[Rick]

Great post. Informative. Thoughtful. Context without a lot of fluff.

A bit off your question set but please add tax planning to your list of things to consider and then plan.

In two ways
With what looks like a $100k per year spending target this will put you into a lot of tax red zones.

Not that high of a tax but more tax can be avoided so should be avoided. Know your cap gains and qualified dividend 0% tax end amount.

Know your Roth conversion plan, all years but also potential extra in a big down market year.

Cap gains harvesting but usually they take a backseat to Roth conversions if both could be done in a year.

And second one plays into the first. Consider asset location. REITs and bond interest is great for those tax deferred accounts since neither are tax rate friendly.

Consider turning off dividend reinvestment in brokerage accounts, using the dividends in your spending, as the extra cost basis to track is a pain over time.

Things like that.

Good luck to you on your fi journey.

[Frank]

As William Bernstein says, “when you have won the game, you can stop playing”. So yes, it’s a good time to start de-risking your portfolio, at least with the portion you need for retirement.

You have a lot of flexibility as to how to do that given your time frame.

You don’t need five years of cash if you have a well-diversified portfolio, especially in your case where so much of your expenses are covered by pensions.. In fact, more than 10% in cash in a portfolio tends to detract from its long-term performance and safe withdrawal rate.

While excessive cash allocations are very popular these days, it is usually an indication that

(1) the holder otherwise has a bad portfolio for spending in retirement with too many equities; and/or

(2) the holder is over-saved, plans to die at highest net worth and is hoarding cash on a personal preference basis; and/or

(3) the holder has a lazy financial advisor who is more interested in psychobabble-tactics about buckets, ladders, flowerpots, pie cakes and other kitchen and gardening implements, and marketing that kind of “system”, rather than just allocating assets in the simplest and best way possible without resorting to useless window dressings and funny labels for cash.

So, I would not do that. Also, cash is the LAST thing you build up before pulling the plug, so build out the other allocations first.

[Ron]

Five years cash will slow your progression to meeting your FI number and will require a higher FI number if you plan to maintain that cash while in retirement.

Yes, start to build your retirement portfolio over a number of years starting before retirement.

[Kevin]

I’d definitely consider the annuity. Consider it as part of your bond portfolio.

[Author]

Posts