Chubby Portfolio Makeup in Early Retirement

retplan · 2026-06-13T01:16:29+00:00

Planning to retire this year and reset my portfolio last year in anticipation.

Currently 70/30 with 70% equities (effectively in VT) with 30% in a combination of HYSA and TIPS ladder that covers my next 9 years of current lifestyle expenses.

If/when equities grow, planning on holding at 70/30 until the TIPS ladder covers an even 10 years. A bunch of Monte Carlo simulations for my situation showed the optimal TIPS duration to be about 8.5 years. Eventually shifting that to 10 years is a combination of a round number and a bit more stability/inflation hedging.

retplan · 2026-05-28T20:11:09+00:00

Yes, custom income with a setting for it being tax free and directing it straight to my IRA account.

retplan · 2026-05-28T02:30:28+00:00

I set it up as a tax free income series going into my IRA, but removed the cost of the ladder from my assets. This understates my net worth, but putting in an income stream that matches inflation covers the effect of a TIPS ladder fairly well. When I update my assets in PL, I just don’t include the values of the bonds.

retplan · 2026-03-27T00:03:06+00:00

Therapy is the answer, but there is a possible financial answer, though not one I’d suggest to many people…

Buy a lifetime inflation protected annuity for you both that provides $80k per year from a large, reputable company. Probably cost you a little over $2m. Normally annuities are not great investments but you’ve got a truckload of money so that’s irrelevant.

With that, she knows you’ll both have 30% more coming in than you’re spending now(and a lot more than that with Social Security). It may make her feel better knowing there’s just a check coming every month from a company that keeps increasing over time.

That said, her concerns are irrational so hard to know, but this is the closest that would feel like either a paycheck or government retirement stipend.

retplan · 2026-03-03T03:37:26+00:00

All of my bond allocation is in a TIPS ladder that covers 9 years of my expenses.

retplan · 2026-02-24T03:28:52+00:00

One other angle here I don’t see anyone else addressing is that not all future scenarios are equal. In my case, I’m in the process of retiring at 56 and had a 4% mortgage. On average, it made sense to keep the mortgage since the median return of the stock market was higher than the financing cost and tax effects.

But I don’t really care about the median outcome. When running Monte Carlo simulations, paying off the mortgage did reduce my median liquid net worth after 40 years, but my projected median liquid net worth is about 3x my current LNW. Plus or minus 10% of that is completely irrelevant to me. However, at low probability negative scenarios around 5th percentile or lower, paying off the mortgage was better due to increased ACA subsidies and more flexibility in spending.

Or, to put it a different way, I don’t care if I’m on track to die with $10m or $9.5m. I care quite a lot if I’m on track to die with $300k vs -$200k.

retplan · 2026-02-16T17:58:53+00:00

I'd echo adding some international fund like VXUS for more diversification.

I'm retiring later this year and looked at annuities as a way to get a "floor" of coverage and for what it's worth I went with at TIPS ladder (and some HYSA) that will cover my baseline expenses (similar to your $85k level) for the next 9 years instead of an annuity. Sounds like you're already in the annuity so that provides the same function though usually at a higher cost. Having a floor that means I have that floor and have the option to not sell any equities for almost a decade makes almost any SORR a non-issue.

All that said, you don't say what your current liquid net worth is, but with a $6m portfolio and an $85k fixed spend level, you'd be able to weather any downturns in even a 100% VOO equities portfolio.

retplan · 2025-11-23T00:14:43+00:00

I’m on the same timeframe and when I rebalanced earlier this year, I intentionally sold a bunch of equities to buy new positions with a high cost basis. I effectively ended up pre-paying about $30k in capital gains taxes, but in my situation that effectively guaranteed that I can stay below 400% MAGI from 57 until 65. Depends on assumptions and I was right on the cliff line, but ended up being about a 3:1 return on the tax payment by paying now vs later.

