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Post by steelpony10 on Nov 19, 2023 16:49:43 GMT
retiredat48 , Since our everyday income with inflation raises is secure for years I know $150k in addition with no time frame is not and never will be. This was our reason to income invest to get more assured cash flow fast and first. Now I can pour all extra income each year into VTI. Since I don’t handcuff myself with rules, studies, allocations or esoteric bizarre discussions when it comes to making real money I’m free to do whatever I want until I pass. I’ve navigated 2 LTC portfolios and know someone that blew through 1 mil. Compounding VTI from now on seems like our best course to take considering the present market. If my luck doesn’t hold and I become a sole survivor I’ll be leaving heirs a blueprint for riches and a handful of old clothes.
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Post by FD1000 on Nov 19, 2023 23:24:18 GMT
johntaylor ,................... .+1Yes indeed...I agree with the author. When you have enough, invest as though it is your heir's investment allocation. And if no children, and perhaps a college, realize they have very large stock allocation percentages. Further, I do not understand those who say that if you get a larger portfolio, and need to take a lesser percent in RMDs to live on, that you should keep reducing your equity allocation side? You likely got this higher valuation due to stock/fund price rises over time. Let it ride. The increased dollar value provides a buffer against any market decline. And stocks in the long run beat bonds. Lastly, I have posted often: "When you have your first million, (or enough), the goal is not to make the second million; rather it is to hedge the first million and protect it." So you strategically build a portfolio to hedge things. Such as, inflation a huge threat?? Own stock funds and perhaps some oil based companies...or real estate (I have three homes, clearly a "second million" hedge). Growth stocks way pricey by historical standards?? (Think magnificent seven), balance with some value stocks and small caps. Interest rates taken to zero for a decade? shorten fixed income durations and invest in dividend paying alternatives, such as income builder funds, preferred stock funds, FI CEFs. Government needs to finance huge debts with interest rates rising (like now!), increase FI durations and lock in some good rates long term; use bond ladders to your advantage, rollover into higher and higher rates if that occurs. And so on... R48 Meanwhile, Dr. Bill Bernstein says “When you've won the game, stop playing.” What he meant by that is you need to take risk to accumulate a nest egg for retirement (play the game), but once you've reach your goal (won the game) you should attempt to reduce investment risk as much as possible (stop playing)." I agree with Bill. De-risking means I know that I'll be good and that my heirs will get a nice pile. +1 Someone who owns many funds at small % can not accomplish what Buffett calls "Diversification is a protection against ignorance." Buffett second choice for most is the SP500, again no diversification. This is why he owns Apple at 40+% in his stock portfolio. BTW, Buffett has a huge % in cash for months now. I based my system loosely on Buffett but converted it to my limited skills and style. I was in 100% in the market all the time, mostly in stocks, until I got to one million(I think it was 2013) and "won" the game, then I changed to invested at 99+% when markets are at "normal" risk, but be out in very high risk. Changing 0.5-1% often here and there doesn't protect your portfolio + does not take advantage of the hanging fruits. The market proved it can be one sided for many years regardless of valuation, the economy, rates and many other indicators the experts love to discuss for days. LC tilting growth has been an easy risk/reward in 1995-2000 + 2010-2023(except 2022) = about 17-18 years. Value+SC+internationl were better during 2000-2010. So, after I got the 2nd and 3rd million, I don't need to use any stocks anymore, unless it's a quick trade with a nice % + own only 2-3 funds.
