Author Topic: Asset allocation once you have passed your "number"  (Read 1614 times)

mak1277

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Asset allocation once you have passed your "number"
« on: January 11, 2018, 07:12:52 AM »
So, with the vesting of some equity awards, as of now I have hit and slightly passed my FIRE "number".  Because of future equity vesting golden handcuffs, I will continue to work for at least a few more years.  So for future savings, would you stick to your planned AA?  Invest future savings more conservatively?  More aggressively? 


MustacheAndaHalf

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Re: Asset allocation once you have passed your "number"
« Reply #1 on: January 11, 2018, 09:34:17 AM »
In my view, your portfolio should be made ready for retirement so you can do so at any time.  Both John Bogle and Larry Swedroe talk about the idea of "enough": when you have enough to retire, you've won the game and should stop playing.  Meaning you should shift from growing your assets to protecting them, typically by increasing the bond percentage.

Another view on it: if you double your assets when you already have enough.. you can't retire twice.  But if that money drops in half, you will be severely impacted.  Owing to that risk, it's better to aim for safety when your portfolio has met your goals.

VoteCthulu

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Re: Asset allocation once you have passed your "number"
« Reply #2 on: January 11, 2018, 04:05:36 PM »
It depends on your goals. If you want to use the extra money to reduce sequence of returns risk, increasing bonds/TIPS/etc. allocation is a good option.

Alternatively, if you want to leave a massive legacy, going to 100% stocks is the surest way to build wealth over 50+ years.

I would just stick with my normal allocation unless I had a huge windfall, though.

sokoloff

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Re: Asset allocation once you have passed your "number"
« Reply #3 on: January 11, 2018, 05:13:01 PM »
As prior posters allude, it depends on the relationship of your expected NW at retirement and your goals.

DW and I are mid-40s and I intend/expect to invest for an 80-year horizon at all times in our lives. By the time I retire, I expect we'll be at 4-6x our minimum FI number (I also have golden handcuffs working right now, but also have kids still in elementary school and like my job, so I have plenty of two-legged reasons to keep working and padding the stache).

We will have more than enough even in a 75% downturn situation, and so there's nothing that we're really investing that is make-or-break for our lifetimes, and if we stay invested for an 80-year horizon, likely not even for our kids' lifetimes.

FIRE 20/20

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Retire-Canada

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Re: Asset allocation once you have passed your "number"
« Reply #5 on: January 12, 2018, 08:21:30 PM »
I'm getting close[er] to my number. I won't be working once I hit it so I am starting to formulate a plan to shift some $$ away from stocks to bonds. If I was going to work another 5yrs past 4%WR I'd just leave my portfolio at 100% stocks until I decided I was ready to retire.

grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #6 on: January 13, 2018, 05:07:13 AM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #7 on: January 15, 2018, 11:21:54 AM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.

Because the amount of money I'd lose out on by quitting today, instead of 2 years from now, is too staggering to walk away from.  It drastically changes the remainder of my life in terms of ability to live where I want, spend what I want, donate what I want.

Car Jack

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Re: Asset allocation once you have passed your "number"
« Reply #8 on: January 15, 2018, 11:40:00 AM »
I think what your AA is during accumulation stage makes a huge difference in what the answer to this question might be.  A co-worker and I were talking about the runup and he's very scared of a sudden crash.  I mentioned that I have a 50/50 AA and am not scared.  He said he's at 100/0 and is scared as hell.  He has since done a "sell to buy" and now has a much more reasonable AA.

For me?  I had been using the age minus ten in bonds but decided in the last year that once I hit 60 (last year), 50/50 would become my forever AA.  So although I am not retired yet (next 2 years), my AA changing days are done.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #9 on: January 15, 2018, 11:43:21 AM »
I'm at 60/40, and if I retired immediately upon hitting my number, I'd stay at 60/40 generally over the course of my retirement.

grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #10 on: January 15, 2018, 11:46:35 AM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.
Because the amount of money I'd lose out on by quitting today, instead of 2 years from now, is too staggering to walk away from.  It drastically changes the remainder of my life in terms of ability to live where I want, spend what I want, donate what I want.
It sounds like you don't have 'enough' then. Am I missing something here?

