This is What a Real $3.2M Retirement Portfolio Looks Like

Have you ever found yourself at a crossroads, wondering how to determine the perfect mix for your retirement portfolio? The questions can be overwhelming. What stocks should I own? What bonds should be in my portfolio? Where should I allocate them? In this video I walk through a real-life example to shed light on the steps taken to guide one couple through this intricate process.
Meet Todd and Katie
Todd, 66, and Katie, 63, approached us with a $3.2 million portfolio, seeking guidance on allocation. Despite diligent saving and investing, they felt uncertain about their financial security in retirement.
Building a Foundation: Goals and Income
With a retirement goal of $8,500 per month, including healthcare and travel expenses, Todd and Katie aimed for an additional $20,000 annually. Analyzing income streams, we considered Todd's Social Security and Katie's with a spousal benefit.
Understanding Cash Flows and Expenses
We broke down living costs, housing, healthcare, and travel expenses. Long-term care costs were factored in to ensure financial support for unforeseen circumstances.
Portfolio and Account Allocation Strategy
Determining the annual portfolio draw, we planned to source $600,000 from their taxable account for flexibility in tax-related strategies. Our recommendations focused on allocation strategy, ensuring each investment served a specific role.
Diversified Portfolio
Crafting a well-diversified portfolio for stability, we recommended conservative investments for the initial years. Emphasizing diversification even within their Roth IRA, we aimed to balance growth potential.
Addressing Current Investments
Shifting from predominantly large U.S. stocks to an 80-20 portfolio (80% growth, 20% stability) aimed to balance growth and risk mitigation.
Todd and Katie's journey exemplifies the intricate yet rewarding process of crafting a retirement portfolio. By aligning investments with goals, addressing income streams, and strategically diversifying, we aimed to ensure they could enjoy a secure and fulfilling retirement.
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⏱Timestamps:⏱
0:00 - Todd and Katie’s portfolio
2:05 - About them and their goals
4:28 - Income and cash flows
8:55 - Considering tax strategy and markets
14:17 - James’s recommendation
18:25 - Strategically allocated funds
22:08 - Dream big
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[@jonathanduncan2665]

Nobody, and I mean nobody on KZbin is this generous with their financial information. Thank you!

[@RootFP]

Thanks for watching!

[@keithmachado-pp6fv]

I agree. He is outstanding compared to the others out there

[@chrismarion4385]

I’ve watched a lot of videos on this subject and studied for many years - this is by far the most detailed and straight forward instruction I’ve seen. Outstanding job!

[@RootFP]

So glad to hear that. Thank you.

[@xDustin]

LOVE your videos. It’s the only place I can find these real, rubber-meets-the-road examples of the generalized advice that I can find EVERYWHERE else.

[@dallison1961]

Another great video that explains the basic concepts and pointing out the weighting issue with the index funds. I also like how you moved them into specific bond funds to address their short and medium term spending needs in case there is a market correction. I share the concern raised in the comments about the capital gains tax hit when reallocating the taxable account into bonds along with the interest generated in the taxable account.

[@myjessiedance]

Love James presentation! Clear, concise, make a lot of sense. Thank you ❤

[@garethwalters2909]

Love this James, so interesting to understand getting the right portfolio split as you approach retirement. Please keep going with these real life examples, they're great and so well explained!

[@clarkmeredith2034]

Thanks , James. Your communication is clear, detailed and understandable.

[@RichardJewkes]

James, I love watching your videos. They are very informative and helpful!

[@bryanwhitton1784]

Just to complete this book I have written. My wife and I really enjoy your videos and this one in particular was very relevant. Thank you for all the work you do.

[@vamsiallada8855]

This was amazing!! Really enjoyed how you systematically went through the process. So extremely helpful! Thank you for all your valuable insight. You have a heart of a teacher and it is greatly appreciated.

[@ravipad6268]

You are awesome dude!! I know quite a bit but you answered questions that I was looking for "a long time". THANK YOU!!

[@GuttersMN]

Watching this video has completely changed our approach to our financial planning process. Thanks!

[@dannycamardelle2592]

Thanks for sharing a real world example in such detail!

