|
Post by steelpony10 on Nov 26, 2023 14:49:46 GMT
Based on grandma’s deerskin bag of animal bones dropped on the sacred blanket:
Expecting little change in the current market sale and since our cash flow investments except for some tweaking are complete I will start adding all excess cash for needs to VTI just in case my wife or I get lucky? and live beyond the next 10-15 years.
Either projected candidate when elected will be a lame duck next year or could keel over in office so with nothing to do but impeach, investigate, argue or get scared because an unknown VP becomes president the sale may last. When that 4 years is over then one could get 2 fresh unknowns to vote for. Sales could continue with additional unknowns even further. Of course world peace could break out if my bone interpretation is off or I lingered too long with the pipe. Anyway Happy Holidays to all. 🎅🏼
|
|
|
Post by kathiel on Nov 27, 2023 0:00:45 GMT
steelpony10, Like you, my investments in my Rollover IRA (100% equities) are set to produce all of the income I need. They yield enough cash each year to cover my RMD, and since I don't need all of that for living expenses, I give the excess to my favorite charities. I had a couple of dividend cuts and several dividend increases this year, and my annual income from this account is up for the year. October was a brutal month for the value of my Rollover Portfolio, as this portfolio is heavy on defensive stocks that did poorly this year - utilities and pharmas I also have a Roth, in which I purchased some growth stocks last year, Amazon, Google, Microsoft, Tesla. I sold the Tesla last week because I was so disgusted with Elon Musk. I basically broke even on the Tesla - made little bit of money, but I just wanted it out of my portfolio. Both Amazon (up 24%) and Microsoft (up 28%) are up significantly, Google is up 5%. In my taxable account, I bought some USB earlier this year when the regional banks were so cheap, an I'm up 17% on that (plus it p[ays about 6%). I also bought some ARM in October, and that is up 30%. So I'm pretty happy with my investments.
|
|
|
Post by Mustang on Nov 27, 2023 1:26:23 GMT
2024 and beyond... are they still forecasting a recession in 2024? I don't think it will matter. Perhaps, I will be able to buy more shares at a lower price. I still believe a retirement portfolio needs both growth and income. A retiree can do the work themselves or let a portfolio manager do the work. I prefer the latter. My traditional IRA is invested in a single moderate-allocation fund. I reinvest all dividends and capital gains. I have received three years of RMDs. My share balance is 99% of my beginning balance. December's distribution may put it back to 100%. (Fingers crossed.)
I have no earned income so the after tax RMDs are invested in two taxable funds: a moderate- and a conservative-allocation fund. I try to keep them roughly 50/50. I reinvest all dividends and capital gains. I went back 10 years to compare their distributions to 4% Rule withdrawals. The last 10 years have been very, very good. Dividend and capital gain distribution have exceeded that of a 4% Rule withdrawal, sometimes significantly more. I have thought of going to income based withdrawals but I like the income stability the 4% Rule provides and leaving excess dividends and capital gains in the funds just makes them grow. Morningstar's analysis (2021) saying the maximum save withdrawal was only 3.3% had me thinking about it. But after reading Kitces' response to their analysis I no longer worry about it any more. Morningstar's pessimistic forecast made the numbers look bad. www.kitces.com/blog/4-percent-rule-bengen-morningstar-report-the-state-of-retirement-income-safe-withdrawal-rates/I don't see a need for any changes. 2024 will just be more of the same.
|
|
|
Post by roi2020 on Nov 27, 2023 5:44:37 GMT
Thanks for the kitces.com link. I've only read the executive summary but will read the entire article later.
