Funding during retirement

[woof]

As I approach retirement, I'm wondering what's the best way to deal with liquidity.
Hoping that the sifus here can share their thoughts on this.

A popular suggestion is to plan for a safe withdrawal rate of 4% or less, depending on how many years you have in retirement. With current low yields on interest/safe bonds, the advocate is to stay invested, using the 110-age = equity ratio.

It all sounds good, but it also means that there's a significant portion in equity during your retirement years. Eg. retire at 60, equity ratio = 50%

During retirement, we'll need income since there's no pay from our jobs. So we'll need to liquidate our investments on a regular basis.

What's the thought on how to do this? On a regular basis (eg. 3 or 6 months or so), sell off our investments in the ratio required?

Thanks!

 

[SBC]

Congrats!

What’s your age now & how much is your assets?

 

[celtosaxon]

During retirement, we'll need income since there's no pay from our jobs. So we'll need to liquidate our investments on a regular basis.

What's the thought on how to do this? On a regular basis (eg. 3 or 6 months or so), sell off our investments in the ratio required?

Thanks!

I can see are doing your homework and are on the right track.

Next step in your learning is something called “the bucket strategy”

 

[Mecisteus]

I think it is critical that you mention what are the kind of assets you are holding.

 

[woof]

I can see are doing your homework and are on the right track.

Next step in your learning is something called “the bucket strategy”

Celtosaxon, thanks - I'll google about "bucket strategy".

 

[woof]

I think it is critical that you mention what are the kind of assets you are holding.

Taking CPF out of this for now (at 65, CPF life cuts in), but I'll like to understand the best way to handle cash investments, keeping considerations for liquidity as I mentioned.

If we follow Shiny's suggestion, that means putting money in MBH, G3B and IWDA.
So it looks like every few months, sell off some MBH, G3B and IWDA to get spending money?

 

[BBCWatcher]

So it looks like every few months, sell off some MBH, G3B and IWDA to get spending money?

Yes, that’s right, although bear in mind MBH and G3B throw off dividends that are also available for spending in retirement.

If you feel that CPF LIFE at ERS level isn’t enough longevity insurance, you might decide to buy more, trading some portion of your future assets to bump up your assured lifetime retirement income.

 

[decibel.]

Just use CPF and if not enough then sell to top up your monthly cashflow

Sent from HUAWEI VOG-L29 using GAGT

 

[polyglob]

If we follow Shiny's suggestion, that means putting money in MBH, G3B and IWDA.

What if someone's current portfolio is basically FAAMG? Kinda funny to sell these flying winners to rebalance into "safer" alternatives. I understand the logic - why keep playing when already won? But still need to figure out mechanics and minimize the transaction fees involved given the portfolio size.

So it looks like every few months, sell off some MBH, G3B and IWDA to get spending money?

Sell proportionally?

 

[polyglob]

Just use CPF and if not enough then sell to top up your monthly cashflow

Sent from HUAWEI VOG-L29 using GAGT

Think TS means early retirement before CPF Life kicks in at 65. And if retiring before 55, no CPF lump sum yet either.

 

[BBCWatcher]

What if someone's current portfolio is basically FAAMG?

Then that person is gambling, not investing.

Kinda funny to sell these flying winners to rebalance into "safer" alternatives.

That’s exactly what every investor and gambler alike should hope to accomplish: buying low, selling high.

But still need to figure out mechanics and minimize the transaction fees involved given the portfolio size.

Gambling is expensive all around. If you stick to a couple simple, low cost, well diversified, accumulating (if available) funds, then your periodic brokerage commissions to raise funds for retirement are that much lower on a total lifecycle basis.

Think TS means early retirement before CPF Life kicks in at 65.

Actually, in general, the smarter financial play is to defer CPF LIFE to age 70, which is the default. Plan accordingly! (The majority of CPF members who have reached age 65 defer, according to the available data. That’s mostly under the classic Retirement Sum Scheme, so we’ll see if the majority decision holds up as members age into CPF LIFE, but I predict it will hold up.)

