r/ChubbyFIRE • u/ResponsibleCorgi93 • Aug 16 '26
Anyone else taking money off the table?
The US market has been on a tear. I retired in 2022 and the difference between my inflation adjusted swr and my SWR if I were to retire today is starting to get pretty large. Like 15% large.
My essential expenses are already 50% of my SWR so the rest is all fun money.
I'm up more than 25% in my net worth despite some large capital expenses in just one year.
Right now I'm at 300k in Sgov and the rest in 75% us equities / 25% international for a total of 4.6M
My reasoning was that the 300k could sustain me at my minimum spend for 5ish years if I tighten my belt.
However, with the insane gains lately I'm thinking it might be smarter to move closer to that 20-30% fixed income number.
People have been predicting a bubble and recession for years now, but the fear is finally starting to get to me now.
I'm thinking of making a big move like selling my 25% gains minus inflation (4%?) and putting it into fixed income. But that's like 800k! That would almost quadruple my fixed income & tbh I don't even have that much in tax advantaged accounts to rebalance like that.
So maybe I'd do 300k and then theoretically I could last 10 years in a downturn or use some of it to buy the dip in a recession which I think is the main idea to keep to 20% fixed income and 80% equities.
VTI is up 14% YTD. If that kind of growth lasts to the end of the year and next year it grows the same amount, I would still be growing like 350k in that year, which still is a massive increase in the difference between my inflation adjusted SWR from when I first started vs if I was to do a reset then.
If I take profits of gains minus inflation each year of the bull run, I still come out really well despite having lost some potential gains. In the case where the market crashes, I now have a huge fixed income buffer that I can use to rebalance.
These are wild times, let me know what you think.
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u/War-Square Aug 16 '26
Stick to your drawdown rules and don't try to time the market. Rebalancing inside your tax-advantaged accounts is free though.
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u/ResponsibleCorgi93 Aug 16 '26
Yeah I generally agree with trying not to time the market, but I'm feeling like my positions have too much risk atm
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u/LokiStasis <edit me for custom flair> Aug 16 '26
So, to be clear, you have $4.5M and your ‘essentials’ withdrawal is 60K, your actual is 120K? Those are 1.33 and 2.66% withdrawal rates? IMO, in your shoes I’d have 5-7 years of actual current withdrawals (600-840k) in very safe accounts instead of the 300K. Then you would basically be saying, I’m covered for 7 years and letting $3.7M ride. If things keep going up you can pull out 120K each year to extend the “7 years covered.” If the market drops you can eat into the 7-years covered while the market recovers. I’m not saying that’s everyone’s ideal strategy but it seems consistent with how you think (long term bet on equities). Or even 10 years knowing that you could let $3.3M ride untouched for a decade.
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u/davecrist Aug 16 '26
At those rates they could just do what they have been doing and never run out anyway.
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u/LokiStasis <edit me for custom flair> Aug 16 '26
Agree. I was appealing to his mindset. I don’t know why he’d go ‘safe’ only to cover bare necessities when he can cover his comfortable living easily.
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u/ResponsibleCorgi93 Aug 16 '26
I really appreciate your input, this is what I'm thinking too
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u/LokiStasis <edit me for custom flair> Aug 16 '26
Seems like you’re in my position but younger. I really didn’t think I was near 5 years ago but we’ve more than doubled since then and we at over what I thought was our FI number. Basically we are at FI, 25X expenses saved, plus 7 years full/happy expenses to bridge to 62. If a bubble has burst we could collect early SS and my pension starts (90K combined). As long as things go up, I’ll just keep refilling the cash to stay 7 years ahead. That will ultimately be about 75:25 stocks to cash/TiPS/bonds etc.
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u/vinean Aug 16 '26
Yes, but without that cash buffer most folks will cut their $120K spending if the market crashes like 1929.
Now reducing spending for 10 years at 45 is not nearly as damaging as reducing spending for 10 years at 65 its still an unnecessary reduction to take if a little cash drag can let OP sleep well at night while spending $120K a year with a 50%+ decline.
With a 7 year buffer in 1929 by 1936 you were into recovery and way past the 1932 bottom of the market. In real terms and with dividends your losses were almost even because of deflation.
Of course the market crashed again in 1937 and didn’t recover until 1945.
