Item 9 was a catch-all for all the other important issues I needed to address, including things like health insurance, disability insurance as necessary, consequences of death (in other words, estate planning), and long-term care insurance.
Estate planning is not the only consequence of death. The change in tax rates to single and the Medicare surcharge changes are things to consider along with being sure each spouse understands this entire plan.
My plan is fine.
I’m pretty sure our plan is still good - but I’m meeting with a new financial advisor next week to review.
I’ve been retired since 2017 and DW retires next May. I started collecting SS at 62. My lifespan is predicted to be to 83-86, so I decided to start collecting as soon as I was able.
DW has a longer projected lifespan - 92 and we are deciding whether she should start to collect as soon as she turns 65, or wait until her Full Retirement Age of 66 and 8 months.
I have a nice pension coming from P&G that I am eligible to start to collect on right now, but we have opted to wait until age 70 (with spousal survivor option) to begin collecting on that.
We have LOTS of savings - mostly in the form of short term investments.
85% Cash
7% Treasury Bonds
4% Domestic Bonds
2% Large Cap Stocks
2% International Stocks
Our Net Worth is broken down as:
19% After Tax Investments
42% Retirement Investments
39% Fixed Assets / Property
We’ve been out of the market since 2019 waiting for the shoe to drop - I think we were a bit early. But now, it looks like we’ll finally get a chance to get back into the market in the next year or so.
We will most likely invest in VOO and BRK-B. VOO gets us our top investment positions (GOOG, AAPL, TSLA, PG, TJX, JNJ). We won’t invest all of our 61% that is currently cash. I’m unsure what percentage we will put into the market, but it won’t be 50% that’s for sure. We are just too risk adverse for that.
We’ve been taking small amounts from our After Tax investments to make up the difference between our cash flows and expenses now that I am retired. Our former financial planner (since retired) told us that we needed a 3% return on our investments considering our conservative spending habits and assuming a 3% inflation rate. Our plan also works at a 1% return - which would leave nothing to our kids - which would also be OK with us as they are very self-sufficient.
So far so good - but we will see what our new financial planner has to say…
'38Packard
7 years in, our plan is doing fine. Net worth is above goal, living off business income.
4. Other sources of income (e.g. real estate rentals, inheritances, etc.)
I’m guessing it would be a small portion of your plan, but in no way would I be counting on an inheritance.
Our plan is working fine, surprised the other day when my stock portfolio was up 2% over the past year (not YTD) compared to an 11% decline for the S&P 500.
The biggest change in our plan was the abruptness of my retirement and not fully realizing how much spare time I was now in possession. Part time hobbies of gardening and wood working have turned into full time hobbies among a few other things.
JLC
5. Necessary supplemental income to meet LMP (Liability Matching Portfolio)
7. Remaining investment funds allocated to RP (Risk Portfolio)
There is no magic here. This is just obscuring your asset allocation.
My LMP is comprised of investments and cash flows that will provide a minimum monthly income (after taxes and inflation) to maintain our current life style.
Pension & SS are not “investments” or “portfolio”. They are just income streams.
As for the actual investment part of LMP & RP…that’s what asset allocation and the 4% SWR are to accomplish.
6. Emergency and contingency funds
You do realize that after you retire you just have ONE portfolio, don’t you? It’s just one portfolio, invested in different things and perhaps multiple accounts.
Also, an emergency fund is for when you are working, to make sure you can pay your mortgage, etc. if you lose your job. After you are no longer living on a paycheck that could vanish, that rationale is no longer operative. This has been discussed a lot on various retirement boards.
Hi Rayvt,
“Pension & SS are not “investments” or “portfolio”. They are just income streams.”
While the OP has a unique name for it, our portfolio does the same thing.
Pension and SS are not part of our portfolio either.
Our portfolio is managed in 2 components:
The primary component of our Income/cash flow portion is our dividend Core:
Dividend Core 27.44% of portfolio: ABBV, AEP, CAT, CCI, CL, JNJ, KMB, KO, MMM, NLY, O, PAYX, PEP, PG, VZ
The other major component is our 2 Roth annuities that pay 4.5% interest compounded daily:
Bond Annuity: 7.25% of portfolio.
