Do you trust the current value of your portfolio?
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Re: Do you trust the current value of your portfolio?
Had this conversation with my wife the other day. I think we're pretty much there from a $$ standpoint. Have a good cash position to weather any multi-year financial down-turns.
But we're still trying to figure out the 'where' exactly and also running down the healthcare options (which being in FL is actually pretty good seemingly...)
The other nice thing is we're both fairly frugal ... so any adjustments we need to make will not be show-stoppers phillosophically.
good luck --
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But we're still trying to figure out the 'where' exactly and also running down the healthcare options (which being in FL is actually pretty good seemingly...)
The other nice thing is we're both fairly frugal ... so any adjustments we need to make will not be show-stoppers phillosophically.
good luck --
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Re: Do you trust the current value of your portfolio?
A few years ago I created a VPW spreadsheet and am tracking (theoretical) withdrawals assuming:
Lifespan: 120
Average Equity growth: 4% real
Average Fixed Income growth: 0% real
Each new year, I calculate the value of withdrawal using the beginning-of-year balance. Occasionally, I mentally calculate what the withdrawal would be with a 50% decline in equities. When that number feels comfortable (i.e. can sustain healthy lifestyle) then I’m ready to retire.
I think everyone should do this 5-10 years prior to retirement just to get in the habit of thinking about converting the portfolio into a stream of income.
Lifespan: 120
Average Equity growth: 4% real
Average Fixed Income growth: 0% real
Each new year, I calculate the value of withdrawal using the beginning-of-year balance. Occasionally, I mentally calculate what the withdrawal would be with a 50% decline in equities. When that number feels comfortable (i.e. can sustain healthy lifestyle) then I’m ready to retire.
I think everyone should do this 5-10 years prior to retirement just to get in the habit of thinking about converting the portfolio into a stream of income.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle
Re: Do you trust the current value of your portfolio?
It's a free market. It's value is exactly what it is.flyingaway wrote: ↑Thu Apr 01, 2021 1:59 pmI have to work for probably another 10 years for that kind of conservatism. At this time, I really want to get out if my portfolio is accurately reflecting its value regarding retirement.TomatoTomahto wrote: ↑Thu Apr 01, 2021 11:27 am I am ridiculously conservative and discount our net worth around 50%. We could get by on a 1-2% withdrawal rate.
What you really want is to be affirmed it won't change drastically.
No one can do that for you. Today, or after a 33% drop tomorrow. No one knows what the value will be the day after that and, while it might feel more stable after that big drop, in reality it probably isn't.
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Re: Do you trust the current value of your portfolio?
So you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
Re: Do you trust the current value of your portfolio?
4% rule and so on are based on all past scenarios, including those in which the market crashed immediately. So, assuming those studies on historical data are relevant to the next 30 years, you should already be hedged against short term market volatility.
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Re: Do you trust the current value of your portfolio?
And, do you spend this 3 years or just hold it indefinitely? If you spend it down, do you replenish it? If so, how/when?flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
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Re: Do you trust the current value of your portfolio?
This is super impressive!! "Small nest egg/no millionaires" but still down 200K from TSLA high?! How do you sleep at night!!! Down ~30% from Jan. Did you take any realized gains during the runup? I'm in the minority saying this, but I admire your courage/mental toughness.Zillions wrote: ↑Thu Apr 01, 2021 3:48 pm I had TSLA in my portfolio and despite the small size of my nest egg (we're no millionaires), I saw my portfolio take a "paper loss" of 200K from the last week of January to mid-March. I would not trust the current value of our "portfolio" even though it massages my ego and makes it think that we, too, can make it to the two comma club. Maybe in 20 years, but not right now.
Everyone says, "oh, I should have bought TSLA 10 years ago, I'd be a millionaire." Or amzn, bitcoin, gme, whatever. No one considers emotions on the down days/months seeing 6-figure swings in the wrong direction. Scared money don't make money
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Re: Do you trust the current value of your portfolio?
With such a small amount, why bother?
That's like 1 oz of gold, and some leftover change for silver.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Do you trust the current value of your portfolio?
