Be careful what you wish for. Imagine if you didn't need to take out your key and hit a button to unlock the doors, instead simply needing to be close by. Now imagine you're parked at a diner, and you've chosen a parking spot right in front of the booth where you'll be eating. You're so close that you can't lock the car, it would take a minute for you to get back to the car if you needed to, and anyone familiar with this "feature" knows it. Currently, Hyundais and Kias are difficult to insure because of the Kia challenge from TikTok, showing how easy they are to steal. If the feature you asked for existed, I would imagine it wouldn't be long before we started seeing Toyota challenges on TikTok.
I'm no fan of cryptocurrency, but the issue isn't that it has no inherent value. The USD also has no inherent value, but rather like all currency its value is linked to its ability to store and settle debts. USD value and stability ultimately comes from the systems in place to regulate it. Cryptocurrency is too erratic to store value and settle debts, but that's because there is no mechanism performing regulation. This lack of stabilizing regulation can also occur in paper currency, as is evident with the Turkish lira. The president of Turkey has been using religious texts to fill government positions and dictate monetary policy, causing the lira to lose 80% of its value over the past 5 years. Believing cryptocurrency has value because of its limited supply is equivalent to the mistake of believing dollars only had value when they were once backed by gold. In reality, the first currency equivalent (accepting written documentation for one's goods and services, rather than demanding direct barter) came about in 3500BCE in the form of clay tablets, with debts inscribed directly onto them. Cryptocurrency Blockchain technology may be able to ensure that no one is able to rewrite the modern equivalent of those clay tablets, but without a stabilization and enforcement mechanism, few people would be willing to forgo direct barter in favor of the volatile nature of cryptocurrency.
Grass fed and Bison are also available at my chain grocery store. Grass fed has a better omega 3 ratio, but on taste it's about the same, and the texture is slightly tougher. Both forms of beef production result in the mass breeding and consumption of cows, the animal with the single highest climate impact of any meat, so I don't see grass fed as anything other than a minor health benefit for a lot more money. I'll take any health benefit I can get, but simply eating less beef is likely the better option.
I mostly agree with your points, but I disagree about the taxable account being a more conservative asset allocation. If someone already has an emergency fund, why add an additional layer of conservative investment? This just seems like mental accounting, since one could accomplish the same by instead having the same asset allocation everywhere and simply increasing the emergency fund. That said, I do plan to keep short term bonds in taxable and intermediate bonds in retirement accounts. I use my taxable account to fill in the gaps caused by the limited options of my 401k. I suspect many people would be well served by doing the same. I suppose this also comes down to what people mean by asset allocation. I find it easier to create separate buckets for specific expenses, like an emergency fund or social security bridge; and view everything else as one single portfolio composed of all other assets. For me the idea of having different asset allocations in different places is just unnecessary complexity. Having 80% in short term also seems a bit excessive, though on balance it's probably better than holding only intermediate bond funds. Holding 1/3 to 1/2 in short term would leave enough in intermediate bonds to provide diversifying volatility to stocks, for those periods where (unlike today) bond correlations are actually negative.
Expecting any taste difference between a $100 steak and a $50 steak is an example of what I call fake luxury. I appreciate the difference between a strip steak, a fillet, or my personal favorites a ribeye or Delmonico. In contrast, expecting a taste difference based on price doesn't make any sense to me. A $20 grocery store ribeye can be cooked at home with results equal to any restaurant, regardless of price. Restaurants tend to add more salt than home cooks do, but where else would any difference even come from? They all come from the same factory farmed cows, and aside from possibly dry aging, are cut and processed in the exact same way. Leather seats are another good example of fake luxury. Leather is cold in the winter and requires extra heating elements in order to be tolerable. It also doesn't allow air flow, requiring extra perforations to allow some level of ventilation on hot summer days. After about 5 years it starts to deteriorate and look worse than a quality cloth seat, assuming both are kept relatively clean. Yet leather is considered a luxury, purely because it's more expensive. Real luxury is all of those things you probably already have. For example, a house that has both heating and cooling, a separate room for each kid, and even a separate room or parking space for your car. These are not necessities, as millions of people exist in housing without these optional extras. It's easy to fall into the trap of faux sophistication, such that one starts "appreciating" differences that aren't even there. But by appreciating all of the real luxuries I have, I find it much easier to avoid the fake luxury trap.
