Author Topic: Asset allocation once you have passed your "number"  (Read 5088 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!

OurTown

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Re: Asset allocation once you have passed your "number"
« Reply #26 on: January 17, 2018, 12:46:53 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.

This is the most reasonable strategy I have read on these boards.

Rubic

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Re: Asset allocation once you have passed your "number"
« Reply #27 on: January 17, 2018, 02:39:43 PM »
About 3 years ago I was in a similar situation as OP.  I'd basically hit my FI number, but
had no urgency to quit working.  In the meanwhile, my net worth has increased ~40%.

I'll probably FIRE sometime this year.  My asset allocation is still mostly equities,
but I have 3-4 years of cash equivalents to ride out any serious market downturn.
I tend to think more in terms of "years of living expenses" in cash rather than %
allocation, though I think Buffett's prescription (for his spouse) of 90% stocks and
10% treasuries works pretty well.

BTDretire

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Re: Asset allocation once you have passed your "number"
« Reply #28 on: January 17, 2018, 04:14:37 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.
  At 25 yrs old you may have had a real job for 5 years, 2 more years is a 40% increase in your working life.
At 50 or 55 yrs old it's just a couple more years!
 Also for many here $40k is enough, but with an extra $20,000 there is just so much more you could do.
 I would gladly work two years for an additional 50%. Add the fact that he/she has been vesting in this plan for maybe 18 years, seems stupid to blow it off now.
 Many of us use the ideas here to create our life based on what is best for us, we don't necessarily abide by any rules that somebody else thinks are an obsolete must. Enough is not all we want.
 Maybe put it in your terms, sex twice a week may be enough, but four times a week is just better.
 And then, maybe you want a little more, so you masturbate. So is enough really enough?

matchewed

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Re: Asset allocation once you have passed your "number"
« Reply #29 on: January 17, 2018, 05:14:29 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.
  At 25 yrs old you may have had a real job for 5 years, 2 more years is a 40% increase in your working life.
At 50 or 55 yrs old it's just a couple more years!
 Also for many here $40k is enough, but with an extra $20,000 there is just so much more you could do.
 I would gladly work two years for an additional 50%. Add the fact that he/she has been vesting in this plan for maybe 18 years, seems stupid to blow it off now.
 Many of us use the ideas here to create our life based on what is best for us, we don't necessarily abide by any rules that somebody else thinks are an obsolete must. Enough is not all we want.
 Maybe put it in your terms, sex twice a week may be enough, but four times a week is just better.
 And then, maybe you want a little more, so you masturbate. So is enough really enough?

If the logic is that more=better then why be on a FIRE forum at all? Isn't the concept of FIRE predicated by the concept of realizing that your lifestyle doesn't need oodles of money? So why not keep working until you die if the goal is just to keep accumulating money until you have so much that you can't even think of ways to spend it?

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.

Welcome back Grant, in some ways it hasn't changed. :)

grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #30 on: January 17, 2018, 09:31:53 PM »
At 25 yrs old you may have had a real job for 5 years, 2 more years is a 40% increase in your working life. At 50 or 55 yrs old it's just a couple more years!
I think you've got this backwards. A 30 year old who will live to 70 is throwing away 5% of their life by continuing to work two years after they don't need to. A 50 year old is throwing away 10%, and it's twice as much of a waste. All you and I have in this world is time.
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Also for many here $40k is enough, but with an extra $20,000 there is just so much more you could do.
If the minimum level of expenses that supports a happy life for you is $60,000 and you have a portfolio that will give you $40,000, you are not FIRE, regardless of the norms of this forum. And once you reach $60,000, there is still "so much more you could do" if you only had $90,000. Regardless, I think we're talking about something more like $100k vs $150k since we're contemplating making sure there is room in the budget for TWO houses instead of a dreary life of deprivation with only one. YMMV but the income beyond the first $100k is probably well past the point of bringing additional utility for most people.
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I would gladly work two years for an additional 50%. Add the fact that he/she has been vesting in this plan for maybe 18 years, seems stupid to blow it off now.
That's called the sunk cost fallacy. It doesn't matter if you are 898 years into a 900 year vesting schedule - if you have enough money without it, all you're going to get by waiting two years is older.
Quote
Maybe put it in your terms, sex twice a week may be enough, but four times a week is just better. And then, maybe you want a little more, so you masturbate. So is enough really enough?
I'm confused how these are "my terms" - did you just ask Urban Dictionary what 25 year olds like? Moreover, there are some key differences that make this an unsuitable analogy. There are no real negative externalities of sex, while the negative externalities of the wasteful Western middle-class lifestyle are literally the whole reason this site exists. Additionally, sex can bring you closer to a loved one in your life, not compete for time with them. More sex can also make you healthier and happier, while more money will leave you the same person as you were with less money. If more money brought you all of these things, MMM would be a blog about how to keep working onto your deathbed.

