Just a quick Question.....

[offroad]

That's where my pirate attitude kicks in. Many think its stupid to have all your money in stocks. Mine are all in INDEXED FUNDS which is effectively all in stocks.

So if the stock market drops off the cliff, am left with my full time job, and whatever material assets I have, and pension, and social security.

So personally it's risky, but so is driving a car. And I do compare the apples to oranges risks

 

[IGBT]

That's where my pirate attitude kicks in. Many think its stupid to have all your money in stocks. Mine are all in INDEXED FUNDS which is effectively all in stocks.

So if the stock market drops off the cliff, am left with my full time job, and whatever material assets I have, and pension, and social security.

So personally it's risky, but so is driving a car. And I do compare the apples to oranges risks

I don't think it is stupid to have all of your money in index funds if you have a fallback plan like you do (job/pension/SS).   You don't want to be cashing in the index funds during a huge market drop (like we had in 2008).   Stocks recovered and hit new highs but only if you didn't touch the money.

I am going with 70% to 80% in stocks and the rest in a CD ladder.   I should be able to handle 5 or 6 years of a negative market without having to sell my index fund stocks at a loss.  Any more than that and things will get ugly.

 

[offroad]

I will drop out of stock market if the week is looking ugly. That's the tool I use to watch trends on index funds. I don't hold anything more than a couple weeks if the trend tool says get out.

 

[IGBT]

I will drop out of stock market if the week is looking ugly.   That's the tool I use to watch trends on index funds.  I don't hold anything more than a couple weeks if the trend tool says get out.

Those tools are great.  They correctly predicted ten out of the last three market drops.

 

[offroad]

Those tools are great.  They correctly predicted ten out of the last three market drops.

Lol. So true. --- But I do predict that I will never win the lottery. And that I will likely be dead in 40 years.

 

[Seraphim]

IGBT -- interesting number crunching. Laughing positively and with no malice at that 4% per year. Let's instead take a typical hard working smart career person who owns a house outright at $250k.  Sell that house and you loose 10% immediately. So you have $225 in the bank.

Learn about how to use stock-bond-fund markets well; and have a gambling trust in your pirate logic (good or bad luck - no one lives forever) and you should be making 10% a year.   Some with good markets and stupid risk are making 30%.  But let's stick to 10% and say you make $25k per year on the $250k.

That and SS income, and maybe part time job, and maybe getting good at other cheap living skills. You might be okay.

Market average tends to be about 7% historically.  One WD strategy is only to withdraw interest, but that means you have to be flexible.  Some years you'll have no investment interest.

The 4% guideline assumes a 60/40 portfolio, stock weighted, and a 25 year lifespan. One starts with a 4% WD of th initial balance, and increases that amount by the cost of living each year. There's a 95% chance you portfolio will last 25 years.  That percentage has been re figured lately to 3.5%.  This is using historical data. YMMV.

Www.firecalc.com has a great historical calculator for assessing future value based on withdrawals. It gives one a pretty good idea of what they might expect.  Check it out and read the expectations carefully before dissing it, please.  It is not a predictor, but runs a large series of calculations based on historical data.

Ass,img 10% IMO is far too liberal an assumption.

 

[Seraphim]

I will drop out of stock market if the week is looking ugly.   That's the tool I use to watch trends on index funds.  I don't hold anything more than a couple weeks if the trend tool says get out.

I ignore trends.  The market drops considerably, I take advantage of the buying opportunity. 

Using index funds I maintain a certain asset allocation. When the portfolio diverges 5% either way from that AA, I rebalance by selling the high assets and buying the low. New cash enters the portfolio when there's a buying opportunity.  I generally assess cash as a fixed income and allocate it in the bond portion of the AA. Right now, about 3/4 of the bond allocation is actually in cash - waiting for interest rates and bond yields to rise.

 

[Seraphim]

I don't think it is stupid to have all of your money in index funds if you have a fallback plan like you do (job/pension/SS).   You don't want to be cashing in the index funds during a huge market drop (like we had in 2008).   Stocks recovered and hit new highs but only if you didn't touch the money.