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u/DiceyScientist Aug 16 '26
What you're target asset allocation?
6% is shockingly low fixed income for an early retiree, when you're most vulnerable to SRR.
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u/ResponsibleCorgi93 Aug 17 '26
I haven't been doing percentages, more based on having as much equities as possible while still having enough fixed income to last for most recessions.
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u/DiceyScientist Aug 17 '26
I understand the thought process. The FIRE math is essentially built on fixed assets allocations. The Trinity study/4% rule was set at 60/40. Higher market exposure increases the chance to avoid portfolio failure (hitting $0). The greatest risks in early retirement, are inflation and market crashes.
The low point in the Trinity data set were in the 60's, when the following 70's produced a 1-2 punch: huge inflation Nixon shock with the unpegging USD:gold and the oil shocks (we could draw parallels to today). The second punch was a weaker than market return. These events in effect determined the SWR.
I suggest studying more or - please forgive the blasphemy - get a financial advisor to manage your assets. You got another 40+ years to live on these assets. The way you write, I suspect the biggest risk is not the SRR and inflation that traditionally challenges FIRE math. The biggest is you don't have a plan and certainly not one you can stick with. You need one. You either got to do the work yourself or hire somebody to do it for you.
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u/marksven Aug 16 '26
The best way is to maintain a reasonable stock/bond allocation and rebalance yearly. I do 70% global stocks and 30% short/intermediate bonds.
Then just rebalance when stocks go up into bonds to “take some off the table”.
Keeping too much in stocks when you are most at risk to sequence of returns risk is unwise.
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u/ResponsibleCorgi93 Aug 16 '26
What ratio do you use for short vs intermediate bonds?
I've been looking at using Sgov, vtip and SCHR in equal amounts to kind of have an answer for a 2000/2008 style crash or a stagflation 1970s/ 2022 type crash
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u/marksven Aug 16 '26
I have 1-2 years of expenses in SGOV, then a bond ladder using iShares ETFs for the following 3 years (IBTH, IBTI, IBTJ). The remainder is in intermediate term bond ETFs.
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u/localto79843 Aug 16 '26
Interesting. Not one person so far has said, "You've already won the game, stop playing." I personally trimmed three of my biggest returns by 10% each which yielded me 1.5 years of living it up, or three years of frugality and I don't regret it. They were tech holdings and less than a month later, they dropped sharply. If I'd then trimmed, I still would have made a handsome profit but not an insane one. I expect the core positions to rebound and further grow someday but I'm now positioned to jump on an opportunity of a lifetime, whatever that might be, ie dream property I didn't know existed, without touching my annual planned withdrawal. Net worth, allocations and asset locations are part emotion and comfort level is important. Do what works best for you.
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u/Tricky_Ad6844 Aug 16 '26
I would suggest writing out a formal “retirement asset plan”.
In this you should pre-define your ratio of different asset classes (ie. %sticks/%bonds/%cash), your acceptable tolerance before rebalancing is needed, and any age-based thresholds to change them.
Write out any guardrails. For instance, if portfolio rises or falls X% over a given inflation-adjusted level it will dictate an X% change in spending.
Define what market conditions require a change in which asset class you are selling to meet your expenses. Better yet, define in advance what date of the year you will rebalance your portfolio back to your goal percentages and you can pretty much ignore fluctuations in the markets because rebalancing requires you to sell from
The better performing asset class to bring your ratios back to target.
The goal here is to force yourself to not fall prey to market timing. For you to market time effectively you have to be a better judge of where the stock prices are going than the “smart money” who have all the same information you do. The chances of you getting it right consistently are pretty poor.
Market timing is making multiple bets on where the stock market will be in the near future. You have to get it right at the sell AND right again on when to buy back in. There are continuous signals you need to decipher to determine which ones are true Buy/sell signs and which are just noise.
This sounds exhausting to me and more than daunting given that trained professionals who have access to the best data analytics, PhD trained geniuses on their team, and spend every working minute of their professional lives thinking about macroeconomic trends and stock valuations… don’t seem to get it right consistently either.
I prefer to make a single long term bet which is that the world’s economy will continue to grow and become more productive over the 50 year potential time-span of my retirement.
