In this episode we answer emails from Camille and Jeff. We discuss how 72(t) and asset swaps enable early IRA access, where to place managed futures and treasuries for taxes, practical cash options at IBKR and ultra-short term ETFs, designing a mix for higher safe withdrawal rates, when to ratchet spending and when to hold flat, and tracking mandatory versus discretionary spending, among other things.
And THEN we our go through our weekly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.
Additional Links:
Father McKenna Center Donation Page: Donate - Father McKenna Center
How To Do An Asset Swap Video from Risk Parity Chronicles: How to Do an Asset Swap
FI Tax Guy Post on 72(t): Retire on 72(t) Payments – The FI Tax Guy
White Coat Investor Podcast with Sean Mullaney: Managing Taxes in Retirement with Sean Mullaney | White Coat Investor
Tax Planning Book: Amazon.com: Tax Planning To and Through Early Retirement: 9798999841599: Garrett, Cody, Mullaney, Sean: Books
Ultra-short ETFs for Parking Excess Cash: Ultra Short-Term ETF List
Portfolio Charts Descriptions of Variable Withdrawal Strategies: Retirement Spending – Portfolio Charts
Breathless Unedited AI-Bot Summary:
What if your IRA isn’t a locked box until 59½? We dig into the real-world playbook for early access and smarter withdrawals, showing how 72(t) and asset swaps let you fund life now without wrecking your allocation or triggering penalties. Along the way, we answer donor questions on where to park managed futures when tax-advantaged space is tight, how to rebalance when bonds live behind the IRA wall, and the cleanest ways to earn yield on cash at Interactive Brokers with short-term ETFs like SGOV, BIL, and JPST. We also touch on BOXX for high earners and ask our Canadian friends to weigh in on legacy RRSP headaches.
From there, we map a durable withdrawal framework: blend growth and value equities, hold intermediate and long treasuries for ballast, and add diversifiers like gold and trend to raise your safe withdrawal rate. If pensions and Social Security cover the essentials, a 5% withdrawal from a risk-balanced mix can still thrive over 30 years, especially when you limit spending increases to 1% instead of full CPI. For raises, we compare floor-and-ceiling rules to ratchets so you can lock in gains after meaningful portfolio advances, yet stay flexible when markets wobble.
To ground it all, we run through market movers—growth stocks buzzing, gold shining, bonds steadying—and share performance across our sample portfolios, from classic Golden Butterfly to leveraged variants. Takeaways are simple and usable: your access is wider than you think, tax location is a spectrum not a slogan, and the best spending rule is the one that fits your life. Subscribe, leave a review, and tell us: which withdrawal rule would you follow this year, floor and ceiling or a ratchet?
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Voices (00:00):
A foolish consistency is the hobgoblin of little mind.
Adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer.
A different drummer.
Mostly Queen Mary (00:18):
And now, coming to you from Dead Center
on your dial, welcome to RiskParity Radio, where we explore
alternatives and assetallocations for the
do-it-yourself investor.
Broadcasting to you now fromthe comfort of his easy chair,
here is your host, FrankVasquez.
Mostly Uncle Frank (00:36):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
Voices (00:49):
Yeah, baby, yeah!
Mostly Uncle Frank (00:51):
And the basic foundational episodes are
episodes 1, 3, 5, 7, and 9.
Some of our listeners,including Karen and Chris, have
identified additional episodesthat you may consider
foundational.
And those are episodes 12, 14,16, 19, 21, 56, 82, and 184.
(01:16):
And you probably should checkthose out too, because we have
the finest podcast audienceavailable.
Voices (01:26):
Top drawer.
Really top drawer.
Mostly Uncle Frank (01:30):
Along with a host named after a hot dog.
Voices (01:34):
Lighten up Francis.
Mostly Uncle Frank (01:38):
But now onward, episode 467.
Today on Risk Party Radio, it'stime for our weekly portfolio
reviews.
Of the eight sample portfolios,you can find at www.riskparty
radio.com on the portfoliospage.
BOARING! Yeah, there was a lotof activity, but it was pretty
boring.
The bees did come to visit,though, at least the uh large
(02:01):
cap growth and Nasdaq 100 typestocks.
But before we get stung bythat.
Voices (02:11):
I'm intrigued by this.
How you say emails.
Mostly Uncle Frank (02:16):
And First off.
First off, we have an emailfrom Camille.
And Camille writes?
Mostly Queen Mary (02:34):
Hi, Frank and Mary.
Hope you're doing well.
I've written in a couple timesin the past and still have some
burning questions.
Fire, fire, fire, fire.
I've also attached a receipt ofmy donation to the Father
McKenna Center.
Number one, I'm 40 years oldand am supposed to be reaching
financial independence in thenext year, given the stock
market doesn't crash and burn.
(02:55):
And it's gone.
I was very late to investing onmy financial independence
journey.
I saved mostly and theninvested a few years ago.
Honestly, most of it in early2024, and now I'm trying to
rebalance.
Most of my portfolio is in ataxable brokerage account.
I will convert my 403B into anIRA when I quit my job.
(03:18):
Currently, my 403B is investedin mostly large cap growth, and
I have very few bonds in myentire portfolio.
I know that the advice is toput bonds and managed futures in
my tax advantage accounts, so Iwas initially going to put
almost all of my 403B into VGLTand DBMF, as that will fulfill
my golden ratio style portfoliothat I'm looking to achieve.
(03:41):
I'm looking to allocate about23% to bonds, which is roughly
how much I have in my 403Baccount out of my total
portfolio.
However, I started thinking, Iknow bonds are not for growth,
but for stability.
But if I cannot withdraw frommy RRA account for another 20
years, why should I keep it allin bonds when I could put it in
(04:01):
equities and have more growthover 20 years?
I understand this wouldn't begood if I was planning to
withdraw from this account soon,but since I literally cannot
withdraw from the account in thenext 20 years, and then the
stock market shouldn't be havingnegative returns on average
over 20 years, wouldn't it makemore sense to let it grow closer
to a 7-10% annual return than3-4%?
(04:23):
And then maybe when I'm closerto accessing the account, say in
15 years, convert the equitiesto bonds.
I understand this is kind of areverse glide path advice, but
just due to my situation wheremy IRA accounts would be all
bonds and not accessible for thenext 20 years, does this make
sense for me?
Voices (04:42):
Not gonna do it.
Wouldn't be prudent at thisjuncture.
Mostly Queen Mary (04:45):
Number two, if I don't have enough room,
percentage allocation to putmanaged futures in my IRA, where
should I put it?
My taxable brokerage?
Number three, once I reachfinancial independence, how do I
rebalance my portfolio when Ican't really withdraw from my
IRA account for 20 years?
If my IRA account is all bondsand say they go up a lot one
(05:07):
year and equities are down, howdo I sell bonds and use the cash
for my living expenses?
Number four, this is basic, butcan you name drop a money
market account at IBKR for me toinvest in?
Right now my cash is in a highyield savings account.
I would like to transfereverything to IBKR.
My understanding is that mycash that I have deposited at
(05:29):
IBKR is not earning anyinterest.
If I sell some stocks at IBKR,then the profits from those
stocks will go into a moneymarket account and earn
interest.
I am not sure if I'm gettingthat right or not, but basically
I need a money market accountto store my cash and don't know
where or how to get it.
Number five, I might be pushingit, but I wonder if you can
(05:50):
connect me with a Canadian,maybe your Quebecois friend,
parce que vive le Quebec, puisje me souviens, who could give
me some advice on what I shoulddo with a mutual fund RSP
account that has been sitting inTD Bank in Canada for the last
15 years.
That's not an improvement.
All of my other investments arein the US.
(06:11):
I have about $50,000 in thisRSP account.
It's like an IRA account in theUS.
I think it is incurring highfees.
I can't access it till I'm 71years old, unless I want to pay
a 30% withholding tax.
I don't know what to do withit, but I don't think it's being
very efficient there either.
Thanks for all you do, Camille.
Voices (06:37):
Good day, how's it going?
I'm Bob McKenzie, it's mybrother Doug.
How's it going?
We got two topics today backbacon and long underwear.
Mostly Uncle Frank (06:45):
Well, Camille, thank you for writing
in again.
And thank you for being a donorto the Father McKenna Center.
As most of you know, we do nothave any sponsors on this
program.
We do have a charity wesupport, it's called the Father
McKenna Center, and it supportshungry and homeless people in
Washington, D.C.
Full disclosure, I am in theboard of the charity and the
current treasurer.
But if you give to the charity,you get to go to the front of
(07:06):
the email line, as Camille hasdone here, and actually our
other emailer today has done aswell.
