Is this good enough to keep 15x in safe assets ?

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Topic Author
carminered2019
Posts: 1939
Joined: Fri Jun 21, 2019 7:06 pm

Is this good enough to keep 15x in safe assets ?

Post by carminered2019 »

Age 54, retired, dividends cover 100% of living expenses, don't care to rebalance and I am looking to keep 15x in safe assets and just to keep up with inflation.

checking: .5X
saving .5X
money market: 1X
I-Bonds; 1X and still buying.
TIPS: 3x
US Treasury: 3x
CD: 3x
Total bond: 3x
Last edited by carminered2019 on Tue May 30, 2023 3:05 pm, edited 1 time in total.
A Random Fellow
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Re: Is this good enough to keep 15x in safe assets ?

Post by A Random Fellow »

It appears you have 6x in TIPS, not 3x.

Does the duration of these bonds match the time when you plan to use them? That would be my main concern.

If there is a reasonable chance of needing these dollars sooner, I would weight towards moving funds toward MMFs given current yields.
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hand
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Re: Is this good enough to keep 15x in safe assets ?

Post by hand »

If dividends cover living expenses - 6x income in CDs and Treasuries seems incredibly conservative and high risk to lose real value over time.

Once my dividends covered expenses, I'd be moving towards increasing risk / growth opportunities or perhaps considering an immediate annuity.
MarkRoulo
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Re: Is this good enough to keep 15x in safe assets ?

Post by MarkRoulo »

carminered2019 wrote: Tue May 30, 2023 11:46 am Age 54, retired, dividends cover 100% of living expenses, don't care to rebalance and I am looking to keep 15x in safe assets and just to keep up with inflation.

checking: .5X
saving .5X
money market: 1X
I-Bonds; 1X and still buying.
TIPS: 3x
US Treasury: 3x
TIPS:3x
CD: 3x
If "dividends cover 100% of living expenses" and you don't have something insane such as one stock paying a 9% dividend then you should be fine almost no matter what.

Assuming a 3% dividend yield for your stocks (S&P 500 is less than 2%...) this would mean your asset allocation would be 33x your annual spend in stocks and 15x in safe assets so almost 50x your annual spending.

You probably have Social Security and Medicare kicking in at some point in the future.

Do you have a specific worry?
jebmke
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Re: Is this good enough to keep 15x in safe assets ?

Post by jebmke »

The dividends on my fixed income funds has varied quite a bit over the years; are you prepared to adjust expense if/when rates decline?
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smectym
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Re: Is this good enough to keep 15x in safe assets ?nk

Post by smectym »

A Random Fellow wrote: Tue May 30, 2023 2:24 pm It appears you have 6x in TIPS, not 3x.

Does the duration of these bonds match the time when you plan to use them? That would be my main concern.

If there is a reasonable chance of needing these dollars sooner, I would weight towards moving funds toward MMFs given current yields.
I’d probably agree with Random, lean into the money market funds a bit more, during this perhaps fleeting window in which MM offers an unusual combination of safety, liquidity and yield.

The usual rationale for holding CDs vs. a money market fund is that by locking up funds you don’t need right away for a time certain, you can get a better rate. But from what I’ve seen, that isn’t really true today. The inverted yield curve seems to be in play with Bank CD’s as well as treasuries.

We are running our own “safe money corner of the portfolio” project; after I bonds, (of which we have a solid slug purchased in a time frame spanning two millennia), next largest holding is VMFXX (“Vanguard Federal Money Market Fund”), followed by a ladder of 2-yr Treasury Notes. A few Bank CD’s, but they yield less than anything else on the list and are exposed to state income tax, so it’s tough to make the case for buying more CD’s right now (though perhaps bargains are available on the brokered cd market).
Topic Author
carminered2019
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Re: Is this good enough to keep 15x in safe assets ?

Post by carminered2019 »

A Random Fellow wrote: Tue May 30, 2023 2:24 pm It appears you have 6x in TIPS, not 3x.

Does the duration of these bonds match the time when you plan to use them? That would be my main concern.

If there is a reasonable chance of needing these dollars sooner, I would weight towards moving funds toward MMFs given current yields.
Thank you, just edited. I am most like will not need to touch these accounts but have not bought total bond yet.
Jack FFR1846
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Re: Is this good enough to keep 15x in safe assets ?

Post by Jack FFR1846 »

I'd agree with smectym that being locked into CDs now is probably guaranteeing that you won't max your return with safe investments. I'm doing lots of safe investments as I retire in 4 weeks. In the last several months, Ally came out with a no penalty 11 month CD for 4.75%. They obviously got way too many applicants and dropped to 4.35% (I got 2 CDs of the 4.75). But looking at Redneck Bank's plain old money market, it pays 5.05%. The downsides there are a limit of $100k total and an ACH daily limit of $5k. But it's not a CD.

The other thing I'd be concerned with are "Where are these dividends coming from?". If from Enron and Polaroid and WorldCom, then I'd be real concerned. If from VTSAX, I would not be concerned. With retirement and Roth conversions coming for me, I want no dividend paying anything in my taxable account and over the last 3 hears have been tax loss harvesting out of those investments in taxable. Dividends mean tax liability, whether you want the money that day or not. For example, say you get dividends on December 30th. If only you could have delayed that 3 days and moved tax liability into the next year, huh? Well, if you were playing the "no dividend" game, you could simply not sell in December and consider what and how much you want to sell in January, delaying the tax payment a year.
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dbr
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Re: Is this good enough to keep 15x in safe assets ?