I manage this portion of our portfolio to provide at least 150% of our needed cash (Income Shortfall = Expenses - Income{pension, SS,etc})
Portfolio Cash Flow vs Income Shortfall: **225%**
Dividend Core 174.41%
Other Dividend 1.42%
ETFs 3.47%
Cash 45.36%
The Growth portion of our portfolio is managed primarily for growth:
Growth 54.49% of portfolio: CRWD, DDOG, ENPH, MNDY, NET, PAYC, S, SNOW, TEAM, TTD, ZS
The above info is part of what I post each day on my Fool profile page. (Which may stop when the new board system is fully in place.)
“Also, an emergency fund is for when you are working, to make sure you can pay your mortgage, etc. if you lose your job. After you are no longer living on a paycheck that could vanish, that rationale is no longer operative. This has been discussed a lot on various retirement boards.”
We keep some additional cash in our savings account and add to it each year as a type of emergency fund. It has funded a refrigerator replacement, a roof replacement and a heat pump system replacement just to name a few things. When these things come up, normally at times when I don’t want to sell stock, I have the cash and can call a contractor and get things going.
Currently, I have just added that money to our building cash pile. After the house is done, I will start building the emergency pile again.
“You do realize that after you retire you just have ONE portfolio, don’t you? It’s just one portfolio, invested in different things and perhaps multiple accounts.”
We have had ONE portfolio since we got married 49+ years ago. It has nothing to do with retirement.
I found it simpler to pool our resources and manage them as a single entity.
Some people at the Fool think retirement accounts are different from a taxable account or each service they subscribe to should be a different portfolio or spouses should keep everything separate to make it easier for a divorce.
For me, a single portfolio is much easier to evaluate and manage than having 10 separate portfolios with various goals.
Does that help you?
Gene
All holdings and some statistics on my Fool profile page
http://my.fool.com/profile/gdett2/info.aspx
Hi DT,
wow. Your plan is elaborate.
I only have a stock portfolio (taxed and tax deferred); some MF and indexes, and basically social security which I intend to start taking at 70 yol or 15 years from now, and a house with no mortgage.
I am going to take the plunge with one of the ‘safe withdrawal method’. I don’t have a pension or other source of income.
Makes me wonder if my plan is not too simple when I read yours.
my portfolio was down 50% earlier in June from last November’s top. It is now more like >40% (yipee?) since last Nov. Talk about stress test.
It’s a good experience assuming these large slides would come far apart(?) in the next few decades of my retirement. I have experienced the 2000 tech bubble and the financial crisis not from a retiree frame of mind but as an investor with new money coming in regularly. This time even if I have not officially retired (I will soon), this downturn will serve as an early drill. But I would not be deterred by it and will not delay my retirement.
tj
Makes me wonder if my plan is not too simple when I read yours.
Many people like extremely simple plans based on a very small number of index funds. Pretty much the whole bogelheads community swears by it. Most there think it’s impossible to beat the market except by getting lucky. Many here disagree. I do think it’s true that more people lose a lot of money trying complex poorly understood strategies than those who significantly beat broad indices year after year. As for me, I tried a few strategies, did ok, but in the end i decided it was too volatile. I settled on a few broad market etfs.
Tj,
Have you gamed out how ss affects your income? Sounds to me like you could split your funds into a large portion for the next 15 yrs, and a smaller portion for after 70.
If we had waited until 70 to draw ss,all of our needs and most all of our wants would be covered.
Our post 70 portfolio could probably be 1/3 the size of our portfolio now.
Jk
Makes everything as simple as possible but no simpler than it needs to be.
Be simple but not naive.
It is sometimes unclear if the complex strategies are really better. Why complicate one’s life if it is not going to be significantly better?
By better, I mean better in your overall financial well-being and not something that ekes out a marginal advantage in a specific area of your finances.
tj
Jk,
sorry not sure I get your msg. Do you mean… You took s.s. before you were 70yol and you suggest it’s might be better to take it before rather than wait?
and you attribute your taking s.s. early (at 62? at 67?) to be able to compound more in your portfolio and as a result a bigger portfolio now?
I thought by taking s.s. at 70yol, I could first get more and more for my wife who does not have any s.s. Also if my portfolio depletes too quickly, I can at least have something after 15 years. But that is not a good enough reason…I should look at this more closely. I just didn’t think I need to look at it now- maybe when I am 62yol I can re-assess.
