our overall allocations (inheritance, fee, bank, spend)

[karen_in_nh_2012]

Thanks, all. Lots to think about. The good news is that I shouldn't have to access my retirement funds at all in 2024, if I teach everything that I'm scheduled to teach -- and that HAS been the case so far, i.e. no surprises at the last minute! (The schedule is set through spring 2025, and it looks like I will have the entire summer off for the first time in decades. That will be fun!)

So I will start re-allocating ASAP.

I don't think I can do it all in one fell swoop, but I think $100,000/year is reasonable to re-allocate. Once Social Security starts, even with my mortgage I would have to take very little out of my retirement accounts each year (I mean, WAY less than the $100k that will be re-allocated to safer funds ASAP). And once my house is paid off, I could likely live on SS alone -- I am just not a big spender. That would be nice for a year or so while I decide what I want to do with the funds I've spend decades saving! (No kids, just a few family members and friends and animals and charities that I'd like to support, but no need at all to leave an estate behind!)

And I CAN see splurging on travel (for a few months) in a few years, but even that would be a one-time big expenditure.

Again, thanks, and Happy New Year to you all!

[ChessieMom]

Originally Posted by karen_in_nh_2012

Thanks, all. Lots to think about. The good news is that I shouldn't have to access my retirement funds at all in 2024, if I teach everything that I'm scheduled to teach -- and that HAS been the case so far, i.e. no surprises at the last minute! (The schedule is set through spring 2025, and it looks like I will have the entire summer off for the first time in decades. That will be fun!)

So I will start re-allocating ASAP.

I don't think I can do it all in one fell swoop, but I think $100,000/year is reasonable to re-allocate. Once Social Security starts, even with my mortgage I would have to take very little out of my retirement accounts each year (I mean, WAY less than the $100k that will be re-allocated to safer funds ASAP). And once my house is paid off, I could likely live on SS alone -- I am just not a big spender. That would be nice for a year or so while I decide what I want to do with the funds I've spend decades saving! (No kids, just a few family members and friends and animals and charities that I'd like to support, but no need at all to leave an estate behind!)

And I CAN see splurging on travel (for a few months) in a few years, but even that would be a one-time big expenditure.

Everyone is different I guess. I never did any sort of reallocation leading up to retirement. But I did do an analysis with a Fidelity guy, which gave me some reassurance that I was in fine shape. That was over 2 years ago.

After things crapped out right when I retired, I didn't know when I'd feel comfortable enough to plan a big trip again...but I just got back from Europe, and I don't even know what I spent. I know it was a lot, but I really don't wanna add it up!

[karen_in_nh_2012]

Originally Posted by ChessieMom

Everyone is different I guess. I never did any sort of reallocation leading up to retirement. But I did do an analysis with a Fidelity guy, which gave me some reassurance that I was in fine shape. That was over 2 years ago.

After things crapped out right when I retired, I didn't know when I'd feel comfortable enough to plan a big trip again...but I just got back from Europe, and I don't even know what I spent. I know it was a lot, but I really don't wanna add it up!

That sounds like a blast!! I have relatives in the UK (technically I have UK citizenship from my mom, who was English) and would love to go there for 4-6 weeks but if I'm going to be in England, I might as well go to Ireland, France, Germany, Poland, and a few other places too. But that's several years off!

I've always been a big planner (even as a kid) but early retirement was pretty scary (still being able to teach when and what I want makes it less so). At this point I am breathing a tiny bit easier.

[ChessieMom]

Originally Posted by karen_in_nh_2012

That sounds like a blast!! I have relatives in the UK (technically I have UK citizenship from my mom, who was English) and would love to go there for 4-6 weeks but if I'm going to be in England, I might as well go to Ireland, France, Germany, Poland, and a few other places too. But that's several years off!

I've always been a big planner (even as a kid) but early retirement was pretty scary (still being able to teach when and what I want makes it less so). At this point I am breathing a tiny bit easier.

Oh I am a HUGE planner. I planned my retirement to the day, 5 years prior. I socked away everything I could and was razor-focused on that day LOL. The market definitely got scary, but thankfully I didn't delay it - it's been just fine. Great in fact. I even declined my boss's request to come back to work. Thank goodness they finally realized I was done and hired a replacement.

[ohio_peasant]

Originally Posted by karen_in_nh_2012

...my problem is that I basically was forced to retire UNEXPECTEDLY 6-8 (or maybe even 10) years early. [b] So it's hard to plan for a "red zone" when you have no idea that you will be thrown INTO ONE very quickly!

