What I Spend

Where are you and where are you going?
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Stahlmann
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Re: What I Spend

Post by Stahlmann »

Good job.

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Viktor K
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Re: What I Spend

Post by Viktor K »

Awesome and inspiring

Smashter
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Re: What I Spend

Post by Smashter »

Scott 2 wrote:
Sat Jan 16, 2021 12:19 am
Thanks for the link to Tyler's response.
Hey Scott, any chance you can find the link that CL sent and post it again? I'd love to read Tyler's thoughts on gold's influencer on SWRs going forward. CL's post became a casualty of the recent ellipses virus that swept through all his content...

Scott 2
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Re: What I Spend

Post by Scott 2 »

Thanks guys.

@Smashter - I tried, but could not remember the article. I'm bummed cL nuked everything, his posts were extremely helpful to me.

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Alphaville
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Re: What I Spend

Post by Alphaville »

wow man, amazing news! this is the forum's trifecta this week.

lemme ask, are you planning to stop working *completelY*?

because years ago i looked into the group plan of the freelancers union, which is pretty strong in new york.

maybe do a little freelancin' :mrgreen:

checkit: https://www.freelancersunion.org/insurance/health/

Scott 2
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Re: What I Spend

Post by Scott 2 »

Thanks. No immediate plans to pick up work, but who knows what might catch my interest.

The site you linked doesn't cover my state, it redirects to a quoting portal. I poked around for other insurance targeted at professional organizations, the pattern seems similar.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I spent most of the morning working on insurance. I learned some stuff:


Dental: Proof of prior insurance is necessary to get the coverage waiting period waived. Keeping with the same insurer, I think this will be easy, but still requires a week for them to confirm. We'll be paying $61 a month for the couple. I believe this is the most affordable option to keep our current dentist.


My health insurance (on exchange):

While at first I found several dozen options, once I filtered out the carriers with low prices and bad reputations, I was left with only two companies.

From talking with doctors, I know one is much harder to work with. The lesser insurer has an inferior provider network, effectively reducing my options to one carrier. I think most people in my state pick them. While not technically a monopoly, it doesn't feel much better.

Committed to the one insurer, there are few differentiators between plans. Provider network is the significant one. All PPO options use the same network. The HMO's use different, restricted networks. The premium for PPO is relatively small, around $30 a month. The HMO makes no sense.

Committed to a PPO, the choice between metal levels feels arbitrary. Pay more now or pay more later, the plans are really well balanced. I am comfortable self-insuring for small amounts, so the decision is tilted in favor towards a bronze plan.

The final consideration is cost sharing, which would require a silver plan. It turns out:

1. Unlike the subsidies, If you don't get it up front, even if your income qualifies later, you don't get it for the year
2. Cost sharing requires proving income today. At best, a hassle, given my 2020 earnings. At worst, I give up before qualifying.
3. Most importantly - cost sharing EXCLUDES participation in an HSA

Tax considerations make my choice obvious - there is one HSA eligible plan, a bronze PPO. Premiums are a little over $400 per month, pre subsidies. I can ignore qualifying for them, then true up at tax time. I get the extra credit card points and avoid some hassle.


So, I try to sign up. I go through the whole process on the exchange, only to find it forces a default effective date - the first of next month. I talk to people ranging from India to Texas, they cannot change it.

Because of the COBRA 60 day retroactive period, I want a 5/1 effective date. Technically I'll have one day without health insurance, but it saves me two months premium. I can stay in bed that day, count my extra $800.

So, I end up cancelling the exchange policy, with instructions to apply again on 4/1. I am so close.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I shipped back my work equipment yesterday and chased my final expensive report. I don't have much confidence in it getting paid. I felt a surprising amount of resistance to returning their items, which have been in my house for years. Hello endowment effect.

Even these light touches resurfaced my frustrations, triggering ruminations I don't enjoy. It's over. I'm done. My brain has yet to let go. The last two of months were rough, but added 4% in net worth. Probably worth the price I am paying/paid. I look forward to fully moving on.