So 0.5% of your current portfolio? Pretty good if the portfolio is 200x your expenses!TomatoTomahto wrote: ↑Thu Apr 01, 2021 11:27 am I am ridiculously conservative and discount our net worth around 50%. We could get by on a 1-2% withdrawal rate.
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Re: Do you trust the current value of your portfolio?
What makes me really comfortable is my TIPS ladder that along with my SS and pensions (I worked in 2 big companies that provided pensions then) will provide all we need for 10 years. With the rest practically in the stock market in indexes, the worst that can happen to us is that we lose "on paper" a healthy chunk of the equity portfolio at one time, and for sure it will happen. So what? It is well diversified, with a global look, all in indexes; therefore it will recover as it has always done. In my view, it is all about having enough in the most conservative asset class (US treasuries inflation protected) to last for a long time.
BTW, I have been in retirement for 17 years and gone through a lot of financial crises. Painful, yes, but uneventful when it comes to funding our retirement.
BTW, I have been in retirement for 17 years and gone through a lot of financial crises. Painful, yes, but uneventful when it comes to funding our retirement.
Re: Do you trust the current value of your portfolio?
Regarding your question, "Do you trust the current value of your portfolio?", my answer is yes. As they say, numbers don't lie.
Everyone has to deal with the possibility that equities will crash, regardless of whether they're retiring or not. It's called "the wall of worry." I trust the market to do what it normally does, and normally, we get a crash once in a while.
Is your actual dilemma whether you trust yourself to exercise good judgement about choosing when to retire? That's a different question.
If you like your current numbers, you could sell everything and move to Treasury Money Market. I'm pretty sure you can trust the numbers then.
If you don't want to be that drastic, Target Retirement Income Fund might be something that works well for the situation you describe. Just an idea.
Everyone has to deal with the possibility that equities will crash, regardless of whether they're retiring or not. It's called "the wall of worry." I trust the market to do what it normally does, and normally, we get a crash once in a while.
Is your actual dilemma whether you trust yourself to exercise good judgement about choosing when to retire? That's a different question.
If you like your current numbers, you could sell everything and move to Treasury Money Market. I'm pretty sure you can trust the numbers then.
If you don't want to be that drastic, Target Retirement Income Fund might be something that works well for the situation you describe. Just an idea.
Strategic Macro Senior (top 1%, 2019 Bogleheads Contest)
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Re: Do you trust the current value of your portfolio?
I put my portfolio trust in retirement calculators like VPW and ABW.
Make sure you check out my list of certifications. The list is short, and there aren't any. - Eric 0. from SMA
Re: Do you trust the current value of your portfolio?
I trust that my Excel document does the math correctly and I trust that Fidelity is calculating the current market value of my holdings correctly.flyingaway wrote: ↑Thu Apr 01, 2021 11:18 am I have a number for my retirement. However, the number was reached far faster than I expected. So I am seriously considering to retire at the end of this year or next year (dependent upon my son's employment status).
When I read around (on similar forums), it seems that everyone's portfolio grows a lot in the past few years. In something like "can I retire now?" questions, people post big numbers. Those posts make me think if my portfolio is inflated due to the run-ups of the past few years and should be discounted in making retirement calculations and decisions? (I have a classic 3-fund portfolio, no bitcoin or QQQ or Tesla, etc.)
I would like to hear thoughts and advices from forum members regarding this matter, i.e., do you trust the current value of your portfolio in making your retirement decision? If not, how much do you discount it?
I would not hesitate to pull the trigger if the math was correct for my personal situation.
Re: Do you trust the current value of your portfolio?
Yes, I trust the value. It's just a number.flyingaway wrote: ↑Thu Apr 01, 2021 11:18 amdo you trust the current value of your portfolio in making your retirement decision?
This isn't just my wallet. It's an organizer, a memory and an old friend.
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Re: Do you trust the current value of your portfolio?
It’s purely psychological, but once your retirement portfolio grows so large that you’re able to retire (whether you actually do is another story), I find it helpful to force myself to pay attention to the growth in the shares as well as the growth in the dollar amount.
