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Are You Still In?


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Vanguards version of asking "Are You Still In?"

 

It is pretty telling when Vanguard starts sending out emails to its customers about re-balancing (certainly not called market timing! - or is it?) with comments like:

 

"Buying stocks now may actually run counter to what many prudent investors should be doing,"

 

Cheers John

Yep. According to my Financial Advosor... we should be out of stocks. And with his half of the family treasury, we are. On my half, I am still sitting in MM funds... Watching & Waiting for 'something'.

 

Interesting times we live in!

Jim

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I just bought another large block of Tesla at 121.00 earlier this week I timed that right.

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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But what to do with all your cash?

An interesting article with no great conclusion. Fact is, no one has the answer.

 

http://money.cnn.com/2013/12/05/investing/stocks-investing-experts.pr.fortune/index.html?iid=HP_LN

 

Wish I knew.

 

ed

Dollar cost averaging works great when accumulating assets. Dollar cost averaging as you dis-accumulate can hurt you emmensely, If you live off your portfolio and you do not have a cash cushion then some of you cash should be dedicated to that. Even taking into account losses to inflation. If your financial position is so precarious as to not allow an emergency fund then you should seriously consider re-entering the workforce. After allowing for such an emergency fund (I use three years), then the remainder of your cash should be dispersed into a widely diversified, international, portfolio. Not my advice, but that of all qualified investment advisors I am aware of. Does not mean that it is "right" today, just that you have the odds from decades of investment history on your side.

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Bob,

That is not my entry. I bought in at IPO in 2010 for 17, then two more large blocks at 22.5. I took my original investment plus 5k profit off the table at 90 so even though a tidy sum at this point, it is all house money not mine. My goal is to leave it in there very long term now, at least to the Model E, which should be out in 2017, right after the Model X in 2014. This was just adding back in a block I had in cash earning nothing. Our other investments are our land and home all paid for, and USAA funds in abundance, as well as a military retirement and other assets. It will at least double or triple by then.

 

On edit:

Bob, if you haven't been following go to the page one and just read a few of my posts on the first two or three pages. That was 2011 well after my initial entry into Tesla.

Edited by RV

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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finance.yahoo.com
Why The 4% Retirement Rule Is No Longer Safe

 

Ever since a California financial planner named William P. Bengen proposed it in 1994, retirees have relied on what’s known as the 4% rule – if they withdraw 4% of their nest eggs the first year of retirement and adjust that amount for inflation thereafter, their money would last at least 30 years.

But Bengen’s rule has lately come under attack. It was developed when interest yields on bond index mutual funds hovered around 6.6%, not the 2.4% of today, raising clear questions about how well bonds could support a 4% rule. As one academic paper, published earlier this year in the Journal of Financial Planning, put it: “The 4 Percent Rule Is Not Safe in a Low-Yield World.”

The paper by authors Michael Finke, Wafe Pfau and David M. Blanchett said that if current bond returns don’t spring back to their historical average until ten years from now, up to 32% of nest eggs would evaporate early. Mutual-fund managers T. Row Price and Vanguard Group as well as online brokerage Charles Schwab have all issued recent re-appraisals of the guideline.

Such estimates are crucial to helping people figure out how much savings they will need to make it through retirement without running out of money. They are tied to the fact that long-term returns since 1926 have been 10% annually for stocks and 5.3% for bonds, according to Morningstar, the investment research firm.

More Flexibility on Withdrawals

Of course investors can’t count on those returns to materialize every year given that market prices, especially for stocks, gyrate unpredictably. As a result, they need some withdrawal-rate estimates based on computer simulations of future market returns.

Even though some investment firms continue to advocate the 4% rule, several are advising retirees to be flexible and use a “dynamic” strategy by altering their withdrawals each year depending on the markets. A Morningstar paper by the three authors of the Financial Planning article found that a retiree with a 40% stock nest egg could withdraw only 2.8% initially and still have a 90% chance of success over a 30-year retirement.

In an interview, author Blanchett attributed the difference to the impact of annual fund management fees, as well as lower expected future returns for stocks and bonds.

In contrast, T. Rowe Price, which offers a retirement income calculator, still believes that “4% gives you a high likelihood of success,” said Christine Fahlund, a senior financial planner at the Baltimore, Md.-based mutual fund firm. In a fall 2013 newsletter, the firm said clients with a mix of 60% stocks and 40% bonds – a relatively risky profile – could use an initial withdrawal rate of 4.3%.

They could use an even higher rate of 5.1% if they don’t take cost-of-living increases during years when their portfolios lost money, T. Rowe Price said. Risk-adverse retirees with all-bond nest eggs should use a lower 2.8% initial withdrawal rate.