If you have confidence in an investment, why only a 10% allocation? To me, adding 10% seems less like investing and more like dabbling. We know moving in and out of positions will on average reduce returns, so why allocate to something in such a way that it clearly indicates a lack of commitment?
Not a fan of Merriman portfolios, too many tiny allocation slices. A 10% allocation to anything isn't going to provide any practical difference compared to not having it. There is also plenty of research showing target date funds, specifically due to the declining equity allocation, are a suboptimal strategy. I also greatly respect Buffett, but fully disagree with his 90/10 portfolio. Anyone familiar with Japan 1989-2019 knows putting a majority of investments into a single country's total market index is a bad idea. That said, portfolio fund selection may not even be the biggest problem to solve. Withdrawal strategy has a much greater impact on portfolio survival. Specifically, following the 4% rule is basically guaranteed to fail once even one assumption turns out sufficiently different than expected. Variable withdrawal amount methods are far more resilient, such as even the simple fixed percentage of current balance method. Track expenses as either required or discretionary, make sure the required expenses are covered, and otherwise embrace variability.
Maximizing SS is the biggest win in retirement planning, so job done there. In my own testing of percentage of portfolio withdrawals, I came to these general rules of thumb: 1) If your intention is to increase the balance over time by more than inflation, withdrawal 3% per year. 2) If your intention is to increase the balance (and thus withdrawals on average) by inflation, withdrawal 4% per year. 3) If your intention is to maintain the balance (i.e decrease the inflation adjusted value over time) withdrawal 5%. If you have enough inflation adjusted income to live on, and just want to spend the portfolio down before you're too old to use it, then I think 6% is probably fine. Just be prepared if in 15 years you're withdrawal amounts to 6% of zero. Where did you get the 5 year estimate for withdrawals during a market crash? Converting percentages to dollars, let's say a $100 portfolio, if you have 30% in cash then that's $70 stocks, $30 cash. A 50% market crash in your portfolio brings the stocks to $35. If you are taking 6% of the portfolio, the new portfolio value is $65, and a 6% withdrawal amounts to $3.9. With zero return, but a balance reduced by the prior withdrawal, the second year withdrawal would be $3.7, etc. This would actually continue for 10 years, at which point your withdrawal would be $2.1. I wouldn't personally spend all cash until gone, I would spend only from cash until my asset allocation returned to 70/30 through regular annual income withdrawals, which in this example would be after 4 years. But as a theoretical exercise, which I think was your intention, the result would be 10 years of cash, not 5 years. If your actual plan is to continue spending 6% of the pre-crash balance after the crash, thus spending all cash in 5 years, then all of my above comments on withdrawal percentage are not applicable, because you're not actually doing a percentage of portfolio withdrawal at that point.
Depending on which study you read, genetics has been found to account for as high as 30% (in older studies) or as low as 7% (in newer studies) of an individual's longevity. Either way, knowing about your family history is not providing the insight you think it is.
There's a significant flaw in your reasoning when you ask "If you have good reason to believe that your life-expectancy is different than the IRS tables." The tables are based on population averages, and it's logically incorrect to use a population average to estimate an individual case. Insurance companies can pool individuals and get useful financial information, but that concept does not work in reverse. In order to expect to experience a population average, you would have to live 10,000 lifetimes. You only get to live one lifetime, and the age distribution for life expectancy is wide enough to make the average meaningless for an individual case. 40% of people will have a lifespan far below the average, and 40% will have a lifespan far above the average. Nobody should be estimating their lifespan based on an average that is significantly inaccurate for a given individual 80% of the time. Ultimately the RMD method is just a version of the percentage of current portfolio balance method, only you haven't decided on the percentages, instead deferring to an arbitrary table. This means you'll still end up with the wild swings in income that any percentage of current portfolio balance withdrawal method would have. If you're already going to need to deal with wild swings of income, why not also decide for yourself what the withdrawal percentage should be, so you can then plan for your split of required and discretionary expenses, as required when income will vary significantly over time.
Comments:
Be careful what you wish for. Imagine if you didn't need to take out your key and hit a button to unlock the doors, instead simply needing to be close by. Now imagine you're parked at a diner, and you've chosen a parking spot right in front of the booth where you'll be eating. You're so close that you can't lock the car, it would take a minute for you to get back to the car if you needed to, and anyone familiar with this "feature" knows it. Currently, Hyundais and Kias are difficult to insure because of the Kia challenge from TikTok, showing how easy they are to steal. If the feature you asked for existed, I would imagine it wouldn't be long before we started seeing Toyota challenges on TikTok.
