We live a stone's throw away from you in a long-established 55+ mobile home park near Starr Pass resort. Tucson is unique in having not only a plethora of such parks that help keep lot rent fairly competitive, but also in having at least three resident-owned parks where you pay a higher price for your old mobile but own the land it sits on and are thereby protected from lot rent spikes and the ever-present threat of the park as a whole being sold to a new corporate owner who either jacks up the rent to unaffordable levels or razes the place and builds condos or single-family homes. You may be interested in this U of A study on this issue: https://www.mapazdashboard.arizona.edu/sites/default/files/2021-10/MAP_MH_Final_Oct5_2021%20V2.pdf
This is just fantastic! Thank you so much for sharing your well thought-out and organized approach. I hope you'll consider writing a separate piece on this for Humble Dollar.
I appreciate the wise reminders Mr. Clements. Recency bias seems to be part of human nature - especially when "recent" spans more than a decade. For what it's worth VT is 66% U.S. stocks and has been at that level for some time, reflecting of course the incredible valuations of the so-called Magnificent Seven tech stocks. I believe I read that Nvidea alone is worth more than the entire stock markets of several countries. Also of interest to me is that U.S. small cap value stocks have been a better diversifier than total international funds like VXUS. But of course championing them is likely to get one an even colder reception than touting the benefits of global diversification. And heck, going international is basically a small (ish) cap play anyway, given that all of the mega cap firms are U.S.-domiciled. I just stick with VT and am grateful to not be able to meddle with U.S./Int'l. percentages anymore.
Well-said! And because the Magnificent 7 tech companies that dominate the S&P are U.S.-domiciled holding VTIAX/VXUS diversifies you away from mega cap companies and gives you ownership of shares in industries other than tech and finance. And of course international and value stocks are very attractively-priced. How much in international is of course subject to endless debate but both Jonathan Clements and William Bernstein recommend something close to world market cap, which is currently ~60:40 U.S./Int'l. Conveniently one can have that in a single ETF - Vanguard's VT. I think for most investors that's a much more sustainable approach than tilting to small cap and/or value funds.
That article by John Rekenthaler really is excellent. I'm with you - and, for that matter, William Bernstein - in seeing no point in SPIAs (or any other type of annuity) when TIPS are not only easy to buy, default risk and hidden-fee free but also support a 4%+ spending rate with the all-important guaranteed inflation protection that annuities don't offer. My wife and I are also at 50:50, but instead of a TIPS ladder we use half each VTIP and VGSH along with 3 years of residual (after Social Security) living expenses in SGOV. Our equities are as plain vanilla as it gets: 80% VTI, 20% VXUS. The barbell of short-term 100% Treasury bond funds is something I learned about from Jonathan Clements, though of course he has a much higher equity allocation than we do. We went this route in part because the mechanics of actually spending the individual TIPS given that they're all in our IRAs and RMDs are quite awhile away for us were more complex than my wife felt comfortable with. The short (~3 year) duration of these funds allows us to truly take our risk almost entirely on the equity side, with the peace of mind of knowing that even in a rising interest rate environment we could raise cash in an emergency without losing much if any money. And of course we're agnostic as to whether inflation-indexed bonds will outperform nominals or vice versa. All that said, I envy the certainty and paycheck-like mechanics of what you've chosen and am sure it will serve you well in what I hope is a very long and happy retirement for both of you. I really enjoy your writing!
Dr. Peter Attia and others have been really emphasizing the critical importance of not just general strength training but in particular foot and (especially!) big toe strength in preventing falls. This article goes into somewhat granular detail but is at least worth a skim: https://www.humanlocomotion.com/the-human-locomotion-fall-prevention-protocol-how-to-create-a-customized-treatment-program-to-maintain-strength-and-agility-as-you-age/
"A Vanguard article that was published this spring I believe calculated that with expected bond returns in the near future a portfolio of 20-40% bonds would produce a healthy return with much less volatility." Actually, the most recent papers from both Vanguard and Morningstar recommend exactly the opposite: 20-40% equities: "For retirees with time horizons both shorter and longer than 30 years, portfolios with equity weightings of 20% to 40% also generally supported higher withdrawal rates than more equity-heavy portfolios." In a nutshell the reason for this is that intermediate-term bonds are paying 4-5% (and if you stick to Treasuries, which you certainly should there's no default risk), while equities are highly-valued by historical norms. https://www.morningstar.com/retirement/good-news-safe-withdrawal-rates
I really enjoyed your article! We have a lot in common,, starting with the fact that we live in a 55+ mobile home park in Tucson. I couldn't figure out which park you bought in (and respect that you may want to keep that private). We're in a smaller community than yours (Park West with about 150 homes) and know the mobile home community scene here pretty well. Because we don't have a second home we are what's called sun birds (or less appealingly but perhaps more accurately sweat birds) who flee Tucson in the summer. Pre-pandemic we had much success doing house/pet sits in places like Santa Fe and Boulder but more recently we end up paying for an AirBnB in such places to make sure we're at least gone for the worst summer months (June through August and ideally well into September). With less than 40K tied up in our mobile (that's now worth more like 90K) and $575 a month in lot rent (including some utilities, a lovely clubhouse with gym and year-round saltwater swimming pool) we can certainly afford the travel while still living cheaply. The problem long-term as I see it is that unlike mild four-seasons places (e.g. Prescott, Sierra Vista, Albuquerque) the summers here make fleeing a necessity for anyone who doesn't want to be trapped indoors for months on end or who is a hiker, owns a dog, etc. It's "have to leave" weather, not "it'd be nice to get away" as is the case when winter drags on a bit too long and you want (but don't actually need) a couple of weeks on the beach in February or March. There are expensive, deluxe 55+ places here (check out Hacienda at the Canyon, for example) with both indoor and outdoor pools, multiple restaurants, multiple levels of care available, indoor movie theaters and lecture series and such and we know older (~80+) people who live in them and because of the amenities feel no desire or need to leave even in summer. Perhaps we'll end up in a place like that at some point but for now we're able to live cheaply but decently and leave much of our nest egg untouched in case a costly CCRC is in our future.
