@@rickdunn3883 agree. I have never kept a car less than 8 years. And I drive a Kia not a BMW. I have never been a “car guy” so no big deal for me I just look at it as transport.
Excellent video. I love the very specific case study. I like the bond amount in years of expenses, instead of percentage of portfolio. That is my plan.
John should look into volunteering for the AARP Tax-Aide program. It helps low income people and seniors file their taxes. No degree required. They provide training.
I retired in 1999 and lived through two negative sequence of return events in one decade. Using regular retirement models, my 3 million in investments should have easily lasted the rest of my life. Instead, I had to return to work. Anyone modelling a retirement needs to seriously take these risks into account. Rather than a 5 year buffer based upon the length of a bear market, I would look at years to break even from down markets. I know from experience that 5 years won't be enough in a major market correction - you'll be harvesting a lot of carryover losses.
Thank you John and James, great discussion! FWIW, I don't think going back to law school is crazy at all. If you find yourself in a place needing to "not go crazy" as you put it, that could provide a great challenge to occupy your mind and time. It would also be very beneficial if you did follow through with the intent to provide needed legal services to those unable to secure them, for no charge. Kudos to you for desiring to do so. I am a life long learner and I'm 75. I think there was a mention of Roth conversions in this discussion, if so, I'd be very interested if James was planning another session with you John, on that topic. Thanks again John and James. Larry, Central Valley, Ca.
@@ld5714 no follow up planned that I know of, just not enough time. After recording was done James was kind enough to stay on and we discussed conversions. The big learning for me on that was James reminding me that a tax free dollar is better than a tax deferred dollar. So even though the software says that conversions gives me “X less dollars overall” those are tax free dollars, I had not considered that.
Good video on showing why you need a balance portfolio. However, you never touched on Roth conversions. Seems that John would really benefit from a Roth conversion.
I hope his bonds in his taxable account are municipal bonds. Otherwise, he's paying a large unnecessary tax bill. Bonds should be held in your IRA or 401k.
One of your best case study, hands down, he asked all the right questions and this gives a lot of good for thoughts for high earners. Thank you James for making time to do these! Good luck John and well done!
I'm 55 and have a liquid net worth of 3 million. I'm contemplating retiring at age 60, and considering just how conservative I should get around retirement to avoid sequence of return risks. This portfolio is just what I needed to see.
Hey John, Thanks for sharing your case. I knew a guy some years ago who had worked in IT his entire career, got out in his early 50's. He got bored and wanted to volunteer his time, so he went back to school to become a Physicians' Assistant, and subsequently led medical relief trips abroad. Don't give up on your law degree goal. Volunteerism in retirement often leads one to the bottom of their true skill level (e.g walking dogs). You might love giving free legal advice. You might even like working for very little money for an already established entity, and be able to make annual Roth contributions in the process!
James, all of your videos are helpful, but you deserve a BIG HUG for this one. For years, I've felt that the bond portion should be based on living expenses, not just a percentage of the portfolio. Thank you for being CRYSTAL CLEAR in explaining that. And John, thank you for being willing to have your story on RUclips.
This was a great video. Thank you and John. It would have been interesting to see some scenarios related to the compounded amounts during his retirement years.
Guardrail approach should have been discussed. If the market dropped initially, lower the slush fund portion temporarily and you'd be fine it would seem.
@@axrod1990 I have considered it. But a dollar is a dollar for me (dividends or capital appreciation) and I think total return on large cap growth is just better. But I respect the strategy.
After watching stock and bond funds fall in tandem in 2022, I'm not comfortable relying on bond funds for SRR reserves. My plan currently is to build up as much of my SRR "dry powder" in iBonds as I can. I might change my mind when the fixed rate drops, but for right now 1.3% fixed is very attractive. I'll sleep better knowing my reserve will at least keep pace with inflation.
What about using treasury bills or notes instead. They have a higher rate of return and if you purchase them in a brokerage account you can easily sell them before maturity.
I have 3 years of expenses in cash. Not because I want to but because I have to as part of financial independent visa for Greece. My wife and I are 49 and we will be tax harvesting the next 5 years for a 0% capital gains tax. Then our pension kicks in at 55, which will cover all our living expenses. Luckily, we won’t have to worry about sequence of return risk since we have plenty of cash if/when the market turns.