A ‘Dynamic Approach’

In October, Vanguard Group published an update which, like T. Rowe Price, also suggested “a more dynamic approach” under which withdrawals could be adjusted up or down depending on how markets perform.

Vanguard says investors with a nest egg evenly split between stocks and bonds who withdraw 3.8% initially with inflation increases would still have a 15% chance of running out of money within 30 years.

Vanguard estimates that an investor with 80% stocks and 20% bonds could withdraw 4% with the same 85% success rate. But Vanguard warned that a conservative investor with only 20% in stocks should limit initial withdrawals to 3.4% to have the same chance of success over 30 years.

Two Other Alternatives

In addition to the traditional Bengen model of starting with a set percentage and adjusting for inflation annually, Vanguard suggests two alternatives.

One is to withdraw a set percentage such as 4% annually - but instead of maintaining the starting dollar amount plus inflation each year, the investor keeps the percentage constant and allows the withdrawal dollar amount to fluctuate depending on the balance.

While this method ensures that the nest egg is never depleted, Vanguard warned that, “this strategy is strongly linked to the performance of the capital markets.” Because spending levels are based solely on investment returns, “short-term planning can be problematic” as withdrawal amounts bounce around.

As a middle ground, Vanguard suggested that annual adjustments to the initial withdrawal amount be limited to a 2.5% reduction from the prior year when markets have declined and a 5% increase when markets have risen. Thus if the initial dollar withdrawal were $50,000, it could fall by $1,250 if markets decline in the first year or increase by $2,500 if markets go up. This method allows a heftier 4.9% withdrawal rate for a portfolio of half stocks and half bonds, with an 85% success rate over a 30-year horizon.

Loading Up on High Yields

Colleen Jaconetti, a senior investment analyst at Vanguard who co-authored both studies, said that because current bond interest rates and stock dividend yields both fall short of 4%, some investors who “don’t want to spend from principal” are tempted to load up on securities with higher yields.

Instead, she recommends that investors “maintain a diversified portfolio” and “spend from appreciation,” meaning any price gains on stocks or bonds.

At the online brokerage Charles Schwab, retirement income planning analyst Rob Williams says based on the firm’s current expectations for market returns, a 3% initial spending rate “may be more appropriate” for investors who need “a rigid rule of spending” and a high degree of confidence that their money will last.

Advice: Stay Flexible

However, Mr. Williams adds that even a 4% spending rate “may be too low” for investors who can remain flexible, are comfortable with a lower confidence level, and expect that future market returns will be closer to historical averages.

To balance the two perspectives, Schwab suggests investors stay flexible and update their plan regularly. Schwab suggests that a plan with a 90% success rate may be too conservative, and that a confidence rate of 75% may be more appropriate.

Two investment analysts at the Merrill Lynch Wealth Management unit of Bank of America, David Laster and Anil Suri, say that while the 4% rule may be overly simplistic, it isn’t too far off the mark.

They also recommend a post-retirement stock allocation of 30% to 40%, lower than some competitors, to reduce the risk of a catastrophic shortfall that could result from a steep market downturn early in retirement.

The Bottom Line

Because women tend to live longer than men, the Merrill analysts say the average 65-year-old woman could initially only withdraw 3.9% annually, with cost-of-living increases, while a man the same age could start withdrawing at a higher 4.2% rate because he isn’t expected to live as long.

Using similar logic, they add, younger retirees in their 50s should start spending at about 3%, while those in their 70s can spend 5%.

 

Everything look okay?
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Timely article, ed ed. Thanks for sharing.

 

Currently, I do not make scheduled withdrawals from our funds, but I do make 'occasional' withdrawals that won't add up to more than 3% annual, usually for specific purchases. We're in our early 60's, and this is a tough one to call. Good time to be conservative in budgeting.

Jim

2007 Dolphin

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I also use three years of emergency fund in cash. This is three years of my high expense years. Any other cash I have is being used to "sit on" for market opportunities. While one can argue - perhaps with some success - that I am "wasting" that excess cash, I have found that having cash available for "opportunities" pays off in the long run. At least historically, for ME. So I am sitting on some cash. Other than that, I'm fully invested - as I've said here in the past: dividend paying, large companies, with a history of surviving downturns and still paying dividends. Mostly US with foreign holdings, but some foreign. Some individual stocks, and some funds.

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We hit the required minimum distributions next year. Question will be whether to do lump sum or spread it out during the year. Has anyone started doing that and which way do you do it?

 

Barb

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finance.yahoo.com
Why The 4% Retirement Rule Is No Longer Safe

 

Wouldn't this article better fit in the thread "Will My Retirement Funds Last?"

 

Cheers John

John & Karen "1/3 - timers"

 

The best things in life aren't things.

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We hit the required minimum distributions next year. Question will be whether to do lump sum or spread it out during the year. Has anyone started doing that and which way do you do it?