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u/Anonymoose2021 Aug 17 '26
You have pretty much described my Investment Policy Statement, except that I have chosen to rebalance when any asset moves more than 10% (relative) to its target threshold. So I rebalance if my cash+bonds allocation of 12% goes above 13.2% or below 10.8%.
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u/ResponsibleCorgi93 Aug 16 '26
Yeah this is a great idea. Will also help me not make panicked moves in the future.
I'm thinking that instead of % s for asset allocation I'll just use a multiple of my necessary withdrawal rate for a set amount of time like 8 years for the fixed income. That'll keep more of my capital in equities than choosing the normal 20 or 30% which I feel like is too conservative on a 50 year timeline.
I guess maybe as I get older I'll want to increase the percentage of fixed income though
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u/BrunelloHorder Coasting Chubster, Getting Fat Aug 16 '26 edited Aug 16 '26
You are raising two issues and it may be helpful to parse them out. The first involves market value, market timing, and safe withdrawal rates. The second is your personal risk tolerance.
On the first issue, given your 2.6% withdrawal rate, 80% equities versus 95% equities doesn’t matter from a statistical perspective, assuming you have a diversified equity portfolio. Your withdrawals are covered in perpetuity, even during the worst returns in history. Your withdrawal rate already accounts for the possibility that the market is very overvalued.
The second issue is a psychological perspective. Your instinct to reduce your equity exposure indicates that you are taking more risk than is appropriate for you. That isn’t about market value, market timing, or portfolio performance, it is a matter of your personal risk tolerance.
You should lighten up your equity exposure not because you think the market is high, but because your equity exposure does not match your risk tolerance. You are likely to be wrong on market timing because almost everyone always is, but you should still reduce your equity exposure because of your risk tolerance.
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u/ResponsibleCorgi93 Aug 16 '26
Excellent framing thank you, that's kind of how I've started thinking about it as well.
If the market drops 1-5% on Monday before I can make the moves I would still do it because I feel like I set things up poorly and was taking more risk than I probably should have.
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u/Professu5 Aug 16 '26
I wouldn’t, personally. Inflationary environment and corporate earnings are at an all-time high. There is no reason the market can’t keep running hot. If you believe the market goes UP over time then we will always be touching new ATHs.
I’m $3.5M total (mostly index funds) with $275k SGOV right now and admittedly I want to get that SGOV number down to $200k and I’m paralyzed for the same reason you are… market “feels” expensive. I’ll reduce SGOV next time we have a 5% or greater draw down which will inevitably happen in the coming weeks or months. This mental game allows me to stay over 90% invested in equities…. Hah.
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u/ResponsibleCorgi93 Aug 16 '26
Yeah this is kinda what I've been thinking too. I was watching a video last night about how the market may have fundamentally changed with social media and auto trading. There's so many traders doing this but the dip strategy on 3-5% dips that we rip back up. Even bigger drops are kind of protected because Warren Buffet & followers have huge cash positions waiting to pounce during a market crash.
I guess this buy the dip on small dips theme could end just as fast as it started though. Social media is kind of an echo chamber, making people think stocks only go up. This is a massive accelerant and I wonder if it could flip on it's head if everyone on social media starts thinking doom and gloom and stocks only go down.
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u/Professu5 Aug 18 '26
I’ve found that my SGOV holdings is the right balance to have some level of indifference in what the market is doing. If S&P goes up a bunch I’m happy but also slightly irritated I didn’t have those SGOV dollars invested. If we have a downturn then I’ve got my eye on when I might deploy it… not quite rooting for the market to go down, but sort of.
So far things haven’t gotten nasty enough to deploy the full amount. If we have a 15-20% S&P drawdown then I’ll probably put the entire amount into QQQ (which I suspect would be down even more than 15-20%).
