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Re: Alright retirees, how'd you do it?

Alternative investments are an excellent addition to one's portfolio........

Gabe

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Re: Alright retirees, how'd you do it?

Unbiased, I repeatedly profess here to not use asset allocation or buy-and-hold. I have never thought through what buckets means. I do not understand bonds well and in general avoid them especially with the reduced returns of many fixed income options. That said, we do have lots of stocks, lots of a newly discovered closed end funds (CEF's) and roughly 1+ years of expenses in checking and a taxable account generating a portion of of yearly income in CEF's that can be sold if larger amounts are needed. So maybe we have a few "buckets" but I do not spend any time on the concept.

I have like many, I suppose, been "burned" pretty badly recently when venturing into "new areas". I suggest great caution when doing so. However, several very knowledgeable people here have put me onto several very useful tools for evaluating new strategies and specific investments.

I have also recently found it helpful to consider most securities as part of smaller portfolios. So I have technology, low volatility/several large T Rowe Price MF's, and Pure PIMCO CEF's. There are a few stragglers but I am spending efforts when market prices allow or performance wanes on forcing most securities into these portfolios. Technology contains AAPL and 3-4 technology ETF's. Low volatility contains 4 ETF's. and Pure PIMCO contains only 5-6 PIMCO CEF funds.

Why? Because I can easily use the excellent Portfolio Visualizer back testing to strenuously test the behavior of the portfolio for returns, drandowns and even comparison against a benchmark (S&P 500, a specific security, etc.) over the same periods. Also, Stock Charts is very helpful for comparing up to 5 individual or even a small portfolio over almost any continuous period for individual and relative performance. For instance, these tools can show you how your choices performed over a period as long as the youngest security, through the 4th quarter 2018 disaster, the last five years up to the start of the current disaster or about 2/1/2020 for me, or even how are they recovering since the late 3/2020 apparent low of the current disaster, ec.

So, I suggest that you do a lot of strategy formation, research and diligence before diving into major changes.   GOOD LOCK!!!    :-)))

PS: In new areas or strategies, make small moves initially. Big moves can be VERY expensive but small moves give experience and small mistakes are a great  way to learn the ropes before launching.

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Re: Alright retirees, how'd you do it?

With apologies to the OP (although this is related to discretionary income), these are some of our cancellations:

--Summer family gathering in Petoskey (loved as much as Juris loves Maine)

--Family gathering for an 80th birthday in Santa Fe for the Fall

--major science award ceremony for my stepson in the Fall

--winter rental in Florida 

--grandson's Bar Mitzvah next February

Bob

P.S. to Juris: you may have seen that our wonderful estate planning lawyer died last week. Great man.

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Re: Alright retirees, how'd you do it?


@judger wrote:

Unbiased, I repeatedly profess here to not use asset allocation or buy-and-hold. I have never thought through what buckets means. I do not understand bonds well and in general avoid them especially with the reduced returns of many fixed income options. That said, we do have lots of stocks, lots of a newly discovered closed end funds (CEF's) and roughly 1+ years of expenses in checking and a taxable account generating a portion of of yearly income in CEF's that can be sold if larger amounts are needed. So maybe we have a few "buckets" but I do not spend any time on the concept.

I have like many, I suppose, been "burned" pretty badly recently when venturing into "new areas". I suggest great caution when doing so. However, several very knowledgeable people here have put me onto several very useful tools for evaluating new strategies and specific investments.

I have also recently found it helpful to consider most securities as part of smaller portfolios. So I have technology, low volatility/several large T Rowe Price MF's, and Pure PIMCO CEF's. There are a few stragglers but I am spending efforts when market prices allow or performance wanes on forcing most securities into these portfolios. Technology contains AAPL and 3-4 technology ETF's. Low volatility contains 4 ETF's. and Pure PIMCO contains only 5-6 PIMCO CEF funds.