Voices (07:12):
The best Jerry, the best.
Mostly Uncle Frank (07:14):
There are two ways to do that.
Either you can go directly tothe donation page at the Father
McKenna website and donatethere, or you can become a
patron on Patreon and givemonthly.
To do that, go to our supportpage at www.riskparty.com and
follow the links there.
Either way, you get to go tothe front of the email line, but
(07:35):
please do mention it in youremail so I can duly move you to
the front of the line.
But now let's get to yourquestions.
All five of them.
What's the answer?
What's the answer what's theanswer?
Okay, your first one waswondering about accessing your
IRA, and I think you're underthe misimpression that there's
no way to access it prior to age59 and a half.
(07:58):
That is actually not true.
Voices (08:00):
That's not how it works.
Mostly Uncle Frank (08:02):
There are a number of ways to access
traditional IRAs without payingpenalties before age 59 and a
half.
Voices (08:10):
That is the straight stuff, O Funkmaster.
Mostly Uncle Frank (08:13):
Probably the most convenient one these days
is going to be what is called72T or SEP SEPP.
Substantially equal periodicpayments, but you can set that
up so that you can withdraw fromit using that.
Now, rather than me trying toexplain that here, it would be
(08:34):
better for me to direct you toan expert in taxes.
Voices (08:39):
It's not that I'm lazy, it's that I just don't care.
Mostly Uncle Frank (08:43):
And the best place to go for that is to go
to Sean Mullaney's website,which is the Fi Tax Guy.
I will link to that in the shownotes where he explained some
of that there.
And you should also get a bookcalled Tax Planning in Early
Retirement.
I'll link to that in the shownotes too.
That's written by Sean Mullaneyand Cody Garrett and explains a
(09:04):
lot of these methods.
And I think given you are goingto be an early retiree, I would
definitely go get that bookbecause there's a lot of
information besides this inthere that you'll want to have
at your fingertips.
Sean Mullaney was just on anumber of podcasts, but I just
heard him recently on the WhiteCoat Investor where he talked
about some of the options forsome of this stuff.
(09:24):
But rest assured, you can getaccess to your traditional IRA
before age 59 and a half.
Now there's another way toaccess it without really
accessing it, and it's called anasset swap.
And thankfully, our good friendJustin from Risk Parity
Chronicles has made a nicelittle video on how to do an
(09:46):
asset swap.
I just stare at my desk, but itlooks like I'm working.
But basically, it workssomething like this.
Suppose you have all of yourbonds in the traditional IRA,
and you have all of your stocksin a taxable brokerage account,
and you want to actually sellbonds for a distribution.
(10:06):
What you would do is sell theamount of stocks in your taxable
brokerage account for thedistribution, and then you would
go over to your IRA and sell anequal amount of bonds in the
IRA and rebuy the stocks in theIRA.
So overall, your stockallocation would not have
changed because you're justselling it in one account and
buying it in another account,whereas your allocation to bonds
(10:30):
would have decreased, but youhave not moved money out of the
IRA.
And so there's no taxconsequence to a move like that.
And that is actually theeasiest way to access money that
is behind a IRA wall, if youwill, without actually having to
take it out.
But that is explained in thevideo that I will also link to
in the show notes.
It's called an asset swap.
Voices (10:52):
Yes!
Mostly Uncle Frank (10:53):
There are additional ways to access IRAs
early, but I'm not going todescribe them here because I
think those two may work for youin this circumstance without
having to start talking aboutRoth conversion ladders and
things like that.
If you're interested in allthose things, there are a lot of
articles at that Phi tax guysite which would explain a lot
(11:14):
more of these options.
And I think that answers yourfirst question.
Voices (11:19):
Looks like you've been missing a lot of work lately.
I wouldn't say I've beenmissing it, Bob.
Mostly Uncle Frank (11:24):
Your second question is where to put your
managed futures?
And yes, if there's not enoughroom in the IRA, you might just
put them in your taxablebrokerage account.
Or you might put some of thebonds in your taxable brokerage
account.
You will find that they paysimilar amounts of ordinary
income each year.
So it's kind of six of one andhalf a dozen the other.
It might be most convenientjust to have some of each of the
(11:48):
bonds and the managed futuresin the taxable account, either
for tax loss harvesting in thefuture or as an easy place to
just sell them if you everwanted to sell them.
But yes, when you run out ofroom in a traditional IRA for
your ordinary income payers,then you do move them usually to
the taxable brokerage account,sometimes to a Roth IRA if you
(12:10):
have a lot of room in one ofthose.
But it does not appear that youdo.
Question three, once you reachPhi, how do you rebalance your
portfolio and you can't reallywithdraw from your IRA account
for 20 years?
If your IRA account is all inbonds and they go up a lot one
year and equities are down, howdo I sell some bonds and use the
cash for my living expenses?
Well, I think I alreadyanswered that question, which is
(12:34):
to use the asset swap techniquethat I described and that I
will link to with a video.
Voices (12:40):
I'd say in a given week, I probably only do about 15
minutes of real actual work.
Mostly Uncle Frank (12:47):
So just because you start with all bonds
in your IRA doesn't mean you'renecessarily going to end up
with those, although youprobably will, but there may be
circumstances where you areselling your bonds and buying
stocks in the IRA.
All right, question four.
You're asking about a moneymarket account at Interactive
(13:08):
Brokers.
Well, Interactive Brokers hassome peculiar rules for cash in
the brokerage account.
And I would consult an AI likeChatGPT or look at the
information on the website.
But essentially, if you don'thave at least $10,000 in there,
you're probably not going to geta very good interest rate.
So it does depend on how muchmoney you have sitting in the
(13:32):
money market account.
Now, if you don't have $10,000in there, there are a couple
ways around that.
First, you could just buy anultra-short-term bond ETF that
holds zero to three monthT-bills or other kinds of paper.
The most popular ones of thoseare SGOV, BIL, and JPST.
(13:54):
I will link to the ETF databaselisting a whole bunch of those
if you're interested in thoseand you can see the interest
rates that are offered, butthose are all short-term paper
that is similar to a moneymarket fund.
You could just use the HYSAwhere you are currently having
that cash, depending on how muchit is.
(14:14):
Or you could have anotherbrokerage account, which might
be annoying, but if you usedVanguard or Fidelity, they will
automatically sweep into acompetitive money market fund,
even if you only have a dollarin there.
I am guessing that once you'rein retirement, you probably will
have more than $10,000 in cash,and so leaving it at IBKR
(14:35):
Interactive Brokers is probablygoing to work out fine.
But do check out their rules,they're kind of odd on this.
Now, if you have an extremelylarge amount of cash or you're
in a high tax bracket, you wouldalso consider using something
like the ETF BOXX, which mimicsshort-term T bills, but is
actually a tax efficient fundfor holding short-term money.
(14:58):
And we have talked about thatbefore, so you might search for
that in the podcast notes at thewebsite or the podcast page at
the website, BOXX, if you wantto know more about that.
I'm not sure it's going toapply to you because this is
really for somebody that's inthe highest tax brackets.
And your last question, numberfive, what to do about a dormant
(15:20):
RSP account in Canada at TDBank.
And I certainly cannot answerthat question.
I do not know the rules forRSPs.
I do understand that they arestricter than for IRAs in the
(15:41):
US.
But I will put that out therefor one of our Canadian friends
who doesn't mind being connectedwith you.
I'll see if our friend Lukewants to do that and knows the
answer to this question.
But I'm sure somebody willraise their hand and then I will
connect you.
Voices (15:58):
We have top men working on it right now.
Who?
Mostly Uncle Frank (16:06):
Top men.
But we don't need to beproviding your emails to the
general public.
Voices (16:15):
You need somebody watching your back at all times.
Mostly Uncle Frank (16:19):
And that's the best I can do for that
question.
Voices (16:22):
Are you stupid or something?
Mostly Uncle Frank (16:25):
But congratulations on your imminent
financial independence.
I would sit down at this timeand study some materials on the
things I discussed here.
And Sean Mullaney is fairlyprolific and has a number of
YouTube videos that are veryinstructional about tax issues
involving retirement accountsand how to get money out of them
(16:48):
early.
So if you also search him overat YouTube, you're going to find
a lot more things other thanthe ones that I referenced and
will link to in the show notes.
And you should spend some timestudying those things because
you have a lot more options thanyou think.
And uh I'll go ahead and makesure you get another copy of
that memo.
Okay.
Hopefully that helps.
Thank you for being a donor tothe Father McKenna Center.
