Re: Where Do I Go From Here

Post by ram »

AnnetteLouisan wrote: Sun Sep 26, 2021 1:19 pm
I’m considering whether broad themes or detailed specifics would be most useful and whether it should be a PM, a reply here or a post under Consumer. I’m also considering how best to avoid sounding presumptuous, preachy or clueless. For example, “don’t get diabetes” would not be helpful, and many of my savings presuppose decent health, no dependents and good insurance, which many folks don’t have. And many people do not want to give up their gym membership, opera subscriptions or flat screens, nor should they as far as I’m concerned. Life is short. I could post my budget and if any line item jumps out we could discuss it. However, I don’t know that there is general interest in that on this forum - Good Housekeeping this ain’t.

Elsewhere I’ve noted that I grew up (relatively) poor (by American standards), that my parents were depression era and that I live like a college student, which pretty much sums its up. I can tell you what kind of coffee to buy and where (Pilon, Walmart), how to save money on energy costs (buy power strips) or answer specific questions you have, but I am not living a great lifestyle and do not have all the answers, as everyone already knows. Walmart delivers, and that’s a big piece of the answer.

Let me know what y‘all (plural is „all y’all,“ I‘m told) prefer.
I would recommend you post your details. People can always add the cost of their Gym memberships if that is something that is absolutely essential for them.
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Re: Where Do I Go From Here

Post by ram »

AnnetteLouisan wrote: Mon Sep 20, 2021 10:24 am As to AA, I can handle up to 30 percent equities. More than that I couldn’t sleep at night. At 25 percent equities, I could sleep like a happy baby in a warm blanket. Maybe I’ll aim for 25 percent by year end, 30 next year if I feel comfortable. The issue is whether to count my cash, pension, and ss as bonds? What is my denominator? sigh...
I think you probably have enough at this point and certainly will have enough by 57 yrs of age

You have 1.2 M or 1200 K in investible assets at this time.

Lets make the following assumptions:
1. You save another 340K by age 57
2. Pension starts at age 60 and is 30K/yr
3. Social security starts at age 62 and is 30K/yr at that time
4. You need 80K/yr in retirement

So by age 57 you will have 1200K + 340 K = 1540 K (not counting the returns on the 1200K)

Amount needed from invested assets from 57 to 60 yrs = 80K x 3yrs =240K

Amount needed from invested assets from age 60 to 62 = 50 K x 2 = 100K (30K /yr is now coming from pension.)

Amount needed from invested assets age 62 onwards = 20 K /yr (30K /yr is now coming from pension & 30 K from SS.)

At 62 your invested assets drop down to 1540 - 240 - 100K = 1200K

2.5% withdrawal on 1200K is 30K /yr. This is a very conservative withdrawal rate.

You can actually spend upto 90K/yr after age 62 if you so wish with 30K each coming from pension, SS and your nest egg of 1200K.

An asset allocation of 25% stocks and 75% bonds should be adequate to have a withdrawal of 2.5% for 40 years (till age 97)

I do not think that there is any reason for you to increase your equity to 30%.

(I am planning on keeping 50 to 60% in equities during my retirement)
Ram
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

ram wrote: Sun Sep 26, 2021 9:25 pm
AnnetteLouisan wrote: Mon Sep 20, 2021 10:24 am As to AA, I can handle up to 30 percent equities. More than that I couldn’t sleep at night. At 25 percent equities, I could sleep like a happy baby in a warm blanket. Maybe I’ll aim for 25 percent by year end, 30 next year if I feel comfortable. The issue is whether to count my cash, pension, and ss as bonds? What is my denominator? sigh...
I think you probably have enough at this point and certainly will have enough by 57 yrs of age

You have 1.2 M or 1200 K in investible assets at this time.

Lets make the following assumptions:
1. You save another 340K by age 57
2. Pension starts at age 60 and is 30K/yr
3. Social security starts at age 62 and is 30K/yr at that time
4. You need 80K/yr in retirement

So by age 57 you will have 1200K + 340 K = 1540 K (not counting the returns on the 1200K)

Amount needed from invested assets from 57 to 60 yrs = 80K x 3yrs =240K

Amount needed from invested assets from age 60 to 62 = 50 K x 2 = 100K (30K /yr is now coming from pension.)

Amount needed from invested assets age 62 onwards = 20 K /yr (30K /yr is now coming from pension & 30 K from SS.)

At 62 your invested assets drop down to 1540 - 240 - 100K = 1200K

2.5% withdrawal on 1200K is 30K /yr. This is a very conservative withdrawal rate.

You can actually spend upto 90K/yr after age 62 if you so wish with 30K each coming from pension, SS and your nest egg of 1200K.

An asset allocation of 25% stocks and 75% bonds should be adequate to have a withdrawal of 2.5% for 40 years (till age 97)

I do not think that there is any reason for you to increase your equity to 30%.

(I am planning on keeping 50 to 60% in equities during my retirement)
Read this last night - really appreciate the number crunching and the insights. I think the assumptions you made and conclusions you drew are very reasonable.

Once I get my actual numbers for everything on 10/2 I will post an update and turn to the mechanics of reallocating. It looks like the Baird Fund is my worst 401k holding right now, so all or part of that could be shifted into stocks potentially.
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Re: Where Do I Go From Here

Post by AnnetteLouisan »

SnowBog wrote: Sat Sep 25, 2021 3:11 pm
AnnetteLouisan wrote: Sat Sep 25, 2021 3:06 pm I had some issues getting my social security statement even though I have a mysocialsecurity account set up. Seemed there was a password issue. I’ll call them next week.
You actually don't want the statement... By default they assume you continue to work /earn what you make now until your full retirement age (presumably 67).

So unless that matches how long you intend to work, it's not accurate...

You'll ultimately need to get to your earnings history (which I think is on the statement, or can be accessed from the site once you can log in). I'd recommend taking that info and going to https://ssa.tools to better understand "your" numbers. You can use it to see what your benefits are now, and the impact of working longer, claiming earlier/later, etc.
yes this estimator was great and I only needed my 2020 ssa salary to access. what a great time saver! myssa still not accessible.
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Re: Where Do I Go From Here

Post by Late2Brake »

My risk aversion derives in part from knowing and reading about so very many people who lost their money in investments and otherwise in 1987, 1992, 2000 and 2008 when it was too late for them to recoup the money.
People that lost money didn't stay the course. Pick a total stock market fund (VTI or VTSAX for example) and do a history. What happened after the market took a dump? Did they eventually come back?
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