[@sarahsunsetpark]

Thanks James. I love seeing these real life portfolio examples! I hope more people find your retirement videos!

[@RootFP]

Thank you, Sarah!

[@JK-pc7zf]

That was awful

[@ericvoorhees1176]

Awesome! Thanks for all the great information.

[@mattchang4694]

Really enjoy this type of case study videos!

[@jrizzle141]

Holy cow this was such an incredible video, props man. I love it.

[@user-xh3zm7vl1k]

So so so helpful and clear. This is the framework I have needed to set some of my retirement angst aside. You are a gifted communicator, instructor and coach. Thank you for sharing your gifts via these online resources.

[@ChristinemSA]

Seeing the thought process of the entire portfolio, withdrawals, and living expenses was incredibly valuable. This gave a full picture. Thank you!

[@rzhang3039]

Another great video, as you always do. Thank you, James!

[@karinstucchio]

This was super helpful. Thank you!

[@GJC-ih7cs]

So you sold $600,000 S&P 500 fund from their joint account to reallocate into fixed income? What about the large capital gains tax?

[@halbouma6720]

Yeah, plus to take the tax hit and replace it with 20% growth/20% value funds - those two combined are not going to outperform the SP500 in any meaningful way. Or the international stocks - I've been trying to be diversified like this for decades and its all mostly underperformed. It doesn't mean it will always be this way, but Buffett just again said they're mainly looking to invest in the USA because all the large USA companies do international anyway. However, a good small cap value ETF like from Avantis can outperform - even in the emerging markets too. Those areas I would get. Overall, there's no reason to rush and take a tax hit to diversify with underperforming assets. 2008 also showed that being diversified doesn't always help. Another red flag, no house repair expenses in the budget - a $30k roof job would cause the yearly budget to go over by 20%

[@halbouma6720]

Anyway, this exactly is the problem. The cost basis was $600,000 so that would be capital gain income of $386,000 - which would jack their medicare tax bracket as well. The new portfolio value shown can't match the old one due to this either. If the 660K of bonds was setup in the 401K, that's about $2k/month. Since they talked about Roth conversions, it also makes sense to have the bonds there for this as well. They don't want to be withdrawing from the 401k when those assets are down 25%. VOO brings in about $1200/month in dividends. To make up the other $10,000/month, I would move VOO to a brokerage, and sell a 30 day month deep in the money call to cover the next 4-6 months. Then ladder covered calls against half of the shares - like if you know you need to sell another 100 shares in 6 months, sell another ITM call 6 months out. That could pay you $2200 in premium right now. Plus they can sell puts. This would help drive up the income from the SP500 assets rather than liquidating it all at once and hedge against down years he's worried about. They could use the extra income from this to diversify and fund the Roth IRA conversions.

[@DividendRick]

I just dropped my 4th dividend video. Keep making these great videos.

[@ubersticks]

2:52 *ANNUAL* out of pocket is $5k --- not monthly. I had to rewind this several times to get my heart started again.... 🙂

[@robertsesi]

I was about to comment on this too, you beat me to it. James should fix this in his video, pretty big mistake.

[@steveb2346]

And that appears PER PERSON, if I’m reading the screenshot correctly.

[@clbcl5]

Your not doing any traveling if you have 5K in medical a month.

[@pandabearoceanpark]

Very help explanation. Thank you!

[@frankb1]

James you are a good teacher

[@ek6151]

Really enjoyed this video about portfolio construction.

[@sco0tpa]

Great video. I like that this couple has a good amount in their portfolio but doesn't have a ridiculously high amount of monthly expenses.

[@M22Research]

Excellent discussion - not for specific advice, but rather for the thought process. Good wisdom in this thinking. You appear a lot younger than your advice sounds!

[@i-postm4943]

I'd be concerned if a planner has managed $ through a long bear market.

[@robertsesi]

Regarding recency bias for tech stocks, you can't compare the tech landscape from 1972 to what it is today. Back in 1972, tech was in its infancy, now advances like AI, mobile and cloud computing are set to transform every part of our lives and every sector.