Dividends just paid. Most of us know the dollar amount, especially those of us who have them pay to cash. How many know the number of shares too?
To answer the OPs question, yes I completely trust the share value of my portfolio. I’m never as trusting of the dollar value since volatility is the price of admission.
Dividends just paid. Most of us know the dollar amount, especially those of us who have them pay to cash. How many know the number of shares too?
To answer the OPs question, yes I completely trust the share value of my portfolio. I’m never as trusting of the dollar value since volatility is the price of admission.
Being wrong compounds forever.
Re: Do you trust the current value of your portfolio?
This is my hyperinflation insurance. It is used to move to some place else.Kookaburra wrote: ↑Thu Apr 01, 2021 11:05 pmI’m confused. How does putting 0.1% of your portfolio into gold or silver even “move the needle”?
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Re: Do you trust the current value of your portfolio?
What you spend or need to spend each month is just as important as what you have in investments.
Are you totally debt free? What does it take for you to live each month as a baseline?
My mother is retired and has a 50/50 AA. Her SSI and small pension cover 75% of her living expenses. Her bonds cover 40 years. It's beyond safe.
Are you totally debt free? What does it take for you to live each month as a baseline?
My mother is retired and has a 50/50 AA. Her SSI and small pension cover 75% of her living expenses. Her bonds cover 40 years. It's beyond safe.
Stay the course!
Re: Do you trust the current value of your portfolio?
When it is needed, it is better to have some than none.
This is in addition to my existing collection.
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Re: Do you trust the current value of your portfolio?
I guess if it helps you sleep at night.
It seems so small as to be close to none.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Do you trust the current value of your portfolio?
Any number is bigger than zero. If the USD worth nothing, what do you have to barter with? Is it too heavy to take with you? Yes, I have food, water, and so on too.
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Last edited by KlangFool on Fri Apr 02, 2021 6:46 am, edited 1 time in total.
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Re: Do you trust the current value of your portfolio?
Folks,
If you are not worried, don't worry be happy! If you are worried, be prepared and planned for it.
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If you are not worried, don't worry be happy! If you are worried, be prepared and planned for it.
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Re: Do you trust the current value of your portfolio?
Why do your plans ignore social security? That seems unnecessary.Jack FFR1846 wrote: ↑Thu Apr 01, 2021 12:55 pm I am a huge safety net guy. My conservatism is like this:
My AA is 50/50. Of the bonds, 12% is in US Savings bonds, so that value is never going down.
My spending, increased for expected retirement increases (health insurance and travel) comes to $62k per year. 25 times that would be $1.55MM. But I put in a "safety" factor. My portfolio as of today is $3.3MM.
In retirement (later this year or maybe early next), I may also be able to manage where I take spending money from to keep taxes way lower than what I'm paying today.
My plans ignore social security and a small pension that I'll take as a lump sum...about $75k and roll to my tIRA.
So I sort of don't trust a standard 25 times spending number.
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Re: Do you trust the current value of your portfolio?
I have no idea what our residual expenses in retirement will be, but our house is paid off and we have reasonable SS and pensions. I have stopped discussing our portfolio on BH, other than to allow that we have $3M in “safe-ish” assets (eg, TBM, Stable Value funds, etc). It’s my lazy person’s form of a Liability Matching Portfolio.anoop wrote: ↑Fri Apr 02, 2021 12:22 amSo 0.5% of your current portfolio? Pretty good if the portfolio is 200x your expenses!TomatoTomahto wrote: ↑Thu Apr 01, 2021 11:27 am I am ridiculously conservative and discount our net worth around 50%. We could get by on a 1-2% withdrawal rate.
I get the FI part but not the RE part of FIRE.
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Re: Do you trust the current value of your portfolio?
Not really. You should be able to withstand a big decline in retirement regardless of if you think the market is "high" or "low". If you could really accurately determine if the market was "high" or "low" you'd probably have so much money you wouldn't have to think about this.
