Am I on Track to Retire at 55?

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Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Am I on Track to Retire at 55?

Post by USPSA »

Emergency funds: I currently have six months of expenses covered.

Debt: Zero Deft

Tax Filing Status: Single

Tax Rate: 24% Federal, 6.33% State

State of Residence: NY

Age: 46

Desired Asset allocation: 84% stocks / 6% bonds
Desired International allocation: 10% of stocks
I'm on a 7 year glide path to: 50% US stocks / 10% International stocks / 40% bonds

Approximate total portfolio $776K

Current retirement assets - holding as a percentage of the entire portfolio

Taxable
0% cash (for investing – do not include emergency funds)
15% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (expense ratio 0.040%)
2% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (expense ratio 0.110%)
1% Vanguard Tax-Exempt Bond Index Fund Admiral Shares (VTEAX) (expense ratio 0.090%)

401k
0% cash (for investing – do not include emergency funds)
55% Vanguard Total Stock Market Index Fund ETF (VTI) (expense ratio 0.030%)
7% Vanguard Total International Stock Index Fund ETF (VXUS) (expense ratio 0.080%)
2% Vanguard Total Bond Market Index Fund ETF (BND) (expense ratio 0.035%)
2% Schwab US TIPS ETF (SCHP) (expense ratio 0.050%)

Employer match 100% up to 4%

Roth
0% cash (for investing – do not include emergency funds)
12% Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX) (expense ratio 0.040%)
2% Vanguard Total International Stock Index Fund Admiral Shares (VTIAX) (expense ratio 0.110%)
0.5% Vanguard Total Bond Market Index Fund Admiral Shares (VBTLX) (expense ratio 0.050%)
0.5% Vanguard Inflation-Protected Securities Fund Investor Shares (VIPSX) (expense ratio 0.200%)

Deferred Compensation
0% cash (for investing – do not include emergency funds)
0.6% Fidelity Extended Market Index (FSMAX) (expense ratio 0.035%)
0.4% Fidelity US Bond Index (FXNAX) (expense ratio 0.025%)


_______________________________________________________________


Contributions

New annual Contributions
$20,500 401k (Employer match 100% up to 4%)
$6,000 IRA/Roth IRA
$24,000 Taxable

Fixed Income During Retirement

Estimated Social Security - Starting at age 67 - 30K per year
Estimated Pension - Starting at age 62 - 27K per year

Spending During Retirement

Estimated Health Care from age 55 to 65 - $5,400 per year
Estimated Health Care from age 65 for life - $2,400 per year
Estimated Yearly Spend in addition to Health Care- 60K per year

Questions:
1. Am I on track to retire at age 55 assuming I live to 95, 90, 85, etc?
2. Could I be doing other things to help reach my goal of age 55 retirement?

Thank you very much.
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David Jay
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Location: Michigan

Re: Am I on Track to Retire at 55?

Post by David Jay »

Welcome to the forum!

A good way to estimate retirement is to calculate a sustainable withdrawal rate (SWR). This is the percentage, with inflation adjustment, that is extremely likely (nothing in life is "guaranteed") to last a lifetime. At age 67 it is reasonable to use 4% for your sustainable withdrawal rate. So what you need to do is fund 12 years between 55 and 67, then take the amount need above SS and pension and multiply by 25 (the inverse of 4%).

Using round numbers to estimate, it looks like after age 67 you have about 50K coming in (starts at 57K but pension will lose spending power to inflation over the years) and you want about 65K in spending. So you need to have a remaining portfolio of about $400K to meet your long term needs.

To get from age 55 to age 67, you will need about $750K. So you have a rough target of 1.2Million to retire at age 55. Saving 50K a year puts you over 1.2M, so I would say 'Yes", you are nicely on track.

Note that expenses and portfolio are shown in today's dollars. There will be inflation between now and age 55 but there will also be portfolio growth. The best you can do at this point is do a rough estimate.
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
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David Jay
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Location: Michigan

Re: Am I on Track to Retire at 55?

Post by David Jay »

Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
It's not an engineering problem - Hersh Shefrin | To get the "risk premium", you really do have to take the risk - nisiprius
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

Thank you so much for taking the time to look this over. As you said nothing in life is guaranteed, but it's nice to know I'm at least heading in the right direction.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

David Jay wrote: Fri Jan 21, 2022 6:37 pm Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
MrLoco
Posts: 32
Joined: Fri Apr 23, 2021 11:40 am

Re: Am I on Track to Retire at 55?

