We have been living off our portfolio since late 2012 (~12 years.)
In that time the market has gone up and down (mostly up.) Our spending has also gone up and down (mostly up.)
Throughout it all the portfolio has remained much the same… heavy on equities, heavy on US based assets, and heavy on simplicity.
Here are some charts that explain it all.
GCC Asset Allocation 2024
As of mid-March 2024, our portfolio looks like this (chart from Empower.)
Assets and Allocation
The portfolio continues to be heavy on equities and light on bonds and cash.
Here is the breakdown:
- US Stocks: 76% -> mostly VTI with some S&P500 and Small-cap trusts in my old 401k
- International Stocks: 15% -> 100% VXUS
- Bonds: 4% -> intermediate term Treasuries (IEI), very short term treasuries (individual), and I-bonds (included in this chart for the first time)
– included here is ~$50k of credit card debt at 0% interest that I have invested in short-term treasuries at ~5.3% as of most recent purchase - Alternatives: 4% -> 100% VNQ (a REIT) and REIT holdings as part of VTI (e.g. equities)
- Cash: 1%
Some interesting ratios:
Stock / Bonds-Cash: ~ 95 / 5 (not quite 100% equities)
US / International equities: ~ 83 / 17
Taxable / Pre / Post-tax: ~ 57 / 32 / 10 (Roth is trending up – was 0% 12 years ago)
Number of ETFs: ~4 (simple)
Data from previous years: 2016, 2018, 2019, 2020, 2021, 2022, 2023.
Changes over time
The portfolio snapshot from Empower is super helpful, offering a lot of insights at a single glance. I use it for easy rebalancing guidance… It is a great tool.
The one thing it doesn’t show is changes over time, which really shouldn’t happen if you are rebalancing regularly… but if you do something untoward like trade some big gains for a house or increase bond allocation because interest rates jumped, well then it is fun to see those changes visually.
As such, I also created some of my own charts. (Also because I like Excel a bit more than is rational.)
Because inflation has run hot the past couple of years, I created some inflation adjusted versions for the first time.
First up is how our investment portfolio has been invested on a percentage basis (e.g. US stock ~70% over time…)
Then this same chart showing dollars (not inflation adjusted.)
I don’t include home value in these charts because I don’t include equity in our retirement portfolio for purposes of the 4% Rule. This is in part why year 10 shows a significant drop in net worth (we traded stock for a house.) However, seeing real assets (house, car, boat, aircraft, etc… minus debt) as part of the mix is interesting for many, so I made those charts this year as well (using Zillow valuations, which… probably optimistic.)
Some interesting data points:
- Even though we bought a house, our investment portfolio is worth more now than it was when we “retired”
- not adjusted for inflation
- With recent market gains (late 2023 / early 2024) our net worth is at an all-time high (at least on the random date each year when I wrote this portfolio review)
- not adjusted for inflation
- Even after 12 years of living large our net worth has more than doubled
However… inflation
I adjusted all prior years’ data for inflation… this graph is otherwise equivalent to the one which proceeds it.
Here we can see that current net worth is actually about 7.5% below where it peaked in 2021 (which helped motivate me to sell some of the froth to buy a house) and we are up about 1.6x from our staring point. Total inflation over these past 12 years is about 35% ($1 million in 2012 had the equivalent purchasing power of $1.35 million today.)
Other assets
Rewards Points
Not a traditional asset class, but something with real value (not included in charts above.)
Alaska Airlines: 166,940 miles
Amex: 0
Capital One: 0
Citi: 0
Delta Airlines: 17,274
Hilton: 0
IHG: 283.275
Marriott/SPG: 314,613
Ultimate Rewards: 278,320
United Airlines: 0
Total value: $13,037+
This past year we flew to Taiwan for free, had some free hotel nights in Hawaii, and have booked 2 domestic trips and a handful of hotel nights at no cost out of pocket.
For the how and why of earning and spending rewards points, see: Introduction to Travel Hacking – Award Travel Series.
Social Security
At this point I am about 12 years away from being able to collect Social Security.
That has measurable impact on portfolio value today, as much as $1,000,000. That much cheese is kinda hard to ignore, although it is not included in the above charts.
Summary
Our spending is up. Markets are up. Our portfolio is up.
It’s nice when that works out.
There is probably something about our investment approach that has staying power – even with some recent inflation – heavy on equities, heavy on US based assets, and heavy on simplicity.
You can’t go wrong tracking your portfolio with Empower (affiliate link)
And most importantly your household has increased 2X.
Love the charts and progress reports. Keep it up!