Re: Do you trust the current value of your portfolio?
I think there are 2 other important sources of volatility to consider:
1) Expenses. There's a lot more that can go wrong with inflation and such when you live an expensive lifestyle. If you don't spend, prices don't matter.
2) Somewhat related, but having certain basics covered helps introduce certainty. I know the whole doomsday prepper thing is kind of a joke to a lot of people, but I think there's something to storing food and other essentials for emergencies. The pandemic caused food prices to surge, there's a computer chip shortage, Texas had its recent outages, there have been fuel crises from time to time, etc. Certain expenses are difficult to front-load, such as computers due to rapid obsolescence, but others might be worth looking into, like if you know your home needs a new roof in 2-3 years but your portfolio is up now and you can find a good deal, it might make sense to just do it now, even if it means working a little longer. Just one less thing to worry about.
That's why I personally consider a paid off home, preferably one with low taxes, essential for retirement (unless you have so much in stocks that a downturn would be extremely unlikely to impact its affordability). I realize everyone's lifestyle is different, but I always feel for the people who post saying they're unsure if they can retire with millions of dollars because they're spending $100k+ on housing, education, healthcare, and other semi-essentials. It's definitely a first-world type of problem, but I can see the stress of not knowing how those things would play out. My goal is to have my recurring expenses for essentials be super low in retirement so I can spend mostly on luxuries and adjust downwards as needed.
1) Expenses. There's a lot more that can go wrong with inflation and such when you live an expensive lifestyle. If you don't spend, prices don't matter.
2) Somewhat related, but having certain basics covered helps introduce certainty. I know the whole doomsday prepper thing is kind of a joke to a lot of people, but I think there's something to storing food and other essentials for emergencies. The pandemic caused food prices to surge, there's a computer chip shortage, Texas had its recent outages, there have been fuel crises from time to time, etc. Certain expenses are difficult to front-load, such as computers due to rapid obsolescence, but others might be worth looking into, like if you know your home needs a new roof in 2-3 years but your portfolio is up now and you can find a good deal, it might make sense to just do it now, even if it means working a little longer. Just one less thing to worry about.
That's why I personally consider a paid off home, preferably one with low taxes, essential for retirement (unless you have so much in stocks that a downturn would be extremely unlikely to impact its affordability). I realize everyone's lifestyle is different, but I always feel for the people who post saying they're unsure if they can retire with millions of dollars because they're spending $100k+ on housing, education, healthcare, and other semi-essentials. It's definitely a first-world type of problem, but I can see the stress of not knowing how those things would play out. My goal is to have my recurring expenses for essentials be super low in retirement so I can spend mostly on luxuries and adjust downwards as needed.
Re: Do you trust the current value of your portfolio?
Trust the number if you are comfortable with your asset allocation.
Folks that are hopping on one foot while withdrawing 3% on odd years and 2% on even years while discounting SS by 25% on the full moon have assets that have grown more than anticipated. Now, it’s time to tell themselves a story that makes them appear knowledgeable/insightful for leaving money on the table.
Folks that are hopping on one foot while withdrawing 3% on odd years and 2% on even years while discounting SS by 25% on the full moon have assets that have grown more than anticipated. Now, it’s time to tell themselves a story that makes them appear knowledgeable/insightful for leaving money on the table.
Re: Do you trust the current value of your portfolio?
Don’t retire until your assets are sufficient with a conservative asset allocation. If your retirement is “feasible” only under some generous growth assumptions and and aggressive AA, then it’s not really feasible in a trustworthy manner.
I decided for me that a 40/60 portfolio AT RETIREMENT will dampen enough volatility but have enough growth to deal with inflation. I also decided on the overall strategy and AA after reading about the v shaped equity glidepath that protects against unfavorable sequence of return risk.
https://www.kitces.com/blog/managing-po ... -red-zone/
https://www.bogleheads.org/wiki/User:Le ... eturn_risk
Before jumping on 40/60 being too conservative,
read the kitces link above. Again the plan is NOT to remain at 40/60.