Post by MrLoco »

The one thing that would concern me is your estimate of future health care costs. Especially between ages 55-65.

I feel that these costs , even under a bronze type ACA plan, will be significantly higher than what your are estimating, ten years from now, when you are in you are in your mid 50's.
Unless you have some type of employer sponsored health care plan to carry you into the early years of retirement.

And while you may be in perfect health now; as we enter our late 50's to early 60's.......health issues crop up.

Also, I fear we have all been spoiled with the splendid returns we have seen since the crash of late 2008.

The next decade could be a lot more of a bumpy ride.

Good luck to you.
jharkin
Posts: 3469
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Am I on Track to Retire at 55?

Post by jharkin »

[Edit to fix typo]

You are probably fine.

I plugged your numbers into FireCALC.. Confirm this:

Current age: 46
Portfolio 760k
adding 50k per year across pretax/roth taxable
Retire at 55 (2031)
Spend 65k
Pension at 62 (2039) - 27k (I put no COL/inflation adjust)
SS at 67 (2043) - 30k


I put in an assumption you are already at 60/40 and let it assume constant forever spending and it spit out a 100% success rate with an average portfolio balance at age 95 of $4.48MM. Worst case was a 750k balance at age 95.

You should go play around with that tool, and if its interesting look at other planning tools like i-ORP, etc. Consider that if you 65k budget includes lot of discretionary expenses they will likely go down as you get older and travel less. FireCALC can model this for you with an approach called the "Bernicke Reality Retirement spending curve"

Also, somebody pointed out the variability of health care costs. For planning I use the Kaiser Family Foundation ACA estimator, plug in my info and use the full premium+ max OOP for a silver plan in my estimates for before medicare. If ACA where to go away and I get seriously ill, I would simply cut back on discretionary categories like travel to compensate (not likely to be traveling as much anyway if you are in cancer treatment for example).

Good luck!
Last edited by jharkin on Sun Jan 23, 2022 11:58 am, edited 2 times in total.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Am I on Track to Retire at 55?

Post by KlangFool »

OP,

1) Assuming that your annual expense is 70K per year and your number is 1.75m

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.


Starting Net Worth $776,000
Annual Savings $50,000
Years
Annual Return Rate 6 7 8 9
5.00% $1,380,010 $1,499,010 $1,623,961 $1,755,159
6.00% $1,449,537 $1,586,509 $1,731,700 $1,885,601
7.00% $1,522,231 $1,678,787 $1,846,303 $2,025,544
8.00% $1,598,211 $1,776,068 $1,968,153 $2,175,605
9.00% $1,677,596 $1,878,580 $2,097,652 $2,336,441
10.00% $1,760,512 $1,986,563 $2,235,219 $2,508,741


2) Your portfolio is overly complicated. Get rid of anything that are less than 5% of your portfolio

A) Taxable account = 100% stock
B) 401K = 100% Bond
C) Roth = mix of the stock and the bond to reach your AA.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: Am I on Track to Retire at 55?

Post by smitcat »

USPSA wrote: Sat Jan 22, 2022 6:54 am
David Jay wrote: Fri Jan 21, 2022 6:37 pm Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
Is your pension COLA'd? Is it a public pension? Do you know the funding rate of the pension?
Is the SS benefit calculated by removing any earnings from age 55 forward?
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: Am I on Track to Retire at 55?

Post by smitcat »

KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

1) Assuming that your annual expense is 70K per year and your number is 1.75m

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.


Starting Net Worth $776,000
Annual Savings $50,000
Years
Annual Return Rate 6 7 8 9
5.00% $1,380,010 $1,499,010 $1,623,961 $1,755,159
6.00% $1,449,537 $1,586,509 $1,731,700 $1,885,601
7.00% $1,522,231 $1,678,787 $1,846,303 $2,025,544
8.00% $1,598,211 $1,776,068 $1,968,153 $2,175,605
9.00% $1,677,596 $1,878,580 $2,097,652 $2,336,441
10.00% $1,760,512 $1,986,563 $2,235,219 $2,508,741


2) Your portfolio is overly complicated. Get rid of anything that are less than 5% of your portfolio

A) Taxable account = 100% stock
B) 401K = 100% Bond
C) Roth = mix of the stock and the bond to reach your AA.