(17:10):
And thank you for your email.
And we just have time for onemore email today.
And so last off.
Last off, we have an email fromJeff.
Voices (17:34):
Mr Spicoli, it's name the game.
Mostly Uncle Frank (17:38):
And Jeff Wrights.
Mostly Queen Mary (17:40):
Dear brother Frank and Sister Mary, I was
glad to get a match from mycompany on my recent gift to the
Father McKenna Center.
Voices (17:47):
Yeah, baby, yeah!
Mostly Queen Mary (17:49):
I feel like a less wise older brother who is
thankful every day for the hopeyou give us through this hobby
of yours.
Voices (17:55):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Queen Mary (18:00):
I'm close to retirement and I need someone to
watch my back as I truly don'tfeel oversaved.
Voices (18:06):
You need somebody watching your back at all times!
Mostly Queen Mary (18:10):
But maybe I'm in a good place after all.
I'll start collecting SocialSecurity next year at 65 and
don't really want another job.
So are you gonna get anotherjob?
Voices (18:20):
I don't think I'd like another job.
Mostly Queen Mary (18:22):
We believe our spending budget, less
housing costs, will do well withSocial Security and some
pension payments.
The cost of living adjustmentson those income streams should
keep us comfortable.
Voices (18:32):
Winner winner dinner.
Mostly Queen Mary (18:37):
We have three funds that we want to
essentially fund our newmortgage and housing costs we
need to carry into retirement.
About $400,000 in a VanguardIRA and Roth that are set to
risk parity allocation now.
About $90,000 in a Fidelity401k that is now 95% in BTC LP
IDX 2030H, and future depositsuntil retirement are dollar cost
(19:01):
averaging every two weeks intothe 5% that is in BTC LP IDX
2040H.
With your help, we feel likemaybe we've won the game and can
stop playing.
Voices (19:12):
You are correct, sir.
Yes!
Mostly Queen Mary (19:14):
About $100,000 in an AUM IRA where my
milkshake is shared.
Voices (19:20):
I drink your milkshake.
Mostly Queen Mary (19:26):
I drink it up.
Question one.
Does it make sense to move allto the Vanguard IRAs at
retirement, or is there anadvantage to open an IRA at
Fidelity also?
I am planning on moving the AUMIRA soon.
I have some Roth, about $70,000between Vanguard and Fidelity,
but most is just pretext 401kIRA.
(19:49):
I also have a small HSA atFidelity.
Question two.
My main portfolio is 23% VUG,23% AVUV, 5% IDMO, 5% AVDV, 13%
VGLT, 13% VGIT, 8% GLDM, 8%DBMF, 2% VMFXX.
(20:14):
Since I started theallocations, I've added a bit of
the developed cash to AVUV andGLDM as they declined a bit.
I have cash lower as we have agood reserve amount and a high
yield savings, 3.9%, through ourbank.
Does that mix make sense forthe long run?
Should I make a couple smallchanges before retirement or
(20:37):
with the incoming funds?
Question 3.
My withdrawal plan is to take5% of the roughly $600,000 on a
monthly or quarterly basis fromthe best performers to do annual
rebalancing and to adjust forjust 1% inflation to cover
increases in house taxes andinsurance.
My feeling is that will keep usin a safe withdrawal rate for
(20:58):
30 plus years.
Am I correct, sir?
Voices (21:01):
You are correct, sir!
Mostly Queen Mary (21:05):
Question 4.
Help me again.
What is a good, simple rule ofthumb, because I am not a smart
man, on when to increase thewithdrawal rate?
Voices (21:14):
I'm not a smart man.
Mostly Queen Mary (21:17):
Or when to hold back for a year or so on
the 1% inflation increase, oreven dig deeper in a tough
drawdown.
In the end, if things are good,we'd like to take a few extra
trips and increase gifts to ourfamily and charities.
Thank you, Mary, for the longemail.
Your grateful and hopeful olderbrother.
Voices (21:36):
Mary, Mary, I need you hugging.
Mostly Uncle Frank (21:45):
Well, thank you also for being a donor to
the Father McKenna Center, Jeff.
And thank you for getting thatmatch from your company.
We are an official 501c3charity.
And so if you do go to thedonation page at the Father
McKenna website, there isinformation about asking your
company for a match or donatingstock or donating out of a donor
(22:06):
advice fund.
There are many ways to donate.
So please do take advantage ofthem and thank you for applying
to your company to get a match.
Okay, you have an interestingsituation here before we get to
your questions.
It looks to me like your mainliving expenses are covered by
Social Security and a pension,and what you are using this
(22:29):
portfolio for is to cover amortgage and associated housing
costs.
And I'm assuming that yourdistributions are going to be in
excess of those costs so thatthey actually cover them, and
you may have some flexibility onthe top end of it.
And so with that in mind, goingto these questions, you asked
(22:49):
whether it makes sense to moveall the money to Vanguard at
retirement.
And the answer is probably,although I'm not sure I would
use Vanguard simply because thecustomer service over at
Fidelity is much better.
And if you are near a brick andmortar outlet of Fidelity, it
is sometimes convenient if youreally have a problem just to go
(23:11):
in there and talk to somebodydirectly, which you're not going
to be able to do at Vanguard.
But you could also consolidatethings at Vanguard if you prefer
that.
Or just leave them in more thanone place, which is more
complicated, but it's not reallythat big a deal.
Because it's not like you'regoing to be in there trading
every day or something likethat.
I am not sure you can move anHSA at Fidelity to Vanguard,
(23:33):
though, so that might be anotherconsideration as to where you
consolidate.
Okay, you did lay out aportfolio that is 56% in stocks
divided into growth and value,26% in intermediate and
long-term treasury bonds, 16% inalternatives, and 2% in a money
market in your question two.
Voices (23:55):
I'm sorry, but all questions must be submitted in
writing.
Mostly Uncle Frank (23:58):
And does that mix make sense?
Yes, that mix makes sense ifyou were trying to maximize a
safe withdrawal rate because ithits all of the main guidelines
for that, namely to havesomewhere between 40 something
and 70 something percent instocks divided into growth and
value, which you have, between15 and 30% in intermediate and
long-term treasury bonds, whichyou have, between 10 and 25% in
(24:23):
alternative assets, such as goldand managed futures, which you
have, and then having less than10% in cash, and you say you
have a cash reserve elsewhereanyway.
So all that makes sense to me,and is likely to give you a
portfolio with a high safewithdrawal rate.
Alright, question three.
Your plan is to take 5%, takeit out monthly or quarterly from
(24:45):
the best performers and dorebalancing and to adjust for
just 1% inflation to coverincreases in taxes and
insurance.
And you're asking whether thatwill cover a safe withdrawal
rate in the range of 30 plusyears.
And the answer is yes, itshould work pretty well.
Yes, Cat, now I should be rulerof the world.
(25:06):
The kind of portfolio you havereally has close to a 6% safe
withdrawal rate since 1970, andmore like 5% since 1930, if you
include the Great Depression andthe last part of the 1960s.
But that would assume you weretaking CPI-based inflation.
If you are taking 1% inflation,that's about 2% less than the
(25:30):
CPI, which is essentially goingto effectively add another
percent to your safe withdrawalrate.
So you probably have a safewithdrawal rate of more like 6%
with that kind of inflationadjustment.
So I think you should do justfine with this.
And in fact, it is most likelyto continue growing, even with
the 5% withdrawals.
Alright, question four.
(25:51):
What's a good simple rule ofthumb for when to increase the
withdrawal rate?
Well, there are a number ofrules that you could follow
here, and I will link to theretirement spending calculator
at portfolio charts.
Not so much for the calculator,although you can play around
with that, but there aredescriptions of three common
methods.
(26:11):
One is called the Bangin floorand ceiling, one is called the
Kitsis Ratchet, and one iscalled Giten Klinger.
And variations of those will befine if you're interested in
increasing withdrawals.
Usually you wait until it goesup like 10% in value or 20% in
value before you start doingthat.
But there are variations onthat theme that you can follow
(26:34):
there.
In terms of worrying about bigdrawdowns and reducing your
withdrawals, I doubt you'll everhave to do that with your setup
here, particularly since you'reonly using that 1% inflation
rate.
So I probably would not worryabout that.
It would have to be somethingon the order of a 30% drop in
the portfolio in one year, whichyou probably will never
(26:55):
experience, since that portfoliois only likely to see about a
20% drop in any one year.
Voices (27:02):
That's the fact, Jack! That's a fact, Jack!