I am going with 70% to 80% in stocks and the rest in a CD ladder.   I should be able to handle 5 or 6 years of a negative market without having to sell my index fund stocks at a loss.  Any more than that and things will get ugly.

Most analysts would consider 70%- 80% risky, more suitable for someone working with a long time horizon ahead of them, rather than someone who is in or near the withdrawal stage of their investment career.

The current bucket system in vogue for retirees suggests 5 years lovng expenses in cash (CDs or whatever), somewhere around 50% stocks, and the rest in bonds. Withdrawel is based on totAl returns, taking from stocks when stocks are high, bonds when bonds are high, and cash when stocks and bonds have both tanked. 

Having other sources of retirement income can permit a riskier allocation, but one should be tactically minded.

 

[Seraphim]

That's where my pirate attitude kicks in. Many think its stupid to have all your money in stocks. Mine are all in INDEXED FUNDS which is effectively all in stocks.

So if the stock market drops off the cliff, am left with my full time job, and whatever material assets I have, and pension, and social security.

So personally it's risky, but so is driving a car. And I do compare the apples to oranges risks

I may be misreading you here, but being in index funds does not mean stock funds. Index funds can be stock funds, bond funds, blended funds, or consist of nothing but other funds.

If you all still working, and the stock market 'drops off a cliff', you can hopefully wait until it combs back up before making any withdrawals.  If the market drops that significant
Y, that's the time to scrape together as much cash as you can, and buy more shares of a stock based fund.

Again, the percentage of stocks in a portfolio is more a factor of how far you are from actually withdrawing funds. I have my son in 100% stock funds, but he's only 25 yoa, and doesnt plan on touching that money until retirement. He doesn't care about the peaks and valleys of volatility yet, nor should he.

 

[IGBT]

Most analysts would consider 70%- 80% risky, more suitable for someone working with a long time horizon ahead of them, rather than someone who is in or near the withdrawal stage of their investment career.

The current bucket system in vogue for retirees suggests 5 years lovng expenses in cash (CDs or whatever), somewhere around 50% stocks, and the rest in bonds. Withdrawel is based on totAl returns, taking from stocks when stocks are high, bonds when bonds are high, and cash when stocks and bonds have both tanked. 

Having other sources of retirement income can permit a riskier allocation, but one should be tactically minded.

We are in our mid 40s so potentially have a long retirement (hopefully).   We will need the gains from the stock market to weather inflation and stupid low bond interest rates over the next 40 years.   Our target SWR is 3% though.   70% in total stock market index fund and 30% in CD ladder which represents about 6 to 8 years living expenses.

 

[Seraphim]

Don't underestimate bonds. I did last year, waiting for Interest rates to rise. (shouldn't try to time the market *sigh*). VBTLX (total bond market) returned 5.6% last year. CDs won't have the diversification effect for your stocks - nor the overall returns - that bonds will. Cash has a function, and so do bonds, for a reason. Your missing a leg of the 3 legged stool without them.

But if you maintain 3%, you shouldn't have a problem. I would suspect you won't get as much growth, however.

I'll get off my soapbox now lol.

 

[IGBT]

Don't underestimate bonds. I did last year, waiting for Interest rates to rise.  (shouldn't try to time the market *sigh*).  VBTLX  (total bond market) returned 5.6% last year. CDs won't have the diversification effect for your stocks - nor the overall returns - that bonds will.  Cash has a function, and so do bonds, for a reason. Your missing a leg of the 3 legged stool without them.

But if you maintain 3%, you shouldn't have a problem.  I would suspect you won't get as much growth, however.

I'll get off my soapbox now lol.

If a bond fund can return 5.6% one year it can lose 5.6% the next year when interest rates rise. 

A CD might return 2% one year and the next year it returns...2%.

I did get some of the 5 year pen fed 3% CDs  awhile back.

 

[HarmonicaBruce]

Or, you can buy UCO (crude oil etf) for $8.70 (current price), sell a Jan 2017 $9 call for $3.40 (current ask price), your net cost for UCO is $5.30.  If crude oil goes up by Jan 2017, you'll get $9 for your UCO that you paid $5.30 for, a 64% increase (in less than 2 years).  The only way you can lose money is if crude oil is down more than 36% on Jan 2017.  Do you think oil will be 36% lower in 2017?  Will gasoline be 36% lower?  That would make it about $1.38 / gal.  Since UCO started trading in 2009 it's never been below $6.50.