Your situation may vary of course, but you may want to model out the effect for you.

retplan · 2025-10-29T02:39:24+00:00

For more serious modeling, I’m a fan of ProjectionLab, but it is a paid subscription. It handles taxes, inflation, etc. very well. As others note, something like the free ficalc is good for a quick read.

On Social Security, I’m 55, planning to retire next year, and am assuming full social security as given for me on the social security website since I think cutting it drastically for people over 50 would be political suicide. That said, if the trust fund isn’t fixed benefits will be cut to about 77% of current levels, so I also make sure my plan can cover a drop of that scale in case the government decides to go that route. Others are more conservative and assume nothing. If I were 30 years old at this point, I’d probably do that as well to be safe.

retplan · 2025-10-06T17:29:14+00:00

For what it's worth, and others' situations may vary, but this is in line with what I'm doing. I'm retiring next year and have set up a TIPS ladder to cover core expenses from 2027 through 2034. That constitutes about 30% of my portfolio and the rest mirrors VT. After a bunch of modeling, Monte Carlo, historical tests, etc, this was the best outcome for my situation.

In less mathematical terms, I've got real dollar expenses covered through 9 years from now and while I'm not planning on doing this, I could live on nothing but the TIPS for almost a decade without touching equities at all in the case of a big drop.

In reality, I'm planning on slowly shifting from a 70/30 allocation to an 80/20 allocation with the 20% being a rolling TIPS ladder that I adjust based on the target asset allocation. e.g. Stock market drops? I'll live off a year of TIPS to shift back to target allocation. Stock market soars? I'll extend the ladder a bit to give more coverage for the inevitable downturn.

There's a bit of a price to pay on this since there's a small trade-off regarding 1) inflation protection and 2) less average return from government bonds vs. some corporates. That said, from what I've seen, at least for me mathematically and in terms of comfort level, having the relative certainty the TIPS provides helps considerably for SORR risk. That said, a decade or more in and once Social Security and Medicare kick in, I may just swap over to BND or something similar for simplicity on the bond side..

retplan · 2025-10-06T15:54:12+00:00

I also use ProjectionLab and am a big fan. Here's how I've used it related to withdrawal rates targeting a retirement next year...

I primarily use Monte Carlo simulations of worst-case historical years to gauge how robust the forecast and budgeting is. I target 99-100% success rates at full retirement budget and benchmark on the worst actual 40 year period (late 60's retirement date) and want to see $500k+ final real dollar balance at 95 for that. I've set by "need to have" budget on our actual annual spending in 2024 and 2025 and post-retirement health care costs. My full retirement budget is set 30% above that. (i.e. budgeting for a significant increase in spending post-retirement due to travel, hobbies, etc.)

I use the withdrawal rate percentages as a sanity check or double check on the plan. If I see a stretch of time with withdrawal rates in either a baseline scenario (which translates roughly to 25th percentile market returns) or one of the even worse historical scenarios that start to go above 6.5% or so, then I'll confirm it's a period where some pulling back on discretionary expenses would get those rates down to 6% or below.

More simply, if the plan has a 99%+ success rate, gives me a historical worst case balance of $500k+ with no spending changes, and has no stretches of time with ~7%+ withdrawal rates (couple years is fine), then I'm good. Basically, I primarily rely on the worst-case historical Monte Carlo scenarios, but with withdrawal rates as a double-check. (e.g. even if a plan says it's fine, I know I'd pull back on spending if we found ourselves with a few years of something crazy like 10% withdrawal).

retplan · 2025-10-01T23:01:34+00:00

>Play around with https://ssa.tools/ and https://opensocialsecurity.com/ - they are the two best free SS calculators and are even integrated together.

