buckets ::: New view post 52!!

[mistymoney]

Not sure if these should be here or investor board. I need some input on visualizing buckets for different time periods.

background: looking to fire in 25, will be 59. Maybe 26 at 60? depends on how things go.

I will only have my savings to live off of for 10-11 years, then get social security at 70. I have some debt payments that will go away throughout that decade, so am looking to fire at an initial 6% WR which (if the market compensates at 6-7% growth) would step down to 5.6, 5.3, 4.9, 4.8 through those years. When I get social security, will then be at a 3% WR and clear sailing.

Unless I get decimated during that higher WR decade.

So I think buckets would help me visualize this better, like I have an official stach for the long haul at 3% but then a bucket that I plan to exhaust over the first decade leading up to social security.

And if I do that, should the separate bucket be all in cash so SORR would not be so big a threat? If that bucket is all in cash, what should the perma stache AA be that I will always be taking 3% from?

I feel like the plan is doable, but if I just say 6% I feel like that is not workable, but also not accurate.

[dandarc]

Interesting way to think about it. If you're really going to implement, probably want to put that depletion bucket into a CD ladder or something quite conservative, because leaving invested in stocks means that portion is at much higher risk of depletion quickly since that 6% initial withdrawal of the overall portfolio is actually going to be higher - maybe as much as 12% of that particular bucket.

Top of my head - if you want to be very conservative for the "depletion" bucket, and assuming your step-down withdraw rates are for 2 years each, I get 53.2% - that would mean very low returns on that portion of the portfolio - just enough to compensate a small bit for any inflation of your expenses. So I'd round that down to 50%.

Are you comfortable that half your portfolio will grow enough to still cover ~50% of your spending in 10-11 years?

I think probably a reasonably good plan though - I input 5.5% (attempt to take into account your stepping-down withdraw rates) into cfiresim with 30K SS starting in 10 years from start. About 95% success. 75% success at 6% initial

If you really do want to do something like this, you might look at a term-certain immediate annuity. 10 year term annuities currently paying a little over 12%, at least on the quick quotes I saw - might work well with your debt-step-down. Of course guarantees are pretty expensive - similar to if you chose CD ladder, you'd probably do a whole lot better keeping money invested over that period of time.

[Tom Bri]

Some more info would help. What is your lifestyle? Yearly spending now and expected in the future? How much already saved? How much are you saving now?

[Radagast]

What is the split of money between pre-tax, post-tax, and taxable accounts?

That is a lot of debt. Can you pay it off as a lump sum now or within the next year? That's my first suggestion.

Or is it a low rate such that you can arbitrage it even after taxes using CDs and treasury notes? In that case I'd suggest a CD/individual treasury bond ladder from now to SS, or at least until your WR is under 4%. Pure cash is not as good, because the Fed may lower rates to 0% within the next ten years.

In theory having higher upfront % withdrawals increases your sequence of returns risk, so I think a CD ladder or bond ladder until SS is a great idea as written. For after SS, 80% or 90% stocks with the rest long term treasury bonds (VGLT or equivalent) seems right. You'll be pulling SS which counts as a big short term inflation protected treasury bond allocation anyway, so make the most of your allocation for stocks. You could also build a TIPS ladder as a sort of build your own annuity. The upside is it would be completely inflation protected (unlike a vanilla annuity). The downside is it would have a hard ending in 30 years, and then you'd be down to SS only.

[fuzzy math]

This seems ideal to put in a FIRE sim type calculator. I don't think I've ever seen any stashe be depeleted at 10 years with an initial 6% withdrawl rate. Seeing as you are almost 60, a 30 year time frame is generous.

Personal capital allows you to do decreased spending and do inputs for various years. If you built your scenario correctly it would lay out spending vs income (SS) etc by year.

[Turtle]

Not sure if these should be here or investor board. I need some input on visualizing buckets for different time periods.

background: looking to fire in 25, will be 59. Maybe 26 at 60? depends on how things go.

I will only have my savings to live off of for 10-11 years, then get social security at 70. I have some debt payments that will go away throughout that decade, so am looking to fire at an initial 6% WR which (if the market compensates at 6-7% growth) would step down to 5.6, 5.3, 4.9, 4.8 through those years. When I get social security, will then be at a 3% WR and clear sailing.

Unless I get decimated during that higher WR decade.

So I think buckets would help me visualize this better, like I have an official stach for the long haul at 3% but then a bucket that I plan to exhaust over the first decade leading up to social security.

And if I do that, should the separate bucket be all in cash so SORR would not be so big a threat? If that bucket is all in cash, what should the perma stache AA be that I will always be taking 3% from?

I feel like the plan is doable, but if I just say 6% I feel like that is not workable, but also not accurate.

Is taking Social Security earlier part of your backup plan in the case of truly catastrophic SORR?  Maybe map out potential worse case scenarios to see how that might effect things if you had to resort to that option.

[mistymoney]

This seems ideal to put in a FIRE sim type calculator. I don't think I've ever seen any stashe be depeleted at 10 years with an initial 6% withdrawl rate. Seeing as you are almost 60, a 30 year time frame is generous.

   OO
    <
  ____

Thanks....I think?

But, I guess I need to think about that angle if I begin to consider OMY for financial stability......If I am down to nothing but social security after 30 years, it may not matter much?

[mistymoney]

What is the split of money between pre-tax, post-tax, and taxable accounts?

Most of my money is pretax, so taxes are going to be an ongoing expense, I will be well into the 22% bracket for most years.

That is a lot of debt. Can you pay it off as a lump sum now or within the next year? That's my first suggestion.

Or is it a low rate such that you can arbitrage it even after taxes using CDs and treasury notes? In that case I'd suggest a CD/individual treasury bond ladder from now to SS, or at least until your WR is under 4%. Pure cash is not as good, because the Fed may lower rates to 0% within the next ten years.

I'd like to pay some debts off or at least get the balances much reduced; then they would be paid off much earlier. Everything is fixed payments - auto and student loans - so if I pay and extra 10k on one of them the monthly payment isn't reduced.

But my connundrum is do I lower my 401k contributions to pay off more debt before retirement ensuring I am paying 24% taxes on the payoff money (to avoid interest rates that are all below 7%, most below 6%)? I've been very hesitant to do that, honestly. But maybe I should consider it?

I've been continuing the max to my 401k and HSA rather than pay down debts more agressively and have put extra money into Ibonds. I have enough stock exposure and very little taxable or cash, so Ibonds seemed a good spot to save up.