Mostly Uncle Frank (27:06):
And you might also consider just holding
back whatever the difference isbetween the mandatory expenses
pertaining to the house and 5%,because I assume that there is
some wiggle room or some leewaybetween the actual cost you're
gonna have to pay and the 5%total.
But I think all that's gonnabecome pretty clear within the
(27:27):
first year or two of managingthis situation, because you'll
see what the results are.
But you might also use thatoverage for home repairs or home
improvements or other thingsrelated to the house.
That's just personal preferencethere.
But I think what you want toreally appreciate is the
difference between theory andpractice.
Voices (27:47):
Yogi Berra said that in theory there's no difference
between theory and practice, butin practice there is.
Mostly Uncle Frank (27:54):
Because a lot of these rules that I just
mentioned are rules set up intheory, but don't necessarily
make that much sense for the wayyou actually live.
And my experience of being inretirement is you just spend
what you need to spend if aslong as it's within reason and
sort of generally within theballpark, and then you make
(28:15):
adjustments as you go.
Assuming you have a reasonableplan to begin with, I would not
say you should use some rule ofthumb to prevent you from
spending, even if you mightexceed some theoretical limit
for one year in particular, likesay you build some kind of
addition or deck or patio orsomething, and that costs more
(28:35):
than you would ordinarily budgetfor the year.
If it's just a one-off thingand it can essentially be
recovered by spending less infuture years, that's perfectly
acceptable.
And that is a more sane way tolive than adhering rigidly to
some rule that you made up thatmay not be serving you as well.
So bear that in mind as you goforward.
(28:58):
I think one of the mostimportant things you can do in
retirement is track your actualspending and allocate that into
mandatory spending anddiscretionary spending because
that will give you a better ideaas to how flexible you can be
with particular expenses.
And if you haven't done thatalready, I would sit down and
look at your expenses for thepast couple of years and do the
(29:22):
exercise of figuring out whatthey were, and then how much of
that was mandatory and how muchof that was discretionary.
You might also go back andlisten to episodes 334, 338, and
341, which talks about the waywe do our planning with what we
call a 311 plan.
If you haven't heard thatalready.
Voices (30:00):
Today, near the first floor bathrooms.
Is he still on campus?
Anyone?
Yes, Desmond?
Some by the food machines.
How long ago?
Right before class.
Okay.
Bring him in.
Mostly Uncle Frank (30:14):
Thank you for being a donor to the Father
McKenna Center.
Voices (30:18):
Oh no.
Mostly Uncle Frank (30:20):
And thank you for your email.
And now for somethingcompletely different.
Voices (30:27):
What is it?
What is that?
What is it?
Not the bees.
Mostly Uncle Frank (30:36):
Well, yes, the bees did descend upon the
stock markets last week.
Although it was not too bad formost of our portfolios here.
But just looking at thosemarkets, the SP 500 represented
by VOO is now up 13.52% for theyear.
The NASDAQ 100, represented byQQQ, is up 15.85% for the year.
(30:57):
Small cap value represented bythe fund VIOV is up 0.80% for
the year.
Gold continues to shine.
Voices (31:05):
I love gold.
Mostly Uncle Fra (31:09):
Representative fund GLDM is up 54.9% for the
year.
Long-term treasuriesrepresented by the fund VGLT are
up 6.8%.
REITs, represented by the fundREET, are up 7.2%.
Commodities represented by thefund PDBC are up 3.31% for the
year.
Preferred shares represented bythe fund PFFV are up 1.14% for
(31:32):
the year.
And managed futures representedby the fund DBMF are up 10.9%
for the year.
Moving to these portfolios,first one is our reference
portfolio, the all seasons.
It is only 30% in stocks and atotal stock market fund, 55% in
intermediate and long-termtreasury bonds, and the
remaining 15% in gold andcommodities.
(31:54):
It's down 1.04% for the monthof November.
It's up 12.11% year to date andup 21.7% since inception in
July 2020.
Moving to these bread andbutter kind of portfolios, first
one's Golden Butterfly.
This one is 40% in stocksdivided into a total stock
market fund and a small capvalue fund.
40% in treasury bonds dividedinto long and short, and the
(32:18):
remaining 20% in gold.
It's down 0.75% for the monthof November.
It's up 15.65% year to date andup 54.88% since inception in
July 2020.
Next one's golden ratio.
The golden ratio.
Yes, that one.
Voices (32:44):
I coalesce the vapor of human experience into a viable
and logical comprehension.
Mostly Uncle Frank (32:50):
This one's 42% in stocks divided into a
large cap growth fund and asmall cap value fund, 26% in
long-term treasury bonds, 16% ingold, 10% in managed futures,
and 6% in a money market incash.
It's down 1.45% for the monthof November.
It's up 15.28% year to date,and up 49.81% since inception in
(33:15):
July 2020.
Next one's the Risk ParityUltimate, kind of our kitchen
sink portfolio.
I'm not going to go through all12 of these funds, but it does
have some Bitcoin in it, whichis the worst performer this
year, or at least since werebalanced it in July.
It's down at 2.04% for themonth of November.
(33:36):
It's up 14.02% year to date,and up 36.08% since inception in
July 2020.
Moving to these experimentalportfolios.
Voices (33:48):
Pony Stark was able to build this in a cave with a
bunch of scraps.
Mostly Uncle Frank (33:55):
Yes, the ones you're not supposed to try
at home involving leveragedfunds.
Voices (34:00):
You can't handle the gambling problem.
Mostly Uncle Frank (34:04):
First one's the accelerated permanent
portfolio.
This one's 27.5% in TMF, alevered bond fund.
25% in UPRO, a levered SP 500fund, 25% in PFFV, a preferred
shares fund, and 22.5% in gold,GLDM.
It's down 3.39% for the monthof November.
(34:24):
It's up 18.79% year to date,and up 20.02% since inception in
July 2020.
Next one's the Aggressive 5050,the most levered and least
diversified of these portfolios.
It's one-third and a leveredstock fund UPRO, one-third and a
levered bond fund TMF, and theremaining third divided into a
(34:44):
preferred shares fund and anintermediate treasury bond fund
as ballast.
It's down 5.09% for the monthof November.
It's up 9.59% year to date anddown 3.48% since inception in
July 2020.
Next one's a levered goldenratio.
This one is a year younger thanthe first six.
(35:04):
It's 35% in a composite leveredfund called NTSX, that's the SP
500 in Treasury Bonds, leveredup 1.5 to 1, 15% in AVDV, which
is a International Small CapValue Fund, 20% in gold, GLDM,
10% in a managed futures fund,KMLM, 10% in TMF, a levered
(35:28):
Treasury Bond Fund, and theremaining 10% in UDOW and UTSL,
which are levered funds thatfollow the Dow and a Utilities
Index.
It's down 1.97% for the monthof November.
It's up 21.14% year to date andup 15.78% since inception in
July 2021.
And the last one is our newestone, the Opter Portfolio.
(35:51):
One portfolio to rule them all.
Voices (35:54):
Forget about it.
Mostly Uncle Frank (35:56):
This one's 16% in UPRO, a levered SP 500
fund.
24% in AVGV, which is aworldwide value tilted fund.
24% in GOVZ, which is aTreasury Strips fund, and the
remaining 36% divided into goldand managed futures.
It's down 2.25% for the monthof November.
(36:16):
It's up 19.94% year to date,and up 23.44% since inception in
July 2024.
And so that concludes ourweekly portfolio reviews.
Voices (36:28):
I'm putting you to sleep.
Mostly Uncle Frank (36:30):
There's been a lot of wailing and gnashing
of teeth about whether the AIbubble has popped or not.
And should we consult ourcrystal ball about that?
Voices (36:41):
My name's Sonia.
I'm going to be showing you thecrystal ball and how to use it
or how I use it.
Mostly Uncle Frank (36:48):
Well, you know what our crystal ball
always says when we ask it.
What's going to happen next?
Voices (36:54):
We don't know! We don't know.
You don't know.
I don't know.
Nobody knows.
I don't know.
That's nice.
Mr.
This class?
Gee, Mr.
Spicoli, I don't know.
That's nice.
I'm like, you know what I'mgonna do?
(37:14):
I'm going to leave your wordson this board for all my classes
to enjoy.
Giving you full credit, ofcourse, Mrs.
Spicoli.
Mostly Uncle Frank (37:23):
Anyway, that's enough of that.
And now I see our signal isbeginning to fade.
The family hordes aredescending upon us next week for
Thanksgiving.
Voices (37:35):
The families will be here soon.
Family?
I I don't want the families overhere.