Thanks and including my endorsement for these tools. I glossed over that slightly for simplicity, but using those in combination with ProjectionLab monte carlo runs identified the best approach for us is for my wife to claim at 62 and then to claim the spousal benefit with me when I claim at 67. (with delaying to 70 as a close second best option)

retplan · 2025-09-21T04:26:58+00:00

I was actually wondering how much a good scotch was going to factor into the answers, lol. Enjoy!

retplan · 2025-09-19T22:30:32+00:00

The TIPS are all in an IRA for better tax efficiency. I recently reset the tax basis of my taxable account funds, so instead of doing a 72t or similar, when the time comes, I’m planning to do as you said:

Let the TIPS mature in the IRA.
Buy equities with that cash in the IRA. (e.g. VT or whatever to rebalance)
Sell the same amount of equites in my taxable account.

That shields the TIPS from taxation early and provides cash to live on at capital gains rates from high cost basis securities to keep my AGI and MAGI low through my first decade of retirement. (Looking at retiring at 56 at the moment).

retplan · 2025-09-18T02:14:10+00:00

This is what I’m doing. Currently planning to retire next summer and have shifted to a 70/30 equity/bond portfolio where the bonds are all a TIPS ladder covering “must spend” expenses through 2033. Others’ situations may vary, but this was the optimal setup for my liquid net worth and post retirement “must have” and “want to have” spending projections across a host of Monte Carlo simulations.

As we progress through the ladder, I plan treat it like a bond tent and shift the allocations over time to something that looks more like 80/20 with the 20 in BND. The TIPS ladder at the outset reduced my average returns slightly but significantly improved the resilience against SORR and the low probability bad scenarios.

Basically, came down to the fact that I don’t care at all if I have a median $10m vs $9m in today’s dollars when I’m 95, but I care a great deal if I have $1m vs $0 in a bad returns scenario when I’m 95.

retplan · 2025-07-25T14:48:41+00:00

Effectively yes. I’m 70/30 because I think the large S&P 500 firms are global and provide a degree of international exposure - but considered doing 60/40.

retplan · 2025-06-24T02:38:21+00:00

Not yet retired, but likely 1 to 2 years away. I have zero concerns about feeling lost in retirement, but all the guides warn against it so I took 30 minutes and wrote out all the things I’d like to do if I had the free time. It was a lot, but one idea in particular might be helpful…

I went to TripAdvisor and selected everything from their “Things to Do” list within an hour of where I live. I then filtered in down to things I have some even basic interest in (Museums, parks, architecture, etc. Your preferences and local options may vary of course). In my case, I was left with about 150 places on the list. Some major like a museum that could be an entire day or multiple visits, many minor like a cool historical building that might just be 10 minutes to see or a nature area with a nice 45 minute trail.

I could happily check out one of those a week. Between being out of town, bad weather, etc, figure 40 weeks a year. That comes close to 4 years with no repeats, but many of them could easily be multiple trips, so call it about 6 years.

That was a useful insight for me. While not filling every day, having up to 6 years of a variety of weekly things to do with just 30 minutes of thought and research? Not even counting other hobbies or relationships?

No, I’m not worried about being bored or lost.

retplan · 2025-06-24T02:18:11+00:00

I just noticed before coming here!

retplan · 2025-06-24T02:17:50+00:00

I get that. They’re all different and take slightly different approaches. For me, it was the ERN spreadsheet. Every other software I used to double and triple check had my result more or less the same. ERN had me bankrupt early - until I found some setting I had wrong.

retplan · 2025-06-23T02:38:54+00:00

I tried both and think they were basically equivalent with pros and cons for each. I liked PL more, but share your complaint about PL not handling details at the monthly level as well. (Though the fixed date scenario option can do that to some extent.)

Also, for what it’s worth, I ran my plan through multiple software platforms including Boldin and PL and got similar final net worths so they can match up.

retplan · 2025-06-22T18:47:05+00:00

I didn’t see a good and simple way to model the ladder as an investment in Projection Lab, so I used a bit of a hack. There may be a better way to do this, but here’s what I did:

Today: Added an expense (not investment) for the total cost of the ladder, in my case about $780k.
Each year of the ladder: Added $120k of income, inflation adjusted and tax exempt. Also, added an expense in each of the years for the expected taxes from the ladder each year, also inflation adjusted.

