We're retired and new to the market - now what?

[WillieJo]

Greetings –

We are new to Bogleheads and the market in general - and are seeking portfolio advice. Here’s our situation:

• Emergency Funds – We have 5 months of expenses in the bank
• Debt – Mortgage - $150,000 @ 3.25% fixed and Auto - $25,000 @ 1%
• Tax filing status – MFJ
• Tax Rate – Federal = 12% / State = 0
• Residence – NH
• Ages – Him – 74 / Her – 72
• Desired Allocation – Stocks - 50%, International – 20% of stocks, & Bonds – 50%
o This allocation is our uneducated best guess. We don’t need to take risk and, at the moment, don’t need income.
Suggestions based on the big picture are welcome.

• Budget 000’s

Income* – SS, Pensions, RMD & Rent $ 120
Expenses - based on last 3 yrs. less 90
Unallocated Net Income $ 30
(*Does not include any income from Apt Bldg or from Private Placement (PP) RE Fund Paying $8K per Year into our Roth IRA’s)

• Net Worth - 000’s
Assets -
Emergency cash $ 50 1.6 %
Cash in IRA’s 375 12.2 %
Stocks 10 > 1 %
PP Stock & PP RE in IRA’s 235 1.6 %
RE – Apt Bldg. equity 1,000 32.2 %
Homes 1,300 43.0 %
Other 60 2.0 %
Total Assets $ 3,030 100 %

Liabilities - $ 175

Net Worth $ 2,855


PORTFOLIO: 000’s Per-Cent

Real Estate – Apartment Bldg* Equity $ 1,000 62 %
*planned sale in 2023

Non-Qualified Joint Investments
o Cash - Vanguard – (VMFXX) 75 5 %
o Stock - 10 1 %

Qualified / Tax Deferred
o His – S-D Roth: PP Stock & RE Funds 175 11 %
Trad IRA – Cash - Vanguard (VMFXX) 60 4 %

o Hers - S-D Roth IRA - PP RE Fund 50 3 %
Roth IRA – Cash - Vanguard (VMVXX) 200 12 %
Trad IRA – Cash - Vanguard (VMVXX) 40 2 %

Total Investment Portfolio $ 1,610 100 %


Background:

My wife and I are retired and new to the idea of investing a significant part of our portfolio in the market. We’ve always been in real estate and the cash in the 4 Vanguard accounts came from recent liquidation of RE investments – both outside and inside our SD IRA’s. We’ve been conservative with debt and, other than regular IRA contributions over the years, our investment dollars have gone into real estate in one form or another.

The largest RE asset - We bought a run-down apartment building in 2018 for $700k - $250K down and $450K financed. Since, we’ve added $375k debt and $200k cash (all from rental income), made major renovations and increased rents from $100K to $180K and the value to recent appraisal at $1.8M. Non-recourse debt is about $800K (the debt doesn’t show on Net Worth calculation – only the equity). The improvement project is largely complete, managing apartments is becoming less fun and we’re considering selling the property this year to shed management work, move into non-RE assets and improve liquidity. Equity is shown at $1M but estimated cash after sale is about $850K after commission and other expenses, accelerated depreciation recapture and capital gains tax. Because we plan to sell, we haven't included any income from the building in our planning.

In addition to the apartment building, combined we have illiquid self-directed (SD) IRA assets of about $225K. $50K in her Roth and $125K in his Roth are shares in a Private Placement (PP) RE development Fund (earning preferred 8% distributed quarterly). The planned exit on that Fund is around 2028 and conservative expected ROIC at that time is $350K. Another $50K is in his Roth - preferred PP stock (accruing - but undistributed - at 8%) in a small manufacturing company – exit timeline is uncertain and beyond our control.

We have a combined $375K cash, all currently in Vanguard Federal Money Market Fund (VMFXX) - $75K in a Joint Non-Qualified investment account, $60 in his Trad IRA, $40 in her Trad IRA and $200 in her Roth IRA.

Short-term (1 year) cash needs in excess of budget are about $50,000. Beyond 1 year, budgeting well, we should be able to fund other cash needs out of net income.

Notes –
• We’re both in general good health but don’t qualify for LTC insurance. To partially compensate, we built a small apartment attached to our home for an on-site caretaker, if needed - and, until then, it brings in rent of $20K / yr.
• We do have umbrella liability insurance.