Mostly Uncle Frank (37:42):
So I think we'll have at least one podcast,
but I can't promise any morethan that.
We'll see.
I do have some more donoremails stacked up here that I'd
like to get to.
But in the meantime, if youhave comments or questions for
me, please send them to Frank atRiskPardyRader.com.
That email is Frank atRiskPardyRader.com.
(38:03):
Or you can go to the websitewww.riskperdiRader.com.
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike, subscribe, give me some
stars, a follow, a review.
That would be great.
Okay.
Thank you once again for tuningin.
(38:24):
This is Frank Vasquez with RiskPurdy Radio.
Signing off.
Voices (38:38):
Thanksgiving is more than eating, Chuck.
You heard what Linus was sayingout there.
Those early pilgrims werethankful for what have happened
to them.
And we should be thankful too.
We should just be thankful forbeing together.
I think that's what they meanby Thanksgiving, Charlie Brown.
Mostly Queen Mary (39:03):
The Risk Parody Radio Show is hosted by
Frank Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial,
investment, tax, or legaladvice.
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
A foolish consistency is the hobgoblin of little mind.
Adored by little statesmen andphilosophers and divines.
If a man does not keep pacewith his companions, perhaps it
is because he hears a differentdrummer.
A different drummer.
Mostly Queen Mary (00:18):
And now, coming to you from Dead Center
on your dial, welcome to RiskParity Radio, where we explore
alternatives and assetallocations for the
do-it-yourself investor.
Broadcasting to you now fromthe comfort of his easy chair,
here is your host, FrankVasquez.
Mostly Uncle Frank (00:36):
Thank you, Mary, and welcome to Risk Parity
Radio.
If you are new here and wonderwhat we are talking about, you
may wish to go back and listento some of the foundational
episodes for this program.
Voices (00:49):
Yeah, baby, yeah!
Mostly Uncle Frank (00:51):
And the basic foundational episodes are
episodes 1, 3, 5, 7, and 9.
Some of our listeners,including Karen and Chris, have
identified additional episodesthat you may consider
foundational.
And those are episodes 12, 14,16, 19, 21, 56, 82, and 184.
(01:16):
And you probably should checkthose out too, because we have
the finest podcast audienceavailable.
Voices (01:26):
Top drawer.
Really top drawer.
Mostly Uncle Frank (01:30):
Along with a host named after a hot dog.
Voices (01:34):
Lighten up Francis.
Mostly Uncle Frank (01:38):
But now onward, episode 467.
Today on Risk Party Radio, it'stime for our weekly portfolio
reviews.
Of the eight sample portfolios,you can find at www.riskparty
radio.com on the portfoliospage.
BOARING! Yeah, there was a lotof activity, but it was pretty
boring.
The bees did come to visit,though, at least the uh large
(02:01):
cap growth and Nasdaq 100 typestocks.
But before we get stung bythat.
Voices (02:11):
I'm intrigued by this.
How you say emails.
Mostly Uncle Frank (02:16):
And First off.
First off, we have an emailfrom Camille.
And Camille writes?
Mostly Queen Mary (02:34):
Hi, Frank and Mary.
Hope you're doing well.
I've written in a couple timesin the past and still have some
burning questions.
Fire, fire, fire, fire.
I've also attached a receipt ofmy donation to the Father
McKenna Center.
Number one, I'm 40 years oldand am supposed to be reaching
financial independence in thenext year, given the stock
market doesn't crash and burn.
(02:55):
And it's gone.
I was very late to investing onmy financial independence
journey.
I saved mostly and theninvested a few years ago.
Honestly, most of it in early2024, and now I'm trying to
rebalance.
Most of my portfolio is in ataxable brokerage account.
I will convert my 403B into anIRA when I quit my job.
(03:18):
Currently, my 403B is investedin mostly large cap growth, and
I have very few bonds in myentire portfolio.
I know that the advice is toput bonds and managed futures in
my tax advantage accounts, so Iwas initially going to put
almost all of my 403B into VGLTand DBMF, as that will fulfill
my golden ratio style portfoliothat I'm looking to achieve.
(03:41):
I'm looking to allocate about23% to bonds, which is roughly
how much I have in my 403Baccount out of my total
portfolio.
However, I started thinking, Iknow bonds are not for growth,
but for stability.
But if I cannot withdraw frommy RRA account for another 20
years, why should I keep it allin bonds when I could put it in
(04:01):
equities and have more growthover 20 years?
I understand this wouldn't begood if I was planning to
withdraw from this account soon,but since I literally cannot
withdraw from the account in thenext 20 years, and then the
stock market shouldn't be havingnegative returns on average
over 20 years, wouldn't it makemore sense to let it grow closer
to a 7-10% annual return than3-4%?
(04:23):
And then maybe when I'm closerto accessing the account, say in
15 years, convert the equitiesto bonds.
I understand this is kind of areverse glide path advice, but
just due to my situation wheremy IRA accounts would be all
bonds and not accessible for thenext 20 years, does this make
sense for me?
Voices (04:42):
Not gonna do it.
Wouldn't be prudent at thisjuncture.
Mostly Queen Mary (04:45):
Number two, if I don't have enough room,
percentage allocation to putmanaged futures in my IRA, where
should I put it?
My taxable brokerage?
Number three, once I reachfinancial independence, how do I
rebalance my portfolio when Ican't really withdraw from my
IRA account for 20 years?
If my IRA account is all bondsand say they go up a lot one
(05:07):
year and equities are down, howdo I sell bonds and use the cash
for my living expenses?
Number four, this is basic, butcan you name drop a money
market account at IBKR for me toinvest in?
Right now my cash is in a highyield savings account.
I would like to transfereverything to IBKR.
My understanding is that mycash that I have deposited at
(05:29):
IBKR is not earning anyinterest.
If I sell some stocks at IBKR,then the profits from those
stocks will go into a moneymarket account and earn
interest.
I am not sure if I'm gettingthat right or not, but basically
I need a money market accountto store my cash and don't know
where or how to get it.
Number five, I might be pushingit, but I wonder if you can
(05:50):
connect me with a Canadian,maybe your Quebecois friend,
parce que vive le Quebec, puisje me souviens, who could give
me some advice on what I shoulddo with a mutual fund RSP
account that has been sitting inTD Bank in Canada for the last
15 years.
That's not an improvement.
All of my other investments arein the US.
(06:11):
I have about $50,000 in thisRSP account.
It's like an IRA account in theUS.
I think it is incurring highfees.
I can't access it till I'm 71years old, unless I want to pay
a 30% withholding tax.
I don't know what to do withit, but I don't think it's being
very efficient there either.
Thanks for all you do, Camille.
Voices (06:37):
Good day, how's it going?
I'm Bob McKenzie, it's mybrother Doug.
How's it going?
We got two topics today backbacon and long underwear.
Mostly Uncle Frank (06:45):
Well, Camille, thank you for writing
in again.
And thank you for being a donorto the Father McKenna Center.
As most of you know, we do nothave any sponsors on this
program.
We do have a charity wesupport, it's called the Father
McKenna Center, and it supportshungry and homeless people in
Washington, D.C.
Full disclosure, I am in theboard of the charity and the
current treasurer.
But if you give to the charity,you get to go to the front of
(07:06):
the email line, as Camille hasdone here, and actually our
other emailer today has done aswell.
Voices (07:12):
The best Jerry, the best.
Mostly Uncle Frank (07:14):
There are two ways to do that.
Either you can go directly tothe donation page at the Father
McKenna website and donatethere, or you can become a
patron on Patreon and givemonthly.
To do that, go to our supportpage at www.riskparty.com and
follow the links there.
Either way, you get to go tothe front of the email line, but
(07:35):
please do mention it in youremail so I can duly move you to
the front of the line.
But now let's get to yourquestions.
All five of them.
What's the answer?
What's the answer what's theanswer?
Okay, your first one waswondering about accessing your
IRA, and I think you're underthe misimpression that there's
no way to access it prior to age59 and a half.
(07:58):
That is actually not true.
Voices (08:00):
That's not how it works.
Mostly Uncle Frank (08:02):
There are a number of ways to access
traditional IRAs without payingpenalties before age 59 and a
half.
Voices (08:10):
That is the straight stuff, O Funkmaster.
Mostly Uncle Frank (08:13):
Probably the most convenient one these days
is going to be what is called72T or SEP SEPP.
Substantially equal periodicpayments, but you can set that
up so that you can withdraw fromit using that.
Now, rather than me trying toexplain that here, it would be
(08:34):
better for me to direct you toan expert in taxes.
Voices (08:39):
It's not that I'm lazy, it's that I just don't care.
