Author Topic: Fixed income  (Read 1311 times)

badassprof

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Fixed income
« on: March 07, 2017, 11:07:26 PM »
I tried using the search function on this to no avail, so my apologies if it is a repeat.

My partner and I are thinking of moving some extra money into fixed income so that we don't have to tap our 401ks/ Roths when the market is down. We are also pretty heavily invested in stocks and want to diversify a bit.  Any suggestions of funds to look into and/or issues to keep in mind?

MustacheAndaHalf

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Re: Fixed income
« Reply #1 on: March 08, 2017, 05:09:21 AM »
You don't list your age or time until retirement.  Bonds generally provide stability as you approach retirement: once you have enough money to retire, you don't it to lose so much value you need to go back to working.  So without knowing your distance from here to retirement, it's hard to know a good percentage to put in bonds.

You also haven't given any details of any kind, so it's hard to give advice off that as well.

badassprof

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Re: Fixed income
« Reply #2 on: March 08, 2017, 06:15:15 AM »
You're right: that was vague. I am 48, my partner 47. We were aiming for 55 for retirement, but now need to see how all this insurance business shakes down due to a pre-existing condition(cancer).  We make about 280,000 a year (includes rental income) and are currently saving roughly 66 percent percent of our income, We have about 820,000 in 401ks/roths and another 75,000 in company stocks.we owe about 660,000 on a house currently valued at 1300000, but who knows--not banking on that. We'll sell and move somewhere cheaper and more rural when we're ready to pull the trigger.

SeattleCPA

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Re: Fixed income
« Reply #3 on: March 08, 2017, 07:29:36 AM »
This isn't a direct answer to your question, but you might gain some context and comfort by using the simulators to test your portfolio.

E.g., noodling around with firecalc and cfiresim to test your current asset allocation formula might give you additional clarity about dealing with a market downturn.

BTW, a variable withdrawal rate will also help tons with an early bear market.

Car Jack

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Re: Fixed income
« Reply #4 on: March 08, 2017, 07:35:50 AM »
Sell all the company stocks today.  If the company goes Enron or Polaroid, you not only lose your investment, you lose your job.

radram

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Re: Fixed income
« Reply #5 on: March 08, 2017, 08:04:22 AM »
Sell all the company stocks today.  If the company goes Enron or Polaroid, you not only lose your investment, you lose your job.

I would disagree with this statement. $75,000 appears to be about 5% of your net worth. The added risk might well be worth it depending on the company you own, and the possible benefits your company gives you to invest in the company you work for. If you received a benefit (i.e. a purchase discount or the like), make sure you are crystal clear on the rules you must abide by. "Sell it now at any cost" seems to be too extreme of a reaction for 5% of your net worth. If the incentives were worth it, I would even consider going up to 10% of your net worth in company stock. I assume you do not want to list the company, so I will leave it up to you as to how solid you feel the company is.

In my opinion, it is your home that you should consider selling. You have "invested" almost 50% of your net worth into your primary residence(hard to tell for sure since you also stated you have rental income). In general, your primary residence is a TERRIBLE investment, even though for this house you may end up doing very well.

I would bet that after selling your home, there are several placed in the US that you could retire to NOW based on the figures you have given so far. Have you run any kinds of simulations for retiring TODAY in a lower cost of living area? I bet you are there whenever you are ready, assuming we do not have another housing crash. I think that would be your biggest risk right now. Congratulations on all your success! And sorry to hear about the cancer thing. Cancer really does suck :(


badassprof

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Re: Fixed income
« Reply #6 on: March 08, 2017, 08:38:12 AM »
On the stocks, they are just given to my partner, so we really didn't purchase them and can only cash out at certain points when there is enough time vested. It is a pretty solid biotech company, but yes, that could evaporate, certainly.

The house is crazy, yes. Very HCOL.  We are fortunate to have a rental that pays about 3/4 of our housing expenses, although our income doesn't allow us (now) to take any deductions on maintenance, etc. We will definitely sell and move when we are ready to FIRE. The crazy thing is that we would be hard pressed to find a home for our family under what we pay right now,  taking the rental income into consideration (which has gone from 1000 a month in 2008 to 2600 a month now, and prices seem to continue to rise). We have a three bedroom, two bath house in the SF bay (plus the two bedroom rental). You'd be hard pressed to find a studio in Oakland/Berkeley for 1200. Nuts, I know. But living here has enabled us to make some good earnings and pocket some good money to take with us with we parachute out , so I'm grateful for that. (And for my mustachian partner, who had the good sense to buy this house when he did).

I know we could pull the trigger now and maybe we should. What is stopping us is insurance. And cancer. I've been free for a few years now, but something like that does may you wary, and I don't feel confident with the current plans slowly working their way through congress. I think any middle aged or older person with any illness history (let alone cancer) is looking at some very high premiums.

badassprof

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Re: Fixed income
« Reply #7 on: March 08, 2017, 08:39:48 AM »
And I should add, if insurance will even be available, regardless of premium pricing.

radram

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Re: Fixed income
« Reply #8 on: March 08, 2017, 12:06:17 PM »
And I should add, if insurance will even be available, regardless of premium pricing.

I definitely understand and sympathize with what you are saying with regard to healthcare unknowns. I can not at all wrap my head around your concerns of cancer coming back and you having to deal with the possibility that you do not have coverage. If there was ever a valid reason for "One More Year", I think you should be the poster child.

We are a relatively healthy family (with preexisting conditions), and I would be lying if I said I was not concerned for the future of healthcare. It is that reason I am still planning on continuing to be FIRE, with the added planning of preparing to be flexible. This includes being willing to leave the country with our stache to a country with excellent healthcare if we are uninsurable, as well as being open to the possibility that I might need to prepare my estate to protect against medical bankruptcy. The thought of not paying my bills makes me sick to my stomach, but as our beloved leader says, using the rules to my advantage is "smart".

All that said, I believe our new healthcare will cost us more, and we will get less coverage. I still believe we will be able to get and afford coverage that will keep us in the country that protects our estate.


badassprof

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Re: Fixed income
« Reply #9 on: March 08, 2017, 01:12:55 PM »
Thanks...cancer is a strange thing. It makes you worry less about some things, but also is a cattle-prod of a reality check too. We were very lucky and very blessed. Caught early, good health coverage, an unbelievable work place that paid me  the part of my salary that disability didn't simply out of the kindness of their hearts. Most people don't have those advantages, and I am grateful every day for them. But when I think of what it would have cost us if we didn't have insurance, or had insurance that dropped us because I neglected to report an infection in my early 20s,  my hair stands on end.  I was healthy, until I wasn't; that's the scary thing. I also think of my brother who could get no insurance--from no one at no cost--because of high blood pressure and gout--and an uncle who was turned down by everyone because of a history of heart disease.

The irony is that we are ready and I think able to FIRE. We both have great paying jobs that we would love to pass on to the next group of folks. Isn't it ironic that we are working primarily for insurance? I wonder what the job-creating potential would be if folks who wanted to exit early could without worrying about health insurance!