In terms of investment horizon, 100% of our income is stable (SS, pension, RMDs and attached apartment (not apartment building) rent) and exceeds expenses. We don’t expect to NEED significant portfolio income but neither do we NEED to take risk. We want to plan for a) possibility for LTC needs and b) would like to use some part of the portfolio, however small at this point, to begin funding our 5 grandkids’ (ages 4 - 10) financial futures.

With all of that as background, the questions we’re asking ourselves are:

1) How to invest $375K cash that’s now in 4 separate Vanguard (VMFXX) accounts?
a. Dollar cost average or lump sum invest with one, some or all accounts?
b. If DCA, T-Bill or an MMF ladder – or does that make much difference?
2) How to think about investing the anticipated $850 K (after-tax) from selling the apartment?
3) With the available assets, how should we think about investing to self-insure for LTC? As always, timing and amount are a guess –
our SWAG might be $500K in 2030,
4) Strategies, even small ones, to invest for our grandkids without giving up control of assets in case we need them for LTC or emergencies.
Should the investment horizon be longer and asset allocation and stock class selections different for anything we set up for them?
and
5) What are we forgetting that we should be thinking about?

Putting all of this together has been very useful - an education for us. We recognize that there is a lot to consider and we sincerely appreciate any advice and suggestions.

[Harry Livermore]

Congratulations on the sale of your property!
I'm a lightweight compared to many BH-ers, but I'll respond to start the thread running...
I think you should lump-sum all the Roth money into VTSAX (total market)
I think you should lump-sum all the traditional IRA money into VBIAX (balanced) or VWINX (wellseley, higher cost managed fund, but a personal favorite)
I think you should DCA the proceeds from the apartment building according to your desired 50/50 AA. Keep it simple, maybe with VTSAX and VBTLX (total bond) MAYBE a smal % to a REIT if you remain a big believer in RE (disclaimer, I have never owned a REIT and have not put any serious study into them)
I would observe it may be difficult to achieve your desired AA without having bonds in your taxable. You're retired so no longer contributing to tax-deferred accounts, and are either soon, or currently, taking RMDs. You could load up the IRAs 100% into VBTLX instead of VBIAX. So, no equities at all in the IRAs, only in the Roths. That still does not likely get you to 50/50, however.
Others might have some advice about the bond portion in taxable. Maybe a muni fund? My casual research into munis indicates that the tax-free yield is similar to the after-tax yield of similar funds.
Does NH tax dividend income? I know there is no general income tax (making NH a retirement destination candidate for us!) but I think there is a weird carve-out for a tax on some kind of "income". Interest? Or dividends? You should see if having taxable bond funds is materially worse tax-wise (for state taxes) than just a MM fund or CD ladders. "Bonds" (for the purpose of ballast in an AA) might include MM funds or high yield savings accounts, especially if there is a tax penalty on one but not on the other.
Regarding the grandkids: if it was me, I'd just start a 529 for each and DCA a reasonable amount. But I'm relatively uneducated on the topic. Others here might offer advice about trusts or UGMAs or something.
Regarding LTC: I think stay healthy and self-fund. Your destiny here is already set; you can't get a plan, so do the best you can. We are in our mid-50s and that is what we have decided to do.
Smarter people here will have better advice than I.
Cheers

[HMSVictory]

Welcome to the forum and congrats on doing a fantastic job managing your finances. You guys have done great.

Don't look "down" on yourself for being more comfortable investing in real estate. There is nothing wrong with having the knowledge and expertise to manage investment properties as you have done. I prefer investing in mutual funds because it is much less hassle (Vanguard has never called me about a clogged toilet - not yet at least). As you know real estate has a lot of benefits too it that just come with more hassle and the need for hands on management.

I would pay your mortgage and car loan off today. Like now.

I think your AA is fine at 50/50 for your desired risk tolerance. You have plenty of investments at this point. Why don't you stick with what you like?

What about investing the $850k into an easy to manage commercial property? I would not finance a penny of it and just pay cash for a small office building or maybe some sort of warehouse space? Commerical real estate is MUCH less hassle than residential.

If you choose not to continue with real estate, then lump sum the $850k into your investments and don't worry about what the market is doing.