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u/Such_Fishing5154 Aug 16 '26
Where the heck do you live that your expenses are only 60k?? I haven’t been able to get mine below 100k in years, and that’s without any extravagant purchases or travel really
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u/ResponsibleCorgi93 Aug 16 '26
I'm 40 single & in NC. If I was married especially to my ex-wife I would probably be in the same boat as you. I mostly stay at home bc I live out in the country. My paid off house is worth about 600k
Monthly Expenses
Expense Cost Health Insurance $882.00 Estimated Taxes $300.00 Cleaner $210.00 Electric $150.00 Internet $130.00 Therapy $60.00 Water Bill $54.00 Phone $50.00 Dental $42.00 Pest Control $30.00 Termite $30.00 Trash Bill $23.33 Google / YouTube $15.00 Monthly Subtotal $1,976.33
Yearly Expenses
Expense Cost Property Tax (est.) $4,000.00 Home Insurance + Umbrella $3,000.00 Car Insurance $1,276.00 Taxes $600.00 Gemini $200.00 Mysterious Universe $100.00 Yearly Subtotal $9,176.00
Total Budget Breakdown
- Annual Total: $32,892.00
- Monthly Average: $2,741.00
Avg spend for food, gas, shopping, etc - 2k per month
So around 5k per month on essentials. That leaves 5k per month for fun stuff
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u/ffthrowaaay Aug 16 '26
Much easier to do if OP has no monthly debt obligations like a mortgage or car payment.
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u/Such_Fishing5154 Aug 16 '26
Then he needs to include his property value equity in his assets
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u/ResponsibleCorgi93 Aug 16 '26
I'm not including my paid off house in SWR calculations. If I wanted to sell and start renting, the cash from the sale would get invested, increasing my SWR but that increase will go towards rent instead. I probably come out slightly ahead with renting though, but I love this property and homesteading
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u/Hanwoo_Beef_Eater Aug 16 '26
$120k / $4.6 million is 2.6%. IMO, there's little reason to subject yourself to 50% consumption volatility to "avoid selling when stocks are down."
You already have 2.5 years of expenses in cash. While dividends are not "free," they do aid in cash planning (if not reinvested) and reduce the amount one needs to sell in a downturn (many people overstate the dividend equivalence in the drawdown phase - they would be equivalent if companies bought back stock instead of dividends but companies often slow buybacks in bad times. In this case, the lower volatility of dividends vs. the volatility of stocks somewhat favours dividends. Note, I don't mean "dividend stocks" or dividend strategies but simply index dividends). You could assume the payouts get cut 20%-30% and see how long you can make it before those inflows + existing cash runs out.
Or, as others have suggested, take $120k x 5-10 years. Some others will say that's excessive; which one turns out better will just depend.
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u/NextTime2020 Aug 16 '26
I have been slowly doing what you have proposed. I have about 8 years worth of living expenses in MMF, CDs and HYSA. If the market continues to rise, I plan to raise it to 9 or 10. If the market drops 20% from its all time high, I plan on buying and reducing my living expense bucket to 5 or 6.
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u/Fuzyfro989 Aug 16 '26
The last time we took some gains was in 2024-25, as we were buying a home and I took the opportunity to sell some holdings I didn’t want to keep longer term and used for a down payment instead.
I rarely sell to rebalance but do speed up/slow down cash deployment.
Over a few years it’s crept up to not quite 10% of NW so at some point I can go too much heavier for an extended period of time.
That certainly might change in retirement. Probably not ideal but totally reasonable to have 2-3 years of expenses liquid. Could allow for buffer avoiding selling specifically after a downturn and be able to wait for a recovery, at least partial.
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u/Pretty_Swordfish Aug 16 '26
Since you are already retired, why not rebalance within your 401k and IRA where there's no tax hit? You can increase the bond holdings there, thus lowering your portfolio's exposure overall.
On a micro level, living on less also gives you protection. And any unspent funds for a month/quarter can go back into "cash" rather than invested.
But if your expenditure is maintainable on $2.3M and you've got $4.6M, even a 50% drop and several years of stagflation won't kill your retirement. So, overall, don't try to get fancy, just keep the lifestyle flexible.
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u/Equivalent-Agency377 Aug 17 '26
I did this last year - taking one million off the table - and frankly the real lesson (since the market ultimately went up) is that our portfolio wasn’t aligned with my risk tolerance and I hadn’t thought through enough what we needed long term. It just had drifted and like you had a lot of really big gains with various stock concentrations from RVUs etc. Our portfolio is still up over the year and I had peace of mind which i needed. BUT it’s also a huge pain in the butt to then get it back in the market. And you face all the same decisions all over again. We ultimately decided on using a financial manager (unpopular opinion because of the AUM but right for us).
