I retired this year and have been working to clean up and rationalize our investments. I have a $29K/year fixed pension (non-COLA). Our expenses for next year are projected to be $61K. I'd like thoughts on our asset allocation and other matters, listed below.
Emergency funds: 9 months. Will be spent down some next year as we need funds for expenses.
Debt: no debts
Tax Filing Status: Married filing jointly
Tax Rate: 12% Federal, 6.6% State
State of Residence: DE
Age: 61 (him) and 64 (her)
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 25% of stocks
Not sure on this allocation, need help (see questions below)
Portfolio Size: $1.85M
Current Retirement Assets:
his Brokerage at Vanguard (31.5%)
25% VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL (VTSAX) (0.04%)
4.6% VANGUARD 500 INDEX ADMIRAL CL (VFIAX) (0.04%)
1.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Taxable at Treasury Direct (0.6%)
0.6% (IBOND) (??%)
her Taxable at Treasury Direct (0.6%)
0.6% (IBOND) (??%)
his Rollover IRA at Vanguard (21.4%)
4.9% VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL (VTSAX) (0.04%)
9.6% VANGUARD SHORT TERM INFLATION PROTECTED SECURITIES ETF (VTIP) (0.04%)
6.9% VANGUARD TOTAL BOND MARKET INDEX ADMIRAL CL (VBTLX) (0.05%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Rollover IRA at Fidelity (11.3%)
11.3% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (SPAXX) (0.42%)
his Rollover IRA at Merrill Edge (6.5%)
5% VANGUARD TOTAL STK MKT (VTI) (0.03%)
1.5% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BANK OF AMERICA, NA RASP (IIAXX) (??%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
his Inherited IRA at Vanguard (1.2%)
0.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0.3% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Vanguard (7.7%)
5.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
1.7% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Fidelity (7%)
5.4% VANGUARD INDEX FDS VANGUARD TOTAL STK MKT ETF (VTI) (0.03%)
1.6% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (SPAXX) (0.42%)
her Roth IRA at Vanguard (5.7%)
4.5% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
1.2% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Merrill Edge (1.6%)
1.2% VANGUARD TOTAL STK MKT (VTI) (0.03%)
0.4% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
her Roth IRA at Merrill Edge (1.4%)
1.1% VANGUARD TOTAL STK MKT (VTI) (0.03%)
0.3% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BANK OF AMERICA, NA RASP (IIAXX) (??%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
his Inherited Roth IRA at Vanguard (0.7%)
0.6% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0.2% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his HSA at Fidelity (2.7%)
2.1% VANGUARD INDEX FDS VANGUARD TOTAL STK MKT ETF (VTI) (0.03%)
0.6% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (FDRXX) (0.34%)
Contributions:
Retired, no more contributions
Available funds:
N/A
Additional Background:
My asset allocation target is 60% US Stock/20% Ex-US Stock/10% Total Bond Fund/10% short term inflation-protected US Treasury bond fund. I realize that I have many accounts and plan to move the Merrill Edge accounts to Fidelity (he) and Vanguard (her) after the holidays. Lower expense lifestyle suits us, and I plan to use any available 12% tax bracket headroom to do Roth conversions to lower future RMDs.
Questions:
1.Asset Allocation: I read through the Assessing risk tolerance wiki page and Lary Swedroe's articles linked to on that page and have taken the Vanguard quiz several times (its last recommendation was a 50/50 stock/bond split). I chose a high stock allocation because the pension gives us the "ability" to take more risk, which I feel that I need to do with retiring this early and how long our money needs to last. Looking at the bond fund absolute value rather than percentage of the portfolio, I figure that I have nearly 10 years of necessary expenses in bonds if there is a drastic market downturn and this should be sufficient. However, I am second guessing this allocation and would appreciate thoughts on whether this reasoning is sound. I'm a little concerned about volatility without corresponding higher return.
I set the ex-US portion, but while looking at our AA I noticed on Portfolio Visualizer that exchanging the ex-US portion for US bonds would have yielded identical results with less volatility over the last 37 years: https://www.portfoliovisualizer.com/bac ... vbhrtN1DCu. Of course, this loses the diversification of ex-US and you never know when that might come in handy. Then there is small cap to consider. I held a small cap fund for a while but sold it in my clean up this year.
So I guess my question boils down to: how do I find an AA (or AA plan if I adopt a guide slope) that feels right and that I stop second-guessing myself on? I am less concerned about selling losing stocks in a down market than I am about jumping to a new "rational" AA in an up market, and I'm not sure how risky this action would be.
2.I feel like we got stung when VBTLX dropped in 2022. My current thoughts on bonds is that they don't do very well, and when the market drops they drop a little less, so they are basically portfolio inertia. Any better way to think of this portion of my portfolio?
3.What's the criteria for when to pull from our bond funds rather than sell stock funds for income? Is it when the market drops X%? Is it whenever I find that the CAGR of the stock funds that I would sell is too low for my liking?
Thanks!
Emergency funds: 9 months. Will be spent down some next year as we need funds for expenses.