I like that! Well said
Hola amigo, QQ: what account are you drawing from for every day expenses?. I’m currently 42 and have most of my $$ tied up in investment account (Roth 401k, IRAs) which of course have the 59.5 age restriction. So curious, how do you do it
>Taxable / Pre / Post-tax: ~ 57 / 32 / 10
57% of our portfolio is in a taxable brokerage account. I withdraw from that
You can access retirement accounts early without penalty with a 72t / SEPP. I haven’t written a post about that, but I can.
The Madfientist did a post covering the different options to withdraw money early. The SEPP beat out the Roth conversion ladder in that post. It has made me consider that option, so if you have time to look into that it would be appreciated. Thanks.
The main variables here are time and withdrawal amount.
If you are in your 30s do you really want to make a 20-30 year withdrawal commitment? Lots of things can change in that time, income wise.
If that contract is for a small amount ($5-10k) it is probably less important than for a big amount ($50k-$100k.)
That makes sense. The flexibility of IRA conversion probably makes it the better choice as it can be used with capital loss harvesting. Also, like you state any income would affect things so an early retiree probably wouldn’t want to go that route unless they were unable to work due to some impairment. Thanks again.
Or like many building projects, multiple tools can be used.
For an extended retirement starting in your 30s…
– start with spending brokerage account plus do annual Roth conversions
– in the middle use seasoned Roth conversions
– at age 52 or so start an SEPP
– at age 59.5 all access limitations are gone
As one possibility…
Since you haven’t worked for many years, how does that affect what you receive for social security? How does it get calculated?
Thanks!
SS is based on your 35 highest income years. Some of those years had $0 income for me, so my expected SS income is lower than if I had continued to work. But only a small amount lower.
See:
– Social Security And Early Retirement
– Social Security Return on Investment
Wow, have been following your blog for ages it seems as you are about 12 years away from SS… Are you planning to take reduced benefits at 62, or wait till full benefit?? Or is there a way to get it earlier than 62?
I will collect at 62: Why I Plan to Collect Social Security as Early as Possible
It is not possible to collect earlier, but we can view SS as part of our total portfolio and start to spend more in anticipation of that income: Spending Future Social Security Income Now
So I am a bit confused now :) at what age did you kiss goodbye to the corporate ?:))) I thought in early 30s, no?)
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following
Love the updates and the excel charts.
Can you expound on your Taxable / Pre / Post-tax breakdown?
How did you wind up with so much of your investments in a taxable account? Did you just meet the 401(k) match at your company and put the rest of your retirement savings target into a brokerage account? And when was that a sufficient number for you to feel comfortable to pull the trigger on leaving the workforce?
Right now my wife and I put all of our money into traditional retirement accounts (401(k)s and Roth IRAs) but I’m now just realizing accessing that money before 59.5 yrs old is going to be very difficult.
When we were saving most of my income for several years the IRA / 401k maximum contributions were too low… so the excess went into a taxable brokerage account.
Our goal was to have a portfolio worth at least 25x our ideal cost of living in Seattle (actually a bit more than we spend now.) This was across all accounts.
Accessing those funds is fairly straightforward but not flexible… you can tap them without penalty via a 72t SEPP
My allocation over the past 9yrs is similar to yours — just wondering if you’ve ever considered pivoting away from International and moving that it all to US? I’m REALLY struggling with this temptation.
Our portfolio would be larger today if I had never owned non-US funds.
But no, I’ve never considered selling them and going US only.
I picked a target asset allocation and am sticking to it. Selling a down fund to buy a winning fund is chasing performance and the opposite of what modern portfolio theory says you should do (portfolio concentration vs portfolio rebalancing)
See: US vs International Investing
Except for a few individual ETFs that emphasis options income on international holdings (QYLD, XYLD, and RYLD), I have divested of all international index funds/ETFs over the years. As you stated, they have returned less than US index equivalents, and with most of the world correlated to the US markets, they seem to be continual laggards. And even the holdings I mention above have not done as well as US only equivalents such as JEPI and others that I also hold.
Thanks for the update!
We have had such a long bull market decade and one cannot ignore the real possibility of a down/sideways decade. Does that thought ever worry you as a possibility? How would you keep your current income level if there was a prolonged down market?
Annualized returns for the s&p 500 for the last 15 years has been 12.3%. The previous 15 years was 4.0%. Definately nice to have been lucky to retire at the beginning of this huge bull run:)!!
I agree, it is nice to retire at the beginning of a prolonged bull market.
There is probably more nuance to it though. In the historical record, after 10 years of spending 4% the average portfolio would be worth 1.5x the starting value (inflation adjusted.)
If we benefited from a 12.3% growth rate for the past 15 years (our drawdown period) then we didn’t benefit from the previous 15 years of 4% growth (our savings period.)