In theory having higher upfront % withdrawals increases your sequence of returns risk, so I think a CD ladder or bond ladder until SS is a great idea as written. For after SS, 80% or 90% stocks with the rest long term treasury bonds (VGLT or equivalent) seems right. You'll be pulling SS which counts as a big short term inflation protected treasury bond allocation anyway, so make the most of your allocation for stocks. You could also build a TIPS ladder as a sort of build your own annuity. The upside is it would be completely inflation protected (unlike a vanilla annuity). The downside is it would have a hard ending in 30 years, and then you'd be down to SS only.

I've been hoping to have a 5 year ibond ladder that I could access if SORR raised its ugly head earlier on, and then I would have that to pay 10+% of each years expenses for the 5 years it held. have 4 years now.

I also have a side gig I plan to keep that currently pays enough for another 10-15% of yearly expenses for the first years of retirement. I plan to keep that going as long as I can, up to 65 if market and finances doing well, or up to 70/social security, if anything goes awry. But I can't guarantee that continues so I don't count on it. I am not counting the ibonds in the stach total either, just an extra source when needed with relatively low tax liability on  the interest, so if I use the ibonds and have the side gig going, then WR would be below 5% initially, about 4.7% from investment accounts. But the ibonds would get exhausted and the side gig may go poof, so not counting them.

To lump sum payoffs with current funds, I would love to do! But would end up paying in 24% and mostly 32% taxes to get access to that money. Would be great if the gov said - tax free IRA/401k withdrawal to pay off student loans. I would do it.

Also am not counting the HSA, I have 35k mostly cash, for anything medical related.

[mistymoney]

Some more info would help. What is your lifestyle? Yearly spending now and expected in the future? How much already saved? How much are you saving now?

not sure this matters much, especially given what fuzzy math said about 30 year timeline :'(

but aiming for 6% to start and 3% at 70.

[mistymoney]

This seems ideal to put in a FIRE sim type calculator. I don't think I've ever seen any stashe be depeleted at 10 years with an initial 6% withdrawl rate. Seeing as you are almost 60, a 30 year time frame is generous.

Personal capital allows you to do decreased spending and do inputs for various years. If you built your scenario correctly it would lay out spending vs income (SS) etc by year.

Is persoal capital still free and still trustworthy?

[Bear Stache]

Question for you that I didn't see you mention... healthcare insurance from 60-65... Are you planning on ACA for health insurance, or do you have other coverage? Will you need to keep your "income" low for 5 years to take advantage of ACA subsidies? Another variable to consider, if you haven't already. I'm 58, my wife is 59, so we're having to manage income for ACA purposes until we hit 65, so it matters where the money in your buckets comes from, pre or post tax.

Without hearing your answer yet, I would advise you to have some in post tax that is available to you whenever you want, even if it means cutting back on your 401k contributions now. It gives you a lot more flexibility down the road with managing your taxes.

[mistymoney]

Question for you that I didn't see you mention... healthcare insurance from 60-65... Are you planning on ACA for health insurance, or do you have other coverage? Will you need to keep your "income" low for 5 years to take advantage of ACA subsidies? Another variable to consider, if you haven't already. I'm 58, my wife is 59, so we're having to manage income for ACA purposes until we hit 65, so it matters where the money in your buckets comes from, pre or post tax.

Without hearing your answer yet, I would advise you to have some in post tax that is available to you whenever you want, even if it means cutting back on your 401k contributions now. It gives you a lot more flexibility down the road with managing your taxes.

Good point. I will ask my employer if there are any retiree benefits along that route, but if not will take the cobra for 18 month and then go to ACA but I do not expect subsidies.

I could keep the HDHP and I assume funnel 2 more years into HSA.

Can a ACA plan be HDHP/HSA compatible?

[fuzzy math]

Some more info would help. What is your lifestyle? Yearly spending now and expected in the future? How much already saved? How much are you saving now?

not sure this matters much, especially given what fuzzy math said about 30 year timeline :'(

but aiming for 6% to start and 3% at 70.

Oh gosh I didn't mean to be such a bummer. I think statistically if you've made it to adulthood, women have a good chance of making it to 87.  I meant more that - the fail rates are generated at a 30 yr interval, its not like you need a 40 - 50 yr interval to be extra extra safe, which would require you to drop your withdrawal rate. A 6 and falling rate, then a flat 3% rate seems super safe but should be tested.

Personal capital is free, and seems secure? I haven't had any security breeches over it. You can also manually add accounts - make them whatever percent equities and bonds you'd like if you don't want to have it connect to your firms. Then just do the withdrawal planning using that.

[mistymoney]

Some more info would help. What is your lifestyle? Yearly spending now and expected in the future? How much already saved? How much are you saving now?

not sure this matters much, especially given what fuzzy math said about 30 year timeline :'(

but aiming for 6% to start and 3% at 70.

Oh gosh I didn't mean to be such a bummer. I think statistically if you've made it to adulthood, women have a good chance of making it to 87.  I meant more that - the fail rates are generated at a 30 yr interval, its not like you need a 40 - 50 yr interval to be extra extra safe, which would require you to drop your withdrawal rate. A 6 and falling rate, then a flat 3% rate seems super safe but should be tested.

Personal capital is free, and seems secure? I haven't had any security breeches over it. You can also manually add accounts - make them whatever percent equities and bonds you'd like if you don't want to have it connect to your firms. Then just do the withdrawal planning using that.

no worries! but your point is one I do need to keep in mind.

do you know offhand about the data agreements for personal capital? i.e. why free? what is their business model?

[wageslave23]

I second using something like firecalc.com. that's what these calculators are for. As far as allocation, I would do two years of expenses in cds or whatever you are comfortable with. Then follow the standard allocation recommendations.

[mistymoney]

I currently have 2 years in cash and was going to go up to at least 3 years in cash. Given the likely higher than desired WR, I am thinking maybe 3 years in cash plus the balance of all the loans. Maybe up to 5 years in cash? Although that much could put a drag on growth, maybe too much drag? But that would be like a glide path if I used up the cash side regardless of what the market was doing. The debt is a total of about 125k across 7 different student loans and a car loan. But figuring it will be about 80-90K at time of retirement next year and will take out at least a few of those with extra money between now and then.

well - I have figured out the amount I need for age 70 and beyond. Will regard that as my rock bottom number to never dip below. If I go below - extreme austerity measures will be put in place and I will seek out money making opportunities too. Hopefully can keep my side gig going as long as I need it. I'm thinking once the day job is done, side gig could be a lot more fun for me and will want to keep for a bit.

I am using my soc security numbers with 0 earned after 2023, so in early 2024 I'll be able to redo those calcs with a full year of earnings plus any inflation adjustments and if market holds or gains, think I will be in 'good enough' shape by this time in 2025.