[WillieJo]

Thanks for your thoughts HMSV - I was in commercial RE brokerage for 30 years and you're right, it can be less hassle than residential. But residential vacancy in our county is <1% (thus a good time to sell) and I've seen too many periods with high commercial vacancies. We were considering buying another property but don't qualify to do a 1031 so we'll pay the tax and avoid the mix of hand's on mgmt and commercial risk. And we've kept the mtg and car loan because the apartment sale isn't closed, thinking that at 3.25% (2.8% after tax), for now, it's cheap money and we're better off with it invested or liquid.
Cheers

[HomeStretch]

… Budget 000’s
Income* – SS, Pensions, RMD & Rent $ 120
Expenses - based on last 3 yrs. less 90
Unallocated Net Income $ 30
(*Does not include any income from Apt Bldg or from Private Placement (PP) RE Fund Paying $8K per Year into our Roth IRA’s) …

… Short-term (1 year) cash needs in excess of budget are about $50,000. Beyond 1 year, budgeting well, we should be able to fund other cash needs out of net income. …

Welcome to the forum! Congratulations on accumulating a great net worth and fully retiring (when you sell the apt building)!

Does your projected annual expense of $90k include everything - living expenses, travel, healthcare, income taxes and periodic expenses such as a new car or major home repairs/improvements?

Your annual income of $120k exceeds your annual expenses of $90k. So you have an additional $30k per year to invest in a Taxable account? What’s giving rise to the cash you need of $50k above your $90k in expenses?

Does your proposed asset allocation (AA) of 50% equity/ 50% fixed income apply to only $435k of your assets (= $50k emergency cash + $375k IRA cash + $10k stocks)? If yes, given how much of your net worth is currently tied up in your home, apt building and PP investments ($2.42 million), I personally wouldn’t invest any of the $435k into equities right now. I’d wait until the $1 million apartment building is sold and then work on investing the $1.435 million according to your desired AA.

For right now, consider using $25k to pay off the car loan, $20k to fund your net cash flow needs and then holding the remaining $390k in fixed income (high yield savings account, Treasuries, etc.). You can earn 4%+.

[Navillus1968]

Greetings –

We are new to Bogleheads and the market in general - and are seeking portfolio advice. Here’s our situation:

• Emergency Funds – We have 5 months of expenses in the bank
• Debt – Mortgage - $150,000 @ 3.25% fixed and Auto - $25,000 @ 1%
• Tax filing status – MFJ
• Tax Rate – Federal = 12% / State = 0
• Residence – NH
• Ages – Him – 74 / Her – 72
• Desired Allocation – Stocks - 50%, International – 20% of stocks, & Bonds – 50%
o This allocation is our uneducated best guess. We don’t need to take risk and, at the moment, don’t need income.
Suggestions based on the big picture are welcome.

• Budget 000’s

Income* – SS, Pensions, RMD & Rent $ 120
Expenses - based on last 3 yrs. less 90
Unallocated Net Income $ 30
(*Does not include any income from Apt Bldg or from Private Placement (PP) RE Fund Paying $8K per Year into our Roth IRA’s)

• Net Worth - 000’s
Assets -
Emergency cash $ 50 1.6 %
Cash in IRA’s 375 12.2 %
Stocks 10 > 1 %
PP Stock & PP RE in IRA’s 235 1.6 %
RE – Apt Bldg. equity 1,000 32.2 %
Homes 1,300 43.0 %
Other 60 2.0 %
Total Assets $ 3,030 100 %

Liabilities - $ 175

Net Worth $ 2,855


PORTFOLIO: 000’s Per-Cent

Real Estate – Apartment Bldg* Equity $ 1,000 62 %
*planned sale in 2023

Non-Qualified Joint Investments
o Cash - Vanguard – (VMFXX) 75 5 %
o Stock - 10 1 %

Qualified / Tax Deferred
o His – S-D Roth: PP Stock & RE Funds 175 11 %
Trad IRA – Cash - Vanguard (VMFXX) 60 4 %

o Hers - S-D Roth IRA - PP RE Fund 50 3 %
Roth IRA – Cash - Vanguard (VMVXX) 200 12 %
Trad IRA – Cash - Vanguard (VMVXX) 40 2 %

Total Investment Portfolio $ 1,610 100 %


Background:

<snip>

With all of that as background, the questions we’re asking ourselves are:

1) How to invest $375K cash that’s now in 4 separate Vanguard (VMFXX) accounts?
a. Dollar cost average or lump sum invest with one, some or all accounts?
b. If DCA, T-Bill or an MMF ladder – or does that make much difference?

