Early Retirement Portfolio & Plan

AARP's Health & Wellness Digital Magazine

Thank you for reading part-4 in my series on asset allocation.  In my last post, I wrote about our current balanced-growth asset allocation.  That is the asset allocation that we plan on maintaining until we retire in 2028.

In this post, I will be considering the future.  This post is about how I foresee our assets being allocated at the time of retirement.  I use the word foresee because it is what I am anticipating.  As I stated in my previous post, I don’t have a crystal ball.  Nobody can predict the future, but this is what I am optimistically forecasting.

At the time of retirement, I will be age 52 and my wife will be age 60.  At age 60, my wife will draw a Pension equal to 70% of her last annual salary.  The Pension technically has a cost of living adjustment (COLA), but there has not been an adjustment in over 15 years.  Moving forward, we are not going to count on any COLA adjustments.

By 2028, we plan on having about 50 years of annual living expenses in investable assets.  To come up with that amount, I have run our figures on many different financial calculators including AARP, Charles Schwab, and Fidelity that take future projected growth of different asset allocations into account.  The 50 years of living expenses is based on what we currently have saved, the amount we plan on adding to our savings, as well as projected market performance.

The asset allocation that we plan on using at retirement will be 50% invested in stocks and 50% invested in bonds/cash:

S&P 500 Index Fund – 32%

Extended Market Index Fund – 8%

Total International Stock Market Index Fund – 10%

Intermediate Term Bond Fund – 32%

TIPS Fund – 10

Cash – 8%

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At retirement, we are planning on withdrawing only 1.8% per year from our portfolio.  Based on the Vanguard Monte Carlo Nest Egg Calculator, our success rate is projected to be 100%.  We also have a greater than 100% projected success rate on Firecalc.com and the Trinity study.

Between the pension and withdrawing 1.8% from our portfolio, we will have $112K per year to live on.  Just based on simple math, if we are taxed at 25%, we would have $7K per month to live on.  That would be more than double of what we live on now with less expenses.

For the first 10 years of retirement, we plan on withdrawing from our taxable account.  When my wife is age 70, we will be forced to withdraw from her Traditional IRA because of Required Minimum Distributions (RMD).  At that point, we will still be 8 years away from having to withdraw from my Traditional IRA.  We might never have to touch our Roth IRA accounts.  If we do use our Roth IRA accounts, it might just be to withdraw extra money without causing us to go into a higher tax bracket.

We are currently planning on being flexible when it comes to Social Security.  Our goal is to take it when my wife is 70 and I am 62.  We are, however, keeping the option open of taking it early based on retiring during a prolonged market correction. Otherwise, the amount that we will collect will compound 7% annually for every year my wife waits between age 62 and 70.

For some people, this plan might seem too conservative.  For me, being a little on the conservative side is important.  That is because I am retiring at a young age.  I have to plan on being able to fund a retirement of at least 35 years for both my wife and myself.

For me, I don’t see it as being overly conservative.  I see it more as being flexible.  By only planning on a 1.8% withdrawal rate, we have a great amount of flexibility.  If we had to increase it to 2.8%, our success rate only falls to 98% on the Vanguard Monte Carlo Nest Egg Calculator.  If my wife had to work two more additional years, her pension would jump to 80% of her last annual salary.  Also, I will most likely still work part-time because I want continue to take advantage of my catch-up contributions in my retirement accounts.

That is how our future plan looks.  It is over 11 years from now.  I don’t want to get too excited.  Between now and then, we will work hard, save, invest, take care of our health, and enjoy every day.

Also, please check out the following links from some of the top personal finance blogs to learn about the #Drawdown Strategy Chain:

Anchor: Physician On Fire: Our Drawdown Plan in Early Retirement

Link 1: The Retirement Manifesto: Our Retirement Investment Drawdown Strategy

Link 2: OthalaFehu: Retirement Master Plan

Link 3: Plan.Invest.Escape: Drawdown vs. Wealth Preservation in Early Retirement

Link 4: Freedom is Groovy: The Groovy Drawdown Strategy

Link 5: The Green Swan: The Nastiest, Hardest Problem in Finance

Link 6: My Curiosity Lab: Show Me The Money: My Retirement Drawdown Plan

Link 6:    My Curiosity Lab:  Show Me The Money: My Retirement Drawdown Plan

Link 7: Cracking Retirement: Our Drawdown Strategy


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10 thoughts on “Early Retirement Portfolio & Plan

  1. Laurie @thefrugalfarmer

    If I were you I’d move back my retirement date by about five years based on your conservative numbers, but then again I can be too much of a risk taker. 🙂 Seriously, though, you guys are doing GREAT! Keep up the journey!

    1. Physician on FIRE

      What she said.

      When I started writing, I stated my goal was to have 40x to 50x expenses before lighting the FIRE fuse. That was mainly based on a timeline of retiring at 45 and where I anticipated we would be.

      Since then, I’ve done a lot more reading, writing, and contemplating, and I’m completely comfortable with 30x to 33x even for a very early retirement. Early Retirement Now has a 16-part SWR series that I recommend to everyone. He’s a Ph.D. economist and digs very, very deep.

      Thanks for taking part in the #DrawdownStrategy chain!


      1. thefinancialjourneyman Post author

        Thanks for the comment PoF.

        I will read that 16-part series.

        Of the two, I am more conservative than my wife.

        I would not have to twist her arm to FIRE a few years early.

        Thanks for welcoming me to the #DrawdownStrategy chain.

  2. Save Splurge Deny Debt - Cameron

    Wow that is awesome that have sort of certainty and flexibility in your retirement.

    I think you will do well to manage any other expenditures that may come your way as well. With that kind of raise involved and having a pension, you should be able to manage a longer retirement just fine. It would be tough for me to wait that long as well, but then again I am definitely on a riskier level.

    Congrats! All that is left is too stay focused and get there. Great series!

    1. thefinancialjourneyman Post author

      Thanks for your comment.

      It is hard to wait.

      We can possibly shave 3 years off of this plan. My wife would have 25 years of service at that point. Her pension would be reduced to 64% of her final salary.

      I am the more conservative one. She would love to drop-out 3 years earlier.

      As you said we will just have to stay focused and evaluate as we get closer.

  3. Mustard Seed Money

    Looks like you have this well thought out. I love when there are plans in place and people know when they can actually retire. I feel like too many people have no idea when they will reach retirement and it’s a huge struggle. Good for you all knowing exactly when you’ll reach it and feeling comfortable in retirement.

    1. thefinancialjourneyman Post author

      Thanks for the comment.

      Like they say, we can plan the plan, but not the outcome.

      On the positive side, we are 2/3 of the way there.

      We will just stay the course as best we can and make adjustments when they are needed.

      Thanks again for your encouragement.

    1. thefinancialjourneyman Post author

      Thanks for your comment.

      I feel that being overly conservative gives us a few options.

      We possibly could FIRE 3 years earlier. My wife has to work until she is 57 to put in 25 years for her pension. Our current plan has her working 28 years.

      We can bump up our withdrawal rate by more than 1% and still withdraw less than 3%.

      There is also the option of taking SS a few years earlier if need be.

      I like being able to have a few back-up plans.


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