Author Topic: Set Up 'Stache for Draw Down  (Read 1757 times)

Acastus

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Set Up 'Stache for Draw Down
« on: June 15, 2018, 11:38:57 AM »
FIRE is imminent for me, and I have been thinking about how to structure my 'stache for easy and tax efficient spending. I was sweating this more a few months ago, but a modest inheritance dropped on Mrs. Acastus, so we have about 25% in taxable accounts instead of 10%. Much simpler. Now I don't have to use the 401k immediately.

Are there any special considerations on how to design the asset allocation or which type account to hold which assets in for withdrawal instead of accumulation? I have taxable, 401k, tIRA, and Roth IRA holdings. I don't need to tap tax deferred accounts early. I can wait until age 60 in a few years.

My basic plan is start with a 60% stock, 30% bond, 10% cash target allocation. As interests rates rise, I will slide a little more into bonds from cash and with longer duration. For spending, have 2-3 years in cash or similar to have ready for the next market meltdown. Refill this reserve quarterly or less. That and bond reserves will allow spending to continue at least 5 years and allow the stock portion to recover. Keep riskier assets in Roth, most bonds, S&P500, and other vanilla funds in tIRA, keep 401k invested in guaranteed contracts at 3.8% until bonds look more attractive. That is all the plan I have so far.

Am I done? Overthinking?

OzzieandHarriet

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Re: Set Up 'Stache for Draw Down
« Reply #1 on: June 15, 2018, 12:11:27 PM »
We are in the process of doing this right now also. We talked to an advisor at Vanguard, who recommended (and this is also on their website under this topic: https://investor.vanguard.com/retirement/income/how-to-set-up-withdrawals) opening a Prime Money Market Fund as a holding spot for dividends and capital gains on taxable accounts and for disbursements.

The Vanguard article explains what to do and why.

boarder42

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Re: Set Up 'Stache for Draw Down
« Reply #2 on: June 15, 2018, 06:55:13 PM »
You're keeping an extremely low stock allocation. If you want you money to last 40-50 years you'll need to be more aggressive. Unless you're planning for reverse equity glide.

Acastus

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Re: Set Up 'Stache for Draw Down
« Reply #3 on: June 15, 2018, 09:52:18 PM »
I plan to pay for my kids college in the next few years, So I'm keeping more cash on hand than normal.

You think 60% stock is extremely low? Not a little low?

DreamFIRE

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Re: Set Up 'Stache for Draw Down
« Reply #4 on: June 15, 2018, 10:41:09 PM »
I plan to pay for my kids college in the next few years, So I'm keeping more cash on hand than normal.

You think 60% stock is extremely low? Not a little low?

You're 56 years old and about to FIRE.  That's definitely NOT too low, especially with current stock valuations.  I wouldn't be planning for 40 to 50 years of retirement.  You probably are due for a full SS benefit at 67 also, which will stretch your stash longer.

boarder42

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Re: Set Up 'Stache for Draw Down
« Reply #5 on: June 16, 2018, 05:00:56 AM »
The difference between 60-80 in historical calculations is staggering different. 30% fail after 40 years with your current plan. 20% fail with an 80/10/10. I'd research reverse equity glide path. It's fine to start where you are if you plan to slowly move to equities over 10years or so. Eliminates sorr which many people who are afraid and like to have larger bond allocations tend to appreciate that method more than others.

pecunia

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Re: Set Up 'Stache for Draw Down
« Reply #6 on: June 16, 2018, 09:21:49 AM »
This is some good stuff.  I've been on the edge for a number of months now, should I FIRE or just wait?  I'm a bit older than Acastus, but lack the knowledge to handle my stash in the best manner.  I have a lower percentage in bonds, but I'm bumping into SS age so I figure that is like another source of bond income.

The simple idea of the money market account is very good.

Acastus

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Re: Set Up 'Stache for Draw Down
« Reply #7 on: June 18, 2018, 10:02:24 AM »
I am planning on 44 years of retirement. I want to see Haley's Comet again and ride the shuttle up for a really close look. I don't care if I make it back. 2061.

Retire-Canada

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Re: Set Up 'Stache for Draw Down
« Reply #8 on: June 18, 2018, 01:45:43 PM »
I'm getting close to FIRE and my FIRE AA will be something like 90/10 or 85/15 to start, but I won't be adding to my bond/cash position or rebalancing it. I'll just hang on to it for a certain number of years in case of a poor early sequence of returns. If I make it through those early years with good returns I'll just leave that portion of the AA alone and let the stocks out run it. As soon as I get through the early sequence of returns risk phase the other FIRE killer is inflation and for that I need lots of stocks.

pecunia

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Re: Set Up 'Stache for Draw Down
« Reply #9 on: June 18, 2018, 03:25:57 PM »
Acastus:
Quote
I want to see Haley's Comet again

Just like Mark Twain.  Maybe you can retire and write some good books.
http://www.todayifoundout.com/index.php/2013/10/samuel-clemens-born-died-year-halleys-comet/

Acastus

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Re: Set Up 'Stache for Draw Down
« Reply #10 on: June 19, 2018, 08:45:04 AM »
I am aware of Mark Twain. I was not born the year of the comet, however.