KlangFool


"1) Assuming that your annual expense is 70K per year and your number is 1.75m"
What have you calculated for the SS payments?
What have you calculated for the pension payments?
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

jharkin wrote: Sat Jan 22, 2022 9:42 am You are probably fine.

I plugged your numbers into FireCALC.. Confirm this:

Current age:55
Portfolio 760k
adding 50k per year across pretax/roth taxable
Retire at 55
Spend 65k
Pension at 62 (2039) - 27k (I put no COL/inflation adjust)
SS at 67 (2043) - 30k


I put in an assumption you are already at 60/40 and let it assume constant forever spending and it spit out a 100% success rate with an average portfolio balance at age 95 of $4.48MM. Worst case was a 750k balance at age 95.

You should go play around with that tool, and if its interesting look at other planning tools like i-ORP, etc. Consider that if you 65k budget includes lot of discretionary expenses they will likely go down as you get older and travel less. FireCALC can model this for you with an approach called the "Bernicke Reality Retirement spending curve"

Also, somebody pointed out the variability of health care costs. For planning I use the Kaiser Family Foundation ACA estimator, plug in my info and use the full premium+ max OOP for a silver plan in my estimates for before medicare. If ACA where to go away and I get seriously ill, I would simply cut back on discretionary categories like travel to compensate (not likely to be traveling as much anyway if you are in cancer treatment for example).

Good luck!
Thanks for the info. I've been looking briefly at FireCALC and it seems like an awesome tool.

I plugged my info into the Kaiser Family Foundation ACA estimator and it came back with a $6,218 per year spend on health insurance. I'll update my projections using this in the future.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

smitcat wrote: Sat Jan 22, 2022 10:02 am
USPSA wrote: Sat Jan 22, 2022 6:54 am
David Jay wrote: Fri Jan 21, 2022 6:37 pm Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
Is your pension COLA'd? Is it a public pension? Do you know the funding rate of the pension?
Is the SS benefit calculated by removing any earnings from age 55 forward?
Hello, no my pension is not cost of living adjusted. I do not know the funding rate of it. The SS website is down right now, but if I recall correctly I did put zero dollars in for earnings after age 55. I'll double check that once their website is back up. Thank you.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.

KlangFool
I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
chipperd
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Location: here and now

Re: Am I on Track to Retire at 55?

Post by chipperd »

USPSA wrote: Sun Jan 23, 2022 5:20 am
KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.

KlangFool
I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
"A portfolio is like a bar of soap, the more it's handled, the less there is." Dr. William Bernstein
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

chipperd wrote: Sun Jan 23, 2022 5:32 am
USPSA wrote: Sun Jan 23, 2022 5:20 am
KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.

KlangFool
I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
JDave
Posts: 591
Joined: Tue Oct 29, 2019 9:23 am

Re: Am I on Track to Retire at 55?

Post by JDave »

No one has a clue about your retirement readiness, because you haven't posted your expenses. Have you done an every dollar budget? Without that information, retirement planning is just guessing.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

JDave wrote: Sun Jan 23, 2022 6:41 am No one has a clue about your retirement readiness, because you haven't posted your expenses. Have you done an every dollar budget? Without that information, retirement planning is just guessing.
Hello and thank you for the response. I do use personal capital to track my expenses and it was 47K last year. I used a 60K expense per year in retirement in my original post. I inflated it so the projections will be ultra conservative and to hopefully cover things I may have missed. Cheers. :beer
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Am I on Track to Retire at 55?

Post by KlangFool »

USPSA wrote: Sun Jan 23, 2022 6:32 am
chipperd wrote: Sun Jan 23, 2022 5:32 am
USPSA wrote: Sun Jan 23, 2022 5:20 am
KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.

KlangFool
I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
Your contribution to 401K should be 100% bonds. And, you should swap stocks to bonds at your 401K account.

Your contribution to taxable account should be 100% stock. Just swap an equal amount of stock to bond at your 401K. Effectively, you are adding bond.