TheAnonOne

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Re: Asset allocation once you have passed your "number"
« Reply #11 on: January 15, 2018, 12:51:58 PM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.
Because the amount of money I'd lose out on by quitting today, instead of 2 years from now, is too staggering to walk away from.  It drastically changes the remainder of my life in terms of ability to live where I want, spend what I want, donate what I want.
It sounds like you don't have 'enough' then. Am I missing something here?

Agree'd to a degree, he is probably 'barebones' or some flavor of that. Though if he truly had 'enough' it wouldn't matter.

However, if you were looking at 2 years from vesting into say... double your FIRE number, chances are you would keep working as well. While I would love to FIRE with my current lifestyle and be really happy, I am sure I (and most of us) would love to expand travel, charitable giving, or other venture.


'Enough' can be a really grey area, because 'enough' is usually followed by 'for . . .'

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #12 on: January 15, 2018, 01:11:19 PM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.
Because the amount of money I'd lose out on by quitting today, instead of 2 years from now, is too staggering to walk away from.  It drastically changes the remainder of my life in terms of ability to live where I want, spend what I want, donate what I want.
It sounds like you don't have 'enough' then. Am I missing something here?

Agree'd to a degree, he is probably 'barebones' or some flavor of that. Though if he truly had 'enough' it wouldn't matter.

However, if you were looking at 2 years from vesting into say... double your FIRE number, chances are you would keep working as well. While I would love to FIRE with my current lifestyle and be really happy, I am sure I (and most of us) would love to expand travel, charitable giving, or other venture.


'Enough' can be a really grey area, because 'enough' is usually followed by 'for . . .'

Without going into specific numbers, staying two more years will add another 50% to my 'stache.  Right now, based on current spending levels, my 'stache puts us at about a 3% SWR based on current spending (which, frankly, is far above what would be considered mustachian), but adding the additional means the possibility of adding a second residence, unlimited international travel, significant reserves for unknown issues, legacy for children, charitable donations/endowments, etc. 


mrteacher

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Re: Asset allocation once you have passed your "number"
« Reply #13 on: January 15, 2018, 01:23:13 PM »
If you have ‘enough’, why don’t you stop working today? All that will happen tomorrow is you will get one day closer to death and you will still only have ‘enough’ to show for it.
Because the amount of money I'd lose out on by quitting today, instead of 2 years from now, is too staggering to walk away from.  It drastically changes the remainder of my life in terms of ability to live where I want, spend what I want, donate what I want.
It sounds like you don't have 'enough' then. Am I missing something here?

Agree'd to a degree, he is probably 'barebones' or some flavor of that. Though if he truly had 'enough' it wouldn't matter.

However, if you were looking at 2 years from vesting into say... double your FIRE number, chances are you would keep working as well. While I would love to FIRE with my current lifestyle and be really happy, I am sure I (and most of us) would love to expand travel, charitable giving, or other venture.


'Enough' can be a really grey area, because 'enough' is usually followed by 'for . . .'

Without going into specific numbers, staying two more years will add another 50% to my 'stache.  Right now, based on current spending levels, my 'stache puts us at about a 3% SWR based on current spending (which, frankly, is far above what would be considered mustachian), but adding the additional means the possibility of adding a second residence, unlimited international travel, significant reserves for unknown issues, legacy for children, charitable donations/endowments, etc.

I'm right there with you, Mak. I see the 'barebones FIRE' and 'ideal FIRE' number as two distinct goals. It'll be wonderful when our NW is such that we could live off it in perpetuity; however, we probably won't really pull the plug until we have enough for travel, donations, etc -- the same sort of things for which you are saving.

grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #14 on: January 15, 2018, 02:27:49 PM »
I’m not being deliberately obtuse here. I think ‘enough’ is a really important part of Mustachianism. We all have finite years left and I don’t understand how a second house could ever possibly be worth trading in two more of yours.

mrteacher

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Re: Asset allocation once you have passed your "number"
« Reply #15 on: January 15, 2018, 03:35:03 PM »
I’m not being deliberately obtuse here. I think ‘enough’ is a really important part of Mustachianism. We all have finite years left and I don’t understand how a second house could ever possibly be worth trading in two more of yours.