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Post by retiredat48 on Nov 20, 2023 4:06:25 GMT
johntaylor ,................... .+1Yes indeed...I agree with the author. When you have enough, invest as though it is your heir's investment allocation. And if no children, and perhaps a college, realize they have very large stock allocation percentages. Further, I do not understand those who say that if you get a larger portfolio, and need to take a lesser percent in RMDs to live on, that you should keep reducing your equity allocation side? You likely got this higher valuation due to stock/fund price rises over time. Let it ride. The increased dollar value provides a buffer against any market decline. And stocks in the long run beat bonds. Lastly, I have posted often: "When you have your first million, (or enough), the goal is not to make the second million; rather it is to hedge the first million and protect it." So you strategically build a portfolio to hedge things. Such as, inflation a huge threat?? Own stock funds and perhaps some oil based companies...or real estate (I have three homes, clearly a "second million" hedge). Growth stocks way pricey by historical standards?? (Think magnificent seven), balance with some value stocks and small caps. Interest rates taken to zero for a decade? shorten fixed income durations and invest in dividend paying alternatives, such as income builder funds, preferred stock funds, FI CEFs. Government needs to finance huge debts with interest rates rising (like now!), increase FI durations and lock in some good rates long term; use bond ladders to your advantage, rollover into higher and higher rates if that occurs. And so on... R48 Meanwhile, Dr. Bill Bernstein says “When you've won the game, stop playing.” What he meant by that is you need to take risk to accumulate a nest egg for retirement (play the game), but once you've reach your goal (won the game) you should attempt to reduce investment risk as much as possible (stop playing)." I agree with Bill. De-risking means I know that I'll be good and that my heirs will get a nice pile. mozart522 ,... I am a big fan of Bernstein; I recommend his book as number one read for investors. But on this point I strongly disagree. His approach is highly risky and i can show it. To get out of the market entirely (stop playing) exposes one to substantial risk of being at the mercy of fixed income/bonds. Severe inflation is perhaps the number one risk we all face. I had a trillion dollar Zimbabwe note in my hand...the front face all filled with zeros. I was advised one could buy eight gallons of gas with that trillion. Currency devaluation is the bane of many countries and investors. IT IS THE MOST FAVORED APPROACH OF GOVERNMENTS. You combat this by owning the means of production, aka businesses, aka companies, aka stocks, aka stock mutual funds/ETFs. Period. Or own land/real estate. So here's a real life anecdote that fits well in this thread...my 103 year old mother-in-law who recently passed away. Convinced that at about her age 85 she would not live very long, she got out of stocks and bought mostly CDs. Her rationale is when she passed she didn't want to leave her children with stocks which may be in a bear market. I urged against this...noting MILs seldom accept son-in-law guidance anyway. Thus, for the last twelve or more years, she earned zilch interest on her CDs. Meanwhile here monthly nut kept going up with prices...such as her assisted living place monthly payments rising by thousands. Her purchasing power severely eroded. A couple years more and she may have been out of money!! Let's take this time period. Liberals/progressives have this very real postulation called 'modern monetary theory." The USA as reserve currency can print all the money it needs...borrow extensively, distribute to poor. If progressives control gvt another four years or more, expect rampant inflation to be the norm. One has to deal with this. Very bad to measure ones wealth in dollars. Measure in things you actually own...as discussed above. And of course the worry then is actually keeping it, as gvts and peoples are wont to take it from you...taxation/confiscation/ etc.! The biggest risk however is getting out of the market. If inflation roars, and stocks keep doing well, how will anyone ever buy back in at high prices?? That is the conundrum. Same conundrum as the generation who sold out of stocks in the financial crises a decade plus ago, and never got back in. R48
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Post by roi2020 on Nov 20, 2023 5:06:11 GMT
Assume an investor is receptive to Mr. Bernstein's suggestion to stop playing when "you've won the game." They can construct a TIPS ladder which will provide inflation protection. TIPS principal is adjusted using the Consumer Price Index for All Urban Consumers (CPI-U); an investor's personal inflation rate may be different.
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Post by Norbert on Nov 20, 2023 6:04:23 GMT
Yes, TIPS will protect capital against inflation at zero risk (excepting currency risk, I guess). However, we'd have to be satisfied with whatever yield we can obtain, a tad over 2% at present on the 10-year bond.
Inflation risk can be less important if we own our home(s), don't mind driving the same car for 10 years, and are covered in terms of medical insurance.
But, I think R48 is right: maintain at least a conservative 30% or so in equities even if relatively risk averse.
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Post by archer on Nov 20, 2023 6:36:36 GMT
According to PV if you click on tools and then "Backtest Asset Allocation", You can then pick TIPS from the drop down menu where assets are entered. In these past couple years of inflation TIPS have declined significantly, especially inflation adjusted returns. Over the long run TIPS have gained. I'm gueess that it hedges against inflation as long as the Fed isn't raising interest rates, or as long as inflation is keeping close to the Feds 2% target.
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Post by roi2020 on Nov 20, 2023 8:27:26 GMT
archer ,
TIPS were not appealing in recent years since they offered negative real yields.