[@theowenssailingdiary5239]

Exactly-just saying 'recency bias' is the laziest thinking. It assumes nothing has changed. Companies are much better run. Even governments (arguably) are fairly quick to act in 'bkack swan' events. Anyway, this douche bag caters to multi million dollar clients. His whole shtick is convincing people with big money that they still need to pay somebody like him. I mean, look at the expenses in this video. Find somebody else mate.

[@alanvonweltin6820]

100% - Recommend reading the now 10 year old paper "Software is eating the world" which outlined a wave that has done nothing but demonstrate the exponential growth of technology as it reshapes our world. Further, you can argue that many of the large S&P companies are effectively global in how they do business so again, having an international allocation may be outdated

[@asheman007]

He's not saying that you shouldn't hold tech stocks. Instead of holding the S&P, he's holding a concentrated position in tech stocks, which is VUG. Then he diversifies by holding the other component of the S&P (i.e. VTV) but he wants to hold these as separate positions. For a retiree especially, this makes perfect sense. In September of 2022, QQQ and VUG (tech stocks) were down 33%, while VTV was down 15%. And in terms of recency bias, it's not an issue of whether technology is part of every sector today, it's how expensive is it to buy tech companies relative to their earnings. That's why it's important to hold something other than tech stocks, particularly for someone in retirement drawing from their accounts.

[@JayRay9999]

I watch ALL your videos, always excellent, and I always agree. I want to say that on this one: I believe "the bonds / cash like" investments should be in the 401k/Trad IRA. The reason is that they are taxed as ordinary income in both a taxable account and in a pretax retirement account (when taken out). The taxable account should have the equities as they are taxed at capital gains tax rate (Could be 0%!), can't pass that up! You may say what if the market goes down, you don't want to sell equities (sequence of returns risk) in a down market. Well, you sell the equities in the taxable account and use the money for your expenses. And then, BUY the equities you just sold with the cash that is in the 401k/Trad IRA. * Buy a different equity if you are claiming a loss (Wash Rule) or wait 30 days. It is the best of both worlds, right? Thank you James!!!!

[@larryjones9773]

But most of us have the bulk of our equities in tax deferred accounts due to the SIGNIFICANT tax deduction benefit. There's no easy way to get those equities into a taxable account. Gains from a taxable account are required to be included in adjusted gross income, even if the tax rate is 0%. Gains from Roth IRAs are taxed at 0%, and are NOT required to be included in adjusted gross income.

[@davidk6498]

What a boot licker he must be your son you can do this your self they want you to believe you can’t let us do it you get on with your life intill you add up the fees one day 😮

[@JayRay9999]

@@larryjones9773I am not sure what you mean by your first 2 sentences. Equites or Bonds/Cash, you still get a tax deduction benefit, Right? And you get them out by selling them inside your Tax Deferred account and then using the cash you have in your taxable account to buy equities, easy! And your 3rd sentence: Both capital gains AND Interest are both included in AGI ... But Cap Gains could be taxed at 0%. And your 4th: Right Roths are great, and you should always strive to build up your Roth account, many ways to do that ...

[@jmo4225]

Hi James, love the videos of real life examples. For the reallocation of the taxable funds, is this something you would recommend doing over period of years or all at once (Given the potential tax hit)?

[@pattylovesneal]

You are a gem, thank you!

[@randomjoe1131]

Love this! Do more videos on this topic please 🙏

[@jaspersanfellipo7184]

OUTSTANDING video. I think your best one so far. I didn't see the link to the "dream exercise" video. ?

[@MerryHampton]

Great video. Making me think about our portfolio. We are invested in separate stocks and a bond fund but your video made me wonder what are the pros and cons of funds vs. individual stocks. Have not asked about dividend stocks either. Another good question to ask our financial advisor.

[@dragon43inf]

Great information, thanks

[@Jl-620]

I would assume this reallocation to bonds in the taxable account is done over a few years before retirement. Otherwise the capital gains tax hit would be high and certainly much much more than the 9k suggested here for first year of retirement. That’s why it is so important to execute this planning in advance of retiring, especially for a portfolio that only has equities in the taxable account, which is the usual recommendation for asset location, but can differ in retirement as in this example.