While working through McClung's book, I've also been establishing my curriculum before reallocating the retirement portfolio. I can do one audiobook in parallel with a paper book. I finished Irrational Exuberance and am almost done with The Investor's Paradox. It's interesting to see behavioural economics keep resurfacing.

I've queued up The Geometry of Wealth and How I Invest My Money, as audiobooks. I also pre-ordered the 2nd edition of Your Complete Guide to a Successful & Secure Retirement, by Swedroe. That will be my final reality check. It's looking more and more like we won't have to give up any luxuries.


I imagine resetting the portfolio allocations is a problem in itself. There's also some consideration to account consolidation. This whole retirement thing just doesn't support my wife and I managing money separately. Administering doubles of every account will be an enormous pain. It could be time to address that.


I've been able to cook everyday and made some mild progress on cleaning. There aren't anymore tumbling furballs, but bathrooms remain iffy. I expect greater reorganizing as the months progress. We started tackling a closet. The big effort will be recovering my gym/office space in the basement. Many ignored problems down there.

ertyu
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Re: What I Spend

Post by ertyu »

congratulations on hitting this next stage man :muscle:

bostonimproper
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Re: What I Spend

Post by bostonimproper »

Congrats on taking the leap! While annoying reminders of work, I wonder if returning work stuff might at least help exorcise some of the old, lurking corporate demons from your home.

Scott 2
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Re: What I Spend

Post by Scott 2 »

Thanks for the well wishes.

There are a few work related financial events that happen this month. Once those are closed, I think the rehashing will settle down. At the essence - I ran from interpersonal issues I couldn't solve. My brain doesn't do well with unfinished problems, so until the reminders stop, I don't think it will. I do feel weird having no work obligations in my personal space. I was remote for 10 years. I think that made the interpersonal problems bigger and is slowing my transition to new normal.

Scott 2
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Re: What I Spend

Post by Scott 2 »

My library gives free access to Morningstar. I am doing the work to use a McClung inspired portfolio. I look up the analysis of each suggested fund, compare it to others in the class, confirm the analysts don't raise any alarms, etc. I learned the Star ratings aren't all that useful, the Medal ratings slightly more so and the analyst reports can offer some useful insights. I also learned how to build a portfolio x-ray.

I don't know if this is worth it - not just the upfront effort, but the ongoing mental overhead of knowing I am doing something slightly clever. I considered using McClung's rules with a simple 3-4 fund portfolio. But that feels like a half-measure. Either I believe him and want to do the thing, or I don't.

My easy option is buy a pure 60/40 life strategy fund, accept the lower returns, and eliminate all complexity. We could live on a 3% SWR, so the ultra lazy path is affordable. Long term, while the ride might be more volatile and provide reduced spending, net worth might even end up comparable. An upside - in the event of my death, it's trivial for my wife to take over. I don't think she'd want to maintain McClung's triad.


It's interesting to evaluate the two portfolio x-rays, bumping McClung to 60/40, so it roughly mirrors the life strategy fund. Given the high odds we'll run well under the SWR, this could be reasonable. Given our 60 year retirement term, maybe even prudent. Comparing the two pictures, McClung's asset allocations, style boxes and regions clearly address my core market concerns.

Not pictured - Relative to the LifeStrategy fund, McClung doubles emerging markets allocations, but compensates with entirely AAA fixed income holdings. The LifeStrategy fund is only 50% AAA, going all the way down to 23% BBB. McClung's approach reminds me of Taleb's barbell. Another tick in favor of his portfolio.


LifeStrategy
Image


McClung Triad (something about my funds selection shortens the lookback)
Image


I've come across the portfolio visualizer tool. I have not played with that, but I might. This is a deep rabbit hole. I'm not sure how casually I can play, without falling all the way in.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I tried the portfolio visualizer tool. I learned the reason my Morningstar x-ray failed to have a decent lookback period, is because each ticker I would buy, doesn't necessarily match the one I need to use for back testing. Portfolio visualizer is cool, in that it identifies the constraining data set. I was able to get the X-ray for Triad to go back about 10 years. Using asset class back testing on portfolio visualizer, I got a further lookback.