5 Yr TIPS Auction Data
April 2020 - April 2022 -0.320% to -1.685% real yields
10 Yr TIPS Auction Data
May 2020 - March 2022 -0.470% to -1.145% real yields
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Post by Mustang on Nov 20, 2023 10:27:13 GMT
Yes, TIPS will protect capital against inflation at zero risk (excepting currency risk, I guess). However, we'd have to be satisfied with whatever yield we can obtain, a tad over 2% at present on the 10-year bond. Inflation risk can be less important if we own our home(s), don't mind driving the same car for 10 years, and are covered in terms of medical insurance. But, I think R48 is right: maintain at least a conservative 30% or so in equities even if relatively risk averse. I agree. An investor cannot limit risk by being out of the stock market. The impact of inflation should not be understated. It absolutely destroys a retirees purchasing power. Someone who retired in 1968 with $20,000 in income would need almost $35,000 to buy the same goods and services just 10 years later. 10 years after that he would need $65,000. Investors who are accustom to 2% inflation have no idea what 8, 10 and 12% annual inflation can do. Some growth is required to minimize longevity risk. Historically, a minimum risk portfolio has between 25-35% equity. The Merrill Lynch chart showing 25% was based on 1977-2011 data. A more current Ameritrade chart using 1970-2019 data shows 33%. www.tdameritrade.com/retail-en_us/resources/pdf/TDA6350.pdf
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Post by bigseal on Nov 20, 2023 12:01:11 GMT
Will always maintain 90+% in equities.
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Post by steelpony10 on Nov 20, 2023 12:10:32 GMT
At 2k+/mo for independent living just for rent, 6k+/mo for assisted living, 10k+/mo for skilled nursing and with my personal experience I believe reducing the risk that one has been comfortable with for years is a poor choice. One should keep executing their plan.
Ours has been all out wealth accumulation with the same bumps that occur at random times and eventually go away which should be to our benefit as always long term. Being too conservative at any point is really risky to me. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never.
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Post by mozart522 on Nov 20, 2023 12:49:04 GMT
Meanwhile, Dr. Bill Bernstein says “When you've won the game, stop playing.” What he meant by that is you need to take risk to accumulate a nest egg for retirement (play the game), but once you've reach your goal (won the game) you should attempt to reduce investment risk as much as possible (stop playing)." I agree with Bill. De-risking means I know that I'll be good and that my heirs will get a nice pile. mozart522 ,... I am a big fan of Bernstein; I recommend his book as number one read for investors. But on this point I strongly disagree. His approach is highly risky and i can show it. To get out of the market entirely (stop playing) exposes one to substantial risk of being at the mercy of fixed income/bonds. Severe inflation is perhaps the number one risk we all face. I had a trillion dollar Zimbabwe note in my hand...the front face all filled with zeros. I was advised one could buy eight gallons of gas with that trillion. Currency devaluation is the bane of many countries and investors. IT IS THE MOST FAVORED APPROACH OF GOVERNMENTS. You combat this by owning the means of production, aka businesses, aka companies, aka stocks, aka stock mutual funds/ETFs. Period. Or own land/real estate. So here's a real life anecdote that fits well in this thread...my 103 year old mother-in-law who recently passed away. Convinced that at about her age 85 she would not live very long, she got out of stocks and bought mostly CDs. Her rationale is when she passed she didn't want to leave her children with stocks which may be in a bear market. I urged against this...noting MILs seldom accept son-in-law guidance anyway. Thus, for the last twelve or more years, she earned zilch interest on her CDs. Meanwhile here monthly nut kept going up with prices...such as her assisted living place monthly payments rising by thousands. Her purchasing power severely eroded. A couple years more and she may have been out of money!! Let's take this time period. Liberals/progressives have this very real postulation called 'modern monetary theory." The USA as reserve currency can print all the money it needs...borrow extensively, distribute to poor. If progressives control gvt another four years or more, expect rampant inflation to be the norm. One has to deal with this. Very bad to measure ones wealth in dollars. Measure in things you actually own...as discussed above. And of course the worry then is actually keeping it, as gvts and peoples are wont to take it from you...taxation/confiscation/ etc.! The biggest risk however is getting out of the market. If inflation roars, and stocks keep doing well, how will anyone ever buy back in at high prices?? That is the conundrum. Same conundrum as the generation who sold out of stocks in the financial crises a decade plus ago, and never got back in. R48 48: You are interpreting this incorrectly in my view. "To get out of the market entirely (stop playing) exposes one to substantial risk of being at the mercy of fixed income/bonds." That isn't what he is saying. He is suggesting that one lowers their risk from the accumulation phase to the point that expected returns will be in line with needed returns. No one is saying 100 bonds and cash (except FD and his method works because he takes advantage of obvious opportunities). Bogle's age-100 has been revised to age-120 so most people will likely have at least 25% in equities over the long haul. According to Otar's aftcasts, 25% in the 500 index would work fine. Your objection to BB's statement, even if it meant what you suggest, doesn't take into consideration how much a person actually has compared to their expenses. Some folks could easily hold a 100% tips ladder with no risk of ever having worries. and I don't believe inflation is really the potential problem you make it out to be. forty-three years ago we had high inflation. A couple of years ago we had another short term bout. I haven't heard anyone here say they are in trouble because of current inflation. We are not likely to see it again in our lifetimes. Finally, I don't believe in holding a higher level of equities as a means of investing for my heirs. Unless I know when I'm going to die and know that my heirs will carry on my investing method, there is a real possibility that I could pass less on to heirs if the market crashes as I'm burning to ashes.