Morningstar updated their research in 2022 and concluded that a safe starting withdrawal rate for 2023 retirees is now 3.8%. The following assumptions were made: 1) 50% stock / 50% bond portfolio 2) 30 year time horizon 3) fixed withdrawals adjusted annually for inflation 4) 90% probability of success (investor does not outlive money)
|
|
|
Post by kathiel on Nov 27, 2023 9:20:57 GMT
Mustang , The same people who were forecasting a. recession for 2023 are still forecasting a recession for 2024. I figure the safe withdrawal rate is what the account produces in income. I don't need that much so the extra goes to charity or buy more shares. I just have to make sure | withdraw the RMD.
|
|
|
Post by Mustang on Nov 27, 2023 10:41:52 GMT
roi2020, Yes, I've seen that article before. It shows how sensitive the simulations are to changes in inputs. It also looked at other asset allocations. I was surprised at how little difference the stock allocation made. The initial withdrawal was 3.8% for equity allocations of 30% to 60%. That is a huge range considering the increased risk that come with high proportions of stocks. Stock allocations above or below that range had lower initial withdrawal rates suggesting lower long term returns. In general, it backs up the results of Bengen's original 1994 study. (Bengen did increments of 25% equity instead of 10%.) I have looked and not found any data that would change my investment strategy. For 2024 and beyond I intend to invest in moderate-allocation funds (ABALX and VWENX) and a conservative-allocation funds (VWIAX). Its a boring way to invest but I like boring when it comes to my retirement portfolio.
|
|
|
Post by Chahta on Nov 27, 2023 12:09:53 GMT
Based on grandma’s deerskin bag of animal bones dropped on the sacred blanket: Expecting little change in the current market sale and since our cash flow investments except for some tweaking are complete I will start adding all excess cash for needs to VTI just in case my wife or I get lucky? and live beyond the next 10-15 years. Either projected candidate when elected will be a lame duck next year or could keel over in office so with nothing to do but impeach, investigate, argue or get scared because an unknown VP becomes president the sale may last. When that 4 years is over then one could get 2 fresh unknowns to vote for. Sales could continue with additional unknowns even further. Of course world peace could break out if my bone interpretation is off or I lingered too long with the pipe. Anyway Happy Holidays to all. 🎅🏼 This is the reason I will keep doing what I do. OK, minor tweaks along the way.
|
|
|
Post by yogibearbull on Nov 27, 2023 12:15:56 GMT
M* has a new study on withdrawal programs for 2023. It's back to basic 4% w/COLA, but may be higher, even 5% w/COLA under "dynamic" withdrawals that require period reviews and adjustments. www.morningstar.com/retirement/good-news-safe-withdrawal-ratesMedia personality Dave Ramsey recently said that people can withdraw 8% w/COLA from all-stock funds, but that has been discredited by M* and others. Ramsey had 2 problems - too high withdrawals and the use of all-stock portfolios. www.morningstar.com/retirement/an-8-retirement-withdrawal-rateI have also posted on withdrawal programs that leave little or all of the inflation-adjusted original principal at the end. One can then run shorter withdrawal programs that may be restarted with modifications, if necessary. If this catches on, it will free people from the preoccupation of withdrawal programs being "Safe" as, by design, there should be some of the original principal left at the end for program restarts or for heirs. For me, " S" in SWR or SWRM (modified) is simply "Systematic", not "Safe" or "Sustainable". ybbpersonalfinance.proboards.com/post/1261/thread
|
|
|
Post by mnfish on Nov 27, 2023 13:39:16 GMT
The last 10 years have been very, very good. Thank you ZIRP. The Fed rate has been near zero since 2003 creating negative real interest rates. Now, with positive real interest rates again, and the beginning of the disappearance of TINA (There Is No Alternative) for stocks this is a new world for many investors. Personally, I'm sitting on more cash (MM) than ever, making 5.3%.
|
|
|
Post by steadyeddy on Nov 27, 2023 14:14:46 GMT
Good thread. Thanks for starting it steelpony10, and I do like your new moniker. Most of us have eased into our own ways of portfolio construction and management - and I think we have been able to cope with whatever the market throws/threw at us. Let that continue... Happy Holidays!!
|
|
|
Post by Mustang on Nov 27, 2023 18:15:26 GMT
In the table she shows a 4% initial withdrawal as having an 86% probability of success. That is the same year that Benz and Rickenthaler said 3.3% had a 90% probability of success. For an upcoming retiree how could this be more confusing. 2021 its either 4% or 3.3%. 2022 its 3.8%. 2023 it 4% not for a 50/50 portfolio but for portfolios with only 20-40% equity. If the recession hits next year using short term predictions for long tern payout periods might make it 3.5%.