With that said - the data for back testing tends to be constrained. Portfolio visualizer seems to go as far back as 1985, but in practice, I struggled to pick funds that get more than a 20-25 year lookback. During those times, I capture the US bull market of the last 10 years. So, the basic life strategy fund looks a lot better than McClung's triad. The bias from this type of back testing is what McClung was attempting to protect against. It's just not a meaningful time period. I further appreciate the effort he put into creating clean data, similar with Tyler's website.

Portfolio visualizer does not easily simulate Prime Harvesting or a robust variable withdrawal strategy. McClung's portfolio is designed to work with these. It would have ridden the growth of stocks a little better, bringing it closer to the target retirement fund, for the good scenario. Of course, during this time window, 100% US Stock market tests best. I obviously don't want that.

There is a lot of customization possible in portfolio visualizer. It looks powerful enough to be dangerous - fit data to obtain a false confidence in my plan. It's also easy to mix up nominal and real returns. I don't think I am going to pursue the tool further. Even the Morningstar x-ray tool feels dangerous. I think it is useful to evaluate "what am I holding?". I don't think extrapolating future performance from the back testing is reasonable.


I finished The Geometry of Wealth and How I Invest My Money. A problem I am finding with pop investing books, is that they are focused on how you reach where I am today. I've queued up 3 of Swedroe's books - The Incredible Shrinking Alpha, The Only Guide You'll Ever Need for The Right Financial Plan, and Your Complete Guide to a Successful & Secure Retirement. I'll get through those pretty fast, I think, then re-evaluate.


There are practical constraints here - my sleep at night metric, how much time I spend thinking about investments and creating something my wife can manage. I know that precludes stock picking, private equity REITs, physical real estate, hedging, etc. I'm still not sure if it precludes using McClung's model. Heck, maybe a robo-adviser isn't the worst thing in the world.

I remain resistant to the textbook driven investor education path. I suffered through Luenberger's Investment Science back in 2012. I did not find it practically useful.

ertyu
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Re: What I Spend

Post by ertyu »

While one is better off with backtesting than without, I have doubts about how reliably one can extrapolate the conclusions. People on twitter have found a regime change at the onset of QE, and another regime change since the 2018 volmageddon. In addition to all this, '85 - on was the down leg in the us rates cycle: over 85-2020, interest rates have trended down and are now at long-term bottom. We can indeed drag along this bottom for a while, we can even go negative - though that would surely occasion yet another regime change - but the most likely scenario is that overall during the course of the period when we will need to live off of our investments interest rates might trend up rather than down. In addition, climate change is likely to hit full-on. The last 40 years contain the most complete and current data we have, but even so, it might be useful to keep in mind the possible limitations on any conclusions drawn on the basis of that data.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I agree, I don't expect the next 40 years to look anything like the past 40.

I know large corporations are already planning for global warming as part of their annual risk planning. Similar to how healthy organizations planned for and absorbed the disruption of pandemic, I think the same will happen with global warming. For me personally, it will probably be financially manageable. I think the US is stable and large enough to absorb the dislocation of residents, in my lifetime.

I am more concerned about interest rate and inflation risk. I think composing the fixed income portfolio as McClung suggests - 25% short term treasuries, 25% intermediate term treasuries, 50% tips - is a reasonable attempt to hedge that risk. Beyond the obvious of owning equities, anyway. I don't think sitting on ~20% cash as I am now, is sustainable. I am eager to resolve that.

The problem of failing to reflect my experienced inflation in CPI is a risk I have not specifically planned for. I suppose I will be using a lower than suggested withdrawal rate. I'll also end up developing skills to be more self sufficient, now that I have time to spare. I am also still mulling over if I bonds are worth the hassle.


I finished The Only Guide You'll Ever Need for The Right Financial Plan. They had good discussion of managing asset location for tax purposes. There was also a nice explanation of why a retiree might weight a portfolio more heavily with small and value stocks. McClung also favors this. The concept of holding 3-5% of equities in commodities, to reduce overall volatility was also raised. McClung hinted at it, but couldn't test it. It feels more like I am getting the big rocks in place now.