We should pause to delineate what's meant by "red zone". Mathjack and others seem to mean, the first 10 years of retirement, where sequence-of-return-risk (SORR) much affects the vitality of the portfolio over any subsequent decades. This implies, for some strategies, a reduction in allocation to stocks. Let's call this RZM, for "red zone mathjack".

But an alternative definition, perhaps more relevant to karen_in_NH and to other early-retirees, is the final 10 or so years of a conventional career, where the employee is expensive but vulnerable to layoff... if one does get laid off, it's hard to find a comparable job. Younger people would struggle less with unemployment, whereas older people would just retire in the normal way, being close to SS eligibility. Let's call this "RZK", for "red zone karen".

Persons in RZK are of two kinds. The first has a vigorous career and maybe a delay in retirement savings, so that now finally they're making good money and saving aggressively. Every additional year counts! Job loss, at this time, would be devastating - implying a damaging recalibration of how to spend, to invest and so on.

The second kind of RZK person is the fast-starter who burns out. This might be a person who made great money already at age 25, say as a software developer, but then plateaued and spent his or her 40s going nowhere. This brings us to a point by Dallas_Dean:

Originally Posted by dallasdean

In pre-retirement I was interested in growth so that I one day could possibly retire. I was willing to take a higher risk for a higher return. If something caused me to have a loss of savings, my paycheck could still buy me food and provide a warm place to stay. I could even cut back on spending and use more of my paycheck to reinvest.

In retirement, I don't have the safety net of a paycheck. A loss of savings would mean a loss of income. Too much loss of income could mean that my standard of living would go down or worse. ...

For the first kind of RZK person, Mr. Dean's point is very fitting. Income is high, the portfolio isn't at the moment all that large, so a bear-market is a buying opportunity. Then, in retirement, the paycheck goes away, so one needs to find steady surrogates. But what of the second type of RZK person? Then, the portfolio is large, but the annual W2 is not. A bear-market can't be to one's advantage, because additional savings, however aggressive, only make a nugatory increment to the portfolio. But then, there's little difference between still-working, and being retired.

Some of us might be fire-breathing career types, but others, I gather, are in a situation where their portfolio is 100X their W2, or more. Not giving a personal example here... just posing an abstract scenario illustrating the second type of RZK. In that case, keeping or losing one's W2 is more a matter of ego or maybe health insurance, than having any effect on how one invests. And this is why I struggle to see how one might have an epiphany and arrant reorientation of one's investment-style, pre-retirement vs. post-retirement.

[mathjak107]

i like these kinds of discussions


when it comes to the red zone there are only two situations.

one is you are not investing to spend down and live off and it’s basically legacy money or case 2 , you will be living off it and need a safe withdrawal rate from what you do have in the near future or now.

for one who will not be living off it , then just keep doing what you are doing , you are not investing to create a safe , secure , consistent income . no red zone.

anyone else will be in that red zone if they need that pile of money to reliably live off of .

whether they choose to do anything about their exposure when what they have is peaking out is an individual issue..

i happen to cut back exposure in 2007 unexpectedly when i thought i would retire around 59 or so when we bought the house in the poconos .

had i waited until 2008 to make changes and retire , my income initially would have taken a massive hit and instead of the 40k per million i expected, it would have been a 40% pay cut . so i lived a red zone event . ..

luckily i had cut my equity exposure by half unknowing what was coming and didn’t retire until a few years later so i was unaffected pretty much .

so that red zone is still alive and well and can effect one’s income for a few years even if we recover since it isn’t smart to immediately go right back up in draw because we may have ralleyed back . we saw that in 1929 only to get beat down even worse .


kitces recommends taking a 10% raise every 3 years if you are still 50% above the level you started .

so a big hit can effect your income for quite a few years before you get it back in full if we recover .

so it’s an individual decision whether you want to cut back or not in that danger zone.

i am now passed it after 8 years in retirement so i am comfortable running where i am .

over all i am

52% equities

37% assorted bond funds

11% cash and no that cash will never be invested but it is still part of my overall allocation and counts . in fact without that cash my portfolio may actually be more aggressive then i want so that cash acts as a ballast to over all volatility and temper the invested portion.

so i classify myself as a moderate risk investor now .

i was a conservative investor thru the red zone with a much much larger cash position and lower equity levels running the golden butterfly .

cash was more then 2x the level now and that was a permanent position because the butterfly holds 20% in cash instruments while the permanent portfolio holds 25% cash

[jasperhobbs]

Originally Posted by mathjak107

i like these kinds of discussions


when it comes to the red zone there are only two situations.