Why? Because I can easily use the excellent Portfolio Visualizer back testing to strenuously test the behavior of the portfolio for returns, drandowns and even comparison against a benchmark (S&P 500, a specific security, etc.) over the same periods. Also, Stock Charts is very helpful for comparing up to 5 individual or even a small portfolio over almost any continuous period for individual and relative performance. For instance, these tools can show you how your choices performed over a period as long as the youngest security, through the 4th quarter 2018 disaster, the last five years up to the start of the current disaster or about 2/1/2020 for me, or even how are they recovering since the late 3/2020 apparent low of the current disaster, ec.

So, I suggest that you do a lot of strategy formation, research and diligence before diving into major changes.   GOOD LOCK!!!    :-)))

PS: In new areas or strategies, make small moves initially. Big moves can be VERY expensive but small moves give experience and small mistakes are a great  way to learn the ropes before launching.


PV is a TREMEDOUS tool, not available to those of us who retired 20 years ago.  Another tool that was just starting to come into its own back then was the Monte Carlo Retirement Withdrawal Simulator.  PV also has that tool in their toolbox and it also is quite flexible.

I have used the PV tool for several years now, but the most important feature that I use in backtesting is the 'Display Income' toggle, where I look at both the reinvestment of those dividends, or not.  Since I never reinvest dividends, interest, or distributions in my portfolio, its total return historical performance is meaningless to me, but the total portfolio cash flow IS, especially whenever comparing one investment to another.

ElLobo, de la casa de la toro caca grande
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Re: Alright retirees, how'd you do it?


@ElLobo wrote:

@dtconroe wrote:

ElLobo: "It makes little difference ifn you have Social Security and/or a pension.  You have to figure out how much cash you need from your portfolio.  Then, whatever amount of cash that implies, per year, having 20 times that amount in investments/savings implies you plan to withdraw at a 5% rate.  Ifn you have 25 years saved up, the rate goes down to 4%.  Ifn 33.3 years, then 3%."

If you have a Pension plus Social Security, you have a much larger income flow to cover your core expenses.  To just say that having a pension is insignificant, is not realistic for many many retirees, who have not accumulated a significant investment amount of principal.  If all you have is Social Security, plus a small amount of investment principal, it is difficult to replicate that larger additional income represented by your Pension amount.  Not everyone on this forum is a retired engineer, retired teacher, retired miliitary, etc. who are not walking in the shoes of laborers or small business owners who may now be unemployed with no income flow other than Social Security. 

Everyone's retirement situation is different and it is difficult to generalize about retirement life without a nice large pension payment each month to pay for your basic expenses.


I'm not sure why you disagree with me, dt.  Obviously, your projected living expenses going forward are a certain amount.  There are 3 typical sources of cash to cover 'em, portfolio, pension, and Social Security.  The more you have of 2 and 3, the less you need of 1!

Here is how I first answered the OP:

"Well, here's how I looked at things 25 years ago. I had, by that time, a good handle on my monthly, quarterly, and yearly expenses. I was a salaried engineer for 36 years. So the first thing I did was to figure out what my expenses would be the day after I quit work. First thing was that I would no longer contribute to my retirement and savings accounts. After considering several things, like no more commuting costs, no more daily lunches, and such, I figured my normal everyday living expenses would be roughly 75-80% of that on the day before I retired.

I then looked at how much I was going to get from my pension and Social Security, so the difference, between my income and my expenses, came out to be some number. I then simply calculated the percent of that number to the total value of my nestegg. For me, the resultant was just under 5%."


My comment of "disagreement" with you, is only in regards to this statement from you: "It makes little difference ifn you have Social Security and/or a pension."  That is a very "pension privilege" sort of statement, and does not correctly reflect the additional difficulty of retiring comfortably when you do not have that nice large pension to cover your a..s, when dealing with the reality of when you are financially able to retire.  If I could have had both a nice large monthly pension payment, on top of my rather modest SS payment, I would have retired many years earlier.  I was not fortunate enough to have worked for an employer that provided a nice lush pension payment, so I had to work longer to just get Medicare and a larger SS payment.  I have a modest retirement amount in my IRA, which I heavily depend on to cover my ongoing core expenses, plus major expenditures that potentially could crop up that would require a large lump sum amount beyond what my core expenses require.  Monthly income flow, to cover core living expenses, is much easier to address with that large pension privilege that some retirees have available.