Thanks for the excellent explanation of why gold prices have surged recently. The old "no inherent value"/no inherent rate of return canard really does need to be retired. As other commenters have pointed out, assets denominated in fiat currencies also have no inherent value - unlike physical gold. But more to the point, gold's value is in being a truly uncorrelated asset that, when held in judicious amounts, can buffer portfolios against sequence-of-returns risk. This comprehensive post on the excellent Portfolio Charts site shows just what this means to real-world retirement portfolios not only in the U.S. but globally. The author points out that as a standalone investment gold is literally the worst of all possible choices - but that in the right amounts it is an invaluable if not essential component of the best-performing (on a risk-adjusted basis) portfolios: https://portfoliocharts.com/2024/04/01/what-global-withdrawal-rates-teach-us-about-ideal-retirement-portfolios/
Comments
We live a stone's throw away from you in a long-established 55+ mobile home park near Starr Pass resort. Tucson is unique in having not only a plethora of such parks that help keep lot rent fairly competitive, but also in having at least three resident-owned parks where you pay a higher price for your old mobile but own the land it sits on and are thereby protected from lot rent spikes and the ever-present threat of the park as a whole being sold to a new corporate owner who either jacks up the rent to unaffordable levels or razes the place and builds condos or single-family homes. You may be interested in this U of A study on this issue: https://www.mapazdashboard.arizona.edu/sites/default/files/2021-10/MAP_MH_Final_Oct5_2021%20V2.pdf
Post: My Humble Abode
Link to comment from December 21, 2024
The 66.10% figure is from Vanguard's own website for the ETF: https://investor.vanguard.com/investment-products/etfs/profile/vt#portfolio-composition
Post: Stuck at Home
Link to comment from November 23, 2024
This is just fantastic! Thank you so much for sharing your well thought-out and organized approach. I hope you'll consider writing a separate piece on this for Humble Dollar.
Post: What’s on Your List?
Link to comment from November 23, 2024
I appreciate the wise reminders Mr. Clements. Recency bias seems to be part of human nature - especially when "recent" spans more than a decade. For what it's worth VT is 66% U.S. stocks and has been at that level for some time, reflecting of course the incredible valuations of the so-called Magnificent Seven tech stocks. I believe I read that Nvidea alone is worth more than the entire stock markets of several countries. Also of interest to me is that U.S. small cap value stocks have been a better diversifier than total international funds like VXUS. But of course championing them is likely to get one an even colder reception than touting the benefits of global diversification. And heck, going international is basically a small (ish) cap play anyway, given that all of the mega cap firms are U.S.-domiciled. I just stick with VT and am grateful to not be able to meddle with U.S./Int'l. percentages anymore.
Post: Stuck at Home
Link to comment from November 23, 2024
Well-said! And because the Magnificent 7 tech companies that dominate the S&P are U.S.-domiciled holding VTIAX/VXUS diversifies you away from mega cap companies and gives you ownership of shares in industries other than tech and finance. And of course international and value stocks are very attractively-priced. How much in international is of course subject to endless debate but both Jonathan Clements and William Bernstein recommend something close to world market cap, which is currently ~60:40 U.S./Int'l. Conveniently one can have that in a single ETF - Vanguard's VT. I think for most investors that's a much more sustainable approach than tilting to small cap and/or value funds.
Post: Equally Bad?
