Hi Zombiehunter.
I don't know the right answer to your question, but I can provide some tools that will help you explore it in more depth. For example, here is how I would model the historical withdrawal rates of your situation:
For reference, all of the asset options are naturally unhedged and when set to "France" the tool automatically translates the returns to French currency (Euro when available, francs before that) and local French inflation. You can also tweak the inputs in the above link to study the performance of any asset allocation you like, including ones with French or European stocks and bonds. And there are also many more calculators to play with that work the same way, so there should be no shortage of data.
BTW, if you're interested in how withdrawal rates differ by country you may also find this article informative: Your Home Country Is Inseparable From Your Withdrawal Rate
I hope that helps. And congrats on your impending FIRE and big move!
Thanks Tyler, that's very helpful - I'll play around with the tool and see if I can come up with something.
Based on some limited reading and research, I'm considering implementing something like the below to provide a hedge against the falling dollar in general and specifically against the Euro:
- 40% Vanguard Europe (VWO)
- 40% Vanguard Emerging Markets (VGK)
- 20% Gold (IAU)
This would be something like a 10% side basket to my main taxable portfolio, ideally built up to 1-2 years worth of living expenses, to be drawn on if the dollar falls so that I don't need to touch the regular portfolio and hope that the value of the dollar recovers in that time.
Other than gold, this portfolio is roughly in line with my investing goals of maintaining low-cost, index funds - rather than some sort of levered or hedged ETF with higher fees. I have never held gold before or been interested in holding it, but from what I understand, it should offer offsetting returns if the value of the Dollar declines. If this ends up being 10% of my portfolio, it would only be 2% of total so query if that is enough to move the needle at all.
The 40% Europe basket is specifically to hedge against the Dollar falling against the Euro - however there is some risk that USD and EURO fall together as they face similar macro factors right now.
The 40% EM basket is to hedge against the Dollar falling in general - from what I understand, the falling dollar would be most beneficial to these markets as opposed to the Euro market.
As an additional tool to hedge against my currency risk, thinking of creating an account in France - I think our bank has some kind of product that permits an allocation between a reasonably high interest savings account (1.5%?) and equity market exposure (not sure if French or Euro markets). Ideally that would hold another 1-2 years of living expenses. However, holding the Vanguard Europe basket described above might not be necessary if holding this in Euros - I could then increase the EM and Gold baskets to something like 60/40.
This would result in the following draw down sequence over the next 5+ years:
- Selloff taxable bond holdings (VTEB) to glide down the bond allocations
- If currency rates exceed [threshold TBD], start to tap into Euro denominated holdings
- If currency rates continue to exceed [threshold TBD], tap into Vanguard EM/Gold hedge holdings described above that should be up
That should be roughly 5 years to avoid touching my primary US equities. Even if it just buys 5 years without having to touch the US equities (e.g. there is not much recover in the dollar during that time), it should be helpful for SORR to avoid any withdrawals during that period.
Any other expats dealing with this issue?