In short, I agree with FDs description below of different categories that retired investors fall into (those with pensions+SS+Investment Principal, and those only with SS+Investment Principal).

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Re: Alright retirees, how'd you do it?

The young (er/est) generation will face a tougher financial retirement without employer contributions towards their 401k (403b or 457b), no DB pension choice, and smaller SS benefit. Based on newspaper photos, they are flocking to beaches, bars, and protests without CV thoughts. Well, some are wearing masks.

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Re: Alright retirees, how'd you do it?

Your first mistake is to assume there's a bunch of retirees who got it right owing to their financial savviness. You are just as likely to have got there by chance. The bull market from 2009 to now was not knowable, so claims of perfect timing are without merit. Latest estimates for a retirement pile are 33 times annual earnings, which is somewhat lower than past decades owing to very compressed fixed income markets. There is no secret formula. It's more a case of avoiding the common pitfalls and then lowering your expectations.

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Re: Alright retirees, how'd you do it?

@dtconroe 

"That is a very "pension privilege" sort of statement, and does not correctly reflect the additional difficulty of retiring comfortably when you do not have that nice large pension to cover your a..s, when dealing with the reality of when you are financially able to retire."

Nothing 'pension privilege' about it.  After working 40-50 years, you either have one or you don't.  Regardless of whether or not you do vest in a pension, you either build up a decent nestegg or you don't.  Regardless of anything else, to be successful in retirement, you have to live within your means, just like when working! 8-)

ElLobo, de la casa de la toro caca grande
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Re: Alright retirees, how'd you do it?


@Mortmain wrote:

Your first mistake is to assume there's a bunch of retirees who got it right owing to their financial savviness. You are just as likely to have got there by chance. The bull market from 2009 to now was not knowable, so claims of perfect timing are without merit. Latest estimates for a retirement pile are 33 times annual earnings, which is somewhat lower than past decades owing to very compressed fixed income markets. There is no secret formula. It's more a case of avoiding the common pitfalls and then lowering your expectations.


Not sure that I totally agree with your statements. You may be right, but I think that "luck" or "chance" is not the answer. I freely admit that I am not that smart, but I never give up. If by my actions or the those imposed on me by whatever factor be it the market or .... things go to s..t. That just means that I have to do something different the next time and ABSOLUTELY try to fix to my best ability whatever has befallen me. Just IMHO.    :-)))

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Re: Alright retirees, how'd you do it?

Mortmain:

Did you not read what Norbert wrote at the very beginning of this thread?

"Investment strategies are not critical. Future returns are unpredictable. The Covid-19 crash may or may not be one in a series. With bonds yielding almost nothing, we're forced to take risks. But, I can't control the outcome. All I can really control is how I live and what I spend."

He made it clear that there's no magic, but there is discipline--without which the likelihood of failure vastly increases.

Bob

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Re: Alright retirees, how'd you do it?

Bob. Which lawyer is this? Please give me first name or a clue.  Allan was a terrific man and lawyer. He first set up our estate plan about ten years ago. A few months ago we updated it, working with a younger lawyer in the same law firm who has a well recognized family name in our capital.

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Re: Alright retirees, how'd you do it?


@Mortmain wrote:

Your first mistake is to assume there's a bunch of retirees who got it right owing to their financial savviness. You are just as likely to have got there by chance. The bull market from 2009 to now was not knowable, so claims of perfect timing are without merit. Latest estimates for a retirement pile are 33 times annual earnings, which is somewhat lower than past decades owing to very compressed fixed income markets. There is no secret formula. It's more a case of avoiding the common pitfalls and then lowering your expectations.