The book highlighted a gaping hole in my plans, around long term care strategy. With my wife having chronic illness, this is a bigger consideration than typical at my age. Risk is still very low, but worth at least having a plan. I have a general sense LTC insurance is not an affordable product. But, it could influence asset location choices. Unwinding poor asset location is a hard problem. Planning decades in advance might give me a real advantage.

I've read the first 20% of The Incredible Shrinking Alpha. I am starting to get more of an intuitive feel for alpha vs. beta. I think I have a better understanding of CAPM and the Fama and French size and value factors. I had to pause when they wanted to add momentum. My brain was too full.

This morning I started Your Complete Guide to a Successful & Secure Retirement. It's a broader overview of the problem space, so I'm expect to make quick progress here. I'm starting to find a fair amount of repetition in my sources.


I can't overstate how good it feels to observe this pressing need in my financial life, and then be able to devote most of my days to resolving it. I've learned more about managing a retirement in the past 10 days than I did in the past 10 years.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I can't get over how much easier it is to learn, without work messing up my day.


I've finished reading:

Your Complete Guide to a Successful & Secure Retirement
The Incredible Shrinking Alpha
Your Complete Guide to Factor-Based Investing: The Way Smart Money Invests Today

I am also casually listening to The Snowball, a bio of Warren Buffett.

I think I understand market beta, value, size and momentum factors - well enough to explain them. I know the difference between the CAPM, Fama French 3 factor model, Carhart four-factor model, etc. I could tell you what a Sharpe ratio is. I am aware of other factors that might be considered, why they are useful or not.. I appreciate the importance of tax location (probably left a new car on the table with that one over the years :shock:). I know what tracking error is and feel inoculated against it. Etc.

With all of that under my belt, I understand the portfolio recommended by McClung. He backs into it in a very weird way, with his harvesting metric, but the design is well explained by factor based models. I get what asset classes I might want to own and why. I also understand what questions to ask about an index fund. I know to avoid traps like picking an index that reconstitutes annually. Or to watch for high turnover funds in taxable accounts. I get that just because he modeled the portfolio with heavy slicing and dicing, I might not want to implement it that way.

My next step is to figure out how I own the things. For the most part, this will be easier - sorting mechanics and asset locations, then unwinding the life strategy funds. There's no way I am building my own stock portfolio. I don't think I'm willing to pay for access to "sophisticated" funds like Dimensional (primarily available via a financial advisor). So, it's going to be an approximation. I think it will be good enough. I am very ready to close my heavy cash position.

I am also incredibly sick of reading about investing. I wouldn't say I hate it, but only because I like having enough money. If I trusted there was a way to abdicate responsibility, without totally hemorrhaging money, I'd be all over that. Unfortunately, with my time horizon, the associated fees don't make any sense. Maybe if the portfolio does well, as I move into my 60's, I'll reconsider.

It is now painfully obvious - internet discussions on investing consist of people who understand 5% of the domain arguing with people who understand 10%. I can only guess at my own remaining ignorance. I cringe at some of the advice I've offered over the years.


Otherwise, I've been shoring up details around the house. I guess if you spend a lot of time in the basement, you're supposed to check it for radon. Whoops. I've got a test on the way. Hopefully that doesn't come up too high. At least I don't smoke.

We are cooking, eating down food inventory, making time to get outside, etc. I was in snow up to my knees today, have a pinto stew going and am making dark chocolate pecan brownies later. Yum.

What I haven't done, is spend time playing video games. It feels like there is so much life neglected, that I can't stop for the virtual world. That has been a total 180. I've also avoided cleaning just about anything. Lifting remains on the back burner, just 1-3 moderate sessions per week. Lately, I don't feel the desire to strain. I'm not looking for change, I guess. Maybe, if I feel comfortable going to a gym by Summer, my drive will return.


I heartily recommend not working :D. While I have more unwinding to do, it feels really good to stop beating my head into that wall.

theanimal
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Re: What I Spend

Post by theanimal »

Congrats, Scott. Glad to read things are progressing so well.

Scott 2
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Re: What I Spend

Post by Scott 2 »

Thanks!


I spent the better part of today doing obvious financial cleanup. Sweeping my HSA funds into the investible account. Linking a bank account so I can contribute for 2021. Making roth ira contributions for 2020 and 2021. Ensuring account beneficiaries are up to date. Etc. Easy, low hanging fruit. There will be follow up over the next two weeks, but the mechanics of this stuff is deterministic.