I decided for me that a 40/60 portfolio AT RETIREMENT will dampen enough volatility but have enough growth to deal with inflation. I also decided on the overall strategy and AA after reading about the v shaped equity glidepath that protects against unfavorable sequence of return risk.
https://www.kitces.com/blog/managing-po ... -red-zone/
https://www.bogleheads.org/wiki/User:Le ... eturn_risk
Before jumping on 40/60 being too conservative,
read the kitces link above. Again the plan is NOT to remain at 40/60.
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Re: Do you trust the current value of your portfolio?
I read the article and get the concept, but using the 4% rule of 25 x expenses 40/60 gives you 15 years of expenses in bonds. The average bear market since WWII has been 13 months. I am guessing but I would bet that running this strategy through a simulator that uses real data would find it less favorable than just going with a straight 60/40 up to leading and through retirement. The opportunity losses in equities using a lot of bonds 10 years up to and 10 more years in retirement would outweigh the protection from the bonds in my view. Way too conservative for me but to each his own.beyou wrote: ↑Fri Apr 02, 2021 7:37 am Don’t retire until your assets are sufficient with a conservative asset allocation. If your retirement is “feasible” only under some generous growth assumptions and and aggressive AA, then it’s not really feasible in a trustworthy manner.
I decided for me that a 40/60 portfolio AT RETIREMENT will dampen enough volatility but have enough growth to deal with inflation. I also decided on the overall strategy and AA after reading about the v shaped equity glidepath that protects against unfavorable sequence of return risk.
https://www.kitces.com/blog/managing-po ... -red-zone/
https://www.bogleheads.org/wiki/User:Le ... eturn_risk
Before jumping on 40/60 being too conservative,
read the kitces link above. Again the plan is NOT to remain at 40/60.
Re: Do you trust the current value of your portfolio?
You're not wrong, but I'm already over my "number" so it's not a factor in retirement in any way shape or form at this point.corn18 wrote: ↑Thu Apr 01, 2021 3:48 pmAs you get closer to retiring, you will want to consider including SS in some fashion. I would have had to work another 5 years if I did not include SS. That seemed silly to me just because of an arbitrary zeroing of SS in my model.MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
Re: Do you trust the current value of your portfolio?
I track my AA both ways (with and without cash). I know I want to maintain 60/40 with my invested assets, so I keep that tracked separately just to keep an eye on it. The cash is just icing on top of the whole process and is meant to be cushion, not part of invested assets. I accept that this is nothing more than 'mental accounting' but I don't care.flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
Re: Do you trust the current value of your portfolio?
I'm not retired yet, but my plan would be to replenish/maintain the 3 years in most "normal" years. If there was a very bad year in the market, I would just spend the cash down rather than selling at a loss to replenish. Alternatively, the 3 years cash could be used as dry powder to buy into a major dip.Kookaburra wrote: ↑Thu Apr 01, 2021 11:06 pmAnd, do you spend this 3 years or just hold it indefinitely? If you spend it down, do you replenish it? If so, how/when?flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
It's purpose is cushion and flexibility to NOT sell invested assets if I don't want to.
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Re: Do you trust the current value of your portfolio?
Isn't that what the bonds are for? It sounds very conservative yet the cash seems like it is for market timing.MAKsdad wrote: ↑Fri Apr 02, 2021 8:09 amI'm not retired yet, but my plan would be to replenish/maintain the 3 years in most "normal" years. If there was a very bad year in the market, I would just spend the cash down rather than selling at a loss to replenish. Alternatively, the 3 years cash could be used as dry powder to buy into a major dip.Kookaburra wrote: ↑Thu Apr 01, 2021 11:06 pmAnd, do you spend this 3 years or just hold it indefinitely? If you spend it down, do you replenish it? If so, how/when?flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
It's purpose is cushion and flexibility to NOT sell invested assets if I don't want to.
Re: Do you trust the current value of your portfolio?
I trust the current value of my portfolio. I also trust that it might go up or down at any time. When you have enough, and trust your plan, you might as well retire. I expect my portfolio will go up and down over the years. My plan includes some flexibiity in spending.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
Re: Do you trust the current value of your portfolio?