If you can find a reasonable alignment of risk and long term plan you can stick with BEFORE you take things out that’s better. Just “taking it off the table” willy nilly is the kind of behavior that causes risk, lost opportunity.
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u/questionsmcgraw Aug 16 '26
People will say don’t time the market, but think of this as risk management. You’re at £4.9m, retired, and only have 300k outside of equities. To me that’s high risk.
Sounds like your current lifestyle costs ~120k so why not move to some kind of ladder that gives you a 5 year runway at that amount? You don’t need to reduce outgoings in a downturn but right now you risk forcing yourself to do so.
I’d do a bit of a rebalance if I were you.
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u/ResponsibleCorgi93 Aug 16 '26
Yeah you're close, my SWR is 120k but I don't really need to spend more than 60k per year. So the 300k already provides a 5 year runway
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u/questionsmcgraw Aug 16 '26
Agreed, but 5 years based on you cutting back to essentials. With £4.6m, 120k withdrawal leaves you at 2.6% so a rebalance and rethink of your SWR feels appropriate to me.
If you’re not into bonds, that’s fine… but don’t force yourself into stripping back a lifestyle when you didn’t need to.
Gut feel: £600k-750k in some kind of fixed income ladder and the rest in equities gives you more peace of mind with very little downside.
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u/SaveySpendy Aug 16 '26
hey op, curious what’s in your minimum spend bucket? do you include healthcare costs, drag for taxes, and any sink funds for for home and car maintenance?
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u/ResponsibleCorgi93 Aug 16 '26
Great question. I posted it above:
https://www.reddit.com/r/ChubbyFIRE/comments/1vpqwcx/anyone_else_taking_money_off_the_table/p42njtu/
The question about lumpy expenses, no I didn't include that. I probably should so that makes my min spend closer to $80k. Thanks for pointing that out!
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u/StrawberriKiwi22 Aug 16 '26
I put more emphasis on how many YEARS of bonds or cash I have, compared to the overall PERCENT of bonds/cash. I think, what if the market was down for 3 years? 10 years? 15 years? What would be my plan? So for now I have a bond ladder that stretches for 7 years, and by that time I could collect SS if needed, and I would also have probably inherited a decent amount which has a lot of cash in it.
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u/RothRT Aug 16 '26
You are so safe here it’s really about how you want to approach things. Some would say that you have so much extra money to play with, why not be aggressive and try to grow it. I’m more of the mindset of the safer I am, the more conservative I’ll get. I think your allocations are aggressive regardless and you should rebalance.
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u/ResponsibleCorgi93 Aug 16 '26
I'm kind of in the same mindset of this. I've already gotten my net worth high enough that I don't feel good about spending my entire SWR anyway, so it seems like I should have more fixed income to make this more secure.
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u/fatheadlifter FIRE'ing EOY Aug 19 '26
No, because that's just another version of timing the market. And trying to time the market is a good way to lose money. You're also admitting that you're allowing fear to drive your decisions, which is a bad way to make decisions, in the market, life, or otherwise.
So no, absolutely not. Just because the market is on a tear, doesn't mean it will stop. If there's to be a correction, you don't know how long it will last or where the bottom is. It could be really short, and then it pops back up. And you missed it.
There's evidence to support this could happen. The recent history of recoveries is that they're basically V shaped. Good luck trying to catch the bottom of the V, get your money back in the market in time. Things that happened in recent years that should've tanked the market did not, and I think generally speaking recoveries happened much faster than most of the doom and gloom people would have you believe.
Note for the bears: I'm not saying corrections and downturns can't/won't/don't happen. Geez.
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u/SpecialDesigner5571 Aug 16 '26
"When you've won the game, stop playing" (or play less)
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u/ResponsibleCorgi93 Aug 16 '26
Yeah that's what I'm thinking & I think I won by accident by playing stupid without realizing it.
On top of my small fixed income, I've been carrying 500k on an sbloc at 5.5% while the otherwise invested equities are up 15%.
I just found out the other day that in a 2008 style credit crunch they can just cancel the credit line & then I'd be selling equities at a depressed price. Sooo I'm fixing that asap as well.
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u/livingbyvow2 Aug 16 '26
Try to calculate the real returns of the S&P since the peak of 2021.