Your desired 50/50 asset allocation (AA) is going to require significant bond/fixed income investments in taxable, because you don't have TIRA space to hold $800k of bonds. Your $120k of annual income is insulated from the stock market's swings, since SSA, pensions, & backyard apartment rent make up the lion's share, yes? RMDs on $100k TIRA are <$5K in your mid-70s, which is only 4% of $120k.

YMMV, but if I had your income, I would be comfortable with a 70/30 stock/bond AA since you can ride out any market swings. This lowers the bond/fixed income in taxable from $700k to only $380k, with TIRA holding the other $100k of bonds in both cases. IRS ordinary income taxation of bond income from $700k bonds in taxable will be higher than LTCG, possibly pushing you into a higher OI tax bracket. In addition, NH taxes interest at 4% [edit- new 2023 rate] until 2027 sunset.

Taxable cash ($75k) goes into VTI or similar stock MF/ETF
TIRA cash ($100k) goes into BND or similar bond MF/ETF
Roth IRA cash ($200k) goes into VTI or similar equity MF/ETF

2) How to think about investing the anticipated $850 K (after-tax) from selling the apartment?

I assume the $850k number is after 15% LTCG taxes on $1M sale? I am no tax expert, but I think a $1M LTCG will: A. incur the 20% LTCG rate (income >$553,850) &, B. also incur the 3.8% NIIT tax on investment income over MAGI $250k. I think your LTCG on the sale will be 23.8%, not 15%. You may want to spread the gains out over multiple years, if possible, to reduce the tax hit.
https://www.investopedia.com/articles/t ... ayment.asp

As far as investing the RE sale gains, I would DCA fairly aggressively into whatever AA you decide on, maybe $100k per month? [edit- If you do an installment sale of the apt building, then DCA happens over multiple years vs months.] I might try to lower dividends somewhat to avoid NH 4% [edit] dividend/interest taxation on top of Fed taxes since you don't need any extra income. Candidates- VBK, VOT, QQQ or BRK. Just a thought.

3) With the available assets, how should we think about investing to self-insure for LTC? As always, timing and amount are a guess –
our SWAG might be $500K in 2030,
4) Strategies, even small ones, to invest for our grandkids without giving up control of assets in case we need them for LTC or emergencies.
Should the investment horizon be longer and asset allocation and stock class selections different for anything we set up for them?
and
5) What are we forgetting that we should be thinking about?

Putting all of this together has been very useful - an education for us. We recognize that there is a lot to consider and we sincerely appreciate any advice and suggestions.

[WillieJo]

Does NH tax dividend income? I know there is no general income tax (making NH a retirement destination candidate for us!) but I think there is a weird carve-out for a tax on some kind of "income". Interest? Or dividends? You should see if having taxable bond funds is materially worse tax-wise (for state taxes) than just a MM fund or CD ladders. "Bonds" (for the purpose of ballast in an AA) might include MM funds or high yield savings accounts, especially if there is a tax penalty on one but not on the other.

Hi Harry -
Thanks for your thoughts. I tried responding earlier but it got lost in the ether. NH has a 5% Int and Div tax - with a $4,800 exemption for MFJ and another $1,200 for over 65 (I think that's per filer but I'm not sure). Come on up when you retire - it's a beautiful place to be (-50* wind chills today notwithstanding!)
Cheers!

[TwstdSista]

Does NH tax dividend income? I know there is no general income tax (making NH a retirement destination candidate for us!) but I think there is a weird carve-out for a tax on some kind of "income". Interest? Or dividends? You should see if having taxable bond funds is materially worse tax-wise (for state taxes) than just a MM fund or CD ladders. "Bonds" (for the purpose of ballast in an AA) might include MM funds or high yield savings accounts, especially if there is a tax penalty on one but not on the other.

Hi Harry -
Thanks for your thoughts. I tried responding earlier but it got lost in the ether. NH has a 5% Int and Div tax - with a $4,800 exemption for MFJ and another $1,200 for over 65 (I think that's per filer but I'm not sure). Come on up when you retire - it's a beautiful place to be (-50* wind chills today notwithstanding!)
Cheers!

Fyi, NH's dividend + income tax is being phased out. It's 4% this year (2023) and drops by 1% per year until it is eliminated entirely in 2027.

[WillieJo]

Fyi, NH's dividend + income tax is being phased out. It's 4% this year (2023) and drops by 1% per year until it is eliminated entirely in 2027.