Given my wife's chronic illness, I looked into how we mitigate the financial risk of long term care. The short answer - we run a little under our SWR and plan to pay for it, ideally aging in place. LTC insurance is way too expensive. Medicaid facilities are scary. Better to burn the assets and live on lentils, if it comes down to that. It probably won't.


Then I went down the asset allocation and investment vehicle rabbit hole, applying everything I've learned. And, hilariously enough, I lean strongly towards copying a 60/40 life strategy fund, then letting prime harvesting take over. Bursting my existing strategy to individual index funds is a must. Everything else, not so much.

In short, I do hate this shit. I resent every minute thinking about it. I find myself continuously second guessing, gathering new information, revising my mental model, etc. It adds zero real value to my life. I don't want to reassure myself about tracking error, ponder the academic basis behind my portfolio, or consider the real life implications of trading costs. I do not want to read Swedroe's next book or worry if my international small cap value fund is vulnerable to front running. I do not care what comes after factor investing.

At the same time - I see Avantis and Dimensional offer factor based ETFs now. Vanguard is even getting on it. This is the efficient market in action, turning alpha into beta. Yeah, I might get a premium for riding the academic curve today. But it's going to change tomorrow. I'll have to keep learning, keep adjusting to the moving target. And for what? Money I don't need. A big pile of mental angst.

Meanwhile - what Vanguard does is satisficing. I won't have to think about it. Not only can I explain it to my wife, she could take over. I don't care if others make more than me. I can afford the lower returns. Owning a diversified range of life strategy funds has been dumb, but a 4 fund portfolio fits my family well.

I'll sleep on it of course, but this feels like mental clarity.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I got my wife's buy in on copying the life strategy portfolio. Modeling it, the metrics are a clear improvement over what we hold today. It might not be a perfect portfolio, but I understand it. Once I was working on the implementation details, I felt very happy to juggle only 4 funds. I have enough learning to do already, without the complexity of choosing things like a small value weighted emerging markets fund. Or figuring out how to spray 13 assets over a dozen different taxable, tax deferred and tax exempt accounts. The 4 fund portfolio is a good fit.

Scott 2
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Re: What I Spend

Post by Scott 2 »

I am navigating two changes in mindset:


1. I am no longer important. My wants and needs are no longer urgent for others. When working, I had grown (maybe unknowingly) accustomed to a certain response from people. I could throw out a quick email or short conversation and have hours or days of someone's time. Now, not so much.

An insurance company finds it totally reasonable to take weeks to respond via postal mail. The property management company for my townhome association might take a couple days to respond to a work request. The answer might be rude, it might be no. That's just how it is.

My instinctive response is to aggressively chase these failures down, eliminate them from the system, so they don't cause repeat problems in the future. I know how to be that person. I don't want to be that person, but the corporate world trained it into me. Without that outlet, the behavior wants to resurface in my personal world.

So, I am learning to dial things back, chill out. It's going to take some time and patience. While the indifferent third parties are a little infuriating, it's good for me to slow down and relax. I'd like to regain and keep that perspective.


2. I don't need to get more money. With our current spending, the math works. We have to really screw up to burn down the entire portfolio. Those scenarios are so dire, they are not practical concerns. We could probably live on Social Security, when that time comes.

And yet, my head is spinning about ways to capture more. There must be some hustle where I can be the person I want, but also get paid to have positive social interactions. I have all these valuable skills, and they are unused. Think of the wasted human capital!

Again, I need to relax and chill out. It is _completely_ reasonable to go the entire year without making any extra money. It would probably be a good thing for my physical and mental health. I want to do things because I enjoy being that person, not because I get a shiny reward.

We are approaching the first pay period without a check. I think that's partially behind this mindset. I also have some nerves around pulling the portfolio re-allocation trigger. All my modeling is based on the worst case scenario, but without an income, the choice feels bigger.


Filling my days has been easy. It's hard to believe "what will you do all day?" is ever considered a legitimate question about FIRE.

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