*by cash, could be MM,CDs, treasuries....still figuring that piece out.

[Radagast]

Have you considered asking this on Bogleheads? You might get a more thorough consideration there.

[mistymoney]

Have you considered asking this on Bogleheads? You might get a more thorough consideration there.

I think Boggleheads will tell me to work till 70, and I'm barely hanging on to the dayjob right now! Clarifying to say - internal hanging on, I don't think I'm up for firing, but a nicely funded layoff would be welcome!

[Telecaster]

I personally don't like bucket strategies because when the smoke clears, you really only have one bucket.  IMO, buckets seem like they make things easier, but they actually make it harder.   What is really happening here is your expenses are going down as you pay off debt, and your income is increasing at you get to SS.

You can use cFIREsim or FIRECALC to model your situation reasonably well.   

[achvfi]

Are you student, car and mortgage loans are low interest rates that you prefer not to pay off before retiring?

If you can pay some of these loans off with some of the 2-3 years cash bucket and may be earnings before retiring, your income needs might come down significantly, that might enable to qualify for ACA, tax arbitrage your pretax monies to Roth and qualify for other benefits.

[mistymoney]

Are you student, car and mortgage loans are low interest rates that you prefer not to pay off before retiring?

If you can pay some of these loans off with some of the 2-3 years cash bucket and may be earnings before retiring, your income needs might come down significantly, that might enable to qualify for ACA, tax arbitrage your pretax monies to Roth and qualify for other benefits.

Mortgage is below 3% and balance is a bit around 325k so not including that in this line of thought. It will be paid off over time when I am ~85ish. But that ongoing mortgage payment does make my yearly spend higher than many others and together with mostly pretax money, higher tax brackets even on the leanfire day to day budget than many here enjoy. Pretax helped alot over the years, but now the bill is coming due, and I'm ok with that, just need to make sure numbers are accurate on the tax liability.

For the auto/st loans, I have been thinking about a full or partial lump sum payoff (partial meaning paying off some but not all the loans. I don't want to use up my small post-tax or roth accounts for this or other regular expenses, preserving those for whenever new roof, car, appliances, splurge trip, etc. come up. However, if those balances increase can reconsider using for more/earlier payoff.

When I retire and start withdrawing, 100% is coming from my 401k and rollovers and I will be well into the 22% tax bracket. If I take out an extra 125k to pay off these balances, that would be an extra 30k in taxes that first year (and push me into the 32% bracket). Maybe that is just the cost of doing business? if I end up paying in the 22% bracket all along for these debt payments, am I really saving much by stringing it along?

Should I look at the payoff of these all as coming at 22% tax (as it would be on top of my other expenses and mortgage) + the ongoing interest rates vs the payoff being in the 22-32% bracket and looks like the average tax paid on the lump sum withdrawal (on top of living expenses) would be about 26-7%. So really very equivalent rates.

[spartana]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

[achvfi]

Are you student, car and mortgage loans are low interest rates that you prefer not to pay off before retiring?

If you can pay some of these loans off with some of the 2-3 years cash bucket and may be earnings before retiring, your income needs might come down significantly, that might enable to qualify for ACA, tax arbitrage your pretax monies to Roth and qualify for other benefits.

Mortgage is below 3% and balance is a bit around 325k so not including that in this line of thought. It will be paid off over time when I am ~85ish. But that ongoing mortgage payment does make my yearly spend higher than many others and together with mostly pretax money, higher tax brackets even on the leanfire day to day budget than many here enjoy. Pretax helped alot over the years, but now the bill is coming due, and I'm ok with that, just need to make sure numbers are accurate on the tax liability.

For the auto/st loans, I have been thinking about a full or partial lump sum payoff (partial meaning paying off some but not all the loans. I don't want to use up my small post-tax or roth accounts for this or other regular expenses, preserving those for whenever new roof, car, appliances, splurge trip, etc. come up. However, if those balances increase can reconsider using for more/earlier payoff.

When I retire and start withdrawing, 100% is coming from my 401k and rollovers and I will be well into the 22% tax bracket. If I take out an extra 125k to pay off these balances, that would be an extra 30k in taxes that first year (and push me into the 32% bracket). Maybe that is just the cost of doing business? if I end up paying in the 22% bracket all along for these debt payments, am I really saving much by stringing it along?

Should I look at the payoff of these all as coming at 22% tax (as it would be on top of my other expenses and mortgage) + the ongoing interest rates vs the payoff being in the 22-32% bracket and looks like the average tax paid on the lump sum withdrawal (on top of living expenses) would be about 26-7%. So really very equivalent rates.

I was thinking you could use your 2-3 year expenses saved in cash to pay off car and student loans. Would that cash balance exceed 125K. Assuming that is 125K loan balance with higher interest rates, would that save you couple thousand in expenses a month?

What is interest rates on student/car loans?

Let's say $2000 a month is $24000 a year less in expenses. would that open up other oppurtunities like ACA or reduce taxes 30% (federal+state) from withdrawals from pretax accounts.

[achvfi]

Next piece of puzzle is to have proper asset allocation with diversified Stocks and bonds funds, that can protect you from sequence of returns risk for first few year of retirement until you start social security.

[mistymoney]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

I'm considering it. I am in the middle of the "hoard of critters" phase. I planned to be pet free at retirement and see the world, but there were a lot of strays during the pandemic, and I opened the door. Have enough that renting is likely not an option for a while, but another purchase could be. I am certainly not the HCOL like you had, but have about 200-250k in equity. A move to a 300-400k (or even less) place purchased outright could be a good move, taxes are 10k a year and only going up.

I have been looking around. Would ideally like some private waterfront or a nice pond/swimming hole in a scenic sparcely populated but at least mildly progressive area.

Was looking at a nice little piece of property in N. Cali with a stream I thought I could build out a small swimming area on. Well under 100k, no building, was thinking about fencing a large area for the pets with one of those prefab containerish abodes set inside the fencing. Go for a composting toilet, solar energy. Not sure if the stream could provide good drinking water or not. So all of that would be less than 200k to set up with ongoing expenses of very little, then just need food and clothes.

Worried about being too isolated though! And no idea what kind of people live around that area. And as a soon to be elderly single woman, I might be biting off more than I can chew and a difficult way out of it. IIRC, the parcel had been on the market for like a year.