What is your rec and why again?
tj
My point was you may want to think of your present portfolio in two pieces,the first to spend until 70,and then the second to fund the amount over 70. If you are 55 and have 15 yrs to grow portfolio 2,it will probably more than double in terms of purchasing power in 15 years.
You may use 2/3 of your portfolio to fund the first 15 yrs,and then 1/3 for the delayed portion.
We took ours early because of family history and by personal confidence that I can manage our portfolio to end up in a better financial position than waiting. That is a personal decision,with many acceptable answers as there are people.
Jk
Upon further reading,If there was only one ss check in the household,I would wait til 70 also.
Jk
Thanks to all for the input and comments on my and your retirement plans, and various ways of looking at retirement portfolios and cash flows. Obviously, designating different names such as LMP and RP for portions of one’s net worth doesn’t change the fact that at the end of the day, everyone actually has only one “portfolio”. But I find this concept useful in deciding how to allocate funds into different risk categories.
Regarding SS, I’ve also decided to wait until 70 since I have other sources of income to draw from for living expenses until then. It’s hard to pass up a government guaranteed cash flow that increases 8% per year in addition to an annual inflation adjustment.
Right now, I’m sitting on a 20% cash position, and am thinking of moving a portion of that into dividend bearing stocks, as Gene (gdett2) describes as his Dividend Core. I’m also considering reallocating a portion of my RP (growth) portfolio into Dividend payers.
Thanks again for all the input,
DT
TXT, ANSS Ticker Guide
Long TXT
Click on my board name to see a list of my holdings
Regarding SS, I’ve also decided to wait until 70 … It’s hard to pass up a government guaranteed cash flow that increases 8% per year in addition to an annual inflation adjustment.
It is not a 8% per year increase.
It’s giving you a higher payment for a lesser number of years.
Lower monthly amount for more years vs. fewer years at higher monthly amount. Designed to be actuarially the same.
It is not a 8% per year increase.
It’s giving you a higher payment for a lesser number of years. – Rayvt
I did a quick mental calculation as I approached 62 years of age.
It turned out that taking SS at 62 is indeed offset by waiting, but (forgetting some of the details now) breakeven between starting early versus waiting was somewhere in my early 80s! And that doesn’t take into account the time value of having that money early.
I took the obvious course of electing withdrawals starting at age 62.
Rob
Former RB and BL Home Fool, Supernova Portfolio Contributor & Maintenance Fool
He is no fool who gives what he cannot keep to gain what he cannot lose.
“The whole secret of investment is to find places where it’s safe and wise to non-diversify. It’s just that simple. Diversification is for the know-nothing investor; it’s not for the professional.” Charlie Munger
FWIW, we are planning for 1poorlady to take it at 62, and me waiting until 70. If I predecease her, she will have the option of taking my bigger SS payout. Otherwise, at 70 we’ll both enjoy the payout.
FWIW, we are planning for 1poorlady to take it at 62, and me waiting until 70. If I predecease her, she will have the option of taking my bigger SS payout. Otherwise, at 70 we’ll both enjoy the payout.
If she predeceases you it works out too.
My wife was ten years older than me. She started SS at FRA, Full Retirement Age, which I think was 65 for her. When she died I was still short of my FRA (66), and had not decided whether to start then or wait until I hit 70.
When she died I began to collect a survivor benefit based on what she had been collecting. The amount was almost the same as what she received, as the difference in age seems to be the basis for calculating the amount. I’ve been receiving that ever since. I will reach 70 this December, and right after my birthday I will contact SS and initiate collecting my own. Mine was already going to be significantly more, and now it will be 32% more than that.
As a side note, one thing the SS site will not tell me is what my benefit is, based on my own work. I recently went through the painful process of going into the details of the calculation, applying my history (which they do provide) to the amazingly strange calculation. It took me four sheets in an Excel spreadsheet. My calculation came to 86% more than the survivor benefit. It will be interesting to see how well that matches their number.
I will reach 70 this December, and right after my birthday I will contact SS and initiate collecting my own.
To avoid delays in getting your increased benefit, you actually should have contacted SS last month - 4 months before your birthday. I would suggest contacting them on Monday.
AJ
I will reach 70 this December, and right after my birthday I will contact SS and initiate collecting my own.
To avoid delays in getting your increased benefit, you actually should have contacted SS last month - 4 months before your birthday. I would suggest contacting them on Monday.
Oops! Thanks for the heads up, AJ, it will be done!