[@timb6985]

I was thinking the exact same thing. They have $1mil in the taxable account, almost all VOO with a basis of $600K ($400k of gains). So reallocating 60% of this to bonds is going to result in capital gain income by $240K. Plus they have almost $2mil in 401k which they might want to do Roth conversions and that more ORDINARY INCOME. Ugh, what a tax bill. And if they leave it to grow in the 401k, they are going to have skyrocketing RMDs and get hit with an incredible tax torpedo when Todd dies and Katie is single and collecting the RMDs.

[@andylewis5662]

This was another excellent video. Thank you, sir!

[@RootFP]

Glad you enjoyed it!

[@jaspersanfellipo7184]

James, I thoroughly enjoy your video content. Was there a video you did similar to this one where you profiled an actual client couple seeking advice for a much larger portfolio? I thought I saw it in your library of videos but now can't find it. Thanks.

[@joselabiosa8892]

James, Great content. Very clear proposal. I wish you would have also discussed the software used albeit looked like a Morningstar portfolio analyzer. Presumably you also used correlation- risk factors in order to abate the risk per return from risk frontier modeling allocation and location of assets. I'm in the 3 bucket camp burning through my taxable accunts to pay for a chunk of Roth conversions, taping a modest amount of TSP and a modest amount of legacy Roth for dedicated wants. Inflation and market fluctuations were pretty brutal from 2021 - 2023 for those in retirement. I opted at the front end for a 5 year SPIA cash flow to fill the gap from deferring my SSB just prior to the bonds market panic selling. I'm glad I did and that the markets recovered in 2023. The challenge now is to look at investment models in a stagnating economy and diversifying the portfolio to bring in foreign cash flow as the dollar continue to devalue. Is this something you have looked at?

[@lordabhikingfisher8087]

I am no expert on currency but $ is still world's reserve and will be for our lifetime. It will be perhaps a diff story for our kids. But in general, with Japan & China's declining steeply (mostly due to population demographic shift) and Europe/Russia becoming insignificant in world economy, India far behind US to pose any real threat; US $ will remain the king in our life time.

[@MichaelToub]

Really like these various net worth real world example

[@samhu3855]

James. I have watched this and your other videos, and like them. I learned a lot from them. One question i have for this (as well as other videos) video is: before the exact portfolio withdraw strategies, how can you already have the taxes amount??

[@JulietFerguson]

I completely agree. You see the first $100k is always the toughest, I didn't really take investing seriously until I was 30 back in 1998. Today, I'm 55 and have a decent $3.2M nest egg, thanks to the careful supervision of my CFP. After learning all of this, my only regret is not starting earlier when I was 25. It may not seem like much but those extra 5years are the most important.

[@jefft9729]

Thank you for an informative and well presented video. A few questions: 1) How does your multi fund portfolio compare (wrt net returns and volatility) to a simpler (and more manageable) 3 fund retirement (IRA) portfolio consisting of, for example, Vanguard Total Stock Index (50%); Vanguard Total International Stock Index (10%); and Vanguard Total Bond Index (20%)? Additionally, outside of the retirement account the Vanguard Federal Money Market Fund (20%). 2) How does you firm’s management fee compare to the above Vanguard portfolio? Do your clients pay separate fund fees besides your management fee? 3) How often do you rebalance the portfolio? Thank you again.

[@joekuhnlovesretirement]

5 years is average peak to peak but we don’t retire into averages but rather real returns. Check out 2000-2010. This period gets ugly with withdrawals. 8-10 I believe is better to plan for. Love you channel and this video. Great logic and flow.

[@dlg5485]

8-10 years of expenses in low return assets is WAY too conservative in my opinion, unless you have a massive portfolio and don't need much growth or don't plan to spend very much. Most retirees can't afford to be that skittish, they need to generate some growth in order to stay ahead of inflation and protect their buying power over time. I plan to only have 4 years of expenses in low risk assets when I retire. That will be plenty since I have a high risk tolerance and a dynamic plan involving rebalancing assets and cutting spending when appropriate, in real time. That is the key to success, no matter what your risk tolerance is. Parking too much in cash/bonds is far more risky than simply maintaining a reasonable asset allocation and utilizing dynamic planning, again, unless you have a huge portfolio and don't need growth.