one is you are not investing to spend down and live off and it’s basically legacy money or case 2 , you will be living off it and need a safe withdrawal rate from what you do have in the near future or now.

for one who will not be living off it , then just keep doing what you are doing , you are not investing to create a safe , secure , consistent income . no red zone.

anyone else will be in that red zone if they need that pile of money to reliably live off of .

whether they choose to do anything about their exposure when what they have is peaking out is an individual issue..

i happen to cut back exposure in 2007 unexpectedly when i thought i would retire around 59 or so when we bought the house in the poconos .

had i waited until 2008 to make changes and retire , my income initially would have taken a massive hit and instead of the 40k per million i expected, it would have been a 40% pay cut . so i lived a red zone event . ..

luckily i had cut my equity exposure by half unknowing what was coming and didn’t retire until a few years later so i was unaffected pretty much .

so that red zone is still alive and well and can effect one’s income for a few years even if we recover since it isn’t smart to immediately go right back up in draw because we may have ralleyed back . we saw that in 1929 only to get beat down even worse .


kitces recommends taking a 10% raise every 3 years if you are still 50% above the level you started .

so a big hit can effect your income for quite a few years before you get it back in full if we recover .

so it’s an individual decision whether you want to cut back or not in that danger zone.

i am now passed it after 8 years in retirement so i am comfortable running where i am .

over all i am

52% equities

37% assorted bond funds

11% cash and no that cash will never be invested but it is still part of my overall allocation and counts . in fact without that cash my portfolio may actually be more aggressive then i want so that cash acts as a ballast to over all volatility and temper the invested portion.

so i classify myself as a moderate risk investor now .

i was a conservative investor thru the red zone with a much much larger cash position and lower equity levels running the golden butterfly .

cash was more then 2x the level now and that was a permanent position because the butterfly holds 20% in cash instruments while the permanent portfolio holds 25% cash

Some argue having cash in a portfolio is unwise, but I see nothing wrong with it. Cash can carry a person when the market is down. Even better now with decent money market rates. Although, I see rates dropping soon. Can't believe they have been holding at 5%

[mathjak107]

cash is like a comfort food , we can get the same nutrition elsewhere but comfort foods are the best tasting


…we can spend down from 100% equities and just sell as needed in good and bad markets and the success rate has been almost the same as 50/50 .

our minds love to replay the story of the emperor’s new clothes to itself ….we love cash buffers because our brains think it is saving us from selling stocks at a loss .

but it is not because the lack of a drag from cash and bonds on 100% equities has the balance that much higher .

but most of us are not 100% equities and so we do have cash buffers despite the fact a mix of stocks and bonds that is spent down directly from with no cash buffer has actually done better .

by the way , any bear market that lasts long enough to damage a safe withdrawal rate would be far longer then the typical couple of years cash most keep as a buffer.

so having cash buffers really is a mental issue not financial as there is no actual benefit unless you are a great timer

[karen_in_nh_2012]

Originally Posted by ohio_peasant

... Persons in RZK are of two kinds. The first has a vigorous career and maybe a delay in retirement savings, so that now finally they're making good money and saving aggressively. Every additional year counts! Job loss, at this time, would be devastating - implying a damaging recalibration of how to spend, to invest and so on.

This ^^^ DOES describe my situation to some degree, except having to retire early wasn't (and isn't) devastating -- it was just nerve-wracking BECAUSE I am such a planner and I simply couldn't plan for this.

If I'd been able to stay for as long as I thought I'd be able to, I'd have more than a million in my retirement accounts by retirement date. Right now, it's close to that but NOT that, and I think there's something psychological going on with that too -- i.e., somehow the million mark would have given me more comfort.

Originally Posted by mathjak107

...so having cash buffers really is a mental issue not financial as there is no actual benefit unless you are a great timer

THAT ^^^ is I think where I am in my head.

I won't NEED to withdraw more than 5% of my retirement funds (TOTAL 5%, not 5% per year) for the next 2-3 YEARS at least. I know that rationally from my own calculations, especially those that include SS.

But I hear talk of red zones and I start freaking out.

I think I WILL do some re-allocating starting ASAP, but tone down my sense of urgency.

And I will keep reading this thread as it's fascinating to think about this stuff!

[moguldreamer]

Originally Posted by txfriend

The same way that I interpreted the title, allocation of investments, not house and cars or net worth.

For me, houses & cars & other assets (fine art, precious jewels & jewelry, antique wristwatches, private equity, transferable club memberships, racing ski collection, etc) are part of my asset allocation and my net worth.