Mostly Uncle Frank (08:43):
And the best place to go for that is to go
to Sean Mullaney's website,which is the Fi Tax Guy.
I will link to that in the shownotes where he explained some
of that there.
And you should also get a bookcalled Tax Planning in Early
Retirement.
I'll link to that in the shownotes too.
That's written by Sean Mullaneyand Cody Garrett and explains a
(09:04):
lot of these methods.
And I think given you are goingto be an early retiree, I would
definitely go get that bookbecause there's a lot of
information besides this inthere that you'll want to have
at your fingertips.
Sean Mullaney was just on anumber of podcasts, but I just
heard him recently on the WhiteCoat Investor where he talked
about some of the options forsome of this stuff.
(09:24):
But rest assured, you can getaccess to your traditional IRA
before age 59 and a half.
Now there's another way toaccess it without really
accessing it, and it's called anasset swap.
And thankfully, our good friendJustin from Risk Parity
Chronicles has made a nicelittle video on how to do an
(09:46):
asset swap.
I just stare at my desk, but itlooks like I'm working.
But basically, it workssomething like this.
Suppose you have all of yourbonds in the traditional IRA,
and you have all of your stocksin a taxable brokerage account,
and you want to actually sellbonds for a distribution.
(10:06):
What you would do is sell theamount of stocks in your taxable
brokerage account for thedistribution, and then you would
go over to your IRA and sell anequal amount of bonds in the
IRA and rebuy the stocks in theIRA.
So overall, your stockallocation would not have
changed because you're justselling it in one account and
buying it in another account,whereas your allocation to bonds
(10:30):
would have decreased, but youhave not moved money out of the
IRA.
And so there's no taxconsequence to a move like that.
And that is actually theeasiest way to access money that
is behind a IRA wall, if youwill, without actually having to
take it out.
But that is explained in thevideo that I will also link to
in the show notes.
It's called an asset swap.
Voices (10:52):
Yes!
Mostly Uncle Frank (10:53):
There are additional ways to access IRAs
early, but I'm not going todescribe them here because I
think those two may work for youin this circumstance without
having to start talking aboutRoth conversion ladders and
things like that.
If you're interested in allthose things, there are a lot of
articles at that Phi tax guysite which would explain a lot
(11:14):
more of these options.
And I think that answers yourfirst question.
Voices (11:19):
Looks like you've been missing a lot of work lately.
I wouldn't say I've beenmissing it, Bob.
Mostly Uncle Frank (11:24):
Your second question is where to put your
managed futures?
And yes, if there's not enoughroom in the IRA, you might just
put them in your taxablebrokerage account.
Or you might put some of thebonds in your taxable brokerage
account.
You will find that they paysimilar amounts of ordinary
income each year.
So it's kind of six of one andhalf a dozen the other.
It might be most convenientjust to have some of each of the
(11:48):
bonds and the managed futuresin the taxable account, either
for tax loss harvesting in thefuture or as an easy place to
just sell them if you everwanted to sell them.
But yes, when you run out ofroom in a traditional IRA for
your ordinary income payers,then you do move them usually to
the taxable brokerage account,sometimes to a Roth IRA if you
(12:10):
have a lot of room in one ofthose.
But it does not appear that youdo.
Question three, once you reachPhi, how do you rebalance your
portfolio and you can't reallywithdraw from your IRA account
for 20 years?
If your IRA account is all inbonds and they go up a lot one
year and equities are down, howdo I sell some bonds and use the
cash for my living expenses?
Well, I think I alreadyanswered that question, which is
(12:34):
to use the asset swap techniquethat I described and that I
will link to with a video.
Voices (12:40):
I'd say in a given week, I probably only do about 15
minutes of real actual work.
Mostly Uncle Frank (12:47):
So just because you start with all bonds
in your IRA doesn't mean you'renecessarily going to end up
with those, although youprobably will, but there may be
circumstances where you areselling your bonds and buying
stocks in the IRA.
All right, question four.
You're asking about a moneymarket account at Interactive
(13:08):
Brokers.
Well, Interactive Brokers hassome peculiar rules for cash in
the brokerage account.
And I would consult an AI likeChatGPT or look at the
information on the website.
But essentially, if you don'thave at least $10,000 in there,
you're probably not going to geta very good interest rate.
So it does depend on how muchmoney you have sitting in the
(13:32):
money market account.
Now, if you don't have $10,000in there, there are a couple
ways around that.
First, you could just buy anultra-short-term bond ETF that
holds zero to three monthT-bills or other kinds of paper.
The most popular ones of thoseare SGOV, BIL, and JPST.
(13:54):
I will link to the ETF databaselisting a whole bunch of those
if you're interested in thoseand you can see the interest
rates that are offered, butthose are all short-term paper
that is similar to a moneymarket fund.
You could just use the HYSAwhere you are currently having
that cash, depending on how muchit is.
(14:14):
Or you could have anotherbrokerage account, which might
be annoying, but if you usedVanguard or Fidelity, they will
automatically sweep into acompetitive money market fund,
even if you only have a dollarin there.
I am guessing that once you'rein retirement, you probably will
have more than $10,000 in cash,and so leaving it at IBKR
(14:35):
Interactive Brokers is probablygoing to work out fine.
But do check out their rules,they're kind of odd on this.
Now, if you have an extremelylarge amount of cash or you're
in a high tax bracket, you wouldalso consider using something
like the ETF BOXX, which mimicsshort-term T bills, but is
actually a tax efficient fundfor holding short-term money.
(14:58):
And we have talked about thatbefore, so you might search for
that in the podcast notes at thewebsite or the podcast page at
the website, BOXX, if you wantto know more about that.
I'm not sure it's going toapply to you because this is
really for somebody that's inthe highest tax brackets.
And your last question, numberfive, what to do about a dormant
(15:20):
RSP account in Canada at TDBank.
And I certainly cannot answerthat question.
I do not know the rules forRSPs.
I do understand that they arestricter than for IRAs in the
(15:41):
US.
But I will put that out therefor one of our Canadian friends
who doesn't mind being connectedwith you.
I'll see if our friend Lukewants to do that and knows the
answer to this question.
But I'm sure somebody willraise their hand and then I will
connect you.
Voices (15:58):
We have top men working on it right now.
Who?
Mostly Uncle Frank (16:06):
Top men.
But we don't need to beproviding your emails to the
general public.
Voices (16:15):
You need somebody watching your back at all times.
Mostly Uncle Frank (16:19):
And that's the best I can do for that
question.
Voices (16:22):
Are you stupid or something?
Mostly Uncle Frank (16:25):
But congratulations on your imminent
financial independence.
I would sit down at this timeand study some materials on the
things I discussed here.
And Sean Mullaney is fairlyprolific and has a number of
YouTube videos that are veryinstructional about tax issues
involving retirement accountsand how to get money out of them
(16:48):
early.
So if you also search him overat YouTube, you're going to find
a lot more things other thanthe ones that I referenced and
will link to in the show notes.
And you should spend some timestudying those things because
you have a lot more options thanyou think.
And uh I'll go ahead and makesure you get another copy of
that memo.
Okay.
Hopefully that helps.
Thank you for being a donor tothe Father McKenna Center.
(17:10):
And thank you for your email.
And we just have time for onemore email today.
And so last off.
Last off, we have an email fromJeff.
Voices (17:34):
Mr Spicoli, it's name the game.
Mostly Uncle Frank (17:38):
And Jeff Wrights.
Mostly Queen Mary (17:40):
Dear brother Frank and Sister Mary, I was
glad to get a match from mycompany on my recent gift to the
Father McKenna Center.
Voices (17:47):
Yeah, baby, yeah!
Mostly Queen Mary (17:49):
I feel like a less wise older brother who is
thankful every day for the hopeyou give us through this hobby
of yours.
Voices (17:55):
You are talking about the nonsensical ravings of a
lunatic mind.
Mostly Queen Mary (18:00):
I'm close to retirement and I need someone to
watch my back as I truly don'tfeel oversaved.
Voices (18:06):
You need somebody watching your back at all times!
Mostly Queen Mary (18:10):
But maybe I'm in a good place after all.
I'll start collecting SocialSecurity next year at 65 and
don't really want another job.
So are you gonna get anotherjob?
Voices (18:20):
I don't think I'd like another job.
Mostly Queen Mary (18:22):
We believe our spending budget, less
housing costs, will do well withSocial Security and some
pension payments.
The cost of living adjustmentson those income streams should
keep us comfortable.
Voices (18:32):
Winner winner dinner.