somers515

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Re: Asset allocation once you have passed your "number"
« Reply #31 on: January 18, 2018, 04:40:49 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?

As you seem to be doing, I agree this would be a good time to review your AA and investment strategy and consider slightly modifying it.  I think elsewhere in this thread you mention you are 60/40.  This might be a good time to add a few other investments that will add greater diversity and perhaps lower your market volatility.  Personally I don't think I would change too much or even go less than 60% equities even when FIRE but you want to have an investment plan that works for you.

I think this article might be helpful to you:https://portfoliocharts.com/2015/11/17/how-safe-withdrawal-rates-work/

Congratulations on hitting your FI number!  It's very freeing to be at the number that you could RE if you wanted to.  Good luck!

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #32 on: January 18, 2018, 07:50:48 AM »

If the minimum level of expenses that supports a happy life for you is $60,000 and you have a portfolio that will give you $40,000, you are not FIRE, regardless of the norms of this forum. And once you reach $60,000, there is still "so much more you could do" if you only had $90,000. Regardless, I think we're talking about something more like $100k vs $150k since we're contemplating making sure there is room in the budget for TWO houses instead of a dreary life of deprivation with only one. YMMV but the income beyond the first $100k is probably well past the point of bringing additional utility for most people.

So if you were FI, you're saying there is literally no amount of money in the world that would cause you to work more?  I mean, if you can say that honestly, more power to you...but for me, knowing that we're talking about a finite amount of time (vs. saying that I want my base salary to continue and falling into an endless OMY cycle), the additional money I'll receive over the next two years is well worth the effort of working for it, even though I'm FI right now.

trollwithamustache

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Re: Asset allocation once you have passed your "number"
« Reply #33 on: January 18, 2018, 08:13:31 AM »
You all are a bung of dinguses, how dare OP be risk adverse.

I'm gonna vote be more conservative/bonds with the extra savings.  If OP is hanging on for this mysterious big payout, chances are its not mysterious but some kind of stock vesting.  That means his future portfolio is both stock heavy and overly the company shares he cannot diversify away.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #34 on: January 18, 2018, 08:16:27 AM »
You all are a bung of dinguses, how dare OP be risk adverse.

I'm gonna vote be more conservative/bonds with the extra savings.  If OP is hanging on for this mysterious big payout, chances are its not mysterious but some kind of stock vesting.  That means his future portfolio is both stock heavy and overly the company shares he cannot diversify away.

It is stock vesting, but I sell as soon as I vest and diversify based on my AA.

tooqk4u22

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Re: Asset allocation once you have passed your "number"
« Reply #35 on: January 18, 2018, 08:57:46 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.

I can't tell if they hit their number or not....they did say they did and they acknowledged they live a pretty spendy lifestyle as it is so it can't be barebones - so maybe they did.  But maybe they are all about bling, shiny objects and keeping up with the jones and they aren't happy not being a jones yet so in that way they haven't hit their number. 

Numbers weren't provided but 50% is pretty meaningful in just two years based on certain disclosure that has hit FIRE number and spending equals 3% WR. 

On a $40k spend that translates to $1.33mil currently so a 50% increase in two years means another $667k and be a $2mil - of by the sounds of it the spending is probably $80-100k so do that math.  That would be hard for me to walk away from. 

As for the question - if I was at a 3% WR currently with a 60/40 portfolio I would either (a) just dump all future money into equities as you already have 13 years of bond exposure or (b) keep going with 60/40.

matchewed

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Re: Asset allocation once you have passed your "number"
« Reply #36 on: January 18, 2018, 09:03:45 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.