Good work John! I am very much like you just a few less $$$'s. Not that anyone's asking my opinion, but... Dang brah you got $3M! Go in tomorrow morning and quit!! Your full time job for the next 12 months is your health. Have a black coffee, take a long walk, read Outlive by Peter Attia. Then go get that law degree and enjoy a long and happy life! 👍🏼
With $3m, it would seem pretty easy to build a portfolio yielding 5%+ using dividend ETFs, preferreds, CEFs, BDCs, covered call funds, etc... Then he'd never really need to touch his principal or worry about sequence of returns. Would that not work? My parents have lived off their dividend portfolio with never really touching their principal for decades now.
Probably not enough time, but would have been interesting to hear how to mitigate sequence of returns risk by combining bond e.g., cash outs (for first 1-2 yrs of stock market downturn) with turning on SS.(if market downturn lasts > 3 years). Having 5+ years expenses in bonds may be out of reach for some.
With health issues, a visibly high BMI, and plans to early retire and have 30-40 years in retirement, I think John needs to budget for a gym membership and personal trainer, and then focus on getting down to healthy weight range, do lots of walking, and get in a couple of easy weight training sessions per week from now until his retirement date. He should worry more about the risks of heart attack, cancer or stroke, than sequence of return risk.
He could have done back-door Roth conversions due to his high income rather than contribute to a taxable account. One can sell fixed-income assets which may increase when stocks are down, which will help with rebalancing and sequence of returns risk. Bonds don't belong in taxable accounts as they are tax-inefficient.
Back door Roth conversions are taxed at current income rates - Paying high taxes now when marginal rate will be much less in retirement doesn’t make sense for many high income people
James - great stuff. Is the software that you utilized - portfolio visualizer - available. I see a vast array of do-it-yourself software available some free, some for a fee, so recommendations would be appreciated.
Does the withdrawal rate in the software include the withdrawals for “goals”? It looks to me like it is just measuring regular expenses, which would be underestimating the total withdrawal rate. Looks like RMDs will be an issue as well.
Does expenses needs to be adjusted based on portfolio size each year to be below 4% to resuce the risk of return,especially in those big market downturn? Does the withdrawal rate in the tool assumes the portfolio size keeps growing each year? If that’s The case, then withdrawal rate for the would be a lot higher than the 3% showed here?
@@dustinw471 I have considered it, I just don’t think the certainty of an annuity is worth giving up control of the money. But I understand the strategy
Good video. Why isn’t an income annuity considered? This would take pressure off the portfolio and create income in perpetuity. Specifically for the bond portion of the portfolio.
Probably, I consider spending it one of my bigger retirement problems actually. To keep the accounts a reasonable amount , say less than 2 million, I have to double my spending. Given that I live affluently now it is hard for me to imagine that. If it comes to that I will probably donate it. My sister is even better off in retirement than me and is retiring at 50. So really anything left goes to her kids. Don’t want to spoil them. Better to donate most of it. It’s a real risk/issue I have to plan for.
Thank you for including a case study for a single person. Examples with married people are great, but many people are divorced or single.
A key factor in making this interesting is that the guest client already has a high function understanding of all the relevant topics.
Thanks for letting us be a fly on the wall for this discussion. Some great learning.
One of the best retirement videos/case studies I have seen
Thanks James for the great talk, I learned a lot.
Thank you, John, for putting yourself on display for our benefit. The discussion around SRR was particularly helpful to hear.
James, I enjoy hearing these conversations. There are a lot of teaching points mixed in.
John can also postpone a car purchase ($50K) in a down market. This helps the portfolio survivability.
Better. Keep cars longer ... say 10 yrs.
@@rickdunn3883 agree. I have never kept a car less than 8 years. And I drive a Kia not a BMW. I have never been a “car guy” so no big deal for me I just look at it as transport.
I can't even wait till the end. This is EXCELLENT!!!
Excellent video. I love the very specific case study. I like the bond amount in years of expenses, instead of percentage of portfolio. That is my plan.
Thank you John!
John should look into volunteering for the AARP Tax-Aide program. It helps low income people and seniors file their taxes. No degree required. They provide training.
Its not crazy! I have considered going back to school to get a second NP certification!! I am 56!