The article in your link make me feel very good about Vanguard Wellesley Income Fund (VWIAX) with its 40/60 asset allocation. The computer simulations show that asset allocations of only 30-40% stock have the highest initial withdrawal rates across the board.
Those thinking of using the Guyton-Klinger guardrail approach should read this first. The author says, "What a disappointment! That’s where the Guyton-Klinger skeletons are hidden. Sure, when your initial withdrawal rate is 5% you never drop below a 4% withdrawal rate (due to the guardrail), but it’s 4% of a much-depleted portfolio value, not 4% of the initial value. That subtle distinction makes a huge difference. For example, the average withdrawal values for GK under the 4/5/6% initial withdrawal rates are only 2.74%, 3.02%, and 3.22% of the initial portfolio value, respectively. Well, it’s no longer a surprise that we have a higher final value than under the static 4% rule because we withdrew so much less! The advertised 5% withdrawal was only 3.02% withdrawal. What a scam!" earlyretirementnow.com/2017/02/08/the-ultimate-guide-to-safe-withdrawal-rates-part-9-guyton-klinger/
He is often over the top in his reviews and he sometimes uses straw man arguments but the table in his G-K review shows what would have happened during the stagflation years. The retiree would get less than half his planned income for over a decade in the middle of his retirement. That is kind of hard to live with.
My opinion: Look for articles and reviews that point out the cons of your investment strategy. Realize why they are cons. If it looks real then make adjustments. I've done that with the 4% Rule. But to be honest most of the criticisms are straw man arguments. In 2020 Rickenthaler criticized the 4% Rule ( www.morningstar.com/funds/math-retirement-income-keeps-getting-worse ). The 4% Rule is a pass/fail rule. A failure is running out of money. His chart shows that the 4% Rule was successful. His criticism was that it wasn't successful enough. Instead of weakening my belief in my withdrawal strategy it strengthened it. Even a confirmed critic showed it was successful.
Thanks for the link. I'll put it in my archives. It again leads me to believe no changes are necessary.
|
|
|
Post by richardsok on Nov 27, 2023 19:30:46 GMT
'stang:
That might be the best post on withdrawal rates I've ever read. Thank you. . Let me throw a question out there. (To you or to anyone else.) Right now PFF is at ten-year lows -- lower even than the worst of the Covid Crash, yielding 7.3% for an ETF of 100% diversified preferreds. (Reasonably conservative by any definition, yes?) . Say we start with $100,000. If one wanted to set up a spouse for lifetime income of, say 5%, and never lose port value, I'm thinking 86% PFF, 5% BRK/B, 5% GLD and 4% SQQQ (bearish hedge). . If set up today, the PFF leg (yielding now 7.3% of $86k = 6278, or +6.2% for the entire portfolio) is more than sufficient for the annual $5000 withdrawal. Theoretically, the smaller gold, bullish and hedging legs should buffer market vagaries and inflation changes. We re-balance annually to maintain 86-5-5-4 ratio. For all practical purposes we should be perpetual. (If you don't like BRK/B, replace it with IOO, USA, PTA, etc.) . Where is my thinking wrong?