[spartana]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

I'm considering it. I am in the middle of the "hoard of critters" phase. I planned to be pet free at retirement and see the world, but there were a lot of strays during the pandemic, and I opened the door. Have enough that renting is likely not an option for a while, but another purchase could be. I am certainly not the HCOL like you had, but have about 200-250k in equity. A move to a 300-400k (or even less) place purchased outright could be a good move, taxes are 10k a year and only going up.

I have been looking around. Would ideally like some private waterfront or a nice pond/swimming hole in a scenic sparcely populated but at least mildly progressive area.

Was looking at a nice little piece of property in N. Cali with a stream I thought I could build out a small swimming area on. Well under 100k, no building, was thinking about fencing a large area for the pets with one of those prefab containerish abodes set inside the fencing. Go for a composting toilet, solar energy. Not sure if the stream could provide good drinking water or not. So all of that would be less than 200k to set up with ongoing expenses of very little, then just need food and clothes.

Worried about being too isolated though! And no idea what kind of people live around that area. And as a soon to be elderly single woman, I might be biting off more than I can chew and a difficult way out of it. IIRC, the parcel had been on the market for like a year.

The remoteness factor as a single person can be a huge issue as we get older. Progressively hard to maintain a place and get around/and away once you are much older.  My dad lived in a remote area alone with his dogs after his second wife died. And even pushing 80 he was very strong, very fit and healthy so able to do all the (endless) big chores required to maintain the place alone. But that was unlikely to last once in his mid 80s and above.  But even if he remained healthy and fit, the social isolation and lack of community was pretty lonely.

Personally I'd look more into condo living as a way to lower housing expenses as well as offer more freedom to travel (just lock the door and go!), a sense of community and easy maintenance. That's what I'd chose for myself but SO isn't a "condo guy" so pooling our $$ for a shared small house in a larger town will work best.

[mistymoney]

Are you student, car and mortgage loans are low interest rates that you prefer not to pay off before retiring?

If you can pay some of these loans off with some of the 2-3 years cash bucket and may be earnings before retiring, your income needs might come down significantly, that might enable to qualify for ACA, tax arbitrage your pretax monies to Roth and qualify for other benefits.

Mortgage is below 3% and balance is a bit around 325k so not including that in this line of thought. It will be paid off over time when I am ~85ish. But that ongoing mortgage payment does make my yearly spend higher than many others and together with mostly pretax money, higher tax brackets even on the leanfire day to day budget than many here enjoy. Pretax helped alot over the years, but now the bill is coming due, and I'm ok with that, just need to make sure numbers are accurate on the tax liability.

For the auto/st loans, I have been thinking about a full or partial lump sum payoff (partial meaning paying off some but not all the loans. I don't want to use up my small post-tax or roth accounts for this or other regular expenses, preserving those for whenever new roof, car, appliances, splurge trip, etc. come up. However, if those balances increase can reconsider using for more/earlier payoff.

When I retire and start withdrawing, 100% is coming from my 401k and rollovers and I will be well into the 22% tax bracket. If I take out an extra 125k to pay off these balances, that would be an extra 30k in taxes that first year (and push me into the 32% bracket). Maybe that is just the cost of doing business? if I end up paying in the 22% bracket all along for these debt payments, am I really saving much by stringing it along?

Should I look at the payoff of these all as coming at 22% tax (as it would be on top of my other expenses and mortgage) + the ongoing interest rates vs the payoff being in the 22-32% bracket and looks like the average tax paid on the lump sum withdrawal (on top of living expenses) would be about 26-7%. So really very equivalent rates.

I was thinking you could use your 2-3 year expenses saved in cash to pay off car and student loans. Would that cash balance exceed 125K. Assuming that is 125K loan balance with higher interest rates, would that save you couple thousand in expenses a month?

What is interest rates on student/car loans?

Let's say $2000 a month is $24000 a year less in expenses. would that open up other oppurtunities like ACA or reduce taxes 30% (federal+state) from withdrawals from pretax accounts.

Car is 5.34%, student loans vary from 5.59% to 6.96%. Student loans have 0.25% interest discount for autopay.

My cash position is mostly pretax as well, MM, bond fund, and treasuries within 401k and rollovers. So that would still up the taxes 30k for the lump sum. I think my best move is to see how much I can pay off before retirement in late 2025, and then in 2026 look at the overall financial picture/taxes and maybe plan a payoff from there.

[mistymoney]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

I'm considering it. I am in the middle of the "hoard of critters" phase. I planned to be pet free at retirement and see the world, but there were a lot of strays during the pandemic, and I opened the door. Have enough that renting is likely not an option for a while, but another purchase could be. I am certainly not the HCOL like you had, but have about 200-250k in equity. A move to a 300-400k (or even less) place purchased outright could be a good move, taxes are 10k a year and only going up.

I have been looking around. Would ideally like some private waterfront or a nice pond/swimming hole in a scenic sparcely populated but at least mildly progressive area.

Was looking at a nice little piece of property in N. Cali with a stream I thought I could build out a small swimming area on. Well under 100k, no building, was thinking about fencing a large area for the pets with one of those prefab containerish abodes set inside the fencing. Go for a composting toilet, solar energy. Not sure if the stream could provide good drinking water or not. So all of that would be less than 200k to set up with ongoing expenses of very little, then just need food and clothes.

Worried about being too isolated though! And no idea what kind of people live around that area. And as a soon to be elderly single woman, I might be biting off more than I can chew and a difficult way out of it. IIRC, the parcel had been on the market for like a year.

The remoteness factor as a single person can be a huge issue as we get older. Progressively hard to maintain a place and get around/and away once you are much older.  My dad lived in a remote area alone with his dogs after his second wife died. And even pushing 80 he was very strong, very fit and healthy so able to do all the (endless) big chores required to maintain the place alone. But that was unlikely to last once in his mid 80s and above.  But even if he remained healthy and fit, the social isolation and lack of community was pretty lonely.

Personally I'd look more into condo living as a way to lower housing expenses as well as offer more freedom to travel (just lock the door and go!), a sense of community and easy maintenance. That's what I'd chose for myself but SO isn't a "condo guy" so pooling our $$ for a shared small house in a larger town will work best.

that is a thought.....but still think too many cats at the moment for a condo. But could be a good second stage to consider.

I was also thinking about expat to mexico as an option. was going to drive down the baja coast one side up the other as a vacay a few years ago to check it out. DD said no, too dangerous!

chuckled at that. how the tables have turned!

but I obeyed :)

[mistymoney]

Next piece of puzzle is to have proper asset allocation with diversified Stocks and bonds funds, that can protect you from sequence of returns risk for first few year of retirement until you start social security.

yeah - I guess buckets, then what is in the bucket? How many years of safe money to put aside. I was thinking 2-3, but now considering 5.

