[USER]

My husband and I are late starters. We are both 58 and intend on possibly stopping work in 3.5 years.

We currently have 415K in retirement accounts. In addition, we have approx 450K equity in our home (HCOL) area Our household income is 130K.

Our plan is to continue to contribute approximately 45K per year.

Assuming we will have 600K in Dec of 2028, our plan is to sell the house and buy a house for cash((LCOL) area. I am fully aware of potentially poor returns over the next three years, which would make all of this plan null and void.

Now to my question.

I need ideas on an asset allocation which would be suitable while we are still trying to accumulate yet we are only 3 1/2 years from stopping work.

Thank you!!

[Ron]

When you are 3.5 years out from starting decumulation your money has little time to grow. You are not compounding at all what you are putting in over that period and what you had before has limited time to grow more.

IMO it’s better to shore up what you have so you can actually carry out your retirement plan in the timeframe you want and not be buffeted/put off by a down market, rather risk a downturn during this time period.

I wouldn’t recommend any specific portfolio, but the Golden Butterfly portfolio or variants have good stats in terms of average yearly gain, 3 and 5 year rolling returns, max drawdown, etc.

This type of portfolio will cushion downturns significantly and give you options to get out of them more quickly.

I did the same thing you all are. I sold a house and that cash helped fund 10 years of LCOL early retirement.

I basically maybe had around what you are projecting to have at retirement if you look at a per person basis. A bit less, but I went extreme LCOL.

Now I have 50% more net worth than I had at the start of retirement. In other words I’m accumulating during retirement.

Best of luck!!

[Angelo]

How flexible is your timeline and how much do you need to be FI?

[Zac]

I’m not so sure you can comfortably retire in 3 years either way.

It’ll be great if you can buy a house cash for 300-400k in a LCOL area but that will still leave you living on like 30-40k/year until you take social security.

Do you have pensions we don’t know about?

[Jenny]

What are your annual expenses? You don’t have much time for your investments to grow.

Instead of retiring, consider cutting back on your hours instead and keep your employer based insurance.

[Stephen]

Downsizing our house… We are sorta doing this ourselves… But going to a smaller and less expensive house is also costing us a lot of money in renovations to make it “ours.”

It’s a disgusting and old house so it needs a lot (did I say “a lot”) of work.

Just don’t underestimate that expense.

[Ahmed]

This is my opinion only.
I think you need to extend your working horizon unless there are extenuating circumstances (eg health issue).

Also, I suspect if interest rates come down, even if only 2% people are going to jump back into the housing market and prices, especially in LCOL areas will jump significantly.

Get with a fee only CFP and review your options.

[Barbara]

Sequence of return risk doesn’t just last for 3 vears.
Do your expenses factor in things like needing a new roof, new car(s), car repairs and home renovations?

[Leslie]

Why assume low returns over the next 3 years? I’m planning for great returns and your nest egg is going to grow.

Read JL Collin’s book, Simple Path to Wealth, since you’re still in the accumulating years.

[Rick]

What happens if you do not meet your desired net worth goal in 3.5 years? That seems like a reasonable thing to explore as it helps set your risk tolerance.

And that risk tolerance will guide your portfolio design.

If you have some flexibility on that end age and that keeps your risk tolerance fairly “normal” for someone accumulating, I would personally stay very light in bonds and heavy in diversified equity index funds.

You need growth to reach your goals.

Is your thought to collect SS as early as possible at age 62? Does a 4-5% withdrawal rate on your target net worth (minus housing in lcol area) plus SS cover your expected future expenses?

Would you consider slow international travel for 5 to 8 years? Without a US based house?

This would allow you to fully invest your net worth, reduce to greatly reduce your monthly expenses draining on net worth, get the much increases SS at full retirement age of about 67 or even at max age of 70, etc.

You could come back to the US at that later age in a stronger financial position and have had amazing experiences seeing the world.

[Author]

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