Why do you assume that retirees can’t get their retirement strategy right because of their financial acumen? Just because you can’t do it? There are knowledgeable posters here who have implemented successful financial strategies that are providing them with a comfortable retirement which was not the result of luck. Many Intelligent investors recognized that an increase in stock prices was likely in 2009 after congress passed a $800B stimulus package and Fed Chair Bernacke promised to do everything in his power to revive the economy which included increasing fed balance sheet by $3T and direct purchase of treasury bonds and mortgage securities By Fed to provide liquidity. I began buying depressed sectors such a banks and Reits in February 2009 and never looked back. Before I turned 70 1/2 I converted 1/3 of my retirement accounts to a Roth IRA which reduced my RMDs by 30k this year. I could take a $30K distribution from the Roth and pay 0 tax. After my high coupon corporate bonds were called or matured I replaced them with high yield stocks paying Qualified dividends taxed at cap gains rate. None of these decisions were the result of chance or luck.

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Re: Alright retirees, how'd you do it?

To add just a point to Intruder's apt remarks above:

One thing that "retirement pile" 3.3 multiplier depends on is how old you are when you exit the labor force (your expectation of remaining life isn't independent of your retirement age). It ought to matter whether you retire at, say, 65 or 75.

I retired at 70, and my core estate (main retirement fund) has held up very well for the 6 years that I've been taking RMD's. In addition to that, I have both Social Security and inherited funds. The latter screwed up the 3.3 multiplier by quite a bit but has allowed me to purchase a retirement home. Our invested money is still well ahead of where it was when I retired.

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Re: Alright retirees, how'd you do it?

Hi.

I am sure that if ones first foray into investing was stock in 2009, your analysis may apply. However, my wife and I started our "savings" program in 1960. It also consisted of some equity positions and they increased over time. We both were college students with children born in 1961. We stayed the course and this included the 1970's. I did not pick stock, and got burned by some "pro's", so decided that I should get more involved. All I did was "sniff" out gold and silver rated funds (current definitions) from M*and stay the course; and yes, this included the last 10-11 years. Just kept up investing through thick and thin and became a "buy and hold" investor. I might be able to say I have beaten 80% of the active investors with this passive approach. I can hear it now from the actives. What anyone needs to see here is discipline, discipline and more of it. regardless of the path one takes which is very personal depending on risk tolerance etc. There are many like myself, not heroes But it takes time, your best friend when young and now my worst enemy. However, we have 10 years of spending in cash which includes 6 years in a nursing home (3 each) if necessary. Those equities are my children and grand children's problem. I did buy some real estate instead of bonds. I would say the only luck I had was living in a country that provided me with the opportunity to do what we did. But you are right, it is the last 10 years in compounding that makes you rich, not the first. I guess one could say I was Lucky to have the last 10.    Start young, keep investing, control debt. stay disciplined, and do not get greedy.

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Re: Alright retirees, how'd you do it?


@dtconroe wrote:

If you have a Pension plus Social Security, you have a much larger income flow to cover your core expenses.  To just say that having a pension is insignificant, is not realistic for many many retirees, who have not accumulated a significant investment amount of principal.  If all you have is Social Security, plus a small amount of investment principal, it is difficult to replicate that larger additional income represented by your Pension amount.  Not everyone on this forum is a retired engineer, retired teacher, retired miliitary, etc. who are not walking in the shoes of laborers or small business owners who may now be unemployed with no income flow other than Social Security. 


Life is like a big river and you are in a small canoe.  The current may sweep you downstream but the choices you make affect your landfall. 

What are some of the events that affected my life?  The Vietnam draft was a big one.  I chose to enlist in the Air Force instead of being drafted.  I know people who went to Canada or to barber’s college.  I didn’t.  The biggest opportunity from this was a chance go to college on the GI bill and graduate almost debt free.  And to think, all I had to do to get it was to go to war.  Pretty much anyone my age could have made the same choice.

