Comments on: Two Interactive Tools to Compare Savings and Investment Returns

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Sun, 28 Jan 2018 14:36:59 +0000

In reply to Kirk. Kirk, good to hear that you have some of your savings in some growth-oriented assets. Seems like you have aligned your finances with your risk tolerance, which should give you peace of mind about your money.

By: Kirk

Kirk — Sat, 27 Jan 2018 17:07:55 +0000

Thanks Zach for the article. I’m currently 10% equities but will redeploy this cash back into equities When they’re at lower levels than here. Meanwhile I’ve picked up some 2year CD’s currently yielding 2.4%! Also, allow me to clarify something; I have 30% allocated to Real estate Crowdfunding, paying a current 8% preferred return with IRR’s ranging from 13-20%. The thing I like about this asset class is that unlike stocks or REIT’s they’re not marked-to-market each day.
I appreciate that due to my risk aversion.
Kirk

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Sat, 27 Jan 2018 16:19:13 +0000

In reply to Kirk.

Great question, Kirk. I believe the 4% rule is based on a 60/40 (stock/bond) portfolio mix. Michael Kitces wrote a nice article on the 4% Rule here: https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/

A 60/40 usually survives 30-year time periods more often than a 100% equities, but with lower median ending values. Obviously the more equities you have in your portfolio, the more growth you’ll see over time, but you run the risk of having your portfolio crushed during stock market crashes. Your personal allocation really depends on your risk tolerance. Equities are necessary for growth, but adding bonds to the mix can increase the probability that your portfolio survives all types of market fluctuations. In your position, since you already have 25x annual expenses it probably makes sense to have at least some bonds in the mix. 10% seems low for equity allocation, but again you have to choose an allocation that matches your risk tolerance.

By: Zach @ Four Pillar Freedom

Zach @ Four Pillar Freedom — Sat, 27 Jan 2018 16:13:28 +0000

In reply to Mike @ Balanced Dividends. Thanks, Mike! Much appreciated.

By: Kirk

Kirk — Sat, 27 Jan 2018 08:10:09 +0000

Great lesson here. I have a question not related to this article/posting.
It someone has saved 25x their expenses they’re assumed to be financially independent and can retire using the 4% rule.
Here’s what I’m interested in knowing: what is the asset allocation of those savings in order for this theory to work?
You see, I have 25x my annual expenses already accumulated (at the age of 50) yet my assets have only 10% allotted to equities at present due to my recent profit taking, paring down equities due to my lower tolerance for risk and my desire to retire early.
Only problem from a personal Gina ace standpoint is the equity allocation doesn’t allow for any portfolio growth.

By: Mike @ Balanced Dividends

Mike @ Balanced Dividends — Sat, 27 Jan 2018 05:21:00 +0000

Nice post, Zach. As always, very helpful stuff.