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Post by anovice on Nov 20, 2023 13:46:52 GMT
At 2k+/mo for independent living just for rent, 6k+/mo for assisted living, 10k+/mo for skilled nursing and with my personal experience I believe reducing the risk that one has been comfortable with for years is a poor choice. One should keep executing their plan. Ours has been all out wealth accumulation with the same bumps that occur at random times and eventually go away which should be to our benefit as always long term. Being too conservative at any point is really risky to me. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never. steelpony, I do not want to get off topic, but I thought you would find this article interesting. www.yahoo.com/news/extra-fees-drive-assisted-living-163533841.html
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Post by uncleharley on Nov 20, 2023 14:10:11 GMT
At 2k+/mo for independent living just for rent, 6k+/mo for assisted living, 10k+/mo for skilled nursing and with my personal experience I believe reducing the risk that one has been comfortable with for years is a poor choice. One should keep executing their plan. Ours has been all out wealth accumulation with the same bumps that occur at random times and eventually go away which should be to our benefit as always long term. Being too conservative at any point is really risky to me. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never. You nailed my problem on the head. I was fat, dumb, & happy with my retirement until I lived longer than expected and the cost of any kind of assisted living went up in the most recent round of inflation. It is a manageable problem because I am near the bottom of your U, but I have chosen to become more aggressive with my investments.
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Post by richardsok on Nov 20, 2023 14:41:19 GMT
At 2k+/mo for independent living just for rent, 6k+/mo for assisted living, 10k+/mo for skilled nursing and with my personal experience I believe reducing the risk that one has been comfortable with for years is a poor choice. One should keep executing their plan. Ours has been all out wealth accumulation with the same bumps that occur at random times and eventually go away which should be to our benefit as always long term. Being too conservative at any point is really risky to me. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never. You nailed my problem on the head. I was fat, dumb, & happy with my retirement until I lived longer than expected and the cost of any kind of assisted living went up in the most recent round of inflation. It is a manageable problem because I am near the bottom of your U, but I have chosen to become more aggressive with my investments. (A slight topic digression here, but I thought the post might be useful to someone.) I have posted on this topic before. If I ever get to the point where I need assisted living my wife knows to take me to Colombia where she still has family. Depending what I need, she can get either an experienced elder nurse or put me in a upper-level facility. I trust my support for the youngsters among her family over the years will stand me in good stead if I ever need a network. Good elder care is a fraction of the cost of the USA and, from everything I read can be comparable to the better facilities here. If it's a topic on your mind, you might want to look into it. Might be worth your while to contact a lawyer here in the US with Colombian contacts to help you decide and help arrange necessary documents, most of which are simple proof of your income. I add two links plus a recent ad I stumbled across. Obviously, your own due diligence is a must. www.elderguru.com/expat-elder-and-long-term-care-in-colombia/www.expatfocus.com/colombia/guide/colombia-elderly-careDIANA ORTIZJanuary 8, 2022 - 11:18 am I am a 30 y/o native speaker of English with great people skills and experience in elderly companionship for expats, I am a university graduate in teaching people of all ages. I have knowledge of the country’s systems and am available in cali colombia for any elderly need. Please reach me in Skype as diana.ortiz.tucker@gmail.com
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Post by steelpony10 on Nov 20, 2023 14:53:42 GMT
anovice , That’s not to much off topic. I quoted the costs mostly for my mom for 17 years ending in 2017. I too agree that I have enough except in that instance which is a possibility for me having both parents going that way. I don’t my want my wife or me living in poverty if I think I can delay that. Cutting back risk doesn’t seem to be the correct path.
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Post by Mustang on Nov 20, 2023 15:06:47 GMT
. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never. A study by the Center for Retirement Research "found that retirement spending drops persistently, by about 1% per year as a cohort ages, even after controlling for a number of other factors."