 

Barb

 

I'm not at the RMD age yet - but my intention when I get there is - to take it out as a lump sum early in the year. Since the amount is determined from the balance on Dec. 31 of the previous year, the total withdrawal will be the same either way and thus the taxes will be the same. That way, I will have the cash available immediately if I need it or I can invest it in taxable accounts, either as a lump or dollar cost averaged buys, as I see fit, if I don't need to spend it.

 

I suppose it could be argued that, if I thought the market was going to do well this (the RMD) year, it might be better to wait until the end of the year to withdraw it, so that the earnings on the withdrawal amount would be tax deferred.

 

Don

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We hit the required minimum distributions next year. Question will be whether to do lump sum or spread it out during the year. Has anyone started doing that and which way do you do it?

 

Barb

My wife and I will take our first RMD's in 2014. I set them all up as quarterly. The hope, but certainly not the guarantee, is that the market will continue to improve. Rather then sell investments, say on January 1st, I'll sell smaller amounts each quarter. The reverse of dollar cost averaging I suppose.

 

ed

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  • 1 month later...

Last May I posted this in this thread:

http://www.rvnetwork.com/index.php?showtopic=93326&p=621313

 

Today it trades at $75.00

http://finance.yahoo.com/q?s=scty&ql=1

 

I hope some of ye of little faith realize it isn't a fad anymore Toto.

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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Yep!

But while it was trading @ $75.00 at noon, it didn't close at that. It closed @ $76.80

Edited by RV

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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woohoo! Congrats!

It was trading today at 74.53 - 79.86 so if not today, very soon it will be double what you paid. Any doubts it will, long term, double and triple? Then read this that just came out today. http://www.washingtonpost.com/blogs/innovations/wp/2014/01/16/elon-musks-five-insights-into-solar-energy/?wprss=rss_technology&wpisrc=nl_tech

 

Most folks won't read that link, it is too long, and like my early almost IPO investment in Tesla, most would have feared buying another block at $135.00 or so last month like I did. I almost bought more SCTY and now realize I would have doubled my money there instead of just 30%or so gains. Just proves I only know Musk and his companies. I am no investment guru. I do know we are about to have another Tesla short squeeze in the next month or three.

 

I am thrilled for you. After reading the article perhaps you'll see where it is as long term as my Tesla stock is.

 

You are going to get accused of being a tree hugger like I have by the deniers who hate to be the only ones left behind. Now if SCTY can, like Tesla, just keep up with demand, which they will, there are going to be a lot of folks not making fun of the investments, but still negative because they still won't understand. We are investing in the actual future as the tipping point has been reached.

 

If I miss anything about them let me know.

Edited by RV

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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  • 1 month later...

Hey catfish!

How are you feeling about it today at $259.00 a share? http://finance.yahoo.com/q?s=tsla

I've been outlining exactly what was going to happen to the fine folks here since before Cindona started this thread in 2011, about three years ago. And on these forums since 2003! My investment was not beginners luck. I knew what was coming. Elon never lies or brags, he just goes ahead and does what he already knew he could do.

 

I am no longer playing with small money. Morgan Stanley just raised their target to$320!

 

Don't sell until mid to late 2017 when we will know the final details of the megafactory for batteries and the Model E.

 

We are well past the tipping point of changing the world. Most still won't accept that until it is far too late. Some folks still don't believe what is real. Some just resent being so wrong, so long.

 

Is this market great or what?!

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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  • 3 months later...

For those still reading here is a great in depth article about why I'm still in.

http://marketrealist.com/2014/06/incredible-stock-whats-big-deal-tesla/

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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I just read this whole thread for the first time. Very interesting to read views from three years ago and to see how things are today. To answer the original post, not only did we stay in, we kept investing more....as Barbara did. I had a few sleepless nights, but Roger was steadfast on investing and not fleeing the market. He was still working, and he maxed out his 401k every month. Then after-tax income was invested. The money invested at the low point has been the best decision. Lately the markets have reached an all-time high.

 

Our home and cars are paid for, because if the worst does happen; we will always have a place to live and cars to drive. We can live off of his naval retirement income and our SS, everything else is frosting on the cake. Our motorhome has a mortgage, because we wanted a tax-deduction.

 

No one can predict the future, but we had a plan; and it worked for us.

 

Karen

Roger & Karen

Roger USN Captain (retired) submarine service

Karen Captain (retired) pilot

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Welcome aboard Karen! We think very much alike I see. Good for you guys!

RV/Derek
http://www.rvroadie.com Email on the bottom of my website page.
Retired AF 1971-1998


When you see a worthy man, endeavor to emulate him. When you see an unworthy man, look inside yourself. - Confucius

 

“Those who can make you believe absurdities, can make you commit atrocities.” ... Voltaire

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