Dear Bogleheads,
Sequence of Return Risks (SORR) around retirement is a frequent topic of conversation. Most of us know Michael Kitces insightful work regarding this matter.
I find myself in midlife with my own sequence of return risk conundrum. I have saved, and I am now spending quite a bit on kid's cars, insurance, and college. Over an eight-year period I have been or will be paying for the above-mentioned items. I am probably in my peak spending years.
I have used taxed advantaged vehicles like 529s for help myself along the way. So as these expenses show up, the money will need to be there (as I have wanted to help my kids in this way). When these expenses arrive, I need cash obviously. I cannot pay with shares of VTI at a lower NAV. Consequently, I have found myself holding on to more cash and short bond funds in taxable accounts (I know livesoft just died hard reading that). Vanguard Target Date Funds suggest my asset allocation should be something like 75/25 stock bonds. Instead, I am closer to 60/40 as I need a "lumpy" amount of money sooner than later.
I know many of you might say "VFANX should you not just be cash flowing these expenses?" Well I can to a certain extent, but in my line of work, my income has not been exactly keeping up with inflation.
Well, I just wanted to get other board members thoughts on this. I know this is a SORR subject.
Regards,
VFANX
Sequence of Return Risks (SORR) around retirement is a frequent topic of conversation. Most of us know Michael Kitces insightful work regarding this matter.
I find myself in midlife with my own sequence of return risk conundrum. I have saved, and I am now spending quite a bit on kid's cars, insurance, and college. Over an eight-year period I have been or will be paying for the above-mentioned items. I am probably in my peak spending years.
I have used taxed advantaged vehicles like 529s for help myself along the way. So as these expenses show up, the money will need to be there (as I have wanted to help my kids in this way). When these expenses arrive, I need cash obviously. I cannot pay with shares of VTI at a lower NAV. Consequently, I have found myself holding on to more cash and short bond funds in taxable accounts (I know livesoft just died hard reading that). Vanguard Target Date Funds suggest my asset allocation should be something like 75/25 stock bonds. Instead, I am closer to 60/40 as I need a "lumpy" amount of money sooner than later.
I know many of you might say "VFANX should you not just be cash flowing these expenses?" Well I can to a certain extent, but in my line of work, my income has not been exactly keeping up with inflation.
Well, I just wanted to get other board members thoughts on this. I know this is a SORR subject.
Regards,
VFANX
Statistics: Posted by VFANX — Wed Jun 12, 2024 4:15 pm — Replies 6 — Views 617