After college graduation I interviewed for a job.  It became readily apparent that I was to work a fat, pompous, egotistical individual whose tie cut into his jowls.  I declined that job and chose instead to go back into the Air Force to work with people that had pride, honor and my complete respect.  It wasn’t an easy career.  My wife was raising our kids by herself half the time.  But it gave us the opportunity to have a pension.

After I retired I chose to go to work as a cost accountant.  It and my pension allowed us to make double payments on our house that we couldn’t buy earlier because of constant moves.  I chose to also teach accounting part-time.  This allowed me to put 25% of my paycheck into the company 401K instead of 10%.  It also allowed additional investments in an IRA,  Anyone can choose to invest in an IRA.  My wife did the same thing when the kids started college.  We got them through without debt.

“Walking in the shoes of laborers?”  I was a laborer.  I am the only person in my family to have graduated from high school.  None of my 3 brothers did.  The two youngest not only dropped out of high school but ended up doing hard time. Laborers make choices too.  Sometimes they need a little help in choosing a better path.

I had no intention of going to college.  I moved out the week of high school graduation and have been on my own ever since.  My first job was running a machine in a factory.  My second job was running a jackhammer on a construction crew.  Then at 19 my best friend was drafted.  I was next.  Later, at 25 my girlfriend (later my wife) talked me into taking college classes at night. Even though I was still running a machine on a factory floor I graduated 5 years later.

Life may carry us away but it is the choices we make that determine where we land. Getting a pension whether it is engineering, teaching, or military is not free.  Those that have one earned it.  Those that don’t made different choices. Good or bad when we reach retirement we have to live with the choices we have made.

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Re: Alright retirees, how'd you do it?

Mustang says: "Life may carry us away but it is the choices we make that determine where we land. Getting a pension whether it is engineering, teaching, or military is not free. Those that have one earned it. Those that don’t made different choices. Good or bad when we reach retirement we have to live with the choices we have made."

I have always said, including to the kids, "You makes your choices and you pays the price." The "price" can be good or bad.   :-)))

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Re: Alright retirees, how'd you do it?

Mustang has his head on straight.

Bob

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Re: Alright retirees, how'd you do it?

Awesome post Mustang. My personal mantra is "Life is about choices".

I deliberately and rationally made a choice to take less salary for more stability and a future pension. To later watch others frequently complain (envious much?) about retiree pensions misses the mark on THAT decision. I stayed with an employer for 30+ years; many of those years were good; some were not, but I stayed through the thick and thin. I watched others bounce around in the industry, chasing the nearest "shiny" that flashed in front of them, and their pensions will never amount to a hill of beans. I also worked my ass off, and made myself as valuable to my employer as possible. All of that paid off in spades.

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Re: Alright retirees, how'd you do it?


@51hh wrote:

The real challenges for retirement may lie in the mental state (e.g., boredom, restlessness), social status; in addition to the obvious financial feasibility.   


Agree.  For some of us, at least, the easy part is accumulating enough money to retire.  I was extremely fortunate to have a great job for almost 40 years, with a retirement plan to which my employer and I jointly contributed 15% of my salary.  I did nothing but keep the funds split 60/40 stock/bonds over the decades.  The hard part was leaving the job I loved.  But my wife was ready, and we wanted to be near our grand children.  As 51hh suggests, mental state, lack of structure, restlessness, loss of social connections are all issues to think about before you take the plunge.  Know what you want to do as a retiree before you retire.

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Re: Alright retirees, how'd you do it?

There are lots of good ideas here about getting to retirement and what to plan for when you take that step.  I had the good fortune to have access to a 401k with a 5% match and low cost index funds.  I invested as much as I could, stayed invested, and let the rising market do the rest for about 30 years.  It is easy to say, harder to stomach at some points.  I went into retirement without debt and a cash cushion that seemed excessive until 2020 and COVid-19 rolled around.

As you save for retirement, don’t put off things you want to do for when you will have more time and money....travel being one of them.  We have lost friends who had big plans but poor health (or worse) got in the way.  It generally doesn’t get easier to do things like that as you get older so enjoy life along the way.

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