Reacher Posted March 13, 2019 Report Share Posted March 13, 2019 19 hours ago, FKIM01 said: Take $3mm and put it in a W-2 trust for family/friends. Keep the remaining $10MM and draw 4% (initially $400K) annually for life. What is a W-2 trust you ask? Define who your intended recipients are and then notify them that annually, your trustee will pay them a percentage of their W-2 or tax return verified self-employment income. Maybe you match 25%, 50% or even 100% of their income...whatever works with the parameters you have. It serves a purpose and sends a message to the leeches. I've witnessed it work very effectively. I agree with you except I would start the income at 3% ($300,000). We are talking a potential 70 year time horizon. The 4% withdrawal rule does not work over a 30 year time horizon in some situations. Link to comment Share on other sites More sharing options...
Zlinedavid Posted March 13, 2019 Report Share Posted March 13, 2019 15 minutes ago, Reacher said: I agree with you except I would start the income at 3% ($300,000). We are talking a potential 70 year time horizon. The 4% withdrawal rule does not work over a 30 year time horizon in some situations. Depends on how well the investments on your principal are performing. Long term, even if you only match the S&P 500, you're talking 10-11% a year. Even factoring in taxes and inflation, with that kind of return plus a 4% income draw, you're probably holding even on the principal. Edit: Scratch taxes. Double dipped in my mind. Was thinking you could defer taxes if it was in a retirement vehicle, but then you couldn't take the annual draw. Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 And welcome to Romeo's financial portfolio...I love it, although you guys are talking Latin to me. Link to comment Share on other sites More sharing options...
Reacher Posted March 13, 2019 Report Share Posted March 13, 2019 Just now, Zlinedavid said: Depends on how well the investments on your principal are performing. Long term, even if you only match the S&P 500, you're talking 10-11% a year. Even factoring in taxes and inflation, with that kind of return plus a 4% income draw, you're probably holding even on the principal. I don't want to get too far into the weeds ( that's where Rico fishes, lol) but you have to factor in sequence of return risk. If you start with a period similar to what we saw from from 2000-2010 (the lost decade), a cumulative $4M in withdrawals will be too hard to recover from. 10 years out you might be taking out 10% of the total. There have been instance where a 4% withdrawal will deplete the principal in 15-20 years. There are a lot of other variables involved.How much are the investment expenses? Financial Advisor expenses? Risk profile and investment maturity of the client. Allowing for adjustments in income due to market forces will help get a better outcome. Link to comment Share on other sites More sharing options...
Zlinedavid Posted March 13, 2019 Report Share Posted March 13, 2019 1 minute ago, Reacher said: I don't want to get too far into the weeds ( that's where Rico fishes, lol) but you have to factor in sequence of return risk. If you start with a period similar to what we saw from from 2000-2010 (the lost decade), a cumulative $4M in withdrawals will be too hard to recover from. 10 years out you might be taking out 10% of the total. There have been instance where a 4% withdrawal will deplete the principal in 15-20 years. There are a lot of other variables involved.How much are the investment expenses? Financial Advisor expenses? Risk profile and investment maturity of the client. Allowing for adjustments in income due to market forces will help get a better outcome. All valid points. And damn I wish I had this problem. 😂 Link to comment Share on other sites More sharing options...
milehiiu Posted March 13, 2019 Report Share Posted March 13, 2019 Another act of kindness from Romeo, that I noticed last game in AH. Fan watching as the team came onto the court. Hands extended, for high fives with the players. Only Romeo and one other IU player took the time to recognize the fan, and reward him with a high five. Link to comment Share on other sites More sharing options...
Reacher Posted March 13, 2019 Report Share Posted March 13, 2019 3 minutes ago, Zlinedavid said: All valid points. And damn I wish I had this problem. 😂 At some point you will want to retire and the those will be your problems. Just with a smaller starting point. Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 You guys talking money has me to thinking(a bad thing). I think Romeo needs a fishing "advisor". Every millionaire needs an expert to put them on fish. I volunteer my services, for a small nominal fee. Link to comment Share on other sites More sharing options...
Zlinedavid Posted March 13, 2019 Report Share Posted March 13, 2019 2 minutes ago, Reacher said: At some point you will want to retire and the those will be your problems. Just with a smaller starting point. Oh I do all of that with my investments. Was more a comment about the starting point. Link to comment Share on other sites More sharing options...