[Radagast]

Wow, those rates are high. I would not hold any cash or bonds at all with those rates. Even with 22% tax, it makes more sense to pay off the student loans than to hold cash in a retirement account for use within a few years. Particularly the 6.96% one, that is hair on fire emergency level for someone looking to retire. If you had a 4.5% bond/cash and paid even 32% tax on it, that's 6.62% equivalent which is still lower than your loan. I'd say shovel all resources toward it immediately; make it go away.

[spartana]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

I'm considering it. I am in the middle of the "hoard of critters" phase. I planned to be pet free at retirement and see the world, but there were a lot of strays during the pandemic, and I opened the door. Have enough that renting is likely not an option for a while, but another purchase could be. I am certainly not the HCOL like you had, but have about 200-250k in equity. A move to a 300-400k (or even less) place purchased outright could be a good move, taxes are 10k a year and only going up.

I have been looking around. Would ideally like some private waterfront or a nice pond/swimming hole in a scenic sparcely populated but at least mildly progressive area.

Was looking at a nice little piece of property in N. Cali with a stream I thought I could build out a small swimming area on. Well under 100k, no building, was thinking about fencing a large area for the pets with one of those prefab containerish abodes set inside the fencing. Go for a composting toilet, solar energy. Not sure if the stream could provide good drinking water or not. So all of that would be less than 200k to set up with ongoing expenses of very little, then just need food and clothes.

Worried about being too isolated though! And no idea what kind of people live around that area. And as a soon to be elderly single woman, I might be biting off more than I can chew and a difficult way out of it. IIRC, the parcel had been on the market for like a year.

The remoteness factor as a single person can be a huge issue as we get older. Progressively hard to maintain a place and get around/and away once you are much older.  My dad lived in a remote area alone with his dogs after his second wife died. And even pushing 80 he was very strong, very fit and healthy so able to do all the (endless) big chores required to maintain the place alone. But that was unlikely to last once in his mid 80s and above.  But even if he remained healthy and fit, the social isolation and lack of community was pretty lonely.

Personally I'd look more into condo living as a way to lower housing expenses as well as offer more freedom to travel (just lock the door and go!), a sense of community and easy maintenance. That's what I'd chose for myself but SO isn't a "condo guy" so pooling our $$ for a shared small house in a larger town will work best.

that is a thought.....but still think too many cats at the moment for a condo. But could be a good second stage to consider.

I was also thinking about expat to mexico as an option. was going to drive down the baja coast one side up the other as a vacay a few years ago to check it out. DD said no, too dangerous!

chuckled at that. how the tables have turned!

but I obeyed :)

The critters are adorable but they do limit where and how you can live or travel. Extremely awesome of you to give orphaned kitties a nice safe place to live!

I don't know much about living in Mexico but I know there are a lot of expat American communities there and it seems many people, including single women,  feel safe there and are happy. I think @shadowmoss lived in a central american country as a single woman for a few years so maybe she can chime in with info. Although if you have kids in the US staying here might be easier.

Also don't discount the possibility of that you'll have or want a serious relationship again. I know your actively dating and, if living in a remote location, might be harder to have romantic relationships as well as just friendships. Not a lot of people in remote or rural  places and likely already partnered.

Also when I FIREd I had what I assumed was 3 years worth of "cash" (laddered CDs and bonds) put aside. I FIREd shortly before the great recession and actually used that money to cover my (very low) expenses when I lost about 50% of my total NW (house value and investments) when that hit allowing me to leave my investment assets untouched. In your case since you have high expenses that might not be the best route but worked for me.

[mistymoney]

Wow, those rates are high. I would not hold any cash or bonds at all with those rates. Even with 22% tax, it makes more sense to pay off the student loans than to hold cash in a retirement account for use within a few years. Particularly the 6.96% one, that is hair on fire emergency level for someone looking to retire.

I find this very inconsistent with other information on the forum.

WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k (traditional or Roth - see "Why #4" below) up to any company match           
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.           
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra.


In step 7, the current 10 year treasury note yield is 4%, so critieria here is to pay off debts at 7% and above. All the interest rates are under 7%, so I have been following the investment order to not focus on these debts but to fund other investment and savings vehicles.   

If you had a 4.5% bond/cash and paid even 32% tax on it, that's 6.62% equivalent which is still lower than your loan.

I don't even know what this means.

But if I were to withdraw an extra 25k to lump sum extra paydown, and that 25k falls in the 32% tax bracket, 8k goes to taxes and 17k goes to the paydown. So I have saved $1,190 in interest for the following year (an extra reduction of principal of 17k at let's say 7% interest for rounding) at a cost of 8k in taxes. That doesn't line up for me.

[mistymoney]

Have you thought about selling your house and downsizing to a less expensive place or location? My house in a HCOL area was always one of my buckets because I knew I'd be selling and downsizing eventually once my horde of critters were gone. I did that and use the money to pay for a new place with cash and had a fairly large amount left over to create a pretty hefty cash bucket to use before having to tap my tax deferred investments.

I'm considering it. I am in the middle of the "hoard of critters" phase. I planned to be pet free at retirement and see the world, but there were a lot of strays during the pandemic, and I opened the door. Have enough that renting is likely not an option for a while, but another purchase could be. I am certainly not the HCOL like you had, but have about 200-250k in equity. A move to a 300-400k (or even less) place purchased outright could be a good move, taxes are 10k a year and only going up.

I have been looking around. Would ideally like some private waterfront or a nice pond/swimming hole in a scenic sparcely populated but at least mildly progressive area.

Was looking at a nice little piece of property in N. Cali with a stream I thought I could build out a small swimming area on. Well under 100k, no building, was thinking about fencing a large area for the pets with one of those prefab containerish abodes set inside the fencing. Go for a composting toilet, solar energy. Not sure if the stream could provide good drinking water or not. So all of that would be less than 200k to set up with ongoing expenses of very little, then just need food and clothes.

Worried about being too isolated though! And no idea what kind of people live around that area. And as a soon to be elderly single woman, I might be biting off more than I can chew and a difficult way out of it. IIRC, the parcel had been on the market for like a year.

The remoteness factor as a single person can be a huge issue as we get older. Progressively hard to maintain a place and get around/and away once you are much older.  My dad lived in a remote area alone with his dogs after his second wife died. And even pushing 80 he was very strong, very fit and healthy so able to do all the (endless) big chores required to maintain the place alone. But that was unlikely to last once in his mid 80s and above.  But even if he remained healthy and fit, the social isolation and lack of community was pretty lonely.