It's unquestionably very conservative, yes. And selling bonds can still generate a taxable event that I may or may not want (the unrealized capital gains in my Total Bond account right now are not insignificant). As I said, the cash is for flexibility of all kinds (including market timing, tax planning, cushion for a bad stretch in the market, etc.). I feel more comfortable with the cash on hand and I accept that I lose a little bit in terms of inflation. That doesn't concern me.michaeljc70 wrote: ↑Fri Apr 02, 2021 8:12 amIsn't that what the bonds are for? It sounds very conservative yet the cash seems like it is for market timing.MAKsdad wrote: ↑Fri Apr 02, 2021 8:09 amKookaburra wrote: ↑Thu Apr 01, 2021 11:06 pmAnd, do you spend this 3 years or just hold it indefinitely? If you spend it down, do you replenish it? If so, how/when?flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
I'm not retired yet, but my plan would be to replenish/maintain the 3 years in most "normal" years. If there was a very bad year in the market, I would just spend the cash down rather than selling at a loss to replenish. Alternatively, the 3 years cash could be used as dry powder to buy into a major dip.
It's purpose is cushion and flexibility to NOT sell invested assets if I don't want to.
I am not out for optimization, I'm out for flexibility, liquidity and psychological comfort.
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Re: Do you trust the current value of your portfolio?
I also plan on keeping 3 years cash. It would be utilized in years where both stocks and bonds are down. Otherwise I would simply sell what's up. I don't think I would utilize it as 'dry powder' though. In the case of an extended bear market that could easily backfire.michaeljc70 wrote: ↑Fri Apr 02, 2021 8:12 amIsn't that what the bonds are for? It sounds very conservative yet the cash seems like it is for market timing.MAKsdad wrote: ↑Fri Apr 02, 2021 8:09 amI'm not retired yet, but my plan would be to replenish/maintain the 3 years in most "normal" years. If there was a very bad year in the market, I would just spend the cash down rather than selling at a loss to replenish. Alternatively, the 3 years cash could be used as dry powder to buy into a major dip.Kookaburra wrote: ↑Thu Apr 01, 2021 11:06 pmAnd, do you spend this 3 years or just hold it indefinitely? If you spend it down, do you replenish it? If so, how/when?flyingaway wrote: ↑Thu Apr 01, 2021 10:24 pmSo you don't include your 3 years of expenses in cash in your 60/40 allocation? Is there any reason for this mental difference?MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
It's purpose is cushion and flexibility to NOT sell invested assets if I don't want to.
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Re: Do you trust the current value of your portfolio?
I don't think it's generally agreed at all that the items you mention are bad for the economy in the long run. I'm no economics professor but think the opposite. Many economists do not buy into the view that lowering taxes, so-called trickle down economics, results in a better long term economy. It is primarily a political argument, which I would not discuss here, of course. I believe that the current extreme concentration of wealth in a few hands is what is bad for the economy in the long term. I do agree that regardless of how you view the economy, the stock market can not keep rising. Markets go up and down, sometimes with or as predictors of the economic trends, sometimes not.by diabelli » Fri Apr 02, 2021 7:48 am
Does anyone understand how the market can keep rising relentlessly despite rising corporate taxes, rising taxes on individuals being discussed, packages being passed to empower labor unions, rising minimum wage laws, etc? This may sound political but isn't it generally agreed upon that these things are bad for the economy in the long run?
Re: Do you trust the current value of your portfolio?
What are you assuming for an annual withdrawal rate? In my mind, that is key.flyingaway wrote: ↑Thu Apr 01, 2021 1:59 pmI have to work for probably another 10 years for that kind of conservatism. At this time, I really want to get out if my portfolio is accurately reflecting its value regarding retirement.TomatoTomahto wrote: ↑Thu Apr 01, 2021 11:27 am I am ridiculously conservative and discount our net worth around 50%. We could get by on a 1-2% withdrawal rate.