Steubenhoosier Posted March 13, 2019 Report Share Posted March 13, 2019 21 minutes ago, Zlinedavid said: Depends on how well the investments on your principal are performing. Long term, even if you only match the S&P 500, you're talking 10-11% a year. Even factoring in taxes and inflation, with that kind of return plus a 4% income draw, you're probably holding even on the principal. Munis yielding 3% on $6 million will produce $180,000. Take the remaining $4 million and at a 3% withdrawal rate, that will produce a very income tax friendly $300,000 a year. Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 Romeo is just a class act...let's enjoy it while we can. Link to comment Share on other sites More sharing options...
jefftheref Posted March 13, 2019 Report Share Posted March 13, 2019 17 minutes ago, rico said: You guys talking money has me to thinking(a bad thing). I think Romeo needs a fishing "advisor". Every millionaire needs an expert to put them on fish. I volunteer my services, for a small nominal fee. I will do it for FREE! Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 8 minutes ago, jefftheref said: I will do it for FREE! And just what are your credentials? Link to comment Share on other sites More sharing options...
jefftheref Posted March 13, 2019 Report Share Posted March 13, 2019 5 minutes ago, rico said: And just what are your credentials? I got a boat, a lake, a pole, a filet knife and a new Garmin Echomap Plus Fishfinder with Touchscreen. In addition I have several years experience fishing White River for White River Bass! Link to comment Share on other sites More sharing options...
jefftheref Posted March 13, 2019 Report Share Posted March 13, 2019 6 minutes ago, jefftheref said: I got a boat, a lake, a pole, a filet knife and a new Garmin Echomap Plus Fishfinder with Touchscreen. In addition I have several years experience fishing White River for White River Bass! How about if we both take him? Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 7 minutes ago, jefftheref said: I got a boat, a lake, a pole, a filet knife and a new Garmin Echomap Plus Fishfinder with Touchscreen. In addition I have several years experience fishing White River for White River Bass! Sorry, you are not qualified. Romeo is interested in perch, walleye, and northern pike!!!!! LOL Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 1 minute ago, jefftheref said: How about if we both take him? And split the beer money? Link to comment Share on other sites More sharing options...
jefftheref Posted March 13, 2019 Report Share Posted March 13, 2019 2 minutes ago, rico said: And split the beer money? Help me filet the fish and you can keep the beer money. lol Link to comment Share on other sites More sharing options...
rico Posted March 13, 2019 Report Share Posted March 13, 2019 9 minutes ago, jefftheref said: Help me filet the fish and you can keep the beer money. lol How about you clean the fish and I still keep the beer money. LOL Link to comment Share on other sites More sharing options...
FKIM01 Posted March 13, 2019 Report Share Posted March 13, 2019 I love a thread filled with finance & fishing guys... For those of you talking sequence of returns/Monte Carlo simulations, etc., you can eliminate much of that concern by simply carrying 15% cash and only touching it when the market is really beat up. That's close to 4 years worth of cash and it's actually yielding better than 2% right now. You can do the same thing with a little more yield in a short bond ladder. Just leave stocks alone when the market is beat up. ...and Romeo has an open invitation visit my private fishing hole...plenty of bass and big hybrid bluegills and red ears.😋 Link to comment Share on other sites More sharing options...
mrflynn03 Posted March 13, 2019 Report Share Posted March 13, 2019 Assuming initial principal of $10M would it be possible to split it evenly in 2 separate accounts and let half ride the market at 80/20 or 90/10 stocks to bonds with 65% s&p 15% international stock index and the rest a bond index fund for awhile. Then set the other half at a 60/40 split between s&p and bond index. Live off 3%-4% withdrawal? Assuming average market return over time this setup would last quite a few years. Would really depend on what lifestyle one would want. Investing became a hobby for me since I want to retire someday. No expertise just curious about a plan like this. Link to comment Share on other sites More sharing options...
Reacher Posted March 13, 2019 Report Share Posted March 13, 2019 12 minutes ago, mrflynn03 said: Assuming initial principal of $10M would it be possible to split it evenly in 2 separate accounts and let half ride the market at 80/20 or 90/10 stocks to bonds with 65% s&p 15% international stock index and the rest a bond index fund for awhile. Then set the other half at a 60/40 split between s&p and bond index. Live off 3%-4% withdrawal? Assuming average market return over time this setup would last quite a few years. Would really depend on what lifestyle one would want. Investing became a hobby for me since I want to retire someday. No expertise just curious about a plan like this. Investing for a 70 year time horizon is much different then for a standard 30 year retirement. There are a number of strategies that will work. For someone retiring at 30, I'd want as much stock exposure as possible. Then the downside is withdrawals in a down market. FKIM is right on with using a cushion there. I use a money manager for my clients that uses such an approach. They only withdraw from the short term fund when markets are down and then replenish it when times are better. They also have a layer of risk management and a tactical approach to the investments. That is the current best thinking in our industry. It is still evolving though. Combining a 80/20 mix with a 60/40 mix yields a 70/30 mix. It could all be done in one account. For larger portfolios, I do prefer to split up and use complementary strategies and different managers. Link to comment Share on other sites More sharing options...