Personally I'd look more into condo living as a way to lower housing expenses as well as offer more freedom to travel (just lock the door and go!), a sense of community and easy maintenance. That's what I'd chose for myself but SO isn't a "condo guy" so pooling our $$ for a shared small house in a larger town will work best.

that is a thought.....but still think too many cats at the moment for a condo. But could be a good second stage to consider.

I was also thinking about expat to mexico as an option. was going to drive down the baja coast one side up the other as a vacay a few years ago to check it out. DD said no, too dangerous!

chuckled at that. how the tables have turned!

but I obeyed :)

The critters are adorable but they do limit where and how you can live or travel. Extremely awesome of you to give orphaned kitties a nice safe place to live!

I don't know much about living in Mexico but I know there are a lot of expat American communities there and it seems many people, including single women,  feel safe there and are happy. I think @shadowmoss lived in a central american country as a single woman for a few years so maybe she can chime in with info. Although if you have kids in the US staying here might be easier.

Also don't discount the possibility of that you'll have or want a serious relationship again. I know your actively dating and, if living in a remote location, might be harder to have romantic relationships as well as just friendships. Not a lot of people in remote or rural  places and likely already partnered.

Also when I FIREd I had what I assumed was 3 years worth of "cash" (laddered CDs and bonds) put aside. I FIREd shortly before the great recession and actually used that money to cover my (very low) expenses when I lost about 50% of my total NW (house value and investments) when that hit allowing me to leave my investment assets untouched. In your case since you have high expenses that might not be the best route but worked for me.

I do think I need to have a good amount in cash due to the multiple vulnerabilities of high overhead to start, on my own, no pension, etc. I think I can do 5 years worth of cash and equivalents and still have enough in the market for growth. I want to make sure I have enough cash to make to early soc sec at a minimum (3 years), just in case. And if I do 5 flush years spending in case, then if things are looking bleak could go lean and stretch that out to 65 and social security/medicare.

And then downsizing, even earlier soc sec, keeping my sid biz going all provide some support safeguarding for a down market.

If the market tanks for a long haul (5+ years), housing tanks (lose equity), and inflation goes haywire I'd have a pretty hard time.

But I think I've established (in my own mind at least!), I don't have OMY. there are no OMYs left. So do my best planning this last year, and if no black swan event, then do it.

[Radagast]

Wow, those rates are high. I would not hold any cash or bonds at all with those rates. Even with 22% tax, it makes more sense to pay off the student loans than to hold cash in a retirement account for use within a few years. Particularly the 6.96% one, that is hair on fire emergency level for someone looking to retire.

I find this very inconsistent with other information on the forum.

WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k (traditional or Roth - see "Why #4" below) up to any company match           
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.           
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra.


In step 7, the current 10 year treasury note yield is 4%, so critieria here is to pay off debts at 7% and above. All the interest rates are under 7%, so I have been following the investment order to not focus on these debts but to fund other investment and savings vehicles.   

If you had a 4.5% bond/cash and paid even 32% tax on it, that's 6.62% equivalent which is still lower than your loan.

I don't even know what this means.

But if I were to withdraw an extra 25k to lump sum extra paydown, and that 25k falls in the 32% tax bracket, 8k goes to taxes and 17k goes to the paydown. So I have saved $1,190 in interest for the following year (an extra reduction of principal of 17k at let's say 7% interest for rounding) at a cost of 8k in taxes. That doesn't line up for me.

That advice is for accumulators heavily investing in stocks, not retirees, though. Market volatility results in accumulators earning the market's 10% nominal average, and getting better returns during bad times. Retirees are the opposite: They average a 6% or so SWR, and worse during bad times.

In your case it would not make sense to hold any loan with a rate higher than the lowest rate of any cash or bond allocation you have (except maybe a tiny amount in a checking account for expenditures). However that includes taxes on dividends. If your bond fund yields 4.5% and you pay 22% tax, 4.5*.78=3.5% you should pay any loans with a rate over 3.5% before holding taxable bonds or cash. The highest tax exempt bond funds yield about 4%. In taxable accounts that means you'd want to pay off any loan with a rate over 4% until you had no taxable bonds or cash left.

You calculate the tax equivalent yield of a bond by dividing it by one minus your tax rate, 4.5% / (1-.32) = 6.62%. Even at 32% tax, it would make sense to sell bond funds and withdraw the money to pay off that high interest rate loan. Ideally i think you'd do it over two years to reduce the tax hit farther.

[mistymoney]

Wow, those rates are high. I would not hold any cash or bonds at all with those rates. Even with 22% tax, it makes more sense to pay off the student loans than to hold cash in a retirement account for use within a few years. Particularly the 6.96% one, that is hair on fire emergency level for someone looking to retire.

I find this very inconsistent with other information on the forum.

WHAT           
0. Establish an emergency fund to your satisfaction           
1. Contribute to your 401k (traditional or Roth - see "Why #4" below) up to any company match           
2. Pay off any debts with interest rates ~5% or more above the current 10-year Treasury note yield.           
3. Max Health Savings Account (HSA) if eligible.
4. Max Traditional IRA or Roth (or backdoor Roth) based on income level           
5. Max 401k (if
    - 401k fees are lower than available in an IRA, or
    - you need the 401k deduction to be eligible for (and desire) a tIRA deduction, or
    - you earn too much for an IRA deduction and prefer traditional to Roth, then
    swap #4 and #5)           
6. Fund a mega backdoor Roth if applicable.         
7. Pay off any debts with interest rates ~3% or more above the current 10-year Treasury note yield.           
8. Invest in a taxable account and/or fund a 529 with any extra.


In step 7, the current 10 year treasury note yield is 4%, so critieria here is to pay off debts at 7% and above. All the interest rates are under 7%, so I have been following the investment order to not focus on these debts but to fund other investment and savings vehicles.   

If you had a 4.5% bond/cash and paid even 32% tax on it, that's 6.62% equivalent which is still lower than your loan.

I don't even know what this means.

But if I were to withdraw an extra 25k to lump sum extra paydown, and that 25k falls in the 32% tax bracket, 8k goes to taxes and 17k goes to the paydown. So I have saved $1,190 in interest for the following year (an extra reduction of principal of 17k at let's say 7% interest for rounding) at a cost of 8k in taxes. That doesn't line up for me.

That advice is for accumulators heavily investing in stocks, not retirees, though. Market volatility results in accumulators earning the market's 10% nominal average, and getting better returns during bad times. Retirees are the opposite: They average a 6% or so SWR, and worse during bad times.