For some it's not worth it; for others it is. OP may be thinking it's worth working two more years to be able to have a second/vacation home that his family will enjoy for decades or longer, or to be able to take trips to foreign countries.

Yes, this is not hardcore Mustachianism.

matchewed

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Re: Asset allocation once you have passed your "number"
« Reply #16 on: January 15, 2018, 06:28:29 PM »
I'd contend that the OP hasn't really hit their number then. I'll not get into the excess and extravagance that has been mentioned in the body but will stick with the concept. If I've decided that some amount is enough and I'm FIRE'd then that is it. That is the goal and it has been obtained. The whole how do I afford my lifestyle question is answered. Adding more money does not provide the utility anymore.

More to the original question, when you have large amounts of excess money you can easily afford to be more conservative with your asset allocation.

Retire-Canada

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Re: Asset allocation once you have passed your "number"
« Reply #17 on: January 15, 2018, 06:32:22 PM »
More to the original question, when you have large amounts of excess money you can easily afford to be more conservative with your asset allocation.

That's ^^^ true, but you would also have less reason to bother doing so. And if spending money like it was going out of style was a life goal than the less conservative allocation would be beneficial to power the firehose of cash.

sokoloff

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Re: Asset allocation once you have passed your "number"
« Reply #18 on: January 15, 2018, 07:50:03 PM »
I’m not being deliberately obtuse here. I think ‘enough’ is a really important part of Mustachianism. We all have finite years left and I don’t understand how a second house could ever possibly be worth trading in two more of yours.
In my case, I've got a first and third grader and we have chosen (and are happy with) public schools.

If I stop working, I give up a job I genuinely enjoy doing that pays me 6-figures (not starting with a 1) all-in (including long-term incentive comp), and it's not like I can go travel around the world all the time and leave the kids at home. I will retire "early", probably in my early 50s, but probably not before the kids are in high school and would be moderately self-sufficient if we wanted to travel somewhere during the school year.

I have one expensive hobby that benefits from the high income; it's not a second home, but comparable expense. That's handily covered for my lifetime if I work even 5 more years from now.
« Last Edit: January 16, 2018, 06:49:16 AM by sokoloff »

Indexer

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Re: Asset allocation once you have passed your "number"
« Reply #19 on: January 15, 2018, 08:45:53 PM »
My retirement AA would be to put 10 years worth of expenses in bonds and the rest in stocks. Following the 4% rule you would have 25X expenses at the start so you would have 10X in bonds and 15X in stocks. Therefore, my starting allocation would be 60S/40B. Any year the portfolio grows faster than I'm spending from it I'll keep adding more to stocks while always maintaining 10X in bonds.

I would keep the 10X in bonds until we hit a down market. Then I will spend down the bonds. This mitigates sequence of return risk.

The expectation is that my most conservative AA would be right at retirement when the portfolio is most vulnerable and that it would likely get more aggressive over time with decent markets.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #20 on: January 16, 2018, 06:31:18 AM »
I'd contend that the OP hasn't really hit their number then. I'll not get into the excess and extravagance that has been mentioned in the body but will stick with the concept. If I've decided that some amount is enough and I'm FIRE'd then that is it. That is the goal and it has been obtained. The whole how do I afford my lifestyle question is answered. Adding more money does not provide the utility anymore.

More to the original question, when you have large amounts of excess money you can easily afford to be more conservative with your asset allocation.

Thank you for actually answering my question and not *only* passing judgement on what you think I have or don't have.

Re: the bolded part...when I first started thinking about ER, my target retirement date was always January 2020...based on the vesting of equity awards.  I've only hit my number already because my company's returns have far outpaced the overall market.  So sure, I could pull the trigger today at a very comfortable withdrawl rate.  I think it's funny that people question whether or not I've hit my number...whatever.  I don't really care what people think about that, or what they think about my lifestyle.  If I wanted critique of that I would have posted in another part of the forum.

matchewed

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Re: Asset allocation once you have passed your "number"
« Reply #21 on: January 16, 2018, 08:27:12 AM »
I'd contend that the OP hasn't really hit their number then. I'll not get into the excess and extravagance that has been mentioned in the body but will stick with the concept. If I've decided that some amount is enough and I'm FIRE'd then that is it. That is the goal and it has been obtained. The whole how do I afford my lifestyle question is answered. Adding more money does not provide the utility anymore.