I retired in 1999 and lived through two negative sequence of return events in one decade. Using regular retirement models, my 3 million in investments should have easily lasted the rest of my life. Instead, I had to return to work. Anyone modelling a retirement needs to seriously take these risks into account. Rather than a 5 year buffer based upon the length of a bear market, I would look at years to break even from down markets. I know from experience that 5 years won't be enough in a major market correction - you'll be harvesting a lot of carryover losses.
What was your yearly withdrawal amount?
I agree - you need to get back to pre bear market values + whatever you've spent getting there
This is the best case study discussion so far. Thanks to James and John and good luck to John for the future.
Thank you John and James, great discussion! FWIW, I don't think going back to law school is crazy at all. If you find yourself in a place needing to "not go crazy" as you put it, that could provide a great challenge to occupy your mind and time. It would also be very beneficial if you did follow through with the intent to provide needed legal services to those unable to secure them, for no charge. Kudos to you for desiring to do so. I am a life long learner and I'm 75. I think there was a mention of Roth conversions in this discussion, if so, I'd be very interested if James was planning another session with you John, on that topic. Thanks again John and James. Larry, Central Valley, Ca.
@@ld5714 no follow up planned that I know of, just not enough time. After recording was done James was kind enough to stay on and we discussed conversions. The big learning for me on that was James reminding me that a tax free dollar is better than a tax deferred dollar. So even though the software says that conversions gives me “X less dollars overall” those are tax free dollars, I had not considered that.
Good video on showing why you need a balance portfolio. However, you never touched on Roth conversions. Seems that John would really benefit from a Roth conversion.
I hope his bonds in his taxable account are municipal bonds. Otherwise, he's paying a large unnecessary tax bill. Bonds should be held in your IRA or 401k.
One of your best case study, hands down, he asked all the right questions and this gives a lot of good for thoughts for high earners. Thank you James for making time to do these! Good luck John and well done!
Fantastic conversation…wish you the best John…you’ve won the game! James, I love the live case studies! Learning a lot.
I'm 55 and have a liquid net worth of 3 million. I'm contemplating retiring at age 60, and considering just how conservative I should get around retirement to avoid sequence of return risks. This portfolio is just what I needed to see.
Hey John, Thanks for sharing your case. I knew a guy some years ago who had worked in IT his entire career, got out in his early 50's. He got bored and wanted to volunteer his time, so he went back to school to become a Physicians' Assistant, and subsequently led medical relief trips abroad. Don't give up on your law degree goal. Volunteerism in retirement often leads one to the bottom of their true skill level (e.g walking dogs). You might love giving free legal advice. You might even like working for very little money for an already established entity, and be able to make annual Roth contributions in the process!
James, all of your videos are helpful, but you deserve a BIG HUG for this one. For years, I've felt that the bond portion should be based on living expenses, not just a percentage of the portfolio. Thank you for being CRYSTAL CLEAR in explaining that. And John, thank you for being willing to have your story on RUclips.
Such a lovely man. A breath of fresh air.✌️
Great episode James, and best of luck on your planned retirement John!
One of your best videos so far.
Great guy and video. I am happy for john 🎉
This was a great video. Thank you and John. It would have been interesting to see some scenarios related to the compounded amounts during his retirement years.
James, you are a good soul.
Guardrail approach should have been discussed. If the market dropped initially, lower the slush fund portion temporarily and you'd be fine it would seem.
I liked this video a lot. Good questions from John. I am younger but can relate to your situation.
Why not take half of the portfolio and invest in dividend paying stocks? Easy security for retirement. doesnt even need the 3M
@@axrod1990 I have considered it. But a dollar is a dollar for me (dividends or capital appreciation) and I think total return on large cap growth is just better. But I respect the strategy.
After watching stock and bond funds fall in tandem in 2022, I'm not comfortable relying on bond funds for SRR reserves. My plan currently is to build up as much of my SRR "dry powder" in iBonds as I can. I might change my mind when the fixed rate drops, but for right now 1.3% fixed is very attractive. I'll sleep better knowing my reserve will at least keep pace with inflation.
What about using treasury bills or notes instead. They have a higher rate of return and if you purchase them in a brokerage account you can easily sell them before maturity.
I have 3 years of expenses in cash. Not because I want to but because I have to as part of financial independent visa for Greece. My wife and I are 49 and we will be tax harvesting the next 5 years for a 0% capital gains tax. Then our pension kicks in at 55, which will cover all our living expenses. Luckily, we won’t have to worry about sequence of return risk since we have plenty of cash if/when the market turns.