Link to comment from October 26, 2024
That article by John Rekenthaler really is excellent. I'm with you - and, for that matter, William Bernstein - in seeing no point in SPIAs (or any other type of annuity) when TIPS are not only easy to buy, default risk and hidden-fee free but also support a 4%+ spending rate with the all-important guaranteed inflation protection that annuities don't offer. My wife and I are also at 50:50, but instead of a TIPS ladder we use half each VTIP and VGSH along with 3 years of residual (after Social Security) living expenses in SGOV. Our equities are as plain vanilla as it gets: 80% VTI, 20% VXUS. The barbell of short-term 100% Treasury bond funds is something I learned about from Jonathan Clements, though of course he has a much higher equity allocation than we do. We went this route in part because the mechanics of actually spending the individual TIPS given that they're all in our IRAs and RMDs are quite awhile away for us were more complex than my wife felt comfortable with. The short (~3 year) duration of these funds allows us to truly take our risk almost entirely on the equity side, with the peace of mind of knowing that even in a rising interest rate environment we could raise cash in an emergency without losing much if any money. And of course we're agnostic as to whether inflation-indexed bonds will outperform nominals or vice versa. All that said, I envy the certainty and paycheck-like mechanics of what you've chosen and am sure it will serve you well in what I hope is a very long and happy retirement for both of you. I really enjoy your writing!
Post: Laying Down a Floor
Link to comment from September 14, 2024
Dr. Peter Attia and others have been really emphasizing the critical importance of not just general strength training but in particular foot and (especially!) big toe strength in preventing falls. This article goes into somewhat granular detail but is at least worth a skim: https://www.humanlocomotion.com/the-human-locomotion-fall-prevention-protocol-how-to-create-a-customized-treatment-program-to-maintain-strength-and-agility-as-you-age/
Post: Exercising Caution
Link to comment from September 7, 2024
"A Vanguard article that was published this spring I believe calculated that with expected bond returns in the near future a portfolio of 20-40% bonds would produce a healthy return with much less volatility." Actually, the most recent papers from both Vanguard and Morningstar recommend exactly the opposite: 20-40% equities: "For retirees with time horizons both shorter and longer than 30 years, portfolios with equity weightings of 20% to 40% also generally supported higher withdrawal rates than more equity-heavy portfolios." In a nutshell the reason for this is that intermediate-term bonds are paying 4-5% (and if you stick to Treasuries, which you certainly should there's no default risk), while equities are highly-valued by historical norms. https://www.morningstar.com/retirement/good-news-safe-withdrawal-rates
Post: Exercising Caution
Link to comment from September 7, 2024
I really enjoyed your article! We have a lot in common,, starting with the fact that we live in a 55+ mobile home park in Tucson. I couldn't figure out which park you bought in (and respect that you may want to keep that private). We're in a smaller community than yours (Park West with about 150 homes) and know the mobile home community scene here pretty well. Because we don't have a second home we are what's called sun birds (or less appealingly but perhaps more accurately sweat birds) who flee Tucson in the summer. Pre-pandemic we had much success doing house/pet sits in places like Santa Fe and Boulder but more recently we end up paying for an AirBnB in such places to make sure we're at least gone for the worst summer months (June through August and ideally well into September). With less than 40K tied up in our mobile (that's now worth more like 90K) and $575 a month in lot rent (including some utilities, a lovely clubhouse with gym and year-round saltwater swimming pool) we can certainly afford the travel while still living cheaply. The problem long-term as I see it is that unlike mild four-seasons places (e.g. Prescott, Sierra Vista, Albuquerque) the summers here make fleeing a necessity for anyone who doesn't want to be trapped indoors for months on end or who is a hiker, owns a dog, etc. It's "have to leave" weather, not "it'd be nice to get away" as is the case when winter drags on a bit too long and you want (but don't actually need) a couple of weeks on the beach in February or March. There are expensive, deluxe 55+ places here (check out Hacienda at the Canyon, for example) with both indoor and outdoor pools, multiple restaurants, multiple levels of care available, indoor movie theaters and lecture series and such and we know older (~80+) people who live in them and because of the amenities feel no desire or need to leave even in summer. Perhaps we'll end up in a place like that at some point but for now we're able to live cheaply but decently and leave much of our nest egg untouched in case a costly CCRC is in our future.
Post: A New Kind of Heaven
Link to comment from May 4, 2024
Thanks for the excellent explanation of why gold prices have surged recently. The old "no inherent value"/no inherent rate of return canard really does need to be retired. As other commenters have pointed out, assets denominated in fiat currencies also have no inherent value - unlike physical gold. But more to the point, gold's value is in being a truly uncorrelated asset that, when held in judicious amounts, can buffer portfolios against sequence-of-returns risk. This comprehensive post on the excellent Portfolio Charts site shows just what this means to real-world retirement portfolios not only in the U.S. but globally. The author points out that as a standalone investment gold is literally the worst of all possible choices - but that in the right amounts it is an invaluable if not essential component of the best-performing (on a risk-adjusted basis) portfolios: https://portfoliocharts.com/2024/04/01/what-global-withdrawal-rates-teach-us-about-ideal-retirement-portfolios/
Post: Shining Moment
Link to comment from April 3, 2024