Post: It Also Has Wheels
Link to comment from April 15, 2023
I'm no fan of cryptocurrency, but the issue isn't that it has no inherent value. The USD also has no inherent value, but rather like all currency its value is linked to its ability to store and settle debts. USD value and stability ultimately comes from the systems in place to regulate it. Cryptocurrency is too erratic to store value and settle debts, but that's because there is no mechanism performing regulation. This lack of stabilizing regulation can also occur in paper currency, as is evident with the Turkish lira. The president of Turkey has been using religious texts to fill government positions and dictate monetary policy, causing the lira to lose 80% of its value over the past 5 years. Believing cryptocurrency has value because of its limited supply is equivalent to the mistake of believing dollars only had value when they were once backed by gold. In reality, the first currency equivalent (accepting written documentation for one's goods and services, rather than demanding direct barter) came about in 3500BCE in the form of clay tablets, with debts inscribed directly onto them. Cryptocurrency Blockchain technology may be able to ensure that no one is able to rewrite the modern equivalent of those clay tablets, but without a stabilization and enforcement mechanism, few people would be willing to forgo direct barter in favor of the volatile nature of cryptocurrency.
Post: Risky Business
Link to comment from April 12, 2023
Grass fed and Bison are also available at my chain grocery store. Grass fed has a better omega 3 ratio, but on taste it's about the same, and the texture is slightly tougher. Both forms of beef production result in the mass breeding and consumption of cows, the animal with the single highest climate impact of any meat, so I don't see grass fed as anything other than a minor health benefit for a lot more money. I'll take any health benefit I can get, but simply eating less beef is likely the better option.
Post: When to Spend
Link to comment from April 5, 2023
I mostly agree with your points, but I disagree about the taxable account being a more conservative asset allocation. If someone already has an emergency fund, why add an additional layer of conservative investment? This just seems like mental accounting, since one could accomplish the same by instead having the same asset allocation everywhere and simply increasing the emergency fund. That said, I do plan to keep short term bonds in taxable and intermediate bonds in retirement accounts. I use my taxable account to fill in the gaps caused by the limited options of my 401k. I suspect many people would be well served by doing the same. I suppose this also comes down to what people mean by asset allocation. I find it easier to create separate buckets for specific expenses, like an emergency fund or social security bridge; and view everything else as one single portfolio composed of all other assets. For me the idea of having different asset allocations in different places is just unnecessary complexity. Having 80% in short term also seems a bit excessive, though on balance it's probably better than holding only intermediate bond funds. Holding 1/3 to 1/2 in short term would leave enough in intermediate bonds to provide diversifying volatility to stocks, for those periods where (unlike today) bond correlations are actually negative.
Post: Building a Barbell
Link to comment from April 5, 2023
Expecting any taste difference between a $100 steak and a $50 steak is an example of what I call fake luxury. I appreciate the difference between a strip steak, a fillet, or my personal favorites a ribeye or Delmonico. In contrast, expecting a taste difference based on price doesn't make any sense to me. A $20 grocery store ribeye can be cooked at home with results equal to any restaurant, regardless of price. Restaurants tend to add more salt than home cooks do, but where else would any difference even come from? They all come from the same factory farmed cows, and aside from possibly dry aging, are cut and processed in the exact same way. Leather seats are another good example of fake luxury. Leather is cold in the winter and requires extra heating elements in order to be tolerable. It also doesn't allow air flow, requiring extra perforations to allow some level of ventilation on hot summer days. After about 5 years it starts to deteriorate and look worse than a quality cloth seat, assuming both are kept relatively clean. Yet leather is considered a luxury, purely because it's more expensive. Real luxury is all of those things you probably already have. For example, a house that has both heating and cooling, a separate room for each kid, and even a separate room or parking space for your car. These are not necessities, as millions of people exist in housing without these optional extras. It's easy to fall into the trap of faux sophistication, such that one starts "appreciating" differences that aren't even there. But by appreciating all of the real luxuries I have, I find it much easier to avoid the fake luxury trap.