Mostly Queen Mary (18:37):
We have three funds that we want to
essentially fund our newmortgage and housing costs we
need to carry into retirement.
About $400,000 in a VanguardIRA and Roth that are set to
risk parity allocation now.
About $90,000 in a Fidelity401k that is now 95% in BTC LP
IDX 2030H, and future depositsuntil retirement are dollar cost
(19:01):
averaging every two weeks intothe 5% that is in BTC LP IDX
2040H.
With your help, we feel likemaybe we've won the game and can
stop playing.
Voices (19:12):
You are correct, sir.
Yes!
Mostly Queen Mary (19:14):
About $100,000 in an AUM IRA where my
milkshake is shared.
Voices (19:20):
I drink your milkshake.
Mostly Queen Mary (19:26):
I drink it up.
Question one.
Does it make sense to move allto the Vanguard IRAs at
retirement, or is there anadvantage to open an IRA at
Fidelity also?
I am planning on moving the AUMIRA soon.
I have some Roth, about $70,000between Vanguard and Fidelity,
but most is just pretext 401kIRA.
(19:49):
I also have a small HSA atFidelity.
Question two.
My main portfolio is 23% VUG,23% AVUV, 5% IDMO, 5% AVDV, 13%
VGLT, 13% VGIT, 8% GLDM, 8%DBMF, 2% VMFXX.
(20:14):
Since I started theallocations, I've added a bit of
the developed cash to AVUV andGLDM as they declined a bit.
I have cash lower as we have agood reserve amount and a high
yield savings, 3.9%, through ourbank.
Does that mix make sense forthe long run?
Should I make a couple smallchanges before retirement or
(20:37):
with the incoming funds?
Question 3.
My withdrawal plan is to take5% of the roughly $600,000 on a
monthly or quarterly basis fromthe best performers to do annual
rebalancing and to adjust forjust 1% inflation to cover
increases in house taxes andinsurance.
My feeling is that will keep usin a safe withdrawal rate for
(20:58):
30 plus years.
Am I correct, sir?
Voices (21:01):
You are correct, sir!
Mostly Queen Mary (21:05):
Question 4.
Help me again.
What is a good, simple rule ofthumb, because I am not a smart
man, on when to increase thewithdrawal rate?
Voices (21:14):
I'm not a smart man.
Mostly Queen Mary (21:17):
Or when to hold back for a year or so on
the 1% inflation increase, oreven dig deeper in a tough
drawdown.
In the end, if things are good,we'd like to take a few extra
trips and increase gifts to ourfamily and charities.
Thank you, Mary, for the longemail.
Your grateful and hopeful olderbrother.
Voices (21:36):
Mary, Mary, I need you hugging.
Mostly Uncle Frank (21:45):
Well, thank you also for being a donor to
the Father McKenna Center, Jeff.
And thank you for getting thatmatch from your company.
We are an official 501c3charity.
And so if you do go to thedonation page at the Father
McKenna website, there isinformation about asking your
company for a match or donatingstock or donating out of a donor
(22:06):
advice fund.
There are many ways to donate.
So please do take advantage ofthem and thank you for applying
to your company to get a match.
Okay, you have an interestingsituation here before we get to
your questions.
It looks to me like your mainliving expenses are covered by
Social Security and a pension,and what you are using this
(22:29):
portfolio for is to cover amortgage and associated housing
costs.
And I'm assuming that yourdistributions are going to be in
excess of those costs so thatthey actually cover them, and
you may have some flexibility onthe top end of it.
And so with that in mind, goingto these questions, you asked
(22:49):
whether it makes sense to moveall the money to Vanguard at
retirement.
And the answer is probably,although I'm not sure I would
use Vanguard simply because thecustomer service over at
Fidelity is much better.
And if you are near a brick andmortar outlet of Fidelity, it
is sometimes convenient if youreally have a problem just to go
(23:11):
in there and talk to somebodydirectly, which you're not going
to be able to do at Vanguard.
But you could also consolidatethings at Vanguard if you prefer
that.
Or just leave them in more thanone place, which is more
complicated, but it's not reallythat big a deal.
Because it's not like you'regoing to be in there trading
every day or something likethat.
I am not sure you can move anHSA at Fidelity to Vanguard,
(23:33):
though, so that might be anotherconsideration as to where you
consolidate.
Okay, you did lay out aportfolio that is 56% in stocks
divided into growth and value,26% in intermediate and
long-term treasury bonds, 16% inalternatives, and 2% in a money
market in your question two.
Voices (23:55):
I'm sorry, but all questions must be submitted in
writing.
Mostly Uncle Frank (23:58):
And does that mix make sense?
Yes, that mix makes sense ifyou were trying to maximize a
safe withdrawal rate because ithits all of the main guidelines
for that, namely to havesomewhere between 40 something
and 70 something percent instocks divided into growth and
value, which you have, between15 and 30% in intermediate and
long-term treasury bonds, whichyou have, between 10 and 25% in
(24:23):
alternative assets, such as goldand managed futures, which you
have, and then having less than10% in cash, and you say you
have a cash reserve elsewhereanyway.
So all that makes sense to me,and is likely to give you a
portfolio with a high safewithdrawal rate.
Alright, question three.
Your plan is to take 5%, takeit out monthly or quarterly from
(24:45):
the best performers and dorebalancing and to adjust for
just 1% inflation to coverincreases in taxes and
insurance.
And you're asking whether thatwill cover a safe withdrawal
rate in the range of 30 plusyears.
And the answer is yes, itshould work pretty well.
Yes, Cat, now I should be rulerof the world.
(25:06):
The kind of portfolio you havereally has close to a 6% safe
withdrawal rate since 1970, andmore like 5% since 1930, if you
include the Great Depression andthe last part of the 1960s.
But that would assume you weretaking CPI-based inflation.
If you are taking 1% inflation,that's about 2% less than the
(25:30):
CPI, which is essentially goingto effectively add another
percent to your safe withdrawalrate.
So you probably have a safewithdrawal rate of more like 6%
with that kind of inflationadjustment.
So I think you should do justfine with this.
And in fact, it is most likelyto continue growing, even with
the 5% withdrawals.
Alright, question four.
(25:51):
What's a good simple rule ofthumb for when to increase the
withdrawal rate?
Well, there are a number ofrules that you could follow
here, and I will link to theretirement spending calculator
at portfolio charts.
Not so much for the calculator,although you can play around
with that, but there aredescriptions of three common
methods.
(26:11):
One is called the Bangin floorand ceiling, one is called the
Kitsis Ratchet, and one iscalled Giten Klinger.
And variations of those will befine if you're interested in
increasing withdrawals.
Usually you wait until it goesup like 10% in value or 20% in
value before you start doingthat.
But there are variations onthat theme that you can follow
(26:34):
there.
In terms of worrying about bigdrawdowns and reducing your
withdrawals, I doubt you'll everhave to do that with your setup
here, particularly since you'reonly using that 1% inflation
rate.
So I probably would not worryabout that.
It would have to be somethingon the order of a 30% drop in
the portfolio in one year, whichyou probably will never
(26:55):
experience, since that portfoliois only likely to see about a
20% drop in any one year.
Voices (27:02):
That's the fact, Jack! That's a fact, Jack!
Mostly Uncle Frank (27:06):
And you might also consider just holding
back whatever the difference isbetween the mandatory expenses
pertaining to the house and 5%,because I assume that there is
some wiggle room or some leewaybetween the actual cost you're
gonna have to pay and the 5%total.
But I think all that's gonnabecome pretty clear within the
(27:27):
first year or two of managingthis situation, because you'll
see what the results are.
But you might also use thatoverage for home repairs or home
improvements or other thingsrelated to the house.
That's just personal preferencethere.
But I think what you want toreally appreciate is the
difference between theory andpractice.
Voices (27:47):
Yogi Berra said that in theory there's no difference
between theory and practice, butin practice there is.
Mostly Uncle Frank (27:54):
Because a lot of these rules that I just
mentioned are rules set up intheory, but don't necessarily
make that much sense for the wayyou actually live.
And my experience of being inretirement is you just spend
what you need to spend if aslong as it's within reason and
sort of generally within theballpark, and then you make
(28:15):
adjustments as you go.
Assuming you have a reasonableplan to begin with, I would not
say you should use some rule ofthumb to prevent you from
spending, even if you mightexceed some theoretical limit
for one year in particular, likesay you build some kind of
addition or deck or patio orsomething, and that costs more
(28:35):
than you would ordinarily budgetfor the year.
If it's just a one-off thingand it can essentially be
recovered by spending less infuture years, that's perfectly
acceptable.