By doing this, all your new contribution are Effectively bond.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

KlangFool wrote: Sun Jan 23, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 6:32 am
chipperd wrote: Sun Jan 23, 2022 5:32 am
USPSA wrote: Sun Jan 23, 2022 5:20 am
KlangFool wrote: Sat Jan 22, 2022 9:55 am OP,

You are overly aggressive with your current AA. You can reach your number with 5% annual return rate in 9 years. You should switch to an AA of 70/30 or 60/40 now.

KlangFool
I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
Your contribution to 401K should be 100% bonds. And, you should swap stocks to bonds at your 401K account.

Your contribution to taxable account should be 100% stock. Just swap an equal amount of stock to bond at your 401K. Effectively, you are adding bond.

By doing this, all your new contribution are Effectively bond.

KlangFool
Thank you again for the reply. I really appreciate all the advice and like the plan of doing a 100% bond allocation with new contributions in my 401k.

One question I do have about the Taxable account is --- if I go 100% stocks in my taxable account for tax purposes how is that going to affect my withdraws during retirement. I will likely be pulling from this account exclusively from age 55 to 59 1/2 after that I can start drawing from other sources. If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. Maybe I get around that will a large ( 4 year ) emergency fund so I can use that when markets are down instead of selling stocks.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Am I on Track to Retire at 55?

Post by KlangFool »

USPSA wrote: Sun Jan 23, 2022 7:44 am
KlangFool wrote: Sun Jan 23, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 6:32 am
chipperd wrote: Sun Jan 23, 2022 5:32 am
USPSA wrote: Sun Jan 23, 2022 5:20 am

I've been thinking about moving to an AA of 60/40 much faster, but I'm struggling with the fact that over the past month my stocks are down. I turns my stomach to tell them at a loss. I'd consider re-balancing to 60/40 if/when my stocks recover from this recent downturn. Maybe I'll just keep a close eye on it for the next couple/few months/years and re-balancing as the opportunity arises. Thoughts?
OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
Your contribution to 401K should be 100% bonds. And, you should swap stocks to bonds at your 401K account.

Your contribution to taxable account should be 100% stock. Just swap an equal amount of stock to bond at your 401K. Effectively, you are adding bond.

By doing this, all your new contribution are Effectively bond.

KlangFool
Thank you again for the reply. I really appreciate all the advice and like the plan of doing a 100% bond allocation with new contributions in my 401k.

One question I do have about the Taxable account is --- if I go 100% stocks in my taxable account for tax purposes how is that going to affect my withdraws during retirement. I will likely be pulling from this account exclusively from age 55 to 59 1/2 after that I can start drawing from other sources. If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. Maybe I get around that will a large ( 4 year ) emergency fund so I can use that when markets are down instead of selling stocks.
USPSA,

1) You should have a few years of emergency fund when you retire. Especially if you need to qualify for the ACA insurance subsidy.

<<If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. >>

2) If you sell 10K of stock in your taxable account and exchange 10K of bond into stock in your 401K, you are effectively selling 10K of bond. Money is fungible.

KlangFool
30% VWENX | 16% VFWAX/VTIAX | 14.5% VTSAX | 19.5% VBTLX | 10% VSIAX/VTMSX/VSMAX | 10% VSIGX| 30% Wellington 50% 3-funds 20% Mini-Larry
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

KlangFool wrote: Sun Jan 23, 2022 7:55 am
USPSA wrote: Sun Jan 23, 2022 7:44 am
KlangFool wrote: Sun Jan 23, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 6:32 am
chipperd wrote: Sun Jan 23, 2022 5:32 am

OP, how about swapping a bit of your stocks for bonds a little at a time? Maybe do couple hundred twice a month or so (or whatever the math says to do to reach your desired reallocation) from stocks into bonds?
That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
Your contribution to 401K should be 100% bonds. And, you should swap stocks to bonds at your 401K account.

Your contribution to taxable account should be 100% stock. Just swap an equal amount of stock to bond at your 401K. Effectively, you are adding bond.

By doing this, all your new contribution are Effectively bond.

KlangFool
Thank you again for the reply. I really appreciate all the advice and like the plan of doing a 100% bond allocation with new contributions in my 401k.