|
|
|
Post by gman57 on Nov 27, 2023 19:46:15 GMT
HOT TIP!!! I just read this actionable headline on Marketwatch. We're all going to be zillionaires!! Here it is: "U.S. stocks could ‘zigzag’ to record high before end of 2023" (ignore the "could" )
|
|
|
Post by yogibearbull on Nov 27, 2023 20:09:32 GMT
richardsok , I put it to historical tests. That may not mean much, but if historical test results are fail/poor, one would need lot of confidence to go with them forward. Portfolio 1: 86% PFF, 5% BRK.B, 5% GLD, 4% SQQQ. PV ran from 01/2011-12/2022 (SQQQ inception was in 2010). SWRM < 0 (f = 1), so FAIL for perpetual possibility. I guessed that the issue may be SQQQ that tanked soon out of the gate and has been losing money gradually. So, I replaced it with CASHX (PV entry for 3m T-Bills). Portfolio 2: 86% PFF, 5% BRK.B, 5% GLD, 4% CASHX. PV ran for 01/2008-12/2022 (14 years; PFF inception was in 2007). SWRM was only 2.29% (f = 1) w/COLA (as 1st step for perpetual withdrawal). So, anything like 5% w/COLA would be FAIL. Thinking that PFF may be the issue, I ran PV with 100% PFF but that was worse. Portfolio 3: 100% PFF. For 01/2008-12/2022, SWRM was 2.04% only (f = 1). So, anything like 5% w/COLA would FAIL too.
|
|
|
Post by richardsok on Nov 27, 2023 21:03:19 GMT
Thanks, yogi. Yes, back-testing is VERY important, and I appreciate it.
Now we're in a muddle. My question is not "What if I bought PFF ten years ago?" It is, "What are long term prospects for my estate of buying PFF NOW at its historic lows?"
Put the question another way. Suppose I buy the 86-5-5-4 portfolio today. Where would the portfolio stand if the S&P swooned to 3500? Or rallied above 5000? I'm not expecting precision answers -- but I AM wondering.
Granting all your back-test exercise says (again, thank you!) the whole point of PFF as the big position is that it stutter-stepped downward only since 2022. But from 2014 to 2022 it was roughly STABLE (except for the COVID Crash). Now, at current extreme lows, might it not be a generational opportunity?
Is PFF not linked at least as strongly to interest rates as to the S&P500?
To re-phrase. Had PFF shown itself to be one of those long & slow erosions, drifting slowly downward year after year, I'd dismiss it. Your backtest would have predictive value. But context is critical here -- a long term chart shows it clearly swooned with the post-Covid interest rate spikes (just as one would expect) and, if my crystal ball reads on-beam, PFF is now set to stabilize at current levels or even slowly rise with interest rates holding or even lowering..... but with a "bought today" PFF position maintaining its current 7.3% yield-on-cost.
Your criticism of SQQQ appears valid. Thank you. I'll nix it. Still, some small protective hedge seems needed, to my thinking. Maybe plain-vanilla SH.
Yogi -- I'm not looking for an argument, nor am I taking an "I-must-be-right" position. I'm sincerely mulling over this one.
Thanks again.
|
|
|
Post by fishingrod on Nov 27, 2023 23:38:28 GMT
General plan: do nothing.- S/T bonds: keep RPHIX. Roll over 6M T-bills into whatever has the highest yield.
- MS bonds: keep moderate PIMIX holding, even if it continues to stink.
- L/T bonds: Maa-a-a-a-a-a-a-a-ybe. Watch VWALX / VWEAX / VWETX - they've all perked up over the last month, but scroll out to 5-10-20 years and they are in the toilet.
- Equities: Keep SCHD/VIG/others in taxable; various AMOEFs in T-IRAs; FBGRX in Roth.
- SC: Consider adding to AVUV on dips (or not on dips).
- Dividend stock portfolio: No changes; take dividends in cash.
I am surprised that you are even considering VWETX. It has a duration of 12.58yrs. Wow. Do you mind sharing why you want to go that long?
Also VWEAX corporate has a duration of 3.68yrs right now.