[@rayzerot]

You don't need to sell at the peaks, you just need to avoid selling at the bottom for multiple years in a row. 5 years will definitely get you far enough along that your portfolio can soak the rest. More than 5 years and you're starting to stifle the growth a portfolio needs

[@nunuvyurbiz123]

My fixed income is 25% or ten years expenses, whichever is greater. And the 25% is split between nominal (cash, total bond, munis) and inflation protected (I bonds). The rest (75%) is total market.

[@itsthegoodstuff]

Great presentation. Good details. Tx. One question. How has Nasdaq done over longer time for tech stocks. And what is the industry that has done best?

[@skobuffs5761]

James love your videos. Quick question...you talk about the market tanking 30-40%. What about stop losses that will hold your loss at 10%?

[@LetsNotBickerAndArgue]

Could you add a link to the Dream Big video you mention at the end? The link did not pop up on the screen as they usually do. I appreciate your sharing this example and for clearly explaining their options.

[@shsal110]

At 7:07, wouldn't you also need to budget for maintenance and other capital improvements needed for the residence? (New roof, furnace etc.) thanks!

[@Jupe367]

I love this channel.

[@laurenceridgwell7011]

Great video! I’m curious why you did not include any TIPS exposure within the bond allocations?

[@Bill-vk7fh]

Good example. I would lie to see the follow on about their Roth conversion strategy. Seems that a better strategy might be to take some from their tax-deferred accounts and pay the tax at the low rates now as well as Roth convert.

[@jefflloyd394]

Very good. I would plan to take SS at 70 as best and cheapest longevity insurance, also better for spous and gives bigger roll over window to reduce RMDs. Can also hedge against down turns with more roth roll over. 50 % down allows twice the equity roll over for same tax. Shame no HSA - best account there is. I liked to asset allocation and location - thanks again.

[@DrMediterranean]

An important consideration is that 20-50 years ago, globalization had not reached nearly what it is today. There is inherent international exposure now with most large cap US companies due to globalization.

[@rebellb258]

Great explanation. I’d be curious how you’d handle adjusting the brokerage account in the manner you described. Going from an S&P fund to a 60/40 split would (presumably) be a very large taxable event. How would propose managing that situation?

[@tomwalsh4592]

Any issues with realizing taxable gains from the joint account when reallocating?

[@reasonableaudiophile2377]

Totally great video. Only thing I would say is you cannot go based on time when comparing exchanges or indexes. What you did not consider is how the world is changing and it’s this change (tech everywhere) this is driving accelerated growth in QQQ.

[@sissydreams7494]

This is an excellent breakdown and explanation of your philosophy. However, most advisors place bond investments INSIDE tax deferred vehicles (e.g., IRAs, 401k, etc); whereas, you placed them in the taxable account. Can you discuss this further?

[@noreenn6976]

Great video but I can't relate. Please do more videos using singles in the example and retirement accounts with a much lower balance.

[@shawnbrennan7526]

The principles are the same though: What are your expectations for retirement? How much will that cost? What are your income sources and current portfolio? What needs to change to support your goals?

[@SR-ob3wn]

I think the video would be the same if the spending needs were $20k a year and the portfolio was $300k. 🤷🏼‍♂️

[@philshelleyruch1033]

it becomes an issue of interest paying funds( bonds, CDs, MM) being held in the brokerage account subject to ordinary tax rates versus qualified dividend rates when one may be in a higher tax bracket. Do you just pay that "penalty" for having these funds at the ready? Also, as one approaches age 70 1/2, having funds available for QCDs ; means having interest paying funds in one's IRA or 401K. Great analysis of asset allocation and location as retirement proceeds.

[@martinneumann9345]

The taxable portion could be put into MYGA ladder and yield over 5% tax differed allowing bigger draw on IRA or Roth conversion.