Good work John! I am very much like you just a few less $$$'s. Not that anyone's asking my opinion, but...
Dang brah you got $3M! Go in tomorrow morning and quit!! Your full time job for the next 12 months is your health. Have a black coffee, take a long walk, read Outlive by Peter Attia. Then go get that law degree and enjoy a long and happy life! 👍🏼
With $3m, it would seem pretty easy to build a portfolio yielding 5%+ using dividend ETFs, preferreds, CEFs, BDCs, covered call funds, etc... Then he'd never really need to touch his principal or worry about sequence of returns. Would that not work? My parents have lived off their dividend portfolio with never really touching their principal for decades now.
Was thinking the same thing
Dividends can and often are cut during bear markets
Probably not enough time, but would have been interesting to hear how to mitigate sequence of returns risk by combining bond e.g., cash outs (for first 1-2 yrs of stock market downturn) with turning on SS.(if market downturn lasts > 3 years). Having 5+ years expenses in bonds may be out of reach for some.
With health issues, a visibly high BMI, and plans to early retire and have 30-40 years in retirement, I think John needs to budget for a gym membership and personal trainer, and then focus on getting down to healthy weight range, do lots of walking, and get in a couple of easy weight training sessions per week from now until his retirement date. He should worry more about the risks of heart attack, cancer or stroke, than sequence of return risk.
He could have done back-door Roth conversions due to his high income rather than contribute to a taxable account. One can sell fixed-income assets which may increase when stocks are down, which will help with rebalancing and sequence of returns risk. Bonds don't belong in taxable accounts as they are tax-inefficient.
Back door Roth conversions are taxed at current income rates - Paying high taxes now when marginal rate will be much less in retirement doesn’t make sense for many high income people
What are international developed (except US market) funds? Are these international funds?
James - great stuff. Is the software that you utilized - portfolio visualizer - available. I see a vast array of do-it-yourself software available some free, some for a fee, so recommendations would be appreciated.
It is available for free. I use it
Does the withdrawal rate in the software include the withdrawals for “goals”? It looks to me like it is just measuring regular expenses, which would be underestimating the total withdrawal rate. Looks like RMDs will be an issue as well.
Jon seemed to dismiss Target Date funds. What are your thoughts on these funds?
I don’t care for those. You can do better than an all in one fund
Berkshire isn’t really one company and i consider almost like a mini S&P500
Does expenses needs to be adjusted based on portfolio size each year to be below 4% to resuce the risk of return,especially in those big market downturn? Does the withdrawal rate in the tool assumes the portfolio size keeps growing each year? If that’s
The case, then withdrawal rate for the would be a lot higher than the 3% showed here?
Shout out to Lucas.
John could also put a small amount of that 3mil into a fixed annuity as bond replacement since he dies a little inside with each buy. 😂😂
@@dustinw471 I have considered it, I just don’t think the certainty of an annuity is worth giving up control of the money. But I understand the strategy
He would die more with an annuity
Good video. Why isn’t an income annuity considered? This would take pressure off the portfolio and create income in perpetuity.
Specifically for the bond portion of the portfolio.
He can always “dabble” into actual part time actual paying job. When “wanted”, does not have to do every for free.
send this directly to Dave Ramsey and watch him call you a wonky nerd
I don’t understand how a high income earner could contribute to Roth. We couldn’t.
He said that while working he made too much to invest in Roth accounts.
Back door Roth
@@墨紫月 I could not. I have no Roth. I can only do conversions.
Backdoor Roth probably
Look up Back door Roth. Mega Back Door Roth.
I predict John will someday pass on with a large estate. Admittedly, there are worse problems. lol
Probably, I consider spending it one of my bigger retirement problems actually. To keep the accounts a reasonable amount , say less than 2 million, I have to double my spending. Given that I live affluently now it is hard for me to imagine that. If it comes to that I will probably donate it. My sister is even better off in retirement than me and is retiring at 50. So really anything left goes to her kids. Don’t want to spoil them. Better to donate most of it. It’s a real risk/issue I have to plan for.
Did he account for a dental plan...
The reality is this.
Johns greatest advantage regarding his likelihood of success in retirement is that he isn’t going to live very long
Damn! That’s cold