In your case it would not make sense to hold any loan with a rate higher than the lowest rate of any cash or bond allocation you have (except maybe a tiny amount in a checking account for expenditures). However that includes taxes on dividends. If your bond fund yields 4.5% and you pay 22% tax, 4.5*.78=3.5% you should pay any loans with a rate over 3.5% before holding taxable bonds or cash. The highest tax exempt bond funds yield about 4%. In taxable accounts that means you'd want to pay off any loan with a rate over 4% until you had no taxable bonds or cash left.

You calculate the tax equivalent yield of a bond by dividing it by one minus your tax rate, 4.5% / (1-.32) = 6.62%. Even at 32% tax, it would make sense to sell bond funds and withdraw the money to pay off that high interest rate loan. Ideally i think you'd do it over two years to reduce the tax hit farther.

My money is almost all in pretax. I still don't see what the 6.62% is suppose to represent. What is it a percentage of? Why is the 4.5% used here? Yield isn't being taxesit but the entire amount withdrawn. So to pay off the entire bit of 125k would need to withdraw ~155k from the 401k rollover to account for all the taxes.

But to me seems like ripping off a bandaid that took some flesh with it but it didn't need ripping and could have been peeled off more slowly. If could be that just doing the lump sum payment (even at 32% or something less) is a better way to go about it from some POV, but I don't think there is any math that shows it conclusively the best or only way.

But I do know some people have taken larger tax hits in the early days to pay off things like mortgages, make big Roth conversions, etc. in order to better manage lifetime tax liability in terms of eventual RMD or to make lower income possible for ACA subsidies. So it does have a following, I know! And maybe I should just bite that 30k in taxes and call it a day. It would really simplify things.

But I could look to pay off extra this last year of work, and then take larger WR retirement year 1 and 2 and have it all paid off by year 3. Would be taking at lot at the 24% tax bracket, so somewhat better than 32%

Alternately, I do have enough in taxable and roth to pay off all the loans rather than pay from the 24/32% income tax brackets. I was kind of hoping to save those for the unexpected and irregular expenses, but maybe it would be better to try to replenish those from the pretax over time?

Something to think about.

[shadowmoss]

I just saw the tag from @spartana .  I lived in Honduras for 2.5 years, but I worked for the US military on post.  I did live out on the economy so I wasn't completely isolated from the locals.  There are issues that I didn't consider beforehand.  If I hadn't had a PO box on post I wouldn't have had a mailing address.  From what I could tell locals just didn't do mail.  We were not allowed to get meil for anyone else and I felt badly that I could just order from Amazon and my local friends couldn't easily.  I don't know if I could live there without the support for daily life having access to the post gave me.  Also, Honduras is a small country and I just always assumed that any random local knew I was attached to the post.  That seemed to give me some added safety.

I have a couple of friends who have moved to Guanajuato, MX and I plan to go visit them in January.  I'm hoping that I like it enough to sort out how to spend a month or so later on.  I do have a small dog and a large cat that complicates this plan.  I have extremely competent pet sitters but a month is a long time.  I live in my motorhome in AZ so having someone actually move in while I'm gone would mean finding someone used to living in an RV.

I probably don't have much else to offer but feel free to tag me if you have any questions.

[mistymoney]

I just saw the tag from @spartana .  I lived in Honduras for 2.5 years, but I worked for the US military on post.  I did live out on the economy so I wasn't completely isolated from the locals.  There are issues that I didn't consider beforehand.  If I hadn't had a PO box on post I wouldn't have had a mailing address.  From what I could tell locals just didn't do mail.  We were not allowed to get meil for anyone else and I felt badly that I could just order from Amazon and my local friends couldn't easily.  I don't know if I could live there without the support for daily life having access to the post gave me.  Also, Honduras is a small country and I just always assumed that any random local knew I was attached to the post.  That seemed to give me some added safety.

I have a couple of friends who have moved to Guanajuato, MX and I plan to go visit them in January.  I'm hoping that I like it enough to sort out how to spend a month or so later on.  I do have a small dog and a large cat that complicates this plan.  I have extremely competent pet sitters but a month is a long time.  I live in my motorhome in AZ so having someone actually move in while I'm gone would mean finding someone used to living in an RV.

I probably don't have much else to offer but feel free to tag me if you have any questions.

Thank you! I appreciate the perspective, and you taking the time to post. :)

Let us know what you find in Guanajuato. Hope you have fun!!

[mistymoney]

so I added up all the payments I would make paying these all over time on payment schedules, and it's actually about 155k anyway.

Maybe this is a bandaid I need to rip off and just be done with it?

I'll start moving things around to get more aggressive on the pay down on Monday.

ok, well thanks everyone. looking at it from a bunch of different angles has changed my perspective.

[dandarc]

Hold on there. Yeah $155K total spread over 5-10 years, right? That's quite different than $155K today and paying whatever taxes you'll have to pay right now.

If you rip that bandaid off and unplug that much in investments, then you're not out only $155K after however long this repayment period is, you're out $155K + the return on any investments you won't have because you unplugged them today. So you should be expecting to be out another 50-100% on top of that compounded over that time depending on how long that is. Or maybe I lost the thread and you have $155K in cash and maybe bonds to throw at it?

Really should be looking at how handle-able the payments are for you before deciding to unplug six figures of investments. You can decide pay everything off in one shot at any point from now until the scheduled pay-offs. And car and student-loan debt can be very easy debt to manage - set on autopay and forget it. So if the payments are not putting you into hardship, maybe pump the breaks on paying everything off immediately.

[dandarc]

Also you should still be looking at a 30+ year time-period. I'd say you have more in common with an accumulator than you might think.

[mistymoney]

Also you should still be looking at a 30+ year time-period. I'd say you have more in common with an accumulator than you might think.

ok - I'll think on it some more!

[Radagast]

Sorry yes, it probably would not make sense to withdraw and pay tax to pay off the loan. However, it would also likely not make sense to make further contributions to tax-advantaged funds with rates like the 7% one. It would be better to stop making contributions, pay down the 7% loan, and swap bonds/cash for stocks in the tax-advantaged fund. That would be equivalent to buying bonds with better rates. It may or may not make sense to pay off the lower rate ones as well. Probably. There's lots we don't know still, for example your current tax rate. It's hard to make recommendations without a complete picture.

However think that with a 4% SWR + 2% inflation, any debt rate over 6% lowers your odds of success.