Hi TwistdSista -
Right - for now anyway...but there's a bill in the Senate - SB261 - to reverse the phase out. The threshold for taxing I&D in SB262 would go up to $50k. Trying to plan around tax policy is fun.
Thanks

[TwstdSista]

Fyi, NH's dividend + income tax is being phased out. It's 4% this year (2023) and drops by 1% per year until it is eliminated entirely in 2027.

Hi TwistdSista -
Right - for now anyway...but there's a bill in the Senate - SB261 - to reverse the phase out. The threshold for taxing I&D in SB262 would go up to $50k. Trying to plan around tax policy is fun.
Thanks

Bah - good to know. Thanks for the heads up!

[WillieJo]

/quote]
Your desired 50/50 asset allocation (AA) is going to require significant bond/fixed income investments in taxable, because you don't have TIRA space to hold $800k of bonds. Your $120k of annual income is insulated from the stock market's swings, since SSA, pensions, & backyard apartment rent make up the lion's share, yes? RMDs on $100k TIRA are <$5K in your mid-70s, which is only 4% of $120k.

YMMV, but if I had your income, I would be comfortable with a 70/30 stock/bond AA since you can ride out any market swings. This lowers the bond/fixed income in taxable from $700k to only $380k, with TIRA holding the other $100k of bonds in both cases. IRS ordinary income taxation of bond income from $700k bonds in taxable will be higher than LTCG, possibly pushing you into a higher OI tax bracket. In addition, NH taxes interest at 4% [edit- new 2023 rate] until 2027 sunset.

Taxable cash ($75k) goes into VTI or similar stock MF/ETF
TIRA cash ($100k) goes into BND or similar bond MF/ETF
Roth IRA cash ($200k) goes into VTI or similar equity MF/ETF

2) How to think about investing the anticipated $850 K (after-tax) from selling the apartment?

I assume the $850k number is after 15% LTCG taxes on $1M sale? I am no tax expert, but I think a $1M LTCG will: A. incur the 20% LTCG rate (income >$553,850) &, B. also incur the 3.8% NIIT tax on investment income over MAGI $250k. I think your LTCG on the sale will be 23.8%, not 15%. You may want to spread the gains out over multiple years, if possible, to reduce the tax hit.
https://www.investopedia.com/articles/t ... ayment.asp

As far as investing the RE sale gains, I would DCA fairly aggressively into whatever AA you decide on, maybe $100k per month? [edit- If you do an installment sale of the apt building, then DCA happens over multiple years vs months.] I might try to lower dividends somewhat to avoid NH 4% [edit] dividend/interest taxation on top of Fed taxes since you don't need any extra income. Candidates- VBK, VOT, QQQ or BRK. Just a thought.

Hi Navillus -

Good point about the TIRA space available for bonds. I think I wasn't clear about the funds to fit the 50/50 AA. It wouldn't be the entire $1.6m portfolio (for the immediate future) - only the $10k stock, the $375k now in Vanguard in cash and the $850k from the apartment sale. The other $225k in the PP RE (in RIRA's) is tied up until late 2020's when those funds exit. So total to fit the AA is about $1.2m - so 600k in bonds. And looking at my $1.6m total portfolio, maybe that should have only shown the $850 after tax as equity for the apartment equity - reducing the portfolio to $1.460.

Good catch on the taxes - we put the summary together quickly and we missed the NIIT. The $1M cash from sale has a basis of about $500K - so taxable about $500k. We can structure an installment sale - so that whole process is going to take some more planning to reduce the tax hit.

Thanks for your thoughts.

[Harry Livermore]

Does NH tax dividend income? I know there is no general income tax (making NH a retirement destination candidate for us!) but I think there is a weird carve-out for a tax on some kind of "income". Interest? Or dividends? You should see if having taxable bond funds is materially worse tax-wise (for state taxes) than just a MM fund or CD ladders. "Bonds" (for the purpose of ballast in an AA) might include MM funds or high yield savings accounts, especially if there is a tax penalty on one but not on the other.

Hi Harry -
Thanks for your thoughts. I tried responding earlier but it got lost in the ether. NH has a 5% Int and Div tax - with a $4,800 exemption for MFJ and another $1,200 for over 65 (I think that's per filer but I'm not sure). Come on up when you retire - it's a beautiful place to be (-50* wind chills today notwithstanding!)
Cheers!

Fyi, NH's dividend + income tax is being phased out. It's 4% this year (2023) and drops by 1% per year until it is eliminated entirely in 2027.

Just in time for our move!