I can't tell if they hit their number or not....they did say they did and they acknowledged they live a pretty spendy lifestyle as it is so it can't be barebones - so maybe they did.  But maybe they are all about bling, shiny objects and keeping up with the jones and they aren't happy not being a jones yet so in that way they haven't hit their number. 

Numbers weren't provided but 50% is pretty meaningful in just two years based on certain disclosure that has hit FIRE number and spending equals 3% WR. 

On a $40k spend that translates to $1.33mil currently so a 50% increase in two years means another $667k and be a $2mil - of by the sounds of it the spending is probably $80-100k so do that math.  That would be hard for me to walk away from. 

As for the question - if I was at a 3% WR currently with a 60/40 portfolio I would either (a) just dump all future money into equities as you already have 13 years of bond exposure or (b) keep going with 60/40.

Fair enough. I think I could walk away from it if the goal were to spend more money on excess. If I were to put that remaining money to charity I might work for it.

robartsd

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Re: Asset allocation once you have passed your "number"
« Reply #37 on: January 18, 2018, 09:38:09 AM »
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.
If I just had enough for a fairly frugal lifestyle using a 4% withdraw rate, the extra security and luxuries 50% more wealth could buy would be worth working two more years to wait for vesting. If I were in the situation OP describes here (weath to support 3% withdraw rate far above mustachian spending), the security and luxuries are already there and very likely to grow, so two years to just to vest more wouldn't be worth it unless I had a specific charity that I was planning to give most of the extra to.

tooqk4u22

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Re: Asset allocation once you have passed your "number"
« Reply #38 on: January 18, 2018, 09:43:27 AM »
At 25 yrs old you may have had a real job for 5 years, 2 more years is a 40% increase in your working life. At 50 or 55 yrs old it's just a couple more years!
I think you've got this backwards. A 30 year old who will live to 70 is throwing away 5% of their life by continuing to work two years after they don't need to. A 50 year old is throwing away 10%, and it's twice as much of a waste. All you and I have in this world is time.

Agree - there is less life left the older you get so each year costs exponentially more. 

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Also for many here $40k is enough, but with an extra $20,000 there is just so much more you could do.
If the minimum level of expenses that supports a happy life for you is $60,000 and you have a portfolio that will give you $40,000, you are not FIRE, regardless of the norms of this forum. And once you reach $60,000, there is still "so much more you could do" if you only had $90,000. Regardless, I think we're talking about something more like $100k vs $150k since we're contemplating making sure there is room in the budget for TWO houses instead of a dreary life of deprivation with only one. YMMV but the income beyond the first $100k is probably well past the point of bringing additional utility for most people.

I don't see it exactly that way - yes if you need $60k and only have $40k then you are not FIRE.  But I do think there are different levels of desired FIREd scenarios that come into play (barebones, desired/acceptable, ideal/extra wants, ridiculous, etc) and while you may not agree with his choices/desires they are what they are even if not mustachian and if he wants to work longer for them, especially if its easy/enjoyable and the timeframe is pretty short then I get it. 

I personally struggle with this because on one hand I could FIRE with pretty good balance that includes some good food and booze, accommodating kids activities, some travel, some college costs, etc (which a lot of this isn't needed but is part of my desired FIRE) but on the other hand I could go a little longer and fully cover college for all of them at most expensive school if needed (btw its never needed) or do some ridiculous safari that costs a ton that I might otherwise not do (and really wouldn't change my satisfaction in life) and I put these things in the nice to have and not the need to have category.  Would I work 10 more years or even one more month if I hated work....absolutely not. 

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I would gladly work two years for an additional 50%. Add the fact that he/she has been vesting in this plan for maybe 18 years, seems stupid to blow it off now.
That's called the sunk cost fallacy. It doesn't matter if you are 898 years into a 900 year vesting schedule - if you have enough money without it, all you're going to get by waiting two years is older.

