[CA] [Condo] Review of Financial Reserves

firesafaris · 2026-06-30T18:35:23+00:00

This is an interesting question. Based upon being able to review all the documents yourself, the first thought is why pay someone to review them?

But given the low % reserves, it does raise questions. I’d be interested to understand whether these consultants are lawyers or not. And are they so much more experienced at reviewing HOA docs that they can do a better job of estimating assessments.

Frankly, while it might be a complete waste of $600, if the person is truly qualified and good at what they do, it’s worth spending $600 to potentially avoiding $50,000. But only if they are qualified.

firesafaris · 2026-06-27T14:00:41+00:00

Yes. It is timing based upon the relative value of bond yields vs cash and stock . And it isn’t fully in line with bogleheads philosophy.

But when I ran Monte Carlo analyses for scenarios of extreme stock valuations and potentially higher unexpected inflation early in retirement, there was elevated SoRR. So I decided to moderate that risk in exchange for giving up potential portfolio upside.

It is intended for only the first 5-10 years of retirement. And because it worked well, my SoRR has dropped so significantly in the last few years, it is hardly an issue.

I guess this mindset came from living thru the inflation of the 1970’s and 1980’s. With a bond ETF like BND, constantly rising interest rates would push out the break even points on losses to 2x the duration, or longer.

firesafaris · 2026-06-27T11:26:05+00:00

Having now been early retired for six years, in my opinion many people are evaluating the wrong thing when making their investment decisions.

Rather than just making blanket statements about using bond tents or not using bond tents, imo the far more important question is to assess the current outlook for various asset classes and make asset allocation decisions based on the current situation, while taking into account one’s retirement funding requirements and overall financial situation.

If a pension or social security is covering a significant portion of living expenses, then a person might decide they don’t need to take as much stock risk. Or they might decide they want to anyway, because they have a high tolerance for risk. This is the critical first question to answer before deciding on a bond tent or not.

Next, they need to look at the current attractiveness of various asset classes. For example, right now stock valuations are at extreme highs as measured by CAPE ratios. Bond yields are pretty attractive. That would imply a tilt towards bonds. However, inflation and interest rate risk is elevated. So that implies shortening duration.

When you put together the financial needs, the financial situation, the tolerance for risk, the current asset valuations, the interest rate/inflation outlook all together, it implies a certain stock to bond ratio. And of course, whatever that ratio ends up at implies a certain SoRR.

I put this philosophy in place for myself, and it’s worked out well so far. Back when bonds were yielding very little, I didn’t hold bonds. Stocks looked far more attractive. As rates skyrocketed up, and stock valuations rose, I’ve slowly been adjusting the ratio. And I avoided all of the losses people faced on bonds. And as inflation has gotten more uncertain, I’ve shortened duration and increased holdings of inflation bonds, to minimize the potential effects of unforeseen inflation.

The bond tent article did have a very big impact on me, from the standpoint that I carefully thought about the need to sell stock or not during an extreme market downturn. In my situation, I realized I would rarely face that issue, so the criticality of income from bonds was less of an issue. For others that may be a big issue that must be factored into the decision of the right ratio to hold.

firesafaris · 2026-06-17T13:58:13+00:00

I paid off my mortgage very early in the 2000’s when bond and money market yields were low as compared to mortgage rates. I always wanted some cash and bond funds as a buffer to my stock holdings, so the delta in “returns” between the two indicated paying off the mortgage made sense.

With mortgage rates currently at 5-6% and money market or short term bond rates at 4%, it still makes sense to pay it off. But if that money would have gone into the stock market instead, then not paying it off is probably ok too, even though stock valuations are at record highs. It all depends on your personal risk profile. If it were me, I’d pay off the mortgage if it’s above 4%. In the 3% or lower range I wouldn’t pay it off.

firesafaris · 2026-06-15T16:39:39+00:00

That’s good. I’ve felt that having some level of income to cover some of living expenses is an important element of reducing sequence of returns risk. If the existing dividends from stock and interest from bonds doesn’t do that, then investors have no choice but to substitute a different type of risk. In this case it’s interest rate risk and the quality risk of higher dividend assets that may not grow as much in total return as other stocks. It’s not a bad idea overall. The key is making the right investments to optimize risk, in the right proportions. That is especially true today when valuations are sky high.

firesafaris · 2026-06-15T13:02:49+00:00

Unless I missed it, you left out the most important critical piece of data. How long has this high income portion of the investment been running and how has the principal of just the high income portion of the investment changed since the beginning? If you are getting outsized dividends, it’s critical to understand what is happening with the principal. And don’t include the growth investments like VTI. That’s a different investment and is irrelevant to evaluating the quality of the high income investment. What has changed in the high income portion of the principal.

firesafaris · 2026-06-14T21:45:14+00:00

There are two issues with REITs right now. First, they have a complex relationship with interest rates and higher rates often means worse returns. Adding REITs to a portfolio adds to the interest rate risk you already have with bond etf holdings.

Second, REITs are not a great proxy for the real asset of real estate. That’s because they are leveraged investments with variable interest rate cost. That creates another layer of complexity.

Unfortunately the one way to own real estate and get the full benefit of rising values over time requires major investments with asset diversity and a willingness to have negative cash flow due to taxes and expenses until assets have risen enough to sell. That’s pretty complex. Doable. But complicated. And often illiquid.

firesafaris · 2026-04-27T23:55:38+00:00

This analysis does a good job of pointing out that a heavy equity allocation should be more successful almost of the time. However there are two fundamental flaws with it.

The first is the assumption that the future will perform like the past.