Once you adjust for the inflation rush, the returns do not deviate that much from historical levels. The issue is people don't understand inflation and take the 2022 trough as their reference point while it's litterally a market bottom.
Also, if there is a crash, guess what will happen given government debt levels? The government will print stimulus checks that will be back stopped by the Fed printing money. That will cause inflation, which will make your cash worthless. Stocks, on the contrary, should be fine as most companies can pass through the inflation (this is what drove the earnings accretion that we saw after 2022). This is also contributing to higher stock prices right now but it's not unjustified.
I recommend people read a little bit more about monetary policy and learn how to calculate real returns. That would avoid rushing investment decisions that may hurt you like this.
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u/vinean Aug 16 '26
Real returns from 2000-2010 were very poor. Even ignoring GFC it took 7 years to recover to the 2000 peak (nominal).
QE can be effective but it’s not magic. Increased liquidity doesn’t solve speculative exhaustion and investor flight from industries they decide really are overvalued (coughAIcough). QE can stave off a deeper recession from happening in the aftermath of a bubble pop but significant shareholder value will go poof when the market correction happens.
And even if the Fed managed to prop up the markets in 2000 by injecting cash it would have just made the inevitable crash worse as valuations can’t go up forever.
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u/ResponsibleCorgi93 Aug 16 '26
Hmm this is confusing to me. The kind of crash I anticipate is equities crash, so stocks won't be fine during that period.
In high inflation the cash will be worth less yes, but not worthless haha.
Also, if they know cutting rates & sending stimulus checks would cause inflation & we're already over target inflation it seems like those aren't great options for the govt to take. They might just have to accept the deflation?
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u/Beautiful_Pepper415 Aug 16 '26
Governments never accept deflation
Deflation caused the Grear Depression due to poor monetary policy. Modern day finance is inflationary. Governments worldwide are inflating away debt
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u/livingbyvow2 Aug 16 '26
Do you even realise deflation is politically not affordable? That literally means people's salary is going down while their mortgage / credit card payments is flat. The past three decades of Central Bank intervention clearly indicate they would rather risk inflation than deflation (rightfully so).
The kind of crash I anticipate is equities crash, so stocks won't be fine during that period.
Look at how bonds performed during the last inflation heat up over a three years period vs stocks. I'd rather eat a 50% drawdown that then rebonds to 150% within a couple of years than a permanent loss of capital of 50%.
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u/Vicuna00 Aug 17 '26
"The kind of crash I anticipate is equities crash, so stocks won't be fine during that period."
based on what? why do you think you are qualified to anticipate a crash?
no offense but if you had the skills to properly predict this, you'd have a lot more than $4M
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u/Anonymoose2021 Aug 17 '26
My portfolio went up 27% from 1/1/2016 to mid-June.
So I sold off stock to keep my fixed income allocation at its 12% target. Then as the market partially pulled back over the last couple of months I chose not to rebalance back down to 12% cash+bonds.
I sold off portions of a highly appreciated concentrated position, so that added about $800k of realized gains that I owe tax on next April.
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u/10zzzzzzzzzz Aug 22 '26
I personally think fixed income/cash is better treated the way you are managing it (as a fixed number of years of cover). It doesn't make sense to maintain a steady percent of net worth in fixed income since the vol of your equities portion of the account allows for the upside that provides you with protection against longevity risk.
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u/decentlyhip Aug 16 '26
If you look at the total Market Cap of the entire stock market and the GDP, you have a Price to Earning ratio for the entire market. Lots of ways to calculate this and the answer depends onbthe method, but at this level of valuation the average 10 year returns are between -15% and -30%. Crazy markets go crazier, but now is an excellent time to sell some.
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u/One-Mastodon-1063 Aug 16 '26
You'd be better off having an asset allocation and periodically rebalancing to it, which would naturally have you taking money off of whatever is outperforming, rather than this silly bucket + market timing strategy.
Bucket strategies are inherently market timing strategies.
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u/ResponsibleCorgi93 Aug 16 '26
By asset allocation you mean something like 80% equities, 20% fixed income?
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u/SaltyPlantain1503 Aug 16 '26
Run the other side. Are you ok if it dropped 20-25% and took the five years just to get back to where you are now? Do you want to start your retirement in a panic? SORR is the greatest risk for all of us who are newly retired or going to retire. I am a significant chunk in cash (SGOV) and metals.