This is wrong - it is definitely not sunk cost because the money is not lost.  It probably falls more under diminishing returns, but at 50% for two years assuming his acceptable FIRE level (but not ideal FIRE level) is reached I am not so sure that it even it that point.  On the other hand if your at a 2% WR on a ridiculous more than ever ideal FIRE level - then yeah would definitely be diminishing returns. But like a lot of things that get discussed here different people have different tolerances for things.

grantmeaname

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Re: Asset allocation once you have passed your "number"
« Reply #39 on: January 18, 2018, 10:29:08 AM »
The money is not a sunk cost. The years of your life are a sunk cost.

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #40 on: January 18, 2018, 11:27:47 AM »
None of this has anything to do with sunk cost of any kind.  It's purely opportunity cost...I believe the additional money is great enough that it's worth working two more years.  This is money that I could almost certainly never make again if I went to work anywhere else in the future, unless I got really lucky (again) with quickly rising stock prices.  The value of the equity is in the neighborhood of 15x my annual salary.

robartsd

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Re: Asset allocation once you have passed your "number"
« Reply #41 on: January 18, 2018, 12:17:59 PM »
None of this has anything to do with sunk cost of any kind.  It's purely opportunity cost...I believe the additional money is great enough that it's worth working two more years.  This is money that I could almost certainly never make again if I went to work anywhere else in the future, unless I got really lucky (again) with quickly rising stock prices.  The value of the equity is in the neighborhood of 15x my annual salary.
Of course there could be a major correction in the next 2 years...

mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #42 on: January 18, 2018, 12:29:52 PM »
None of this has anything to do with sunk cost of any kind.  It's purely opportunity cost...I believe the additional money is great enough that it's worth working two more years.  This is money that I could almost certainly never make again if I went to work anywhere else in the future, unless I got really lucky (again) with quickly rising stock prices.  The value of the equity is in the neighborhood of 15x my annual salary.
Of course there could be a major correction in the next 2 years...

absolutely.  And at some point, the incremental value of the stock wouldn't be worth the extra time at work.  If the stock price went down 50%, for example, I'd retire in '19 instead of '20.

trollwithamustache

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Re: Asset allocation once you have passed your "number"
« Reply #43 on: January 18, 2018, 02:28:26 PM »
You all are a bung of dinguses, how dare OP be risk adverse.

I'm gonna vote be more conservative/bonds with the extra savings.  If OP is hanging on for this mysterious big payout, chances are its not mysterious but some kind of stock vesting.  That means his future portfolio is both stock heavy and overly the company shares he cannot diversify away.

It is stock vesting, but I sell as soon as I vest and diversify based on my AA.

1. But you sorta  view the unvested stock as part of your assets, so it shouldn't you diversify for it?  By continuing to work you are implicitly saying you do value the stock as part of your assets.

2. I'm thinking there is a game (sure, with market risk), where you hold onto stock the last year you work to kick out as much of that stock sale as long term gains and into the next tax year when your income is super low.  You'd end up being stock heavy while holding on to stock for this, so if your savings from regular income would be used to make the diversified positions.


mak1277

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Re: Asset allocation once you have passed your "number"
« Reply #44 on: January 18, 2018, 02:38:31 PM »
You all are a bung of dinguses, how dare OP be risk adverse.

I'm gonna vote be more conservative/bonds with the extra savings.  If OP is hanging on for this mysterious big payout, chances are its not mysterious but some kind of stock vesting.  That means his future portfolio is both stock heavy and overly the company shares he cannot diversify away.

It is stock vesting, but I sell as soon as I vest and diversify based on my AA.

1. But you sorta  view the unvested stock as part of your assets, so it shouldn't you diversify for it?  By continuing to work you are implicitly saying you do value the stock as part of your assets.

2. I'm thinking there is a game (sure, with market risk), where you hold onto stock the last year you work to kick out as much of that stock sale as long term gains and into the next tax year when your income is super low.  You'd end up being stock heavy while holding on to stock for this, so if your savings from regular income would be used to make the diversified positions.

1 - I definitely do not view unvested stock as part of my assets.  When I say I've hit my FI number, that doesn't include any of the unvested shares.

2 - I exercise my options as soon as they vest.  I pay ordinary income tax when I exercise the options.  I only would pay capital gains tax if I exercised, held the shares, and then sold at a gain at a later time.  I don't ever do this though...I sell the shares as soon as I exercise so I never have capital gains.