One question I do have about the Taxable account is --- if I go 100% stocks in my taxable account for tax purposes how is that going to affect my withdraws during retirement. I will likely be pulling from this account exclusively from age 55 to 59 1/2 after that I can start drawing from other sources. If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. Maybe I get around that will a large ( 4 year ) emergency fund so I can use that when markets are down instead of selling stocks.
USPSA,

1) You should have a few years of emergency fund when you retire. Especially if you need to qualify for the ACA insurance subsidy.

<<If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. >>

2) If you sell 10K of stock in your taxable account and exchange 10K of bond into stock in your 401K, you are effectively selling 10K of bond. Money is fungible.

KlangFool
#1 - Understood. Thanks.
#2 - Now that makes total sense to me. Sorry, it took me so long to understand what you where saying. I'm pretty new to this. Thanks again.
KlangFool
Posts: 31525
Joined: Sat Oct 11, 2008 12:35 pm

Re: Am I on Track to Retire at 55?

Post by KlangFool »

USPSA wrote: Sun Jan 23, 2022 8:17 am
KlangFool wrote: Sun Jan 23, 2022 7:55 am
USPSA wrote: Sun Jan 23, 2022 7:44 am
KlangFool wrote: Sun Jan 23, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 6:32 am

That's a great idea. In addition to that how about directing a larger chunk of my contributions into bonds too? Maybe a 40/60 allocation of stocks/bonds with all new contributions until I reach the desired AA?
Your contribution to 401K should be 100% bonds. And, you should swap stocks to bonds at your 401K account.

Your contribution to taxable account should be 100% stock. Just swap an equal amount of stock to bond at your 401K. Effectively, you are adding bond.

By doing this, all your new contribution are Effectively bond.

KlangFool
Thank you again for the reply. I really appreciate all the advice and like the plan of doing a 100% bond allocation with new contributions in my 401k.

One question I do have about the Taxable account is --- if I go 100% stocks in my taxable account for tax purposes how is that going to affect my withdraws during retirement. I will likely be pulling from this account exclusively from age 55 to 59 1/2 after that I can start drawing from other sources. If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. Maybe I get around that will a large ( 4 year ) emergency fund so I can use that when markets are down instead of selling stocks.
USPSA,

1) You should have a few years of emergency fund when you retire. Especially if you need to qualify for the ACA insurance subsidy.

<<If it's 100% stocks when I'm drawing from it I may be forced to sell stocks in a less than optimal time. >>

2) If you sell 10K of stock in your taxable account and exchange 10K of bond into stock in your 401K, you are effectively selling 10K of bond. Money is fungible.

KlangFool
#1 - Understood. Thanks.
#2 - Now that makes total sense to me. Sorry, it took me so long to understand what you where saying. I'm pretty new to this. Thanks again.
USPSA,

#2 -> This is a very common misunderstanding. Many experienced investors still do not understand this.

KlangFool
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danaht
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Joined: Sun Oct 18, 2015 11:28 am

Re: Am I on Track to Retire at 55?

Post by danaht »

You are probably on track if you can get a low cost ACA medical plan at 55 and are in good health. Medical care costs are the reason I plan not to retire until I reach 65. As others have said medical care costs can be very expensive as you get older and before you get medicare. Even when you get medicare you still need additional insurance because of the high costs.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

USPSA wrote: Sun Jan 23, 2022 5:12 am
smitcat wrote: Sat Jan 22, 2022 10:02 am
USPSA wrote: Sat Jan 22, 2022 6:54 am
David Jay wrote: Fri Jan 21, 2022 6:37 pm Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
Is your pension COLA'd? Is it a public pension? Do you know the funding rate of the pension?
Is the SS benefit calculated by removing any earnings from age 55 forward?
Hello, no my pension is not cost of living adjusted. I do not know the funding rate of it. The SS website is down right now, but if I recall correctly I did put zero dollars in for earnings after age 55. I'll double check that once their website is back up. Thank you.
I just logged into the Social Security website and I can't see a way to set the earnings to zero starting at age 55 forward. I can and did set average future earning to zero ( I assume that means starting now ) and the yearly doing that was $30,528 with benefits starting at age 67. I must have done that when creating the initial post.

Is there anyway to get an estimate that includes my working years between now and 55? I that would increase the payout. - Thank you.
smitcat
Posts: 13302
Joined: Mon Nov 07, 2016 9:51 am

Re: Am I on Track to Retire at 55?