Cheers

[Navillus1968]

/quote]
Your desired 50/50 asset allocation (AA) is going to require significant bond/fixed income investments in taxable, because you don't have TIRA space to hold $800k of bonds. Your $120k of annual income is insulated from the stock market's swings, since SSA, pensions, & backyard apartment rent make up the lion's share, yes? RMDs on $100k TIRA are <$5K in your mid-70s, which is only 4% of $120k.

YMMV, but if I had your income, I would be comfortable with a 70/30 stock/bond AA since you can ride out any market swings. This lowers the bond/fixed income in taxable from $700k to only $380k, with TIRA holding the other $100k of bonds in both cases. IRS ordinary income taxation of bond income from $700k bonds in taxable will be higher than LTCG, possibly pushing you into a higher OI tax bracket. In addition, NH taxes interest at 4% [edit- new 2023 rate] until 2027 sunset.

Taxable cash ($75k) goes into VTI or similar stock MF/ETF
TIRA cash ($100k) goes into BND or similar bond MF/ETF
Roth IRA cash ($200k) goes into VTI or similar equity MF/ETF

2) How to think about investing the anticipated $850 K (after-tax) from selling the apartment?

I assume the $850k number is after 15% LTCG taxes on $1M sale? I am no tax expert, but I think a $1M LTCG will: A. incur the 20% LTCG rate (income >$553,850) &, B. also incur the 3.8% NIIT tax on investment income over MAGI $250k. I think your LTCG on the sale will be 23.8%, not 15%. You may want to spread the gains out over multiple years, if possible, to reduce the tax hit.
https://www.investopedia.com/articles/t ... ayment.asp

As far as investing the RE sale gains, I would DCA fairly aggressively into whatever AA you decide on, maybe $100k per month? [edit- If you do an installment sale of the apt building, then DCA happens over multiple years vs months.] I might try to lower dividends somewhat to avoid NH 4% [edit] dividend/interest taxation on top of Fed taxes since you don't need any extra income. Candidates- VBK, VOT, QQQ or BRK. Just a thought.

Hi Navillus -

Good point about the TIRA space available for bonds. I think I wasn't clear about the funds to fit the 50/50 AA. It wouldn't be the entire $1.6m portfolio (for the immediate future) - only the $10k stock, the $375k now in Vanguard in cash and the $850k from the apartment sale. The other $225k in the PP RE (in RIRA's) is tied up until late 2020's when those funds exit. So total to fit the AA is about $1.2m - so 600k in bonds. And looking at my $1.6m total portfolio, maybe that should have only shown the $850 after tax as equity for the apartment equity - reducing the portfolio to $1.460.

Opinions differ (& I am no expert), but rental/investment real estate can be counted as part of your AA. Most people don't count their own residence in their AA, but income-producing property might be added to the fixed income/bond side of your AA (although opinions differ). If you add $225k Roth RE to the fixed income side of the ledger, minus your $100k TIRA bonds, leaves about $405k to be allocated to bonds/cash in taxable to reach 50% of $1,460k.

When your Roth RE position closes in 5 years or so, most people put 100% equities in Roth, so you would re-balance $225k (or the value of the RE in 2028) in taxable into bonds/fixed income to maintain your 50/50 AA. To avoid incurring capital gains, you might do this over time using your excess annual income, unless you can TLH stocks to free up cash to buy bonds.

AA BH Wiki: https://www.bogleheads.org/wiki/Asset_a ... and_return
BH real estate AA discussion: viewtopic.php?t=378636

Good catch on the taxes - we put the summary together quickly and we missed the NIIT. The $1M cash from sale has a basis of about $500K - so taxable about $500k. We can structure an installment sale - so that whole process is going to take some more planning to reduce the tax hit.

Thanks for your thoughts.

Good to know that your cap gains are 'only' $500k (LOL), so avoiding 20% LTCG is a cinch &, with some planning, avoiding the NIIT should be feasible as well without a drawn-out installment sale lasting 5-plus years.

People debate safe withdrawal rates (SWR) in retirement vs sequence of returns risk (SORR), but I think all would agree that a withdrawal rate of negative 2% (you can ADD $30k/year extra income to your $1460k portfolio in retirement while withdrawing zero dollars!) is as safe as it gets.