Lower growth in the saving years means we had to work longer to get to a sufficiently large portfolio to ditch the paycheck. It goes the other way as well… if you have been working and building a nest egg these past 15 years then maybe you will have less growth in the near future because business cycles happen. Another way to say that… if you expected to get to 25x in 15 years but it happened in 7, you have been lucky and some unlucky times should also be expected.
Is it a possibility. Of course.
Am I worried? No.
How would I keep our current income level? I wouldn’t (income would go down in a prolonged recession.)
The reason I am not worried is because nobody ignores this real possibility. It is the one thing on which everyone agrees, and has been the subject of more research than anything.
What that research says is that in the worst times in economic history (world war, severe depression, global pandemic (Spanish Flu), fuel shortages and excessive inflation, a banking crisis) you could spend roughly 4% of your portfolio for the long term. This is the worst that has ever happened, and why people reference the 4% rule and not the 5% rule or the 6% rule.
Now… some might say that in the future something will happen that is worse than the worst we have ever seen. Sure, it might… zombie apocalypse, nuclear armageddon, etc… But it wouldn’t be rational to plan for it.
Would you change anything regards to your Taxable vs Pre-Tax vs Post Tax allocation?
I might have missed it but what numbers did you start with 12 years ago?
Starting point was around 75/25/0 Taxable / Pre / Post-tax.
Now that is ~57/32/10 (as shown in the post above.) If I add the house into the taxable mix it is ~65/27/8
I’ve been spending from taxable and doing Roth conversions so the trend makes sense.
Would I have changed anything? There isn’t really much I could have changed… I could possibly have made some backdoor Roth contributions and started from a 75/25/0.5 position, but I don’t think it would have made much difference.
Just added up our positions and 45/49/6 appears to be the breakdown. This does not include our own home or 2 rental properties.
I always figured if I keep it close to 50/50 should be in a good position. Both currently working so still opportunity to increase positions a little bit in any direction but money going in leans retirement at 55 or 60 percent compared to taxable at least for automatic additions.
My wife never worked in the US so we had just the one 401k, thus a smaller Traditional percentage.
The ideal ratio depends on target retirement age. The closer you are to 59.5, the less it matters how much you have in a taxable brokerage account with unrestricted access.
We have been following the KISS principle with our investments since 2013. Indeed, it had stood the test of time. Retiring has made it even more easy to do so. Thanks for the update. Carry on.
You mentioned that you still have holdings in an old company 401k. After all these years I’m curious why you hold on to it instead of just rolling it over into an IRA?
Is there some greater strategy you have that overrides simplifying the portfolio?
Outside the 401k I would invest in an index fund with a 0.03% expense ratio. Inside the 401k I have a similar fund for 0.01%
Have you considered adding Bitcoin to your portfolio?
I have about $7 worth. But I also have $1 trillion worth of Go Curry Cracker Coin.
Hey GCC, what are your thoughts on rebalancing through taxable accounts. In the past, I’ve always rebalanced through pre-tax but now those options are now limited. I know I can rebalance slowing via targeted withdraws but it’s not really hitting the target. Do you ever intentionally take a tax hit just to hit your portfolio target? Thanks
In the past I just did rebalancing as part of capital gain harvesting at 0% tax rate or as part of cap loss harvesting.
I don’t think I would intentionally take a big tax hit unless the portfolio was WAY out of alignment. Being 5-10% off of target allocation is not a big deal.
Perfect. Thanks for the reply.
Thank you for posting this – I always enjoy reading this every year. One quick question – when you are eligible to take Social Security, will your kids still be young enough to receive the additional payments? I am an “old Dad” and will be in that position for a few years of receiving benefits for minor children and their mother. But I have to weigh it against the lifetime reduced benefit for taking SS at 62. This would affect both my wife (who is about 9 years younger than me, so will likely live much longer. Since she never worked in the US, her ultimate SS benefit will be determined by my max SS benefit, so the math is tricky there). Just curious if you have looked at this.
Yes, our youngest will get a couple years’ worth of SS once I start collecting at 62 (he will be 16.)
We have a similar situation – my wife never worked in the US.
See: Why Early Social Security Provides the Greatest Spousal Benefit
I love your articles GCC. You’ve inspired us for almost a decade now and I’m convinced we wouldn’t have retired early without you.
Secret Retirees
Wow. What a great and detailed post. I am going to read this one a few times. Thinking about how to live off the portfolio before 59 the best we can is our next goal of understanding. Thank you for taking the time to write such a detailed and helpful post.
Hi Jeremy, your asse allocation on US stocks is mostly on VTI, that is exactly what I am doing around 78% on VTI. Vanguard Financial advisors charge little about $300/yr for $100,000. Is it a good idea to pay them or just going solo following your advice? I noticed that my Vanguard financial advisor also has VTI, around 45%.
Rather than pay an advisor I would spend a couple hours reading The Simple Path to Wealth.