Zlinedavid Posted March 13, 2019 Report Share Posted March 13, 2019 11 minutes ago, mrflynn03 said: Assuming initial principal of $10M would it be possible to split it evenly in 2 separate accounts and let half ride the market at 80/20 or 90/10 stocks to bonds with 65% s&p 15% international stock index and the rest a bond index fund for awhile. Then set the other half at a 60/40 split between s&p and bond index. Live off 3%-4% withdrawal? Assuming average market return over time this setup would last quite a few years. Would really depend on what lifestyle one would want. Investing became a hobby for me since I want to retire someday. No expertise just curious about a plan like this. It's one of those long-run theories vs short-term reality things. If the markets take a hit like in 01-02, the half that is stock-heavy is going to depreciate so much that the short term returns are going to be lower than projected. This becomes an issue if you're drawing down off of that principal at the same time. Lower principal = lower long term gains. You might still make market returns on the portion that is left when the market goes back up, but the total will be lower than you may have initially projected. Also, one thing I didn't mention, you'd want to make sure that whatever withdrawl is being taken is net of taxes. I'm sure there are ways this could be set up to mitigate the losses in taxes, but there will still be some, and it will be a mix of both income and capital gains. Overall, doesn't look like a half bad setup to me. But I'm just an amateur that plays around in the market a little. The bulk of my savings/retirement are just your typical conservative 401K/IRAs. Link to comment Share on other sites More sharing options...
mrflynn03 Posted March 13, 2019 Report Share Posted March 13, 2019 38 minutes ago, Reacher said: Investing for a 70 year time horizon is much different then for a standard 30 year retirement. There are a number of strategies that will work. For someone retiring at 30, I'd want as much stock exposure as possible. Then the downside is withdrawals in a down market. FKIM is right on with using a cushion there. I use a money manager for my clients that uses such an approach. They only withdraw from the short term fund when markets are down and then replenish it when times are better. They also have a layer of risk management and a tactical approach to the investments. That is the current best thinking in our industry. It is still evolving though. Combining a 80/20 mix with a 60/40 mix yields a 70/30 mix. It could all be done in one account. For larger portfolios, I do prefer to split up and use complementary strategies and different managers. I guess my thought process was because it is such a long horizon to have simultaneously 2 different strategies for early and later retirement. I asked this because it is likely the wife and I will see a significant windfall in the future and I will have my own retirement savings. So I have wondered about this setup in the event it does happen. Of course my time horizon will be shorter and I will have less principle. Link to comment Share on other sites More sharing options...
Zlinedavid Posted March 13, 2019 Report Share Posted March 13, 2019 2 hours ago, mrflynn03 said: I guess my thought process was because it is such a long horizon to have simultaneously 2 different strategies for early and later retirement. I asked this because it is likely the wife and I will see a significant windfall in the future and I will have my own retirement savings. So I have wondered about this setup in the event it does happen. Of course my time horizon will be shorter and I will have less principle. Just free-wheeling an idea, but a starting place might be: figure out the minimum amount per year it would take for you to live a comfortable lifestyle. You can then play around with the calculations of how many years/months you expect to live and various rates of returns. When you settle on a logical pair of years and returns, you can calculate the net present value of what you'd need on whatever your Day Zero is. To put it differently, it'll tell you how much you'd need on Day Zero, for you to withdraw X per month for X years, if the remaining principal is drawing Y%. Once that is established, you can use your tiered idea, taking any additional income/windfall and exposing it to various higher levels of risk/return. What the ideal combination would be....way too complicated for me to answer (without researching the hell out of it). It would depend on the investment vehicles used, your other tax considerations, etc etc. Aside: I won't give odds on investments, but I 100% guarantee that you won't see conversation like this on CatsPause or RuppRafters. 😉 Link to comment Share on other sites More sharing options...
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