Fishingrod
|
|
|
Post by chang on Nov 28, 2023 1:20:49 GMT
fishingrod - In case the Fed starts cutting rates. But I wouldn’t buy on the long side of an inverted yield curve! (Edit: and during the last 1-2 months, long yields fell, making the curve more inverted! I guess it’s unlikely I will change what I’m doing for a while.)
|
|
|
Post by Mustang on Nov 28, 2023 3:24:53 GMT
'stang: That might be the best post on withdrawal rates I've ever read. Thank you. . Let me throw a question out there. (To you or to anyone else.) Right now PFF is at ten-year lows -- lower even than the worst of the Covid Crash, yielding 7.3% for an ETF of 100% diversified preferreds. (Reasonably conservative by any definition, yes?) . Say we start with $100,000. If one wanted to set up a spouse for lifetime income of, say 5%, and never lose port value, I'm thinking 86% PFF, 5% BRK/B, 5% GLD and 4% SQQQ (bearish hedge). . If set up today, the PFF leg (yielding now 7.3% of $86k = 6278, or +6.2% for the entire portfolio) is more than sufficient for the annual $5000 withdrawal. Theoretically, the smaller gold, bullish and hedging legs should buffer market vagaries and inflation changes. We re-balance annually to maintain 86-5-5-4 ratio. For all practical purposes we should be perpetual. (If you don't like BRK/B, replace it with IOO, USA, PTA, etc.) . Where is my thinking wrong? I used a new program (Portfolio Visualizer) that YBB showed us. It has a few minor things I'd change but it doesn't have the same problems as Monte Carlo simulations. It uses historical data, not forecasted averages. But, it has a problem all back tests have. The last 13 years are unlikely to be repeated.
I'm just adding a little bit to other comments. If withdrawals were adjusted for inflation, starting with $100,000 then almost 13 years later the ending balance was approximately $59,000. Not adjusting for inflation the ending balance would be approximately $67,000 but that comes with a pretty big cost, reduced purchasing power. Using an inflation calculator the spouse would be able to buy 73% of the goods and services purchased in 2011. It takes $1.37 to buy what $1.00 bought in 2011.
Inflation during that period was very low. Even if the Fed gets inflation down to 3% after 13 years of inflation it would take $1.47 to buy what $1.00 does today. The $5,000 initial withdrawal grows to $7,350 to maintain purchasing power. That's only 13 years. Going out 30 year the inflation adjusted withdrawal would be $12,150. I don't think a 6.2% return will cut it. Morningstar used 9.4% for equity and 4.8% for bonds. A 50/50 allocation would have a 7.1% return. Even with the higher portfolio return they only took a 4% initial withdrawal not a 5%.
Edit: Please remember I'm not a financial advisor. I'm just someone who tries to learn a little more every day.
|
|
Deleted
Deleted Member
Posts: 0
|
Post by Deleted on Nov 28, 2023 4:58:34 GMT
I'll be moving between these two positions based on my +/- Figure of Movement. Not exciting. FI 40% 60% VTI 30% 20% SCHD 20% 10% VGT 10% 10%
|
|
|
Post by Norbert on Nov 28, 2023 7:15:50 GMT
fishingrod - In case the Fed starts cutting rates. But I wouldn’t buy on the long side of an inverted yield curve! (Edit: and during the last 1-2 months, long yields fell, making the curve more inverted! I guess it’s unlikely I will change what I’m doing for a while.) Good observation. This wasn't on my radar. There are useful charts and analysis regarding yield curve behavior here: www.currentmarketvaluation.com/models/yield-curve.phpI note that some of the ratios are quite dramatic, not seen since the late 1970s. For example, check out the 10-year to 3-month yield spread chart. ----- Regarding sustainable withdrawal theories, I treat them skeptically. Everything is driven by historical return data. As frequently mentioned, the various forms of money printing exercises launched in 2008-09 have juiced the market, eventually leading to zero rates. Meanwhile, large fiscal deficits are mostly ignored. So, I'm clueless about what a sustainable withdrawal rate will turn out to be ... despite the availability of elegant models. The one thing I can control is discretionary spending; and I've made a serious effort to keep fixed costs on the low side too. "Expectation is the root of all heartache." (Shakespeare) N.