[@dmoon9037]

What is the risk tolerance for Todd & Katie? I watched this whole episode, sorry if I missed your discussion of it - you did discuss sequence risk and inflation risk, but not the clients’ tolerance for it.

[@vtrav]

What planning software do you use. I like the simplicity of the visual presentation!

[@aledahl]

Looks like a version of Right Capital.

[@jpturner171]

Thanks James….excellent video…..as usual!👍🏽

[@hcs77135]

This was excellent. My question is, did your asset location take into account tax consequences of holding 40% of taxable in bonds, taxed at ordinary income rates, while allocating presumably more stocks into tax-deferred, which would also be counter-intuitive from a tax point of view? Was this approach specifically tailored for making large Roth conversions before SS (so that the stocks in tax-deferred would actually end up in Roth)? And once SS (and/or RMDs) kick in would you bump the equities in taxable back up to 100% and re-allocate to bonds in the remaining tax-deferred? Or always keep 5 years of cash/bonds in taxable?

[@cbrottler]

I know this won’t be applicable to a lot of folks but let’s say a couple is projected to have about 100k worth of pensions annually, how would they approach a tax strategy at different levels of portfolio balances at a retirement age of 60. I’m assuming it’d be the same framework you’ve mentioned before but the benefits of, say, a Roth conversion would just be less.

[@rickdunn3883]

You talked a small amount about Asset location, what about asset location and taxation? Also, Does it make any difference which Asset class fund one withdraws from each year. Just withdraw from any (while minimizing tax implications) and rebalance. The result is the same as withdrawing only from the fund that did well. Its just algebra, right?

[@kermicgreen3370]

I agree with all the previous comments...great VIDEO. So much food for thought! You are a gem. Instant subscription (if I wasn't already a subscriber lol)

[@dlg5485]

I have a HSA which will likely represent about 10% of my total portfolio when I retire at 65. However, the majority of portfolio is in a tax deferred IRA with about 20% of in a Roth, and about 5% in a taxable account. I would love to see a hypothetical example of a single retiree with a somewhat unusual account mix like mine.

[@gregm3023]

Recommended portfolio asset location is not tax efficient. Carry only tax efficient index funds (VOO or VTI) in taxable brokerage. If forced to sell during market drawdown simply sell bonds and rebuy equities in tax deferred. Money is fungible and portfolio should be viewed as a whole with strong consideration regarding income tax bite

[@Omar-et7sb]

Your content is awesome, but the only thing that irks me about CFP's is the obsession with throwing funds out there that can be easier to capture with simple fund of funds. For example, Your VIGAX, VVIAX, VTMGX, VBTLX, VEMAX, VFITX fund selections could have easily been summarized on VASGX. That would have gotten you a cheaper exposure of very similar composition, and the benefit of constant re-balancing built in - no need to portfolio fiddle. So you created a complex 9 fund portfolio that could have been accomplished with 3 at worst.

[@danvivian6018]

Well ya, that would be far too simple and then he'd be out of work

[@testodude]

Did you miss the part where he said using all Vanguard funds was for illustration purposes only? If I had AUM with someone, and they recommended a "basket of funds" fund, I'd promptly fire that advisor.

[@tintinet]

stock and bond performance has been correlated lately -bonds don't add stability

[@CalmerThanYouAre1]

This video really highlighted the benefits of a simple 80/20 portfolio of a total stock market index fund and cash. Focus on tax and fee efficient investing and withdrawal strategies using a combination of qualified accounts and a brokerage account. To the degree you’re risk adverse, keep working as long as it takes to stack as many years of living expenses in cash as allows you to sleep well at night.

[@timb6985]

I would put all the bonds in the IRA/tradition 401k (so that that account doesn't grow much more and it is the most stable -- the higher that grows the larger the RMDs and subsequent inheritance to kids -- someone is going to have to pay ALL THE TAXES on that money as ORDINARY INCOME. I would use the taxable brokerage account for EQUITIES that don't force/distribute much Dividends or Capital Gains. Then use that account only when necessary and if the couple dies with a lot left in the account, the STEP UP cost basis will let their kids inherit that money TAX-FREE. Yes to converting some 401k to ROTH but that will cause greater taxes (increase marginal taxes and may even result in IRMAA taxes if they are not careful).

