Retiring beyond 55

[gopherguy]

Hey folks,
Thanks for reading, and thank you (anyone and everyone) in advance for your input.
I'm 55 and have not been invested. Sad but true, and the reason is too long to explain here.
I have a little over 1.1M in cash. And approx. 500K in 401k. House is paid, no debts.
Yearly expenses are approx. 42K.
I’m still employed.
The key for younger people seeking FI is time, younger people have more time to allow their nest egg (investments) to grow. My plan is to invest 1M and not touch it until I’m 67. Is that enough time (a little under 12 years) to allow it to grow? And given the market is valued so high at this time, is it wise to go all in at my age?
Appreciate your feedback!
Note: at 67 I'll also begin to claim social security, so I won't need very much of that 1.1M. My social security will cover at least 75% of my expenses. Thanks again for your feedback!

[gocurrycracker]

There are many possible paths forward.

It seems like growing the portfolio is not necessary, just maintaining it.

Roughly you have a cash pile that covers 38 years worth of spending (1.6 million / 42k = 38 years.)

With social security income, that number grows to 150 years (1.6 million / 42k / 0.25 = 150 years.)
Less how many years you withdraw funds before collecting SS.

If you threw the $1.1 million into something like a 60/40 stock/bond allocation, you would get $20k/year or so of dividend and interest income. With SS income your portfolio now lasts forever.

[gopherguy]

Thank you GCC for your reply.

I've been contemplating VWENX, which is 'roughly' 70/30 stock/bond.

Because valuation is high I'm thinking of slowing dollar cost averaging over the next 18 or 24 months. In your opinion, if you were 55, would you go slow or all in? I'll make up my own mind but curious what you would do.

Glad I found your blog.

Regards!

[gocurrycracker]

Well... the statistics say that the market is often at an all time high and lump sum usually wins.

https://awealthofcommonsense.com/2018/05/the-lump-sum-vs-dollar-cost-averaging-decision/
https://personal.vanguard.com/pdf/ISGDCA.pdf

But the right answer is whichever makes you most comfortable.

[gopherguy]

Thank you for the link to the article. Very informative.

My favorite sentence is "Investing is ultimately an exercise in regret minimization." LOL

Much appreciate all of your feedback.

Regards!

[gocurrycracker]

My favorite sentence is "Investing is ultimately an exercise in regret minimization." LOL

Can confirm this is true 

[gopherguy]

Hello GCC and everyone... When I submitted my original post/request for feedback of course I couldn’t even imagine the current events. Afterward societal and market changes began to happen so quickly I invested (thankfully) just a small portion of my cash position. New Question: I had a significant amount in my vanguard money market account — settlement fund) in order to deploy quickly into the market. This past Saturday I freaked out and decided to move the cash back to my FDIC insured bank accounts. Reason being I wasn’t sure if the money market account might somehow lose value or become inaccessible. Ok, I know that might sound ridiculous, but like I said I ‘ freaked’ out. Now that the market has dropped precipitously, and may drop further... I want to be ready to go into the market again once it feels right. Thus, I would rather not have my money in the bank because it takes a few days to do the transfer back to Vanguard. Apologies- I’ll get to my question: Is the vanguard Settlement fund safe? Appreciate everyone’s feedback. Hope all who are on this board are in good health, and keeping a level head, relative to the situation. Best!!

[gocurrycracker]

question: Is the vanguard Settlement fund safe?

money market funds can sometimes trade at prices different from their NAV. This is usually short-lived but does happen.

this is Vanguard's disclaimer:
Vanguard Prime, Federal, and Treasury Money Market Funds: You could lose money by investing in the funds. Although the funds seek to preserve the value of your investment at $1 per share, they cannot guarantee they will do so. An investment in the funds is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. The funds' sponsor has no legal obligation to provide financial support to the funds, and you should not expect that the sponsor will provide financial support to the funds at any time.



At the beginning of the recent downturn, for example, prices in everything were coming down due to margin calls and people rushing to cash. If you were trying to withdraw funds at the height of the rush you might have lost a bit, but it is back to normal now. (*Might - I don't know how Vanguards MM behaved in those few days.)

Cash in a savings account won't have the same behavior.

Our cash pile at the moment is almost entirely in money market funds with token amounts in a few savings accounts at banks and our credit union.

