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Early Retirement / How to convert investments to cash
« on: February 04, 2023, 11:50:40 AM »
Hi all,
I am hoping to retire in August of 2024. I will be 53. I think my portfolio and pensions/SS will be in a good place to walk. But I have very little cash and I am worried about having enough if I get the worst sequence of returns issue right when I retire.
I will make 78K this year and then 50k in 2024 before leaving work in June. I spend about 46K a year (with very cheap and good quality health insurance as a teacher that I will lose when I leave). My state tax is 9%. I plan on needing 50K/yr each year in retirement with higher insurance costs.
• At 55 I will get 520/mo pension with a lump sum payout of 30K.
• At 65 I will get another pension of 1240/mo with a 54,000 lump sum (rolled to my IRA).
• At 70 I get SS at 1500/mo.
My portfolio allocations are attached.
I have been investing a lot and probably waited a bit too long to build up cash for my first few years and am probably too heavy in bonds (especially right now!).
Would love feedback on what I plan to do.
Plan for cash this year:
• Put 17k to my 457 (bond fund) this to keep salary very close to the 22% tax bracket and pair this with selling 17k of my brokerage bond fund (at a 3K loss) to add 17k to treasuries in my brokerage (and harvest the 3K loss to add any salary to 457 or treasuries). I’m also maxing an HSA.
• Add a 5K RMD from my inheritance IRA to treasuries as well.
• This year and next: I will continue to loss harvest bond funds to buy treasuries next year (market conditions allowing) to get the 50K cash for the first year and then an additional 14K for when I turn 55 and maybe some more for a third year. (In my 55 year I will start my first pension (6.2K/yr) and get the lump sum 30K… so that is effectively 36K cash). Then, at 56 I will see what I have and hope that bonds are more useful.
So, I find this all kind of confusing and wonder a few things:
• Is the plan good enough to succeed? Will my available/accessible money last me until 59.5?
• How much cash/treasuries do I actually need when I walk away? And how much in bonds?
• Should I put my 457 money in bonds or equities? Bonds are feeling terrible right now.
• Should I shift away from all bonds throughout my portfolio to treasuries (for example in my inherit IRA) and shift back when the treasuries stop returning 4.5% +?
• And big picture: How do you decide in retirement when the market is “good enough” to pull funds from equities and bonds to replenish cash? Or do you just make an objective annual rule and follow it no matter what?
Thanks for any thoughts.
I am hoping to retire in August of 2024. I will be 53. I think my portfolio and pensions/SS will be in a good place to walk. But I have very little cash and I am worried about having enough if I get the worst sequence of returns issue right when I retire.
I will make 78K this year and then 50k in 2024 before leaving work in June. I spend about 46K a year (with very cheap and good quality health insurance as a teacher that I will lose when I leave). My state tax is 9%. I plan on needing 50K/yr each year in retirement with higher insurance costs.
• At 55 I will get 520/mo pension with a lump sum payout of 30K.
• At 65 I will get another pension of 1240/mo with a 54,000 lump sum (rolled to my IRA).
• At 70 I get SS at 1500/mo.
My portfolio allocations are attached.
I have been investing a lot and probably waited a bit too long to build up cash for my first few years and am probably too heavy in bonds (especially right now!).
Would love feedback on what I plan to do.
Plan for cash this year:
• Put 17k to my 457 (bond fund) this to keep salary very close to the 22% tax bracket and pair this with selling 17k of my brokerage bond fund (at a 3K loss) to add 17k to treasuries in my brokerage (and harvest the 3K loss to add any salary to 457 or treasuries). I’m also maxing an HSA.
• Add a 5K RMD from my inheritance IRA to treasuries as well.
• This year and next: I will continue to loss harvest bond funds to buy treasuries next year (market conditions allowing) to get the 50K cash for the first year and then an additional 14K for when I turn 55 and maybe some more for a third year. (In my 55 year I will start my first pension (6.2K/yr) and get the lump sum 30K… so that is effectively 36K cash). Then, at 56 I will see what I have and hope that bonds are more useful.
So, I find this all kind of confusing and wonder a few things:
• Is the plan good enough to succeed? Will my available/accessible money last me until 59.5?
• How much cash/treasuries do I actually need when I walk away? And how much in bonds?
• Should I put my 457 money in bonds or equities? Bonds are feeling terrible right now.
• Should I shift away from all bonds throughout my portfolio to treasuries (for example in my inherit IRA) and shift back when the treasuries stop returning 4.5% +?
• And big picture: How do you decide in retirement when the market is “good enough” to pull funds from equities and bonds to replenish cash? Or do you just make an objective annual rule and follow it no matter what?
Thanks for any thoughts.