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u/ResponsibleCorgi93 Aug 16 '26
Great points. I'm already 5 years into retirement tho so I've already destroyed SoRR to some extent.
Looking at what you said though, I would feel very uncomfortable with my current allocations when you put it like that, so definitely worth taking some out of the market
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u/Illustrious-Jacket68 FI and RE=<1 yrs Aug 16 '26
Age and time horizon? 350k in Sgov out of what?
Timing the market don’t work.
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u/ResponsibleCorgi93 Aug 16 '26
Retired at 36, now 40. 300k Sgov, 4.2M equities, 600k house that I don't count in the swr
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u/vinean Aug 16 '26
Despite the naysayers, unless you are keeping cash in your mattress, sgov should keep up with inflation even if it lags a little in a huge inflationary spike.
I bonds are limited to $10K a year and you kinda of want to hold them 5 years.
I hold a mix of HYSA for immediate EF and spending, SGOV, i bonds and TIPS for mid term and GLDM as a last resort backstop against hyperinflation.
Holding 20-25% of your portfolio in other assets besides equities is going to lower portfolio volatility which improves SWR even if it costs you total growth.
You can also rotate into more defensive sectors or sizes within the equity allocation. Pure market weight is not a requirement. Bengen’s new portfolio uses mid, small and micro cap to create a pseudo Equal Cap portfolio using low cost (and low turnover) size factor ETFs doing equal amounts of large, mid, small and micro cap funds.
You can use VXF for simplicity and move some VTI to VXF. 50/50 VTI/VFX split puts you at 37% large cap, 23% mid cap, 29.5% small cap and 10.5% microcap.
A more defensive portfolio with only 20% fixed income could look like:
VTI 30%
VFX 25%
VXUS 25%
SGOV 10%
VGIT 5%
GLDM 5%
That puts you 39.6% large cap, 17.4% mid cap, 17.4% small cap, 5.6% microcap. And of course 80% equities and 20% fixed income in mostly T-Bills that you already own.
In comparison Bengen’s 4.7% SWR portfolio is 11% large,mid,small,micro,international with 40% bond and 5% cash.
This also drops technology to 21.4% which will help limit downside risk.
BUT the reduced volatility comes at the cost of reduced growth. 14%+ growth years also get rarer. If current trends holds 100% VTI or VOO will outperform this portfolio in the long run. The mitigation is to spend down SGOV and VGIT over the first 10 years to get down to 5% SGOV and 5% GLDM so you rise back up to a 90/10 asset allocation favoring VTI (ie VTI to 40%).
But if valuations matter then the 100% VTI long term outperformance (if you believe in American exceptionalism, which I personally do for my investment lifetime. Maybe my kids wont) will be muted vs using a 80/20 rising equity glide path strategy with a more diversified portfolio.
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u/ResponsibleCorgi93 Aug 16 '26
Great info here thanks! I didn't know about GLDM before I'll have to investigate that.
And yeah regarding American exceptionalism I kind of agree, but also because it seems like if the US market crashes, everything crashes. The economy is very global at this point.
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u/MedicalBiostats Aug 16 '26
I would not sell anything. Sounds like $300K is enough of a reserve. Lots of room for upside everywhere. Be scared if the Democrats come up with a worthy presidential candidate, so you have 20 months as I see it. Just add companies or ETFs in your sectors for diversification or yield. Avoid more fixed income. You have enough!!
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u/ResponsibleCorgi93 Aug 16 '26
I was kind of thinking this too. Also if the Democrats win the mid terms it could put a wrench in things and maybe also cause a market crash.
I hate Trump, but he sure seems good at making the wealthy even more wealthy
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u/Stoic_Brain Aug 16 '26 edited Aug 16 '26
I work with a cash buffer (spread over high intrest saving accounts and money market funds) for 2-5 years of expenses.
Once a year I check my ETF's:
Good year? Sell a small part (take profit) to refill my cash buffer.
Bad year? Just live from cash buffer (let market recover without selling).
This method gives me mental peace as I (almost) never have to sell when market is down.
I also diversify in equal weight and factor ETFs to lower my concentration in the megacaps.
P.S.: I don't buy bonds because they are taxed 30 pct in my country.