Personal Investments • Portfolio Review (taxable and cash questions)

1. Starting this year, I expect my taxable investment contributions will exceed combined tax advantaged contributions. If the market is favorable, it is possible that I could retire/downshift before 55 with >$1M in taxable. If that occurs, I assume I would draw from taxable for a few years before starting 72(t). Given this possibility, what, if any, changes should I make to my taxable allocation (currently 100% VTI)?

Generally, I'd say to treat all accounts as a single unified portfolio, and if possible keep Taxable and Roth accounts at 100% stocks, while all bonds (and the balance of stocks) are in Trad Tax-Deferred accounts. That adheres to Tax-Efficient Fund Placement.

However, if you're using a Taxable account as a bridge to age 59.5 (or perhaps less than that if you're starting a 72t/SEPP), then it's reasonable to be concerned that the order of withdrawals could drain Taxable before you reach the desired end-period to switch to other accounts. If you're retiring in 2036 (age 56) and you need to draw from Taxable with $1M balance, you could draw 10% initial and then adjust the draw in year-2 through year-5 by +3%/yr for inflation (Const-$ strategy of the Trinity Study) and have a about a 99.1±0.3% of not running out early. If you need more than $100K draw, it will likely still work out. If you want to retire before 55, consider that if you had $1M in Taxable at age 45 you could draw 7.8% initial (again +3%/yr for next 10 years) and still have about 91.2±0.9% success rate (Trinity Study used ≥90% as threshold).

So it depends on what your part-time income is + portfolio draw and if that's bigger than taxes + savings for lumpy expenses + monthly bills/spending. However, changing Taxable from 100% VTI doesn't seem necessary (you could always initiate the 72t/SEPP earlier if there's some super-crash and flat market but that seems to be < 5-10% likelihood in the Monte Carlo models I ran above). The initial draw is going to vary based on how long you need the period is up to age 59.5 (the shorter the period the higher the draw that can be supported with acceptable risk).

The case for 7.8% draw for 10y is show below from my Withdrawal Monte Carlo, linked below the image along with other models that don't require Excel (GoogleSheets can't run a macro to aggregate the 1,000 random trials).


Data and Models I use for Monte Carlo:
NYU Data Set 1928-2017 with Model Fits
Accumulation Monte Carlo
Withdrawal Monte Carlo <- Image above

You'll need a MS Excel license; download to your local machine and enable macros (required for the 1,000 random trials and results aggregation).

I'm using my own model as I like to know what's under the hood, but there are other models I like that have public facing website interfaces:
TPAW Planner (probably most comprehensive, supports ABW), <- Try this one!
Portfolio Visualizer's Monte Carlo (also their Financial Goals model is nice),
Engaging Data: Rich, Broke, or Dead, (uses historical returns in a cycle for your retirement duration), and
FireCalc (also historical data, but lots more inputs to tailor to your situation).

Paid models sometimes cited here include Boldin (formerly NewRetirement) and Pralana Gold as well as many others (just citing these not recommending for or against on any of these).

That 5th percentile result (-$20.3K) represents a bad SOR (e.g., multiple years with bad returns, perhaps as low as a -60% crash). The uncertainty in projected balance tends to grow exponentially with the duration of the accumulation/withdrawal period (the longer you're saving or withdrawing the bigger the variance between the 10th and 90th percentiles). However, if some/most of your spending in retirement is discretionary then VPW or ABW withdrawal strategies largely mitigate the SOR risk (in exchange for a cut in spending which reduces inflation-adjusted purchasing power, but you'll never run out of money early with VPW and it's much less likely to run out with ABW vs Const-$).

Standard caveats about simulations apply (those using 30y rolling periods suffer from small sample size for estimating a binomial proportion as the success rate and those using a large sample size as random draws from a distribution assume the distribution is constant over the withdrawal period; all sims suffer from assuming the future looks like the past in one way or another).

"All models are wrong, some are useful." – George E. P. Box

2. How should I manage cash needs for different time horizons? I have ~$250K in cash across a few accounts all earning around 4% interest.

I like the approach @professor_americus gave; pick a target for cash (e.g., $50K) and put the rest in VTI. Since you have a non-zero state tax rate, you probably want a Treasury-only MMF for the cash like VUSXX to get a break on IL tax. An HYSA is fully taxable by IL, so a Treasury-only fund is typically a better after-tax yield.

Statistics: Posted by bonesly — Fri Jan 30, 2026 12:51 pm — Replies 10 — Views 723

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