Whether being in this enviable position makes you reconsider your fairly conservative 50/50 AA is up to you, but I would think about a higher bias towards equities in your position because the daily/monthly/yearly swings of the market don't affect your income one bit. At a minimum, it would save you money on taxes, LTCG vs OI taxation on bond interest.
Myself, I would probably go 90/10 or 80/20, but it's classic YMMV situation- you need to do what's comfortable, there's no wrong answer. Some would advocate 30/70 or 20/80 AA to avoid risk since you've 'won' the game.

[Outer Marker]

Welcome to the forum and congratulations on your success!

I confess to not having read the full details and replies on your complicated situation, which is, well, complicated. Going forward, how much time and effort are you willing to spend on managing your investments? It seems like you are well situated under almost any concievable scenairo.

A simple solution might be to put all of your taxable investments in the Vanguard Tax Managed Balanced Fund (50/50 AA, all U.S.), and use Vanguard Lifestrategy Mod Growth (60/40 AA, 40% foreign) in your tax advantaged accounts. That should come close to your desired overall AA and require little or no management on your part, apart from taking RMDs and withdrawing money as needed. I would also pay off all of your debts to further simplify things, and hold a generous cash stash on the side for continencies.

I would not worry too much about LTC. It's a scary unkown, but you have substantial assets and will most likely have more than enough to cover the expense if needed. Having seen three elder relatives through this in the last ten years, all of them required some LTC, but none of them more than 18 months.

[WillieJo]

Welcome to the forum and congratulations on your success!

I would not worry too much about LTC. It's a scary unkown, but you have substantial assets and will most likely have more than enough to cover the expense if needed. Having seen three elder relatives through this in the last ten years, all of them required some LTC, but none of them more than 18 months.

Yes - our parents lived into mid-90's without needing LTC (yet) so for us too, anecdotally, it's low/moderate risk but high impact. Insurance of all kinds = you bet something bad will happen and the insurance company bets it won't. It's like Vegas - they know the odds better than you do, they set the terms and can afford to lose. The house always wins! Thanks OM

[WillieJo]

/quote] Opinions differ (& I am no expert), but rental/investment real estate can be counted as part of your AA. Most people don't count their own residence in their AA, but income-producing property might be added to the fixed income/bond side of your AA (although opinions differ). If you add $225k Roth RE to the fixed income side of the ledger, minus your $100k TIRA bonds, leaves about $405k to be allocated to bonds/cash in taxable to reach 50% of $1,460k.

When your Roth RE position closes in 5 years or so, most people put 100% equities in Roth, so you would re-balance $225k (or the value of the RE in 2028) in taxable into bonds/fixed income to maintain your 50/50 AA. To avoid incurring capital gains, you might do this over time using your excess annual income, unless you can TLH stocks to free up cash to buy bonds.

AA BH Wiki: https://www.bogleheads.org/wiki/Asset_a ... and_return
BH real estate AA discussion: viewtopic.php?t=378636

Good to know that your cap gains are 'only' $500k (LOL), so avoiding 20% LTCG is a cinch &, with some planning, avoiding the NIIT should be feasible as well without a drawn-out installment sale lasting 5-plus years.

People debate safe withdrawal rates (SWR) in retirement vs sequence of returns risk (SORR), but I think all would agree that a withdrawal rate of negative 2% (you can ADD $30k/year extra income to your $1460k portfolio in retirement while withdrawing zero dollars!) is as safe as it gets.

Whether being in this enviable position makes you reconsider your fairly conservative 50/50 AA is up to you, but I would think about a higher bias towards equities in your position because the daily/monthly/yearly swings of the market don't affect your income one bit. At a minimum, it would save you money on taxes, LTCG vs OI taxation on bond interest.
Myself, I would probably go 90/10 or 80/20, but it's classic YMMV situation- you need to do what's comfortable, there's no wrong answer. Some would advocate 30/70 or 20/80 AA to avoid risk since you've 'won' the game.

Well, the suggested allocation is a compromise and I won't say who's more conservative or aggressive. With the recent RE moves we've made (that produced most of the cash in the RIRA's and TIRA's) and the planned sale of the apartments, we're starting our market education. As beginners, figuring out how to allocate the cash now and coordinate whatever allocation we settle on with the apartment sale*, the Roth RE exit in 5 years and tax planning for each event has had our heads spinning a bit. You've given us a good points to think about and we appreciate the detailed thought you put into your replies. Very helpful - Thanks!

*(frozen pipes there last night and 2" of water on the ground level apartments - tenants, hotel for them until we clean it up, insurance deductibles, ah! - it's time to sell!)