Post: When to Spend
Link to comment from April 5, 2023
If you have confidence in an investment, why only a 10% allocation? To me, adding 10% seems less like investing and more like dabbling. We know moving in and out of positions will on average reduce returns, so why allocate to something in such a way that it clearly indicates a lack of commitment?
Post: Better Than Buffett?
Link to comment from March 27, 2023
Not a fan of Merriman portfolios, too many tiny allocation slices. A 10% allocation to anything isn't going to provide any practical difference compared to not having it. There is also plenty of research showing target date funds, specifically due to the declining equity allocation, are a suboptimal strategy. I also greatly respect Buffett, but fully disagree with his 90/10 portfolio. Anyone familiar with Japan 1989-2019 knows putting a majority of investments into a single country's total market index is a bad idea. That said, portfolio fund selection may not even be the biggest problem to solve. Withdrawal strategy has a much greater impact on portfolio survival. Specifically, following the 4% rule is basically guaranteed to fail once even one assumption turns out sufficiently different than expected. Variable withdrawal amount methods are far more resilient, such as even the simple fixed percentage of current balance method. Track expenses as either required or discretionary, make sure the required expenses are covered, and otherwise embrace variability.
Post: Better Than Buffett?
Link to comment from March 25, 2023
Maximizing SS is the biggest win in retirement planning, so job done there. In my own testing of percentage of portfolio withdrawals, I came to these general rules of thumb: 1) If your intention is to increase the balance over time by more than inflation, withdrawal 3% per year. 2) If your intention is to increase the balance (and thus withdrawals on average) by inflation, withdrawal 4% per year. 3) If your intention is to maintain the balance (i.e decrease the inflation adjusted value over time) withdrawal 5%. If you have enough inflation adjusted income to live on, and just want to spend the portfolio down before you're too old to use it, then I think 6% is probably fine. Just be prepared if in 15 years you're withdrawal amounts to 6% of zero. Where did you get the 5 year estimate for withdrawals during a market crash? Converting percentages to dollars, let's say a $100 portfolio, if you have 30% in cash then that's $70 stocks, $30 cash. A 50% market crash in your portfolio brings the stocks to $35. If you are taking 6% of the portfolio, the new portfolio value is $65, and a 6% withdrawal amounts to $3.9. With zero return, but a balance reduced by the prior withdrawal, the second year withdrawal would be $3.7, etc. This would actually continue for 10 years, at which point your withdrawal would be $2.1. I wouldn't personally spend all cash until gone, I would spend only from cash until my asset allocation returned to 70/30 through regular annual income withdrawals, which in this example would be after 4 years. But as a theoretical exercise, which I think was your intention, the result would be 10 years of cash, not 5 years. If your actual plan is to continue spending 6% of the pre-crash balance after the crash, thus spending all cash in 5 years, then all of my above comments on withdrawal percentage are not applicable, because you're not actually doing a percentage of portfolio withdrawal at that point.
Post: Riding the Rails
Link to comment from March 9, 2023
Depending on which study you read, genetics has been found to account for as high as 30% (in older studies) or as low as 7% (in newer studies) of an individual's longevity. Either way, knowing about your family history is not providing the insight you think it is.
Post: Riding the Rails
Link to comment from March 8, 2023
There's a significant flaw in your reasoning when you ask "If you have good reason to believe that your life-expectancy is different than the IRS tables." The tables are based on population averages, and it's logically incorrect to use a population average to estimate an individual case. Insurance companies can pool individuals and get useful financial information, but that concept does not work in reverse. In order to expect to experience a population average, you would have to live 10,000 lifetimes. You only get to live one lifetime, and the age distribution for life expectancy is wide enough to make the average meaningless for an individual case. 40% of people will have a lifespan far below the average, and 40% will have a lifespan far above the average. Nobody should be estimating their lifespan based on an average that is significantly inaccurate for a given individual 80% of the time. Ultimately the RMD method is just a version of the percentage of current portfolio balance method, only you haven't decided on the percentages, instead deferring to an arbitrary table. This means you'll still end up with the wild swings in income that any percentage of current portfolio balance withdrawal method would have. If you're already going to need to deal with wild swings of income, why not also decide for yourself what the withdrawal percentage should be, so you can then plan for your split of required and discretionary expenses, as required when income will vary significantly over time.
Post: Riding the Rails
Link to comment from March 8, 2023