[@drew4980]

How do you decide between pulling money from the Roth IRA or taxable brokerage? So the Roth IRA distributions are tax free and the taxable brokerage would have some amount of capital gains assuming your traditional to Roth conversion puts your income high enough to pay taxes on long term capital gains. Is that why you say to use Roth before taxable account?

[@lordabhikingfisher8087]

I plan to go to a three bucket strategy. i.e have a bucket that will cover 2.5 years of bad market - mostly in CD's and Govt i-Bonds. Rest will be in S&P500 ETF regardless of taxable or tax exempt accounts. I dont like to put money in funds that I done really understand. Example Fidelity dated funds. They tend to perform poorly regardless when market goes up or down. Fund managers are crooks. My spend is similar to the example James uses but my investable asset is significantly more and that gives me more freedom to take some additional risk. Converting to roth IRA will be very important to me.

[@SR-ob3wn]

Consider buying treasuries instead of CDs, banks will always take a cut off the top.

[@bakntheday]

Is it wise to keep your taxable income down until 65 to qualify for a better ACA subsidy? Would save a lot on monthly insurance premiums,.

[@panodanno]

Good information. Thanks. Interesting that you used 2.5% growth (inflation) for Social Security, 3% inflation for living expenses, and 5% inflation for medical expenses... That suggests that Social Security does not keep up with inflation for this couple. Why is that?

[@timb6985]

It's because of the way that they only use about 2 specific months of the year when calculation SS increases plus they don't necessary reflect the increases that seniors are most likely to incur. James probably used historical averages.

[@joy945]

Social Security absolutely does not keep up with the real inflation experienced by retirees. I think that since about 2000, retirees have lost half of their spending power. As time goes on, more and more people are projected to be spending all of their social security payments on medical expenses.

[@user-bt9cm7ze4c]

Owning enough rental properties like i do as to where the rent pays all your bills as part of your overall portfolio makes life a whole lot less stressful in retirement. It allows me to keep my "ticker symbol" portfolio a lot simpler. SCHG and SCHD. That's it. Although i have been buying short term T bills now that rates are over 5 pct.

[@bryanwhitton1784]

In the "Dream Big" segment of this video you reference a video but we didn't see the link and you didn't say the title. Could you either answer with the link or the name so we can follow up?

[@PDXLANDBARON]

Index Funds for equities, low fund expenses. Bond funds to balance out depending on age. Real estate passive income/loss and collect SS at 62. Once your net worth passes $5M you don't think about vacations, property taxes or mortgage. Roth conversion takes place against passive real estate loss. Combine diet and exercise and you have made it.

[@erdrick22]

James Canole knows his stuff.

[@ms8742]

78% in the market at age 66? I think that is way too aggressive. Also, too heavy in International. No direct ownership of muni bonds, no 3 to 5 year fixed annuities for guaranteed income while the rates are still good. I think this portfolio has a ton of risk for their age and as others have said, has too many funds. I just retired at 56 with a couple mil more than this couple and my overall allocation is 50% equities (almost zero international and all ETF funds and some dividend stocks for income), and 5 year fixed annuities, Munis, some bond funds, structured debt paying 7%, and a couple CDs paying 5%+. I think you have them in way too much risk. Capital preservation should be an additional focus.

[@user-uk6db3mb2f]

Great video. My only issue is that your example offer is too complicated. You could get the same 80/20 without so many funds. Secondly is there a reason you are using mutual funds as an example versus ETF's? ETF's are usually more cost efficient and liquid. Granted either could be used to reach your goals. Lastly whether the market is up or down, with quality holdings does the price change matter much if the dividend is the same or increasing? I think most have a goal to eat less into the principle and use income from your investments.

[@edbalboni]

You should have included an explanation of potential capital gains tax on their taxable account. Sure, they needed to move $600,000 into a safer investment and pay the tax but the rest could have stayed in the SP500 until needed. Not at all clear that paying the tax now is better than delaying it and accepting a little added risk.