For example, if you were planning on say a 4.0% inital WD rate, maybe retiring into what you think is a frothy market, plan on using a low to mid 3.0% initial WD rate. It's just another way of building some cushion into your modeling. This doesn't mean hack back your spending to meet that lower withdrawal level. It means wait until your portfolio will support the spending you've been envisioning.
Real Knowledge Comes Only From Experience
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Re: Do you trust the current value of your portfolio?
I will be using a 3% withdrawal rate initially. It does not mean that I do not trust the 4% rule. My problem with all SWR is that the base (the expenses) is difficult to estimate. I know how much I may spend, but I don't know how much I want to spend.MikeG62 wrote: ↑Fri Apr 02, 2021 8:48 amWhat are you assuming for an annual withdrawal rate? In my mind, that is key.flyingaway wrote: ↑Thu Apr 01, 2021 1:59 pmI have to work for probably another 10 years for that kind of conservatism. At this time, I really want to get out if my portfolio is accurately reflecting its value regarding retirement.TomatoTomahto wrote: ↑Thu Apr 01, 2021 11:27 am I am ridiculously conservative and discount our net worth around 50%. We could get by on a 1-2% withdrawal rate.
For example, if you were planning on say a 4.0% inital WD rate, maybe retiring into what you think is a frothy market, plan on using a low to mid 3.0% initial WD rate. It's just another way of building some cushion into your modeling. This doesn't mean hack back your spending to meet that lower withdrawal level. It means wait until your portfolio will support the spending you've been envisioning.
Re: Do you trust the current value of your portfolio?
It's difficult for me to take the amount in my portfolio too seriously when I know a large portion of it could disappear in a relatively short period of time if there is a serious drop in the market but several retirement calculators tell me I'm 100% and I have a lot of wiggle room in my expenses so I suppose I do trust the current value will carry me through. I have done my DD and barring an unforeseen catastrophe it almost certainly will do what I have set out for it to do. Trust but verify.
The fool, with all his other faults, has this also - he is always getting ready to live. - Seneca Epistles < c. 65AD
- canadianbacon
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Re: Do you trust the current value of your portfolio?
This is a good exercise for people to do. If my equity allocation drops 50% I'll be at March 2020 level.Svensk Anga wrote: ↑Thu Apr 01, 2021 1:23 pm No. I periodically divide my equity allocation by two, then decide if I am okay with the diminished balance. There is enough fixed income that if SS comes through near projections, all is well.
Bulls make money, bears make money, pigs get slaughtered.
Re: Do you trust the current value of your portfolio?
Makes sense. I can handle no social security or a 50% drop in equities but not both. I actually planned to retire with only a 95% Probability of Success (Ps) in firecalc and Monte Carlo sims. I was ok with that. I was fortunate to get RIF'd with a giant separation package that put me well north of 100% Ps, so I feel fortunate.MAKsdad wrote: ↑Fri Apr 02, 2021 7:59 amYou're not wrong, but I'm already over my "number" so it's not a factor in retirement in any way shape or form at this point.corn18 wrote: ↑Thu Apr 01, 2021 3:48 pmAs you get closer to retiring, you will want to consider including SS in some fashion. I would have had to work another 5 years if I did not include SS. That seemed silly to me just because of an arbitrary zeroing of SS in my model.MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
Consistently sets low goals and fails to achieve them.
Re: Do you trust the current value of your portfolio?
TINA / negative real interest rates on bondsdiabelli wrote: ↑Fri Apr 02, 2021 7:48 am Does anyone understand how the market can keep rising relentlessly despite rising corporate taxes, rising taxes on individuals being discussed, packages being passed to empower labor unions, rising minimum wage laws, etc? This may sound political but isn't it generally agreed upon that these things are bad for the economy in the long run? I hear it said often that the stock market is not the economy, but if the economy goes down the toilet it must follow at some point that the stock market suffers (...no?)
Of course I'm about halfway through reading Sowell's Basic Economics
I would have shifted to lower equity AA if bonds were offering positive net real returns.