Just another idea.  If anyone thinks there's a flaw in my logic, please point it out to me.  Don't worry about hurting my feelings, I don't have any.  

 

[Seraphim]

No flaws, except - no matter the odds - it's a gamble. I don't gamble with retirement savings.

 

[Seraphim]

If a bond fund can return 5.6% one year it can lose 5.6% the next year when interest rates rise. 

A CD might return 2% one year and the next year it returns...2%.

I did get some of the 5 year pen fed 3% CDs  awhile back.

And stock funds can lose 20% or 30% in a year - you know that as well as I. Look at 2008. it's the long term average that counts. And during the last recession, bonds are the reason my portfolio didn't dip anywhere near as badly as others did.  Cash can't do that.

The Feds going to introduce rate increases slowly. Value will drop, yields will rise. Any lapse in value on bonds will disappear in 5 - 7 years time ( assuming intermediate term bonds) while garnering higher yields. Bonds always lag behind the curve but catch up.  Just stay away from treasuries and look into high grade corporate bonds. Once yields peak move to long term bonds and reap the higher yields for a longer term.  Then when rates cyclically drop again, you'll have higher yields locked in combined with increasing value. It's always about looking down the road to what will be, not at what is.

And bonds provide income, year after year after year, at an average higher return than CDs - without early withdrawel penalties.

 

[Seraphim]

http://www.morningstar.com/cover/videocenter.aspx?id=601506

On retirees holding too much cash...but it also applies to pre-retirees.

 

[compassrose]

Okay, I find this interesting. You vandwellers have said many times that it is cheaper to to "stealth" than to live in an RV park. I live 24/7 in an RV park. Last year I made $22K. Had to buy hubby's heart meds out of that too. Paid cash for all med's and doctors. Yet you are now saying it takes more than I made last year. I also was paying for two tracfones as well. Oh and I have 10% taken out of each of my paychecks to buy company stock (had to cash it out to pay for hubby's cremation so the remainder got put into a schwab account).

 

[IGBT]

Okay, I find this interesting. You vandwellers have said many times that it is cheaper to to "stealth" than to live in an RV park. I live 24/7 in an RV park. Last year I made $22K. Had to buy hubby's heart meds out of that too. Paid cash for all med's and doctors. Yet you are now saying it takes more than I made last year. I also was paying for two tracfones as well. Oh and I have 10% taken out of each of my paychecks to buy company stock (had to cash it out to pay for hubby's cremation so the remainder got put into a schwab account).

Sorry for your loss.


Well, if you look at my proposed budget, it includes several items that could be considered frivolous.

$400 a month in fuel...could be cut to $50 a month if you stay in one place or just move a few miles every week.

$500 hobbies/entertainment...could be cut to $0

$400 food, $200 dining out...could be cut to $300 food, $0 dining out

$150 healthcare insurance...could be cut to $0 if below $21,000 MAGI for a couple (Medicaid)

$300 hotel/campground...could be cut to $100 a month if extensive boondocking (although the 300 figure presumes some boondocking)


There.  Instead of needing $2250 a month, now need $750 a month, or $9,000 a year, plus the $3000 annual expenses for a budget of $12,000 a year.

 

[HarmonicaBruce]

Okay, I find this interesting. You vandwellers have said many times that it is cheaper to to "stealth" than to live in an RV park. I live 24/7 in an RV park. Last year I made $22K. Had to buy hubby's heart meds out of that too. Paid cash for all med's and doctors. Yet you are now saying it takes more than I made last year. I also was paying for two tracfones as well. Oh and I have 10% taken out of each of my paychecks to buy company stock (had to cash it out to pay for hubby's cremation so the remainder got put into a schwab account).

I too am sorry for your loss.

It sounds like you could teach some of us a few things about budgeting.  One item that is flexible is hobbies.  You can ride a motorboat, or you can go for a walk, they're both hobbies.  One needs to choose hobbies that are compatible with one's budget.