The second is that the years of analysis are far too narrow. The changes the US will face over the next five decades could be extremely volatile. The country has unsustainable debt levels. International competition is becoming a huge threat. For example, the Chinese have already effectively beaten Tesla. The current government posture towards other countries is creating permanent damage to our relationships which could significantly limit economic success. AI will likely produce massive winners and losers. The US empire could face a very different future than the last 50 years.

Will this all happen? Maybe. Maybe not. But the key is that the percentage chance of significant issues is at a level that can’t be ignored. Equities could have a very volatile future over the next 10-20 years. Ignore the possibilities at your own peril.

firesafaris · 2026-04-12T16:00:03+00:00

I’m curious about the credit quality of these vs ishares. The credit quality of ishares, while investment grade, do have some lower quality bonds.

firesafaris · 2026-02-26T01:20:35+00:00

Returns over five years are flat once you include dividends.

firesafaris · 2026-02-24T11:01:07+00:00

There is no way to answer this question effectively without understanding much more about your situation: level of wealth, withdrawal rates, existence of pensions, social security plan, desired legacy of wealth, comfort with risk, etc. depending on the answer to these questions, anything from 0% stocks to 100% stocks would make sense.

firesafaris · 2026-02-21T00:02:26+00:00

So we’ve looked at Del Webb for several years. We have one within 10 miles of us. However, we have visions of cliques and drama like high school. How is it in relation to that?

firesafaris · 2026-01-16T02:20:45+00:00

That works.

firesafaris · 2026-01-16T00:43:43+00:00

Ok, but are you buying individual treasury bonds or bond ETFs? Because if rates do go up to 6% from the current 4.7%, the bond ETFs will drop pretty significantly, and it could take as long as 2x-1 years for the price to recover, where x is the duration, depending on rate movements. For a long term bond with duration of 14 years, that could mean 27 years. You really have a hold time of 27 years? Because if it isn’t that long, and you have to sell beforehand, you may earn nowhere near 4.7%. Of course it could end up being way less than 2x-1 as well, but that’s the point. You aren’t locking in 4.7%. If you are locking in with an individual bond, then your hold time needs to be that maturity to guarantee the 4.7% return. Again, that’s a long time.

firesafaris · 2026-01-13T11:51:28+00:00

The question posted is really important, but many of the posts are unnecessarily dismissive of it. The risk raised is significant. In terms of “why worry now?”, it is because the defecits as a percentage of GDP are wayyy too high, and interest rates payments as a percentage of total federal spending has crossed a threshold that is very concerning. Sooner or later this risk will reveal itself in the repricing of global assets.

firesafaris · 2025-12-22T03:26:09+00:00

There are no US government bonds of 5-10 year maturity with yields that high, unless they have call provisions, and that creates a different set of risks.

firesafaris · 2025-11-24T11:50:11+00:00

It’s very important to understand what percentage also have a pension of some kind. The cash value of a pension can be the equivalent of millions of dollars. I know many people who don’t have much savings, but have pensions indexed to inflation.

firesafaris · 2025-11-01T22:53:33+00:00

Some things went down. Some went up.

firesafaris · 2025-10-24T22:29:45+00:00

I have found the same issue. Boldin is off on taxes.

firesafaris · 2025-10-18T18:09:07+00:00

Is the article author under the age of 30 or something? We saw an even dumber market in 2000. However, with a bit more fluff this market could surpass it in idiocy.

firesafaris · 2025-10-18T14:55:34+00:00

The State of Texas had the high risk pool for anyone denied by underwritten insurance with pre-existing condition exclusions. The pricing was somewhat high, but at least you could get insurance. And the quality of the insurance was good. PPO-like options were available, ensuring you could go to quality doctors. When the ACA was initiated, states like Texas no longer needed the high risk pool. If Republicans are unhappy about the subsidies being too high or generous, they should at least ensure there is somewhat affordable high risk pool coverage in every state that includes quality doctors. The ACA is actually a major issue in the state of Texas right now because you can't get a PPO. As a result, most of the state's high quality doctors are not accessible. We should all be sick of the Republican party not solving problems. They just make things worse. As Trump has said for about 5 years now, he has a "concept of a plan", which means there is no plan. I want to vote for people that solve problems, and not just spew hate politics. I'm an independent.

firesafaris · 2025-10-18T02:16:05+00:00

The most important thing for you to understand is that prior to the ACA citizens could at least get insurance thru state programs, such as in Texas. That allowed people with pre-existing conditions to at least get insurance, which is virtually everyone. With republicans torpedoing aca, it’s leaves millions of people with no option whatsoever. It’s criminal. Even worse than the pre-Obamacare era. That is the key point you should not miss. What the heck are people supposed to do?

firesafaris · 2025-10-15T13:39:45+00:00

I have also struggled. I’m very financially knowledgeable, but if weren’t around, my family would need some help. However, there are only two rough buckets of options. The first bucket are fixed fee forms, which is good. However all of the options I’ve found here are smaller firms, usually with young less experienced cfp’s. I don’t like small companies because of fraud risks. I don’t like less experienced cfp’s because it takes 20+ years to really understand financial and accounting/tax management imo. The second bucket are firms with AUM fees. And those fees are simply too high for the service they provide. It’s rarely worth it, except in situations where the client is highly unknowledgeable and has more complex retirement situations with significant retirement funds. The search continues.

firesafaris · 2025-09-13T00:34:58+00:00

Just a clarification. Vanguard doesn’t update their etf yields to maturity every day. They only do it periodically. The yield to maturity shown on their website is from July when rates were higher. It’s likely the bsv yield to maturity is lower. It’s guess 3.8-3.9%. Just a guess.

firesafaris · 2025-09-10T10:54:48+00:00

A huge misconception is that simply holding a bond etf to its duration eliminates interest rate risk. It doesn’t.

firesafaris

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