[spartana]

I just saw the tag from @spartana .  I lived in Honduras for 2.5 years, but I worked for the US military on post.  I did live out on the economy so I wasn't completely isolated from the locals.  There are issues that I didn't consider beforehand.  If I hadn't had a PO box on post I wouldn't have had a mailing address.  From what I could tell locals just didn't do mail.  We were not allowed to get meil for anyone else and I felt badly that I could just order from Amazon and my local friends couldn't easily.  I don't know if I could live there without the support for daily life having access to the post gave me.  Also, Honduras is a small country and I just always assumed that any random local knew I was attached to the post.  That seemed to give me some added safety.

I have a couple of friends who have moved to Guanajuato, MX and I plan to go visit them in January.  I'm hoping that I like it enough to sort out how to spend a month or so later on.  I do have a small dog and a large cat that complicates this plan.  I have extremely competent pet sitters but a month is a long time.  I live in my motorhome in AZ so having someone actually move in while I'm gone would mean finding someone used to living in an RV.

I probably don't have much else to offer but feel free to tag me if you have any questions.

Hey @shadowmoss Thanks for sharing your experience. I use to really enjoy your stories on your blog and I think hearing the good (and the bad) about being a single woman expat in Central and South America and Mexico is help dispell a lot of beliefs. Not too many have done that!

[mistymoney]

Just an FYI for any who found this an interesting angle to consider: I've found a similar line of thought on bogleheads.

https://www.bogleheads.org/forum/viewtopic.php?t=102609

And a few threads offshooting from this. the terminology used by some of these posters are a bridge (to ss) rather than a bucket. I'm still reading some of these threads to see where they line up, but so far the bridges are much shorter than my time line, and the implication is that the money is in cash. Since I am contemplating an 11 year bridge to get to max soc sec at 70, keeping that much in cash may tip over into other kinds of risk.

Still reading and messing around with spreadsheets, but thought this was another piece of the puzzle I'm trying to put together. aka, I'm not the first one on this rodeo ride. lthough with a longer timeline, my ride could potentially be a bit rougher...

[achvfi]

11 year cash sounds like equivalent 60/40 stocks/bonds portfolio. My concern is you keep saying 11 years of cash. Do you mean cash or fixed income like bonds. There is big difference.

If you are looking for buckets something like 2 year cash bucket, rest of the fixed income in short/intermediate term bond bucket and remaining in diversified stock bucket.

[mistymoney]

11 year cash sounds like equivalent 60/40 stocks/bonds portfolio. My concern is you keep saying 11 years of cash. Do you mean cash or fixed income like bonds. There is big difference.

If you are looking for buckets something like 2 year cash bucket, rest of the fixed income in short/intermediate term bond bucket and remaining in diversified stock bucket.

Cash and equivalents. treasuries, etc. I think the fund in my 401k is STT rather than cash, MM in rollovers. But still trying to figure it out, reading on bonds in bogleheads....they are having a meltdown on it, no one agrees.

[VanillaGorilla]

This is a tricky scenario for many reasons!

The simplest solution, and also perhaps the least practical, is to pay down all your debts before quitting your job. Then you have a simpler scenario where you have a fixed withdrawal rate for the first ten years, with additional social security kicking in, which most FIRE calculators let you model pretty easily. cFIRESim does this trivially - for example, a 4% WR for ten years then dropping to 3% has never failed, historically.

The debts make things complicated, since there are multiple debts with varying maturation dates. Also, they're not inflation adjusted. So really, the question you're asking is: for a given debt, how much money do you need invested to cover the debt? You can model this in cFIRESim as well - I started a thread doing this for mortgages, but it should work equally well for any fixed rate debt.

If you have a debt that costs $10,000 per year and will be paid off in 10 years, with a 50/50 portfolio you need about $100,000 invested to cover that debt. This approach failed 2% of the time, which is safer than the 4% rule of thumb. If you have $110k invested the failure rate goes down to 1%. You can play with asset allocations - I think a 30/70 stock/bond split would do even better over 10 years.

Now that you've established your baselines, you can calculate your total asset allocation. For each debt, calculate how big a portfolio you need at what asset allocation to cover that debt. Then calculate how big a portfolio you need to live off of excluding all your debts. Then add them together and weight the asset allocations.

So say:
1.) $1,000,000 to live off in perpetuity at 80/20
2.) $200,000 to pay off a mortgage at 30/70
3.) $100,000 to pay off student loans at 30/70

So in total, $800k+60k+30k in equities, 200k+180k+70k in bonds, so $890k in equities and $350k in bonds.

This is probably overfitting a little to historical data since a 10 year duration is pretty short, so I wouldn't twiddle with stock/bond/cash ratios too much, but it should give a pretty decent baseline.

[mistymoney]

This is a tricky scenario for many reasons!

The simplest solution, and also perhaps the least practical, is to pay down all your debts before quitting your job. Then you have a simpler scenario where you have a fixed withdrawal rate for the first ten years, with additional social security kicking in, which most FIRE calculators let you model pretty easily. cFIRESim does this trivially - for example, a 4% WR for ten years then dropping to 3% has never failed, historically.

The debts make things complicated, since there are multiple debts with varying maturation dates. Also, they're not inflation adjusted. So really, the question you're asking is: for a given debt, how much money do you need invested to cover the debt? You can model this in cFIRESim as well - I started a thread doing this for mortgages, but it should work equally well for any fixed rate debt.

If you have a debt that costs $10,000 per year and will be paid off in 10 years, with a 50/50 portfolio you need about $100,000 invested to cover that debt. This approach failed 2% of the time, which is safer than the 4% rule of thumb. If you have $110k invested the failure rate goes down to 1%. You can play with asset allocations - I think a 30/70 stock/bond split would do even better over 10 years.

Now that you've established your baselines, you can calculate your total asset allocation. For each debt, calculate how big a portfolio you need at what asset allocation to cover that debt. Then calculate how big a portfolio you need to live off of excluding all your debts. Then add them together and weight the asset allocations.

So say:
1.) $1,000,000 to live off in perpetuity at 80/20
2.) $200,000 to pay off a mortgage at 30/70
3.) $100,000 to pay off student loans at 30/70

So in total, $800k+60k+30k in equities, 200k+180k+70k in bonds, so $890k in equities and $350k in bonds.

This is probably overfitting a little to historical data since a 10 year duration is pretty short, so I wouldn't twiddle with stock/bond/cash ratios too much, but it should give a pretty decent baseline.

This is an interesting POV, thank you. I was kind of modeling the mortgage as a permanent expense. But it does make sense to treat that debt a little more conservatively.

[mistymoney]

working that out on my numbers gives me a total allocation of 71/29.

[dandarc]

working that out on my numbers gives me a total allocation of 71/29.

Call it 70/30 and enjoy the simple life with one actual bucket!