Thank you. What I've been doing has indeed worked but the very large majority of my assets are from active business and real estate that I have sold. I do have relatively substantial LTCG from equities but millions in paper money can evaporate very quickly in a bear market. I'm not so much concerned about the temporary reduction in net worth but more so not being in a position of taking advantage of "blood in the streets".$180K/$7000K = 2.6%. Seems a Safe withdrawal rate if you simply keep doing what are doing.
I hate the idea of selling equities to fund expenses while in a bear market. I know that no one knows when that will be hence one reason why I have 12 months of EF as well as a lot of cash in MM in my taxable account so that I have some cushion as well as "dry powder" if things really collapse. Writing this out sounds like tactical asset allocation or market timing but does it matter that in my particular situation cash in MM is earning 5.25% right now which is really part of my fixed income allocation that is more stable at the cost of lower long term return to have instant liquidity for any opportunities that may arise?? If equities fall 50% in the next 6 month and fixed income stay flat I would have no hesitation substantially reducing fixed income exposure to increase equities exposure. I have a very long "retirement" ahead of me and low withdrawal rate so wouldn't it be wise to get more aggressive with equities if they "go on sale"? This isn't a traditional 30 year retirement hence the looking for the Boglehead hive mind thoughts. Or am I just trying to justify market timing?With a 2% to 2.5% withdrawal rate, you are pretty set, probably no matter what you do, though you do have quite a long retirement ahead of you. You should be able to live on dividends/interest alone, and to rarely touch your capital, and your capital base should grow in real terms.
I agree although it is hard to give up the short end of the yield curve when it is inverted. I have been in short term treasuries, CD and MM for my fixed income for many years because I thought it was super silly to be in an intermediate bond fund when interest rates were basically 0. Was this dumb luck?- Your bonds are very short term, yet you have a long horizon. If interest rates drop, your yield will go down very quickly, and you will either draw down your bond capital or put more pressure on your equity. At the same time, bond prices will go up, making them more expensive and psychologically more difficult to buy. While no one knows where interest rates will go, intermediate term bonds can provide a more stable and predictable income stream, even though the stream will be somewhat less than the 5% you are getting right now. Of course, if interest rates then go up, your bonds will go down, but your income stream will rise. I am about 55/45 with intermediate (muni) bonds, and I pretty much missed the "bond collapse" as my income from bonds doubled, and the bond drawdown was offset by increases on the equity side. From a total return perspective, the "bond collapse" turned out well for me - more income and more assets. I really don't care if rates rise, and if they fall, my bond assets rise.
Any particular muni bond funds you would recommend? I'm not super interested in very small bps difference in total after tax monies if it substantially increases default risk or complicates my portfolio. I'm happy to net less after tax for the sake of simplicity.- I would do your taxes with taxable and muni bonds and see which is better. You cannot simply look at TEY (tax equivalent yield), as using taxable bonds will, in addition to their own taxes, potentially cause taxes elsewhere - you will use up your zero bracket qualified dividends, make Roth conversions more expensive (does not look like this applies for you), cause IRMAA issues (maybe too far in the future for you) , etc. You should also look at the total return of muni vs taxable bond funds over time - you might be surprised that the muni funds can do better than the taxable funds even before accounting for taxes.
Statistics: Posted by MidnightSnarl — Sat Jul 27, 2024 12:40 pm — Replies 5 — Views 852