[gopherguy]

Hello GCC,

Thank you for your reply. I ended up moving some funds back to my Vanguard settlement fund. Thank you for your feedback. I’ve decided not to worry so much about trying to get in at the bottom. I did some research on the history of funds that break the buck... obviously it’s rare. But in the heat of the moment I panicked. I’m not a day trader or someone who trades on the volatility. I’m going to jump back in eventually, but not yet. Hope you and all the readers of this forum are in good health and doing well. Best!

[gopherguy]

Hello GCC, and anyone who would like to respond.

Long story short. I really wanted to try to do my financial planning on my own, but I'm doubting myself. I still think I can sort of manage it on my own, but I feel that I need direct input/feedback in respect to my situation.. and setting up the foundation.

As the subject reads I'm 55. My current plan is to manage 3 buckets.

Bucket #1
1 million in savings and money market: intent is to invest this and not need it until I'm 70. I've invested a small amount already, just prior to sh*t hit the fan with the virus. Thankfully it was a very small portion (to dip my feet in the water), and though I'm down a tad, it's just a very small tad.

Bucket #2
My 401k is about 620K and counting as I'm still working. Mostly invested in money market, and small portion in bond funds. Plan is to live off of this for 10 years, from age 60-70

Bucket #3
Cash. 200K to live off of until I'm 60. I plan to begin when I'm 56-1/2, April 2021. I'm still in process of saving this bucket.

Does anyone recommend an hourly/fee-only financial planner? Is that ok to ask here? I feel sort of confident of what to do with Bucket #1. I'd like to have bucket #2 invested somehow, but obviously it needs to be conservative, but I'm not sure what to do here. For Bucket #3 I think its best to just leave as cash.

Again, I'm looking for someone who I can have a couple hour conversation with, help lay the foundation (of a financial plan). Someone who can see things that I don't see.

Note: No debts, house and cars paid in full.

Thank you.

[gocurrycracker]

Hi gopherguy

I don't know any fee-only financial planners to recommend.

Your bucket plan sounds reasonable.

Vanguard has Target Date funds that you could consider - they transition to more bonds / less equities as you approach a specific date, so it gets "more conservative" over time. Ultimately, they all arrive at a 30% stock / 70% bond allocation in the Target Retirement Income Fund
https://investor.vanguard.com/mutual-funds/profile/VTINX

One possibility:
Bucket 1 - Cash and short term CDs
Bucket 2 - Target date fund 2025 - 40% stock / 60% bonds https://investor.vanguard.com/mutual-funds/profile/VTTVX
Bucket 3 - target date fund 2030 (70/30) or 2035 (75/25) etc... tune to get to target stock/bond split
https://investor.vanguard.com/mutual-funds/profile/VTHRX

[gopherguy]

Thank you GCC.

One concern is the 'bucket plan'. Thanks for your feedback on that 'sounding reasonable'.

bucket 1 will definitely be in CDs and hi yield savings.

Thank you for info about the Target date funds, will look into those.

I'm thinking of moving my quit date to this fall instead of next April. Probably won't be able to invest as much into bucket #3, but I'm really hating work. Furthermore with this virus I'm sort of apprehensive about jumping back on planes... which I do a lot, and will have to do again once my employer brings everyone back WFH.

I look forward to learning more from all the articles you write concerning tax savings. Don't have the energy now, but will after I stop working. I find all of the topics that you write about very interesting. Finance has never ever been my forte, nor business in general. I'm in the creative field. Trying to educate myself on this is a large departure from how I think. And though it's extremely challenging for me I still want to learn, so that's good. Thank you again!

[gocurrycracker]

The bucket plan is a pretty common approach. It's really just a mental model for an asset allocation that shifts over time, but it can feel more comfortable to say think about it as having bucket 1 2 3 as opposed to an asset allocation is x% cash / y% bonds / z% stocks.

Learning is the cornerstone of life I think. It's a good way to stay busy and happy.
80% of this tax stuff I learned post-retirement, although I'm an engineer by training and practice so thinking about and optimizing this stuff comes naturally.

I didn't mention it, but I do some 1:1 consulting on the side. Happy to continue answering any questions you have in the forum, but this is an option also: https://www.gocurrycracker.com/consulting/

[gopherguy]

Hi Jeremy,
I just saw your reply yesterday. Thank you again for your feedback and sending the link to your service, I wasn't aware of it. I'll be in touch. Thanks again, John