And if retiring before 55, no CPF lump sum yet either.

That’s right, and CPF is a fairly expensive source of such funds because they’re weirdly high yielding government bonds, effectively. Plan accordingly, and if you’re coming up short then how about not retiring so early and/or completely? Perhaps the best investment you can make is to find something you enjoy doing that somebody will pay you to do. That’s free or better than free money.

 

[polyglob]

Then that person is gambling, not investing.

Gambling is expensive all around. If you stick to a couple simple, low cost, well diversified, accumulating (if available) funds, then your periodic brokerage commissions to raise funds for retirement are that much lower on a total lifecycle basis.

Using your language, this someone I know has had a lucky gambling streak, in that the FAAMG portfolio has now grown to allowing retirement before 55. Cashing out the chips, so to speak, involves liquidating the FAAMG and buying the lower volatility portfolio. The question is: How to execute the transition while minimizing transaction costs and factoring other considerations not yet thought of.

Of coz can sell all and place into FD or SGS, safe and sure. But the idea as readers of this forum know is to manage risks, not be stupid.

 

[decibel.]

Think TS means early retirement before CPF Life kicks in at 65. And if retiring before 55, no CPF lump sum yet either.

Then you got to plan how much monthly you need and until what year would you live until. Let's say you need $5K monthly. Then you need to see if you sell now how long can you last vs selling at different rate per year.

For me I would sell off shore and find investment vehicles in Singapore to park my retirement funds if I'm retiring here.

Sent from HUAWEI VOG-L29 using GAGT

 

[BBCWatcher]

Using your language, this someone I know has had a lucky gambling streak, in that the FAAMG portfolio has now grown to allowing retirement before 55.

As of market close on Friday. As of market open on Monday, probably, but you never know.

Then you got to plan how much monthly you need and until what year would you live until. Let's say you need $5K monthly. Then you need to see if you sell now how long can you last vs selling at different rate per year.

Don’t forget inflation. For example, whenever you say something like “I need S$5,000 per month,” you’d add “(in constant 2020 dollars).” You don’t actually need dollars specifically. You need food, electricity, bus and train fares (increasing in just a few days), soap, etc., etc.

For me I would sell off shore and find investment vehicles in Singapore to park my retirement funds if I'm retiring here.

“Not really.” There’s still a strong argument in favor of maintaining some degree of reasonable global diversification throughout retirement, and it’s an easier argument in small, open economy Singapore with a currency that’s a loose peg to a basket of other currencies and with no tax or regulatory hostility to such prudence. The notable exception would be if life/plans didn’t work out well, in which case you’d do the best you can to nail down the biggest CPF LIFE income stream you can manage and hunker down.

The basic idea in drawdown years is to manage your assets according to retirement-oriented portfolio allocations (with some degree of reasonable global diversification as I mentioned) and then to strive for cost efficiency, such as broker commission efficiency. These core principles are no different than during one’s accumulation phase, but the target allocations are different.

 

[polyglob]

As of market close on Friday. As of market open on Monday, probably, but you never know.

Looks like this is out of your realm of experience. Or like the enciks in the army like to say, don't know say don't know, don't talk cock.

TS, sorry for hijacking your thread. Give you back.

Don’t forget inflation. [...] There’s still a strong argument in favor of maintaining some degree of reasonable global diversification throughout retirement

These I agree.

 

[BBCWatcher]

Looks like this is out of your realm of experience.

Don’t be obtuse or ad hominem. What’s your logical argument? That someone with all or most wealth held in the form of “FAAMG” stocks (5 individual stocks) has a reliable retirement lifestyle ahead without any adjustments to her portfolio? If that’s your argument, I disagree.

[FAAMG = Facebook, Amazon, Apple, Microsoft, and Google. Google is part of and now corporately named Alphabet, but the G remains in this particular acronym for now.]