Debt: no debts
Tax Filing Status: Married filing jointly
Tax Rate: 12% Federal, 6.6% State
State of Residence: DE
Age: 61 (him) and 64 (her)
Desired Asset allocation: 80% stocks / 20% bonds
Desired International allocation: 25% of stocks
Not sure on this allocation, need help (see questions below)
Portfolio Size: $1.85M
Current Retirement Assets:
his Brokerage at Vanguard (31.5%)
25% VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL (VTSAX) (0.04%)
4.6% VANGUARD 500 INDEX ADMIRAL CL (VFIAX) (0.04%)
1.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Taxable at Treasury Direct (0.6%)
0.6% (IBOND) (??%)
her Taxable at Treasury Direct (0.6%)
0.6% (IBOND) (??%)
his Rollover IRA at Vanguard (21.4%)
4.9% VANGUARD TOTAL STOCK MARKET INDEX ADMIRAL CL (VTSAX) (0.04%)
9.6% VANGUARD SHORT TERM INFLATION PROTECTED SECURITIES ETF (VTIP) (0.04%)
6.9% VANGUARD TOTAL BOND MARKET INDEX ADMIRAL CL (VBTLX) (0.05%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Rollover IRA at Fidelity (11.3%)
11.3% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (SPAXX) (0.42%)
his Rollover IRA at Merrill Edge (6.5%)
5% VANGUARD TOTAL STK MKT (VTI) (0.03%)
1.5% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BANK OF AMERICA, NA RASP (IIAXX) (??%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
his Inherited IRA at Vanguard (1.2%)
0.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0.3% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Vanguard (7.7%)
5.9% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
1.7% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Fidelity (7%)
5.4% VANGUARD INDEX FDS VANGUARD TOTAL STK MKT ETF (VTI) (0.03%)
1.6% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (SPAXX) (0.42%)
her Roth IRA at Vanguard (5.7%)
4.5% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
1.2% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his Roth IRA at Merrill Edge (1.6%)
1.2% VANGUARD TOTAL STK MKT (VTI) (0.03%)
0.4% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
her Roth IRA at Merrill Edge (1.4%)
1.1% VANGUARD TOTAL STK MKT (VTI) (0.03%)
0.3% VANGUARD TOTAL INTL STK (VXUS) (0.07%)
0% BANK OF AMERICA, NA RASP (IIAXX) (??%)
0% BLACKROCK LIQUIDITY (TMCXX) (??%)
his Inherited Roth IRA at Vanguard (0.7%)
0.6% VANGUARD TOTAL STOCK MARKET ETF (VTI) (0.03%)
0.2% VANGUARD TOTAL INTL STOCK INDEX FUND ETF (VXUS) (0.07%)
0% VANGUARD FEDERAL MONEY MARKET INVESTOR CL (VMFXX) (0.11%)
his HSA at Fidelity (2.7%)
2.1% VANGUARD INDEX FDS VANGUARD TOTAL STK MKT ETF (VTI) (0.03%)
0.6% VANGUARD TOTAL INTERNATIONAL STOCK INDEX FUND (VXUS) (0.07%)
0% HELD IN MONEY MARKET (FDRXX) (0.34%)
Contributions:
Retired, no more contributions
Available funds:
N/A
Additional Background:
My asset allocation target is 60% US Stock/20% Ex-US Stock/10% Total Bond Fund/10% short term inflation-protected US Treasury bond fund. I realize that I have many accounts and plan to move the Merrill Edge accounts to Fidelity (he) and Vanguard (her) after the holidays. Lower expense lifestyle suits us, and I plan to use any available 12% tax bracket headroom to do Roth conversions to lower future RMDs.
Questions:
1.Asset Allocation: I read through the Assessing risk tolerance wiki page and Lary Swedroe's articles linked to on that page and have taken the Vanguard quiz several times (its last recommendation was a 50/50 stock/bond split). I chose a high stock allocation because the pension gives us the "ability" to take more risk, which I feel that I need to do with retiring this early and how long our money needs to last. Looking at the bond fund absolute value rather than percentage of the portfolio, I figure that I have nearly 10 years of necessary expenses in bonds if there is a drastic market downturn and this should be sufficient. However, I am second guessing this allocation and would appreciate thoughts on whether this reasoning is sound. I'm a little concerned about volatility without corresponding higher return.
I set the ex-US portion, but while looking at our AA I noticed on Portfolio Visualizer that exchanging the ex-US portion for US bonds would have yielded identical results with less volatility over the last 37 years: https://www.portfoliovisualizer.com/bac ... vbhrtN1DCu. Of course, this loses the diversification of ex-US and you never know when that might come in handy. Then there is small cap to consider. I held a small cap fund for a while but sold it in my clean up this year.
So I guess my question boils down to: how do I find an AA (or AA plan if I adopt a guide slope) that feels right and that I stop second-guessing myself on? I am less concerned about selling losing stocks in a down market than I am about jumping to a new "rational" AA in an up market, and I'm not sure how risky this action would be.
2.I feel like we got stung when VBTLX dropped in 2022. My current thoughts on bonds is that they don't do very well, and when the market drops they drop a little less, so they are basically portfolio inertia. Any better way to think of this portion of my portfolio?
3.What's the criteria for when to pull from our bond funds rather than sell stock funds for income? Is it when the market drops X%? Is it whenever I find that the CAGR of the stock funds that I would sell is too low for my liking?
Thanks!
Statistics: Posted by chadkaz — Fri Dec 20, 2024 8:58 am — Replies 0 — Views 27