|
|
|
Post by daddymisc on Nov 30, 2023 0:17:42 GMT
Only 10% on my investment is in Roth (rest in IRA/401k) so will continue conversion to Roth (in-kind move of stock/MF/cef/etf/cash/etc.).
|
|
Deleted
Deleted Member
Posts: 0
|
Post by Deleted on Dec 27, 2023 22:30:07 GMT
I have decided to keep it simple. 1) Mega tech stocks (35%) (Existing investment) 2) Berkshire Hathaway + PRILX + TCAF (15%) (Large Blend) (Existing investment) 3) SP500 (20%) 4) Broad International funds (20%) 5) 10% open, whatever seems good at any point. May be US small/Mid cap - Avuv and ?
( I have emergency cash separate)
|
|
|
Post by keppelbay on Dec 28, 2023 10:31:34 GMT
Regarding sustainable withdrawal theories, I treat them skeptically. Everything is driven by historical return data. As frequently mentioned, the various forms of money printing exercises launched in 2008-09 have juiced the market, eventually leading to zero rates. Meanwhile, large fiscal deficits are mostly ignored. So, I'm clueless about what a sustainable withdrawal rate will turn out to be ... despite the availability of elegant models. The one thing I can control is discretionary spending; and I've made a serious effort to keep fixed costs on the low side too.
I share Norbert 's view on withdrawal theories. But, I recognise that this type of thinking matters if you base funding your retirement on gains in equity markets. You have to decide how much to take out and you can't know whether/if/when prices will tank (take it as given that dollars are fungible and that total return matters). I don't like the uncertainty.
Given that, I've adopted an approach that is quite different from many of you, who rely on equity allocation for growth. I focus on growing the income stream. Key to the approach is underspending, and investing the excess to grow future income. I use mainly fixed income vehicles, with a hefty allocation to multisector FI CEFs. I don't try to pick sectors or predict market or rate direction. The fund managers do that better than I could.
I decided to trial-run a retirement strategy while I was still working. Starting early, I felt free to experiment. If I didn't like the way it was working, I could (a) try something else, (b) stay employed to 'fix' it. I didn't need plan B and was able to retire early. My income from invested capital has grown by more than 40% since I retired in 2017 and started living off the cash flow. Total portfolio size has grown, though at a rate slower than the stock market (S&P500). This is partly due to withdrawals and partly due to the effect of rising rates on FI CEF prices in 2022.
pros: - Steadily growing income stream, in excess of spending needs. - I am able to grow the income at more than the rate of inflation, so this could be sustainable.
cons: - One obvious downside is that I have paid more income tax than I might have needed to (particularly pre-retirment).
- Portfolio growth was keeping pace with the growth of the S&P500, but has lagged recently, mostly due to FI CEFs in 2022. I've been adding to these while their prices have been dropping. This has markedly grown income. Meanwhile, CEF NAVs and mkt prices seem to be starting to recover in anticipation of rate cuts.
conclusion: The approach survived the recent stress test of rapidly rising US rates - bruised but not broken.
Plan for 2024: - more of the same, to ensure that income growth exceeds inflation. - some of the 'fresh' reinvested money will go to less volatile vehicles, as the excess income buffer is adequate. Also, the best bargains in my favorite CEFs may have passed.
- think about whether I need a more formal allocation model to help constrain the impulse to take on more risk than I need.
|
|
|
Post by rhythmmethod on Jan 1, 2024 23:23:00 GMT
I am just now seeing this thread. My apologies for creating an almost duplicate thread. It is still good to see what people are doing forward-looking, whether a prediction or driven by their personal circumstances. - RM
|
|