For reference, as a matter of historical fact, the NASDAQ Composite Index of 100 (not 5) predominantly technology stocks fell 78% peak to trough (and on a nominal basis) starting from March 10, 2000. The NASDAQ did not reach its 2000 peak on a nominal basis until over 15 years later. This really happened — it’s in the history books. I am not persuaded given the historical evidence that a heavy FAAMG speculator has a reliable retirement lifestyle foundation in her speculation. I just crack open the history book to make that particular assessment — not hard. This period and others happen to be part of my “realm of experience.”

 

[decibel.]

As of market close on Friday. As of market open on Monday, probably, but you never know.


Don’t forget inflation. For example, whenever you say something like “I need S$5,000 per month,” you’d add “(in constant 2020 dollars).” You don’t actually need dollars specifically. You need food, electricity, bus and train fares (increasing in just a few days), soap, etc., etc.


“Not really.” There’s still a strong argument in favor of maintaining some degree of reasonable global diversification throughout retirement, and it’s an easier argument in small, open economy Singapore with a currency that’s a loose peg to a basket of other currencies and with no tax or regulatory hostility to such prudence. The notable exception would be if life/plans didn’t work out well, in which case you’d do the best you can to nail down the biggest CPF LIFE income stream you can manage and hunker down.

The basic idea in drawdown years is to manage your assets according to retirement-oriented portfolio allocations (with some degree of reasonable global diversification as I mentioned) and then to strive for cost efficiency, such as broker commission efficiency. These core principles are no different than during one’s accumulation phase, but the target allocations are different.

Yeah damn everything is increasing these days.

As for global diversification, is it necessary to maintain in off shore account? If let's say your balance overseas is about $500K upon retirement, wouldn't it be safer to bring those back to local accounts to minimize risk of brokerage default? If not $500K will be in custodian of US broker that doesn't have protection for non US residents?

Sent from HUAWEI VOG-L29 using GAGT

 

[polyglob]

Don’t be obtuse or ad hominem. What’s your logical argument? That someone with all or most wealth held in the form of “FAAMG” stocks (5 individual stocks) has a reliable retirement lifestyle ahead without any adjustments to her portfolio? If that’s your argument, I disagree.

[FAAMG = Facebook, Amazon, Apple, Microsoft, and Google. Google is part of and now corporately named Alphabet, but the G remains in this particular acronym for now.]

I take back what I said if you consider it ad hominem.

I am not arguing anything. I am asking, on topic for this thread, for the purpose of helping someone: if the portfolio is currently FAAMG, and the person is ready to retire, how best to transition to the low volatility funds while minimizing transaction fees -- this is selling a few millions worth of financial instruments just to buy the same $ amount of some other financial instruments -- and more importantly, what else to consider other than fees.

Just picture a slightly different scenario: Instead of FAAMG, the portfolio is all BTC. To me, the case is clear cut. Sell the coins pronto and switch, transaction costs be damned.

For the sake of discussion, assume that the absolute $ position remains cushy even if FAAMG or BTC drops 50% on Monday.

To answer an earlier reply - Why not keep working? That's an option too, but then the scenario also changes - just build the new low volatility portfolio using the continued income and slowly liquidate the FAAMG. And sell the BTC now. Easy.

 

[Geeezz]

i would actually take the drawdown percentage as the maximum i can take out. if can use lesser then take out lesser, cuz 20/30yrs after retirement the flat withdrawal won’t be enough cuz things will always get more expensive

 

[polyglob]

For reference, as a matter of historical fact, the NASDAQ Composite Index of 100 (not 5) predominantly technology stocks fell 78% peak to trough (and on a nominal basis) starting from March 10, 2000. The NASDAQ did not reach its 2000 peak on a nominal basis until over 15 years later. This really happened — it’s in the history books. I am not persuaded given the historical evidence that a heavy FAAMG speculator has a reliable retirement lifestyle foundation in her speculation. I just crack open the history book to make that particular assessment — not hard. This period and others happen to be part of my “realm of experience.”

You added this part while I was replying.

The worst time to sell is after an 80% drop. When this happens again, IF my someone holds her nerve, then she will probably be gnashing her teeth that she is retired and has no spare money to scoop up the stuff that is now on sale.