[@CaptainBenjamins]

I’ll stick to my S&P 500 fund. If that is risky, then just have to retire with more money then so I take a lower withdrawal rate

[@johnyjsl9219]

thanks for the good example James.

[@user-bh1lk9rj7j]

How about inflows from the portfolio?

[@rajanvaradarajan4575]

own 25% QQQ, 25% Voo ,10% VXUS, 6% VB, 10% very short term bond ( FLTR, FLOT, etc), and 14% in high-yield savings and CDs - you should be fine in the long run - do not spend too much in the beginning of retirement to mitigate sequence of returns risk. And do not spend too much in retirement. Period. Downsize and move to low cost states ( FL, GA, etc ). Holding too many funds and rebalancing every year is a hazzle for retires.

[@brianh6680]

Average market downturn lasts just under 1 year (from high to low to recovered). Wondering why 5 years of living expenses need to be conservatively invested. A buffer of 2 years seems sufficiently safe.

[@mark5846]

He could save expenses on the retirement date fund. The Vanguard fund of the same retirement date is 0.08 per year instead of 0.61. Your suggestions have quite a few funds. I like the way you use Vanguard funds but Is there a way to accomplish the goal and reduce the number of funds? They need a simplified portfolio so they can worry about their next vacation not their complex portfolio.

[@mstryff]

Yea this is overcomplicated to convince you that you need to pay someone to tell you how to do it. Read the simple path to wealth.

[@SR-ob3wn]

80% VTI 15% 2-3 yr treasuries 5% MM 🤷🏼‍♂️

[@MattT157]

I agree with you but he needs to complicate the portfolio to justify his fee. Who is going to pay an advisory fee for a target date fund? Most advisors do this.

[@tybrent2841]

How do i get these sheets

[@cristianb5612]

Thanks for the info. There will be a tax liability created from switching funds in the taxable account.

[@barrylorenz7604]

Terrific job James, thank you, what's your opinion of creating an immediate annuity for the $600k parked outside of the market in their situation?

[@NEWHAMPSHIREGUY]

James, great sample review! My biggest concern would be the tax implications of moving $600K in one year from the S&P to other funds. Is there a strategy for that?

[@shawnbrennan7526]

Since it’s in their taxable account, the tax consequences shouldn’t be that severe as they’ve been paying taxes on interest/dividends/STCG/LTCG each year. But we’d have to see their cost basis to know for sure.

[@BrunoEnriquezStruck]

@@shawnbrennan7526 STCG/LTCG are only payed when the investment funds are sold not each year.

[@et_phonehome_2822]

You are screwed if you never moved to a Roth IRA during your working years.

[@johnbirman5840]

Interesting. But w/ 60k coming from S.S. they need about 140k from 3.4 million. At present a 10 year Bond pays 4.2% which is 142k. And if they keep till maturity they can not lose principal or interest.

[@RootFP]

They’d struggle to keep up with inflation in that scenario

[@curtwuesthoff6377]

My wife and I were in a similar situation three years ago, but we were a bit older @ 60/57. We asked our FP to run scenarios that combined options, some of which are presented in your video. We refined our plan to retire earlier @ 62, travel more, and assist our two grown children with buying a home. I am retired, with a much lower stress level, and enjoy helping out more around the house, helping my elderly mom, and more. My wife continues to work part time, so we have more time to travel, and she intends to retire in one year. Suggest that you include a couple of combo options beyond one-at-time. Also, I’m new to your videos but if you’re not already doing so, please include Monte Carlo simulation to model the impact of market risk and uncertainty. My FP typically provides the resulting probability of success (%) based on a set of investment variables, which I believe is valuable input.

[@drew4980]

Would you owe a lot in taxes if you convert the taxable brokerage account into more conservative investments all at once? I would imagine youd pay the full amount of long term capital gains unless you do the conversion in a year you have low income to pay 0% long term capital gains.

[@bryanwhitton1784]

We are looking at your Academy but were wondering if the software that you use is included with completing the course?

[@johndeacon4302]

What software are you using to analyze this data?

[@abcdefghijkl5408]

Excel