More to the original question, when you have large amounts of excess money you can easily afford to be more conservative with your asset allocation.

Thank you for actually answering my question and not *only* passing judgement on what you think I have or don't have.

Re: the bolded part...when I first started thinking about ER, my target retirement date was always January 2020...based on the vesting of equity awards.  I've only hit my number already because my company's returns have far outpaced the overall market.  So sure, I could pull the trigger today at a very comfortable withdrawl rate.  I think it's funny that people question whether or not I've hit my number...whatever.  I don't really care what people think about that, or what they think about my lifestyle.  If I wanted critique of that I would have posted in another part of the forum.

Right but you stated in your original post that you've hit your number for FIRE. If that is the goal then cool why haven't you FIRE'd? If it's because you've shifted the goal posts then you haven't hit your number then right? Or am I missing something? Maybe I'm looking at it too black and white.

Livingthedream55

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Re: Asset allocation once you have passed your "number"
« Reply #22 on: January 16, 2018, 10:21:37 AM »
Sounds like you've hit your barebones FI number. What Asset Allocation you are comfortable with depends on you.  There are very good threads on that topic here.

For me, since I'm getting closer to FIRE, it's 60% equities (Vanguard Total Stock Market Index Fund) and 40% bonds (Vanguard Total Bond Market Index Fund) and will remain so for the rest of my life. I will rebalance yearly. I will also have two other income streams (govt pension, Soc. Sec.). As you know, others here are more aggressive with their AA.

I just finished reading Jim Collins' book which I highly recommend.

https://smile.amazon.com/Simple-Path-Wealth-financial-independence-ebook/dp/B01H97OQY2/ref=sr_1_1?ie=UTF8&qid=1516122829&sr=8-1&keywords=j+collins+investing




grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #23 on: January 16, 2018, 11:03:58 AM »
Thank you for actually answering my question and not *only* passing judgement on what you think I have or don't have.
Sorry, I thought for a minute this was the Mr Money Mustache forum.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #24 on: January 16, 2018, 12:16:22 PM »
I'd contend that the OP hasn't really hit their number then. I'll not get into the excess and extravagance that has been mentioned in the body but will stick with the concept. If I've decided that some amount is enough and I'm FIRE'd then that is it. That is the goal and it has been obtained. The whole how do I afford my lifestyle question is answered. Adding more money does not provide the utility anymore.

More to the original question, when you have large amounts of excess money you can easily afford to be more conservative with your asset allocation.

Thank you for actually answering my question and not *only* passing judgement on what you think I have or don't have.

Re: the bolded part...when I first started thinking about ER, my target retirement date was always January 2020...based on the vesting of equity awards.  I've only hit my number already because my company's returns have far outpaced the overall market.  So sure, I could pull the trigger today at a very comfortable withdrawl rate.  I think it's funny that people question whether or not I've hit my number...whatever.  I don't really care what people think about that, or what they think about my lifestyle.  If I wanted critique of that I would have posted in another part of the forum.

Right but you stated in your original post that you've hit your number for FIRE. If that is the goal then cool why haven't you FIRE'd? If it's because you've shifted the goal posts then you haven't hit your number then right? Or am I missing something? Maybe I'm looking at it too black and white.

I said I'd hit my number.  I never said "RE as soon as possible is my goal".  As I said, my target retirement date was always 2020 when all my equity vested...just because I hit my number doesn't mean I have to change that. 

BFGirl

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Re: Asset allocation once you have passed your "number"
« Reply #25 on: January 16, 2018, 12:47:26 PM »
My AA is fairly conservative.  I'm at my number and working mainly to be able to take pension in 2020 and get retiree health benefits.  As a result, my AA is more conservative than many on here because I am more interested in preservation and beating inflation than I am in accumulating more.  I've run my numbers through CFireSim with my AA and am currently okay with the spending amount recommended.

Congrats on reaching your number!