Global stocks, IG/HY bonds, gold & digital assets at market weights 75% / 19% / 6% || LMP: TIPS ladder
Re: Do you trust the current value of your portfolio?
It s a psychological benefit.. Sort of like having 5 pounds of dried beans and rice in the basement. Nice to know it s there in case the big one comes!!?!Kookaburra wrote: ↑Thu Apr 01, 2021 11:05 pmI’m confused. How does putting 0.1% of your portfolio into gold or silver even “move the needle”?
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Re: Do you trust the current value of your portfolio?
I think you missed the part about the rising equity. The absolute amount invested in bonds peaks at the time of retirement (or slightly ahead of). After that, by spending down the bond portion and allowing the stocks to run, you will work back to a 60/40 in several years depending on the actual portfolio returns.michaeljc70 wrote: ↑Fri Apr 02, 2021 7:52 amI read the article and get the concept, but using the 4% rule of 25 x expenses 40/60 gives you 15 years of expenses in bonds. The average bear market since WWII has been 13 months. I am guessing but I would bet that running this strategy through a simulator that uses real data would find it less favorable than just going with a straight 60/40 up to leading and through retirement. The opportunity losses in equities using a lot of bonds 10 years up to and 10 more years in retirement would outweigh the protection from the bonds in my view. Way too conservative for me but to each his own.beyou wrote: ↑Fri Apr 02, 2021 7:37 am Don’t retire until your assets are sufficient with a conservative asset allocation. If your retirement is “feasible” only under some generous growth assumptions and and aggressive AA, then it’s not really feasible in a trustworthy manner.
I decided for me that a 40/60 portfolio AT RETIREMENT will dampen enough volatility but have enough growth to deal with inflation. I also decided on the overall strategy and AA after reading about the v shaped equity glidepath that protects against unfavorable sequence of return risk.
https://www.kitces.com/blog/managing-po ... -red-zone/
https://www.bogleheads.org/wiki/User:Le ... eturn_risk
Before jumping on 40/60 being too conservative,
read the kitces link above. Again the plan is NOT to remain at 40/60.
Re: Do you trust the current value of your portfolio?
The number of my portfolio is just an indicator, how you use it is a different thing. In a good year, I spend extra while I can cut back a bit for the bear market.
Re: Do you trust the current value of your portfolio?
Right now my WR would be something absurd like 1.2% if I quit tomorrow.corn18 wrote: ↑Fri Apr 02, 2021 9:56 amMakes sense. I can handle no social security or a 50% drop in equities but not both. I actually planned to retire with only a 95% Probability of Success (Ps) in firecalc and Monte Carlo sims. I was ok with that. I was fortunate to get RIF'd with a giant separation package that put me well north of 100% Ps, so I feel fortunate.MAKsdad wrote: ↑Fri Apr 02, 2021 7:59 amYou're not wrong, but I'm already over my "number" so it's not a factor in retirement in any way shape or form at this point.corn18 wrote: ↑Thu Apr 01, 2021 3:48 pmAs you get closer to retiring, you will want to consider including SS in some fashion. I would have had to work another 5 years if I did not include SS. That seemed silly to me just because of an arbitrary zeroing of SS in my model.MAKsdad wrote: ↑Thu Apr 01, 2021 3:37 pm My perspective:
1) I am choosing to use a 3% WR for planning purposes at a 60/40 allocation.
2) I want 3 years of expenses in cash at the time of retirement.
3) My retirement plans do not contemplate or rely on receiving SS.
This is unnecessarily conservative, so I don't feel the need to also haircut my portfolio value. That being said, I 'trust' the number. It is a fact, it's not an estimate.
Re: Do you trust the current value of your portfolio?
I would just make sure you had lots of cushion in your spending/withdrawal plan. Be especially conservative in your withdrawals for the first few years in order to see how things go. I probably wouldn’t retire now if the financials were “tight” or if I didn’t hate my job.
Re: Do you trust the current value of your portfolio?
OP, Just go to 100 % cash.. You can surely trust that. Get back in when you think the market is at more reasonable levels , which btw could be higher than what it is now