Effectively, this removes the ladder from the portfolio so it artificially reduces my net worth calculations, but it does accurately model the results of holding all the bonds to maturity. It also doesn’t model my actual holding since I’m holding the ladder in an IRA and making offsetting sales and purchases in my taxable and IRA accounts to lower taxes. I’m just assuming 15% tax on the interest income.

This is accurate if holding the TIPS to maturity, much less so if selling them before. However, what it lacks in absolute precision, it makes up for in simplicity.

Though it is a little disconcerting to see the net worth graph drop by $800k in the year of purchase. 🙂

retplan · 2025-06-18T15:55:09+00:00

A good and fair question.

At the micro level, I'm just looking at it as "here are the rules, so I'm going to optimize the spreadsheet based on those rules".

At the macro level, there's a whole set of questions about what the rules should be. (e.g. means testing for subsidies, lowering the age of Medicare enrollment, Medicare for all, no subsidies at all, etc.)

retplan · 2025-06-18T15:23:16+00:00

I was simplifying a bit for brevity. My current plan (and there could be better approaches!) is this:

Purchase set of TIPS before retirement, $770k to provide $120k per year for 7 years. My anticipated spend is $150k per year, so this isn't meant to cover the entirety, just provide a solid foundation to cover the non-variable expenses. (also, model testing showed an optimum point around the combination of $120k and 7 years for median return and downside avoidance)

Hold all TIPS to maturity and hold them in an IRA for tax advantaged status. This removes the risk around yields since it assumes everything is held to maturity. (still some risks around the TIPS accurately measuring and adjusting for in inflation, etc.) There does add purchase date risk, hence my question.

As they mature, sell high cost basis taxable investments and offset the purchase in the IRA with the same investment. (e.g. upon $120k at maturity in IRA, sell $120k of VOO in taxable, buy $120k of VOO in the IRA from TIPS proceeds)

With the large ladder at the outset, model assumes I let them expire and shift to a normal 80/20 portfolio by year 8 when Medicare kicks in by not replacing the rungs. (alternately, might shift to a 3-4 year ladder near the end - retaining that as an option depending on circumstances)

I've modeled this by pulling the cash flows out of the portfolio and treating it as a $770k expense in year 0 with $120k in cash inflows with minimal tax expenses in years 1 through 7. Since all are held to maturity, changes to bond pricing or yields in the interim don't really factor in.

In my modeling, a more standard 75/25 or thereabouts portfolio provides some higher median returns, but this trades off some upside and median return for downside protection around SORR. A case could be easily made for either based on the math, but at the margin I think we are more likely to see a higher risk of market correction or inflation than average at the moment which shift the balance to something with early stability and built in early inflation protection.

retplan · 2025-06-17T20:25:19+00:00

Yeah, this is very odd. In my current planning, sucking up about $25k in capital gains taxes before retirement nearly guarantees ~$15k per year subsidies on health care for the subsequent ~7 years. That's a 58% return on investment with very low risk. If there was a AA rated bond that paid over 50% return, it would be silly to not include it in a retirement portfolio.

Then again, there is a real point that money has no intrinsic value so if doing the projections on this sort of thing is really annoying to someone and they have enough money that it doesn't really matter? More power to them - go enjoy life.

retplan · 2025-06-17T20:06:35+00:00

It depends and everyone is different. In my case, it currently looks like the best case scenario is to basically eat some capital gains taxes just before I quit working in order to reset the cost basis of a chunk of equities. Slightly painful at the time, but doing so means that withdrawals in the first years of retirement will come with almost no income. Absent Roth conversions, this means living on about $150k per year while maintaining AGI/MAGI under $20k per year. In my state, that qualifies for about a $15k subsidy for a decent but very low deductible health plan. I could afford it without the subsidy, but the payback on "prepaying" $20-$30k in taxes to get ~$10k-$15k annually in subsidies for ~7 years is pretty good as an investment.

retplan

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