"A follow-up study by David Blanchett of Morningstar, though, used the Rand Health and Retirement Study (HRS), which actually does provide some longitudinal data on retiree spending behaviors over time. When Blanchett looked at the available data (which, admittedly, was somewhat limited by the sample size), a slightly different pattern emerged: real spending declined a little at the beginning of retirement, accelerated its decline in the middle retirement years, and then slowed its decline again in the final decade, in a pattern that was dubbed the “retirement spending smile”.
I believe this retirement smile is what you are talking about.
"Notably, the chart above graphs the real (inflation-adjusted) change in spending, showing that real spending declines by an average of about 1%/year in the first decade of retirement, 2%/year in the second decade, and about 1%/year again in the final decade. Given that inflation itself averages more than 2%/year through most of the historical years in the data set, though, this still means that retirees were maintaining or slightly increasing their nominal spending each year. Just by less than the annual amount of inflation."
"A similar study by JP Morgan, which analyzed spending patterns based on JP Morgan’s own proprietary data of how its clients spend (using consumer credit and debit card data), and focusing on more affluent households (those with $1M to $2M of investible assets), similarly found a version of the retirement spending smile, albeit more lopsided – where real spending clearly decreases in the early retirement years, but appears to merely level off in the later years (as health care spending in particular ramps up for those in their 80s). Still, though, retirement spending was down by about 1%/year through the first 20 years of retirement."
"One notable aspect of these results is that while health care expenses do ramp up in the later years, health care expenditures overall are still only a relatively moderate percentage of the retiree’s total spending, falling roughly in the 15% - 20% range, and not even fully replacing the decreases in spending in the other categories (such that total spending in a retiree’s 80s is still more than 20% below where it was at the beginning of retirement). In other words, health care expenses really do rise in the later years of retirement, but not enough to raise total spending in the later years of retirement!'
The key point is if you are using a withdrawal method like the 4% Rule is that spending increases slower than inflation. Approximately 1% per year in our 60, 2% per year in our 70s and 1% per year in our 80s including health care. Therefore the retiree can adjust inflation adjusted withdrawals by one percentage point per year less than the inflation rate.
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Post by steelpony10 on Nov 20, 2023 15:09:21 GMT
uncleharley GoGo years = 65-75, Slow go years = 75-85, No go years = 85-? The bottom of the U is 75-85, the years some make it or…🍀
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Post by Deleted on Nov 20, 2023 15:22:28 GMT
At 2k+/mo for independent living just for rent, 6k+/mo for assisted living, 10k+/mo for skilled nursing and with my personal experience I believe reducing the risk that one has been comfortable with for years is a poor choice. One should keep executing their plan. Ours has been all out wealth accumulation with the same bumps that occur at random times and eventually go away which should be to our benefit as always long term. Being too conservative at any point is really risky to me. Since I believe retirement expenses are U shaped and being at the bottom of the U this seems like the time to ramp things up. Any equity values aren’t real until someone liquidates shares which in anyones case may be never. steelpony10, uncleharley, richardsok, A timely subject for me. I have been pondering this subject and you guys are moving me in your direction. I'm not sure where I am on the " U" and I'm not extremely conservative but I think I should tweak to a more aggressive position. I'm 81 while spouse is 79. Both in reasonably good health. I have some LTC ins, $55K/yr for 3 years, while spouse does not. We have no family locally. Thanks for the discussion
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Post by steelpony10 on Nov 20, 2023 16:10:14 GMT
@axe ,
My point is I didn’t think reducing risk at any age or under most circumstances is wise for a “couple” for the reasons that are important to me.
The U shape I’ve read before and that’s what I think can happen to some since I experienced it first hand.
Staying the course or in my instance increasing risk with VTI, not single holdings, seems like a better way to slow portfolio depletion for me if needed as a starting point before getting to my steady income investments. A single person could possibly reduce risk because the consequences of that course only applies to them.
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Post by steelpony10 on Nov 20, 2023 17:04:13 GMT
Mustang , The OP presents “a study” that reaches a conclusion about a complete unknown that might be disastrous to some. I believe the greatest risks are the unknowns. In our case I don’t think any reduction in spending “if” it occurs as we age will ever compensate for any sudden doubling or tripling of needed monthly expenditures. That’s why I’ll try to increase risk now and hopefully well before being in a possible too little to late situation like I’ve faced twice already.
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Post by FD1000 on Nov 20, 2023 23:34:22 GMT
Many make the assumption that if inflation is X (assume 3%) and your portfolio makes only 6% while your withdrawal=4% and keeps growing at 3%, you will not make it too long. You actually would make it almost 44 years. See www.key.com/personal/calculators/enough-retirement-savings-calculator.htmlEven if you make only 5% annually, it would still lasts 34 years. Attachments:
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