Post by dbr »

carminered2019 wrote: Tue May 30, 2023 11:46 am Age 54, retired, dividends cover 100% of living expenses, don't care to rebalance and I am looking to keep 15x in safe assets and just to keep up with inflation.

checking: .5X
saving .5X
money market: 1X
I-Bonds; 1X and still buying.
TIPS: 3x
US Treasury: 3x
CD: 3x
Total bond: 3x
None of these assets are safe, depending on what you think "safe" means -- or they are all safe, depending on what you think safe is. As to inflation specifically, in that list I bonds are the only ones that always keep up with inflation. All the rest can have negative real return.

If you are asking could those assets be a possible holding for fixed income in general, then yes.

What dividends are you referring to that allegedly "cover" your living expenses. It would be a better analysis to mention what assets you are using to supply your living expenses. Also, hopefully you don't mean to include in dividends the dividends from bond funds -- or do you?
Topic Author
carminered2019
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Re: Is this good enough to keep 15x in safe assets ?

Post by carminered2019 »

To clarify, on the stock side, I have S&P500, total US, total international, 10% in individual stocks and my stock position will never be below 75%. I need the 15x just to keep up with inflation or close to inflation.
Call_Me_Op
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Re: Is this good enough to keep 15x in safe assets ?

Post by Call_Me_Op »

carminered2019 wrote: Tue May 30, 2023 8:37 pm To clarify, on the stock side, I have S&P500, total US, total international, 10% in individual stocks and my stock position will never be below 75%. I need the 15x just to keep up with inflation or close to inflation.
So you do not expect your stocks to keep up with inflation?
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dbr
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Re: Is this good enough to keep 15x in safe assets ?

Post by dbr »

Call_Me_Op wrote: Wed May 31, 2023 7:35 am
carminered2019 wrote: Tue May 30, 2023 8:37 pm To clarify, on the stock side, I have S&P500, total US, total international, 10% in individual stocks and my stock position will never be below 75%. I need the 15x just to keep up with inflation or close to inflation.
So you do not expect your stocks to keep up with inflation?
It makes no sense on the face of it that one holds the 25% in fixed income in a 75/25 portfolio in order to "keep up with inflation." This idea needs more explanation. In any case to hold bonds that keep up with inflation one would imagine choosing only inflation indexed bonds, which is not what is in the list. Such bonds do not offset inflation by a leverage factor sufficient to "protect" the other assets.
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Watty
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Re: Is this good enough to keep 15x in safe assets ?

Post by Watty »

carminered2019 wrote: Tue May 30, 2023 11:46 am ...I am looking to keep 15x in safe assets.....
Calling your fixed income investments "safe" is very misleading since they all have their own risks including inflation and declining in value if interest rates go up. For example a bond mutual fund would go down in value a lot if interest rates go up to 10%. Even TIPS mutual funds can go down in value if interest rates increase.

Bonds may be less volatile but there can be bear markets in bonds too.
carminered2019 wrote: Tue May 30, 2023 11:46 am ....and just to keep up with inflation.
Just for brainstorming you might look at individual TIPS that you hold to maturity as part of your stragety. It would be very conservative but you could buy a ladder of individual TIPS where something like $10K(or maybe 1x expenses) matures each year for the next 15 to 30 years. Unlike a TIPS mutual fund you do not need to worry about them losing value if interest rates change as long as you hold them to maturity. Because of the way TIPS are taxed it usually only makes sense to hold them in tax advantaged retirement accounts.

The current yield on individual TIPS is also pretty decent now especially compared to a year or two ago when they were negative.

https://www.wsj.com/market-data/bonds/t ... _tips_full
A Random Fellow
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Re: Is this good enough to keep 15x in safe assets ?

Post by A Random Fellow »

It appears that OP has about 45x expenses invested in some conglomeration of low expense US and world stock index funds, as well as 15x fixed income.

I would submit that it does not matter how OP allocates the 15x FI. If I were OP, I would go with I bonds, MMF and very short term TIPS for the majority of that and go enjoy life/give generously to charity.

OP is fully and completely financially independent and will likely continue to grow wealth very significantly over the rest of his/her life. 60x expenses is a 1.6ish withdrawal rate...
Marseille07
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Re: Is this good enough to keep 15x in safe assets ?

Post by Marseille07 »

carminered2019 wrote: Tue May 30, 2023 11:46 am Age 54, retired, dividends cover 100% of living expenses, don't care to rebalance and I am looking to keep 15x in safe assets and just to keep up with inflation.

checking: .5X
saving .5X
money market: 1X
I-Bonds; 1X and still buying.
TIPS: 3x
US Treasury: 3x
CD: 3x
Total bond: 3x
I think this is a strange point of view. You don't need your safe assets to keep up with inflation; and you should rebalance so that safe assets are replenished by assets that keep up with inflation.
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TinyHouse
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Re: Is this good enough to keep 15x in safe assets ?

Post by TinyHouse »

carminered2019 wrote: Tue May 30, 2023 8:37 pm To clarify, on the stock side, I have S&P500, total US, total international, 10% in individual stocks and my stock position will never be below 75%. I need the 15x just to keep up with inflation or close to inflation.
“Safe” investments rarely keep up with actual inflation…
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Sandtrap
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Re: Is this good enough to keep 15x in safe assets ?

Post by Sandtrap »

carminered2019 wrote: Tue May 30, 2023 11:46 am Age 54, retired, dividends cover 100% of living expenses, don't care to rebalance and I am looking to keep 15x in safe assets and just to keep up with inflation.

checking: .5X
saving .5X
money market: 1X
I-Bonds; 1X and still buying.
TIPS: 3x
US Treasury: 3x
CD: 3x
Total bond: 3x
to op

bigger picture question::::
missing data?

What are your other income streams now or future?
pension?
or pension like?
rental income?
annuities or deferred annuities?
etc?

j🌺
Wiki Bogleheads Wiki: Everything You Need to Know
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