And that is a more sane way tolive than adhering rigidly to
some rule that you made up thatmay not be serving you as well.
So bear that in mind as you goforward.
(28:58):
I think one of the mostimportant things you can do in
retirement is track your actualspending and allocate that into
mandatory spending anddiscretionary spending because
that will give you a better ideaas to how flexible you can be
with particular expenses.
And if you haven't done thatalready, I would sit down and
look at your expenses for thepast couple of years and do the
(29:22):
exercise of figuring out whatthey were, and then how much of
that was mandatory and how muchof that was discretionary.
You might also go back andlisten to episodes 334, 338, and
341, which talks about the waywe do our planning with what we
call a 311 plan.
If you haven't heard thatalready.
Voices (30:00):
Today, near the first floor bathrooms.
Is he still on campus?
Anyone?
Yes, Desmond?
Some by the food machines.
How long ago?
Right before class.
Okay.
Bring him in.
Mostly Uncle Frank (30:14):
Thank you for being a donor to the Father
McKenna Center.
Voices (30:18):
Oh no.
Mostly Uncle Frank (30:20):
And thank you for your email.
And now for somethingcompletely different.
Voices (30:27):
What is it?
What is that?
What is it?
Not the bees.
Mostly Uncle Frank (30:36):
Well, yes, the bees did descend upon the
stock markets last week.
Although it was not too bad formost of our portfolios here.
But just looking at thosemarkets, the SP 500 represented
by VOO is now up 13.52% for theyear.
The NASDAQ 100, represented byQQQ, is up 15.85% for the year.
(30:57):
Small cap value represented bythe fund VIOV is up 0.80% for
the year.
Gold continues to shine.
Voices (31:05):
I love gold.
Mostly Uncle Fra (31:09):
Representative fund GLDM is up 54.9% for the
year.
Long-term treasuriesrepresented by the fund VGLT are
up 6.8%.
REITs, represented by the fundREET, are up 7.2%.
Commodities represented by thefund PDBC are up 3.31% for the
year.
Preferred shares represented bythe fund PFFV are up 1.14% for
(31:32):
the year.
And managed futures representedby the fund DBMF are up 10.9%
for the year.
Moving to these portfolios,first one is our reference
portfolio, the all seasons.
It is only 30% in stocks and atotal stock market fund, 55% in
intermediate and long-termtreasury bonds, and the
remaining 15% in gold andcommodities.
(31:54):
It's down 1.04% for the monthof November.
It's up 12.11% year to date andup 21.7% since inception in
July 2020.
Moving to these bread andbutter kind of portfolios, first
one's Golden Butterfly.
This one is 40% in stocksdivided into a total stock
market fund and a small capvalue fund.
40% in treasury bonds dividedinto long and short, and the
(32:18):
remaining 20% in gold.
It's down 0.75% for the monthof November.
It's up 15.65% year to date andup 54.88% since inception in
July 2020.
Next one's golden ratio.
The golden ratio.
Yes, that one.
Voices (32:44):
I coalesce the vapor of human experience into a viable
and logical comprehension.
Mostly Uncle Frank (32:50):
This one's 42% in stocks divided into a
large cap growth fund and asmall cap value fund, 26% in
long-term treasury bonds, 16% ingold, 10% in managed futures,
and 6% in a money market incash.
It's down 1.45% for the monthof November.
It's up 15.28% year to date,and up 49.81% since inception in
(33:15):
July 2020.
Next one's the Risk ParityUltimate, kind of our kitchen
sink portfolio.
I'm not going to go through all12 of these funds, but it does
have some Bitcoin in it, whichis the worst performer this
year, or at least since werebalanced it in July.
It's down at 2.04% for themonth of November.
(33:36):
It's up 14.02% year to date,and up 36.08% since inception in
July 2020.
Moving to these experimentalportfolios.
Voices (33:48):
Pony Stark was able to build this in a cave with a
bunch of scraps.
Mostly Uncle Frank (33:55):
Yes, the ones you're not supposed to try
at home involving leveragedfunds.
Voices (34:00):
You can't handle the gambling problem.
Mostly Uncle Frank (34:04):
First one's the accelerated permanent
portfolio.
This one's 27.5% in TMF, alevered bond fund.
25% in UPRO, a levered SP 500fund, 25% in PFFV, a preferred
shares fund, and 22.5% in gold,GLDM.
It's down 3.39% for the monthof November.
(34:24):
It's up 18.79% year to date,and up 20.02% since inception in
July 2020.
Next one's the Aggressive 5050,the most levered and least
diversified of these portfolios.
It's one-third and a leveredstock fund UPRO, one-third and a
levered bond fund TMF, and theremaining third divided into a
(34:44):
preferred shares fund and anintermediate treasury bond fund
as ballast.
It's down 5.09% for the monthof November.
It's up 9.59% year to date anddown 3.48% since inception in
July 2020.
Next one's a levered goldenratio.
This one is a year younger thanthe first six.
(35:04):
It's 35% in a composite leveredfund called NTSX, that's the SP
500 in Treasury Bonds, leveredup 1.5 to 1, 15% in AVDV, which
is a International Small CapValue Fund, 20% in gold, GLDM,
10% in a managed futures fund,KMLM, 10% in TMF, a levered
(35:28):
Treasury Bond Fund, and theremaining 10% in UDOW and UTSL,
which are levered funds thatfollow the Dow and a Utilities
Index.
It's down 1.97% for the monthof November.
It's up 21.14% year to date andup 15.78% since inception in
July 2021.
And the last one is our newestone, the Opter Portfolio.
(35:51):
One portfolio to rule them all.
Voices (35:54):
Forget about it.
Mostly Uncle Frank (35:56):
This one's 16% in UPRO, a levered SP 500
fund.
24% in AVGV, which is aworldwide value tilted fund.
24% in GOVZ, which is aTreasury Strips fund, and the
remaining 36% divided into goldand managed futures.
It's down 2.25% for the monthof November.
(36:16):
It's up 19.94% year to date,and up 23.44% since inception in
July 2024.
And so that concludes ourweekly portfolio reviews.
Voices (36:28):
I'm putting you to sleep.
Mostly Uncle Frank (36:30):
There's been a lot of wailing and gnashing
of teeth about whether the AIbubble has popped or not.
And should we consult ourcrystal ball about that?
Voices (36:41):
My name's Sonia.
I'm going to be showing you thecrystal ball and how to use it
or how I use it.
Mostly Uncle Frank (36:48):
Well, you know what our crystal ball
always says when we ask it.
What's going to happen next?
Voices (36:54):
We don't know! We don't know.
You don't know.
I don't know.
Nobody knows.
I don't know.
That's nice.
Mr.
This class?
Gee, Mr.
Spicoli, I don't know.
That's nice.
I'm like, you know what I'mgonna do?
(37:14):
I'm going to leave your wordson this board for all my classes
to enjoy.
Giving you full credit, ofcourse, Mrs.
Spicoli.
Mostly Uncle Frank (37:23):
Anyway, that's enough of that.
And now I see our signal isbeginning to fade.
The family hordes aredescending upon us next week for
Thanksgiving.
Voices (37:35):
The families will be here soon.
Family?
I I don't want the families overhere.
Mostly Uncle Frank (37:42):
So I think we'll have at least one podcast,
but I can't promise any morethan that.
We'll see.
I do have some more donoremails stacked up here that I'd
like to get to.
But in the meantime, if youhave comments or questions for
me, please send them to Frank atRiskPardyRader.com.
That email is Frank atRiskPardyRader.com.
(38:03):
Or you can go to the websitewww.riskperdiRader.com.
Put your message into thecontact form and I'll get it
that way.
If you haven't had a chance todo it, please go to your
favorite podcast provider andlike, subscribe, give me some
stars, a follow, a review.
That would be great.
Okay.
Thank you once again for tuningin.
(38:24):
This is Frank Vasquez with RiskPurdy Radio.
Signing off.
Voices (38:38):
Thanksgiving is more than eating, Chuck.
You heard what Linus was sayingout there.
Those early pilgrims werethankful for what have happened
to them.
And we should be thankful too.
We should just be thankful forbeing together.
I think that's what they meanby Thanksgiving, Charlie Brown.
Mostly Queen Mary (39:03):
The Risk Parody Radio Show is hosted by
Frank Vasquez.
The content provided is forentertainment and informational
purposes only and does notconstitute financial,
investment, tax, or legaladvice.
Please consult with your ownadvisors before taking any
actions based on any informationyou have heard here, making
sure to take into account yourown personal circumstances.
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