How To Select Your Asset Allocation For An Early Retirement!
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- čas přidán 24. 06. 2024
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In the video, I will discuss the importance of personalized asset allocation and asset location for early retirement planning.
A one-size-fits-all approach doesn't work, as individual financial situations vary greatly; while some may comfortably allocate 100% to equities, others might need a more conservative mix.
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Time Stamp
00:00 - Intro
00:09 - Starting with an example
01:39 - Important information about asset allocation
05:25 - Example of Roth IRA or Roth 401k
06:07 - Continuing with the million-dollar example
10:47 - Better example illustration
12:39 - Another example used
14:04 - Understanding the amount needed
14:41 - Importance of personalized asset allocation
17:21 - Example of different financial scenarios
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PODCAST - earlyretirementpodcast.com/
INSTAGRAM - / earlyretirementari
LINKEDIN - / aritaublieb
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Ari Taublieb, CFP®, MBA, is the Vice President of Root Financial Partners (Fiduciary) and host of the Early Retirement Podcast.
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⚠️ "DISCLAIMER:⚠️
All content is not to be received as financial advice, and each individual should consult with their dedicated financial planner, tax preparer, estate attorney, etc., before making any financial decisions.
This video contains content I created and got permission from its creators to use. This Channel DOES NOT Promote or encourage Any illegal activities; all contents provided by This Channel are meant for EDUCATIONAL AND ENTERTAINMENT purposes only.
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It never occurred to me to have my Roth portion of my 401k fully in equities. Thank you for that advice.
Glad it helped :)
Wow, I’m impressed with suggestion.
Excellent explanation yet again , thanks!
You’re welcome Joe!
If you have a lump sum to invest that has been sitting in cash earning 5 percent it’s tough to deploy it to stocks exactly at a time when market is at all time high
Thanks Ari, you provided a lot of good information in a simple way.
Thanks for explaining how your firm’s metrics are different for your advisors vis-a-vis (no) number of client visits daily but instead a portfolio limit of 75-100 clients per advisor. I’ve looked at your content and pricing on your new academy and I intend to join next month when we’re back from our summer travels. I get a lot out of you and James conole’s You Tube videos-thank you for sharing your knowledge freely!
You’re so welcome!
New sub here, agree with this advice and it’s how we are driving towards our early retirement.
Always worthy watching, listening, and using Ari’s advise. If I may advise him,today, lay off the caffeine…😊
I get too excited…
Thank you for the helpful content! I know that you guys use the AUM fee structure, but do you also offer flat fee financial advising?
Excellent content as usual! I’ll be tweaking my Roth to be a tad more aggressive, and sprinkle in some less risky investments in my taxable account. Meanwhile, my Traditional IRA and 401K are hunky-dory!
Keep it up Ari! Dont know if its a blind spot, would love to see an episode about a person with only roth k/roth iras and brokerage. If theres no earned income, does it make sense to have a reit etf in a brokerage account spinning off "ordinary income" dividends up to the federal exemption limit once retired?
Roth 100 percent equities depends on how you intend to use it and when. If you need it to manage income for Obamacare, might want to have some $$ available that are not taxable. As a single person, it is a very low threshold where my healthcare costs go up. Got to manage income to keep costs low. Finally, you have to take measure of your risk tolerance. If you have a fairly large percentage of assets in Roth and the market tanks, sayonara. I prefer a little bit of safe money in the Roth to keep me from overreacting. What I've learned over the years is you need to manage your money based on your psychology. Be wary of rules of thumb and act according to your specific situation.
100% equities, for early retirement make your baseline cost of living equal to about the dividends of the SP500 / General market fund, if a down turn comes just don't sell and just live off the dividends, even in 2000 -> 2010 dividends still went up or stayed the same despite the market dropping. Then in the same time period you can do Roth Conversions since a down turn would give opportunity to move pre-tax to a Roth since you can sell more assets within a lower tax bracket.