Post by smitcat »

USPSA wrote: Mon Jan 24, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 5:12 am
smitcat wrote: Sat Jan 22, 2022 10:02 am
USPSA wrote: Sat Jan 22, 2022 6:54 am
David Jay wrote: Fri Jan 21, 2022 6:37 pm Additionally, with regard to your bond glideslope, one should not attempt to hold all asset classes in all accounts. Instead make your asset allocation across your total portfolio and select optimal accounts for each asset type.

I would recommend making future bond purchases in your 401K and removing bonds from both your taxable and your Roth, as follows:

401K: Your 401K is not "all yours", the IRS has an interest in the account. A portion of the account will be taken by the IRS at distribution, so holding lower yielding funds in the 401K will mean less tax paid over the course of distribution.

Taxable: Long Term Capital Gains rates are very favorable compared to income tax rates and Total Stock (VTSAX) has distributed all qualified dividends - which are taxed as LTCG - for a number of years.

Roth: The IRS has no claim on your Roth, so maximize the return by holding highest yielding assets in Roth space.

More details in the Wiki here: https://www.bogleheads.org/wiki/Tax-eff ... _placement
Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
Is your pension COLA'd? Is it a public pension? Do you know the funding rate of the pension?
Is the SS benefit calculated by removing any earnings from age 55 forward?
Hello, no my pension is not cost of living adjusted. I do not know the funding rate of it. The SS website is down right now, but if I recall correctly I did put zero dollars in for earnings after age 55. I'll double check that once their website is back up. Thank you.
I just logged into the Social Security website and I can't see a way to set the earnings to zero starting at age 55 forward. I can and did set average future earning to zero ( I assume that means starting now ) and the yearly doing that was $30,528 with benefits starting at age 67. I must have done that when creating the initial post.

Is there anyway to get an estimate that includes my working years between now and 55? I that would increase the payout. - Thank you.
There is a calculator on the SSUSGov site that you were on that allows you to load in your data and then enter variable future years of contribution's.
FWIW - if it is applicable, I know folks in the USPS and their pensions are COLA'd
jharkin
Posts: 3469
Joined: Mon Mar 28, 2016 7:14 am
Location: Boston suburbs

Re: Am I on Track to Retire at 55?

Post by jharkin »

You can also use Neurosphere's Social Security estimator to play with different scenarios:

viewtopic.php?t=262772
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

jharkin wrote: Mon Jan 24, 2022 9:15 am You can also use Neurosphere's Social Security estimator to play with different scenarios:

viewtopic.php?t=262772
The spread sheet is great. Thank you.
Topic Author
USPSA
Posts: 22
Joined: Fri Jan 21, 2022 6:38 am

Re: Am I on Track to Retire at 55?

Post by USPSA »

smitcat wrote: Mon Jan 24, 2022 9:11 am
USPSA wrote: Mon Jan 24, 2022 7:00 am
USPSA wrote: Sun Jan 23, 2022 5:12 am
smitcat wrote: Sat Jan 22, 2022 10:02 am
USPSA wrote: Sat Jan 22, 2022 6:54 am

Thank you for the insight. I though I was getting around having to pay taxes on bonds in my Taxable account by holding Tax-Exempt Municipal Bonds ( VTEAX ). I'll definitely read the Wiki page.
Is your pension COLA'd? Is it a public pension? Do you know the funding rate of the pension?
Is the SS benefit calculated by removing any earnings from age 55 forward?
Hello, no my pension is not cost of living adjusted. I do not know the funding rate of it. The SS website is down right now, but if I recall correctly I did put zero dollars in for earnings after age 55. I'll double check that once their website is back up. Thank you.
I just logged into the Social Security website and I can't see a way to set the earnings to zero starting at age 55 forward. I can and did set average future earning to zero ( I assume that means starting now ) and the yearly doing that was $30,528 with benefits starting at age 67. I must have done that when creating the initial post.

Is there anyway to get an estimate that includes my working years between now and 55? I that would increase the payout. - Thank you.
There is a calculator on the SSUSGov site that you were on that allows you to load in your data and then enter variable future years of contribution's.
FWIW - if it is applicable, I know folks in the USPS and their pensions are COLA'd
Thanks. I'll take a look.
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