If the markets aren't down then just live well with a 4-5% withdrawal rate.
Extremely safe, just requires saving a lot of money up-front before early retirement, or significantly minimizing your regular expenses.
Well said!
Some retire early with real estate rentals also but I know that can't be monetized by this industry.
The all-equity Roth makes sense to me. But I’m not sure I follow why the brokerage account might be 50/50? Is that only if you need it to last for a number of years as a bridge account? I one were to retire at 55 and able to use the “Rule of 55” to withdraw from a 401(k) immediately upon retiring, might most or all of the fixed-income assets be in the 401(k)?
The purpose of having some cash or ultra safe bonds in the brokerage is indeed to have that money stable to bridge the gap before you’ve access to your 401k/IRA and also to keep your reportable income low for things like ACA healthcare subsidies before 65, tax gain harvesting at 0%, Roth conversions, etc. since bonds/cash in your brokerage have minimum taxes. If you already will have access to your 401k/IRA, remember that those distributions are fully taxable so it would be more difficult to keep your MAGI low and also you are reducing tax-deferred growth. On a separate note, if you’re planning for the rule of 55, make sure your 401k plan will allow for partial distributions after you separate from the company. Many plans don’t allow it, in which case you either leave all in the plan or you take it all out. The rule of 55 just says you won’t pay a penalty if you take a distribution, but employer plans are not obligated to allow for such partial distributions. Hope this helps!
What do you think about all/more stocks in post tax (brokerage) and all/more bonds in pretax to minimize tax liability, particularly when still working and a few years away from retirement? For example, let’s say I want $500K in bonds to weather a market downturn in retirement. Why not keep it in pretax, and in event of downturn, sell bonds for stocks in pretax and then sell the same amount of stocks in post tax (brokerage) to live on. In other words, I sell low but also buy low, a wash on the stock side, yet get the cash I need. What am I missing?
It works in principle but your total stock allocation will increase since the cash from selling the stock for your expenses (if retired) is no longer part of your portfolio. Also, selling the stock will generate taxes which could affect you if you are trying to keep MAGI low for ACA. Also, what would you do in a year like 2022 when both stocks and bonds are low?. Just some of the things to be considered...
@@Jl-620 Thanks. My stock allocation will increase regardless of location, at least until the market recovers and I refill my cash/bond bucket. To your point, the sticking point is taxes. Better to minimize tax hit now by locating in pretax or later by locating in post tax. Probably depends on my specific situation, but post tax location seems simplest to manage, which probably offsets any potential benefits the other way. Good thought exercise though.
Translation: most of ya’ll don’t have the assets to work with Ari 😂
I do, but I'm not willing to give him $40k a year!
What if you do not have any Roth IRA retirement accounts?
Check this out: czcams.com/video/L5bhAwfVxp8/video.html
Hmm, I would potentially disagree with this video. I have c2.5M in a post tax brokerage account... I have shifted this into more of a fixed income portfolio comprised of ETFs like REITs, BDCs, MLP, Preferred, Bonds (WPC,RQI, BIZD, AMLP, PFXF, USHY, BND) which yields about 6.5% in aggregate. With a house that's paid for, the dividend that this portfolio throws off helps pay for family expenses as well as re-investment for inflation. In my 4011k, I have 1M which is allocated all in VOO/QQQ for growth. Maybe my simple strategy won't work?
Doesn’t sound bad to me! I believe it’s not optimized, but if it lets you sleep better with less fluctuation, then it’s the right approach for you :)
Financial is personal.
Would recommend you project how much your RMDs will be based on the projected balance you will have in the 401k when you reach RMD age. If you are currently in your 50s, the current 1M could grow quite significantly, unless you take withdrawals, do Roth conversions, or there is a pretty bad bear market...
@@Jl-620 Thanks for the advice and will take a look. I am 49, planning to retire early in 3 years and focus on my health.