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henrysd
ParticipantThe old school crap all the financial planners use is percentage of the bond in your portfolio is your age. If you are 60 years old , then 60% your portfolio is bond, 40% stock; if you are 70 years, then 70% bond allocation.
Modern days people don’t do that any more. There are several reasons:
1) Bond yield at 2% are still historically very low. We no longer have The old days bond can return 7% a year and provide good safety income return for retirement income. People used to just own GNMA bond fund for 7% safe return, but no longer attractive now.
2) People who already meet their basic retirement need can go more aggressive in investment. Many piggs who own rental homes fall into this category.I would personally prefer age – 20 as my bond allocation during retirement. I can allocate 45% in bond when I turn 65.
Participant[quote=svelte]Starting to lay plans for my distant retirement so I’ve been doing a lot of reading.
I’ve noticed most advisors recommend somewhere between a 40/60 to 60/40 mix bond/equity after one retires.
The bond portion, from what I’ve read, is to give a retiree a stable base in case the equities fall sharply during a downturn.
The equities portion is to allow a retiree to keep pace with inflation, in case s/he lives 20-30 or more years.
OK, makes sense so far.
Here is what confuses me: for the 401K portion of my retirement, the govt has a required minimum withdrawal (RMD) somewhere in the 4% range, dependent on the outcome of running an equation.
If I plan on only withdrawing the minimum each year, that means a 40% bond mix would get me through roughly a 10 year downturn.
That sounds excessive….am I looking at it right?
If not, what is the thinking of keeping 40-60% of one’s portfolio in bonds?
Confused.[/quote]
You are fine with 40% bond and 60% stock. Bond interest rate is low now and price is high, so you won’t get much return from bond other than the diversification effect. Stock still can return 6-6.5% long term. Nominal GDP growth is about 4.5%. The reported GDP growth we see on news headline is inflation adjusted rate, let us assume 2.5% real GDP growth and 2% inflation, so it come up with 4.5% nominal growth. The broad market S&P 500 also has 1.85% dividend yield (beating the T-bill now). So assuming P/E ratio stays the same in ideal world, the market will return 6.3% long term. Of course in real life P/E may expand or compress, the stock market return on the long haul will deviate from that, 6.3% can be a good guidance number to use.
ParticipantPaying off mortgage actually makes some sense to you. Your mortgage interest is only $13K a year, you are only allowed $10K on SALT and property tax to deduct. If you don’t have large charitable donation and you itemize, you have only $23K deduction, less desirable than taking simple standard deduction of $24K. The $10K SALT limit won’t increase for inflation, but standard deduction adjusts for inflation(chain based). Maybe next year it becomes 25K, a few years later you will find it is a lot bigger than itemizing.
In another language your mortgage interest is basically no longer deductible in federal tax, even though still deductible in CA state tax.
ParticipantIsn’t property tax a special case of local tax?
It seems to the whole SEC. 11042 “LIMITATION ON DEDUCTION FOR STATE AND LOCAL, ETC. TAXES.” doesn’t even mention property tax. It did mention foreign real prop tax, but not related to local property tax.Our San Diego prop tax bill is 2017 July 1st to 2018 June 30 calendar, so the 2nd installment may still be considered as 2017 tax.
ParticipantThis is what the new text bill Page 604 Conference Agreement on the subject is saying, you can try it on your own risk:
The conference agreement also provides that, in the case of an amount paid in a taxable
year beginning before January 1, 2018, with respect to a State or local income tax imposed for a
taxable year beginning after December 31, 2017, the payment shall be treated as paid on the last
day of the taxable year for which such tax is so imposed for purposes of applying the provision
limiting the dollar amount of the deduction. Thus, under the provision, an individual may not
claim an itemized deduction in 2017 on a pre-payment of income tax for a future taxable year in
order to avoid the dollar limitation applicable for taxable years beginning after 2017.ParticipantWhat I understand from new GOP bill text is it keeps the current tax law 20% dividend rate breakpoint which is $479K for married couple. The new plan would still tax dividend and capital gain at 20% if income is over $479K (the current law 20% breakpoint). I don’t think the new bill would attach 20% tax rate to new highest tax bracket income starting point $600K in this case.
ParticipantThe senate bill still allows casualty loss deduction only restricts to federally declared disaster. I heard some tax cheaters made phony casualty loss deduction and IRS doesn’t have all the resources to verify it, so politicians want get more revenue from it.
The definition of federally declared disaster I can find from IRS is:
A federally declared disaster is a disaster that occurred in an area declared by the President to be eligible for federal assistance under the Robert T. Stafford Disaster Relief and Emergency Assistance Act. It includes a major disaster or emergency declaration under the Act. See Publication 547, Casualties, Disasters, and Thefts, for more information.Trump did approve a federal disaster declaration for California in response to October CA wildfires:
Trump approves disaster declaration for California wildfires
Since the 2 houses are still working on combined bill, I would be really surprised if the CA fire victims are not allowed for casualty loss claim in their 2017 tax return.
ParticipantI hear so many negative comments on tax bill. Yes the house bill is negative to Californians: low mortgage amount to deduct interest, limit prop tax to $10K, remove SALT deduction, and 35% tax rate kicks in so early starting from $260K family income. House bill hits hard on those $200-500K income range Californians. But the senate bill is much different and quite friendly to pigs on this board:
1) Mortgage amount to deduct back to $1m.
2) Added many lower tax rates to benefit family with income less than $200K. For high earners, $32% tax rate kick in much later at $320K (all assuming married couple) and it is low 24% before hitting that threshold.
3) $2000 child credit. Not reward family with multiple children, but still decent credit.
4) The new AMT tax is much more friendlier. Do not listen to journalists about the bad things on that, do you own calculations. In 2016 tax filing, the AMT exemption is $83,800 and exemption phase-out starts at $159,700. Senate bill AMT bill increases exemption to $109,400 and exemption phase-out starts at $208,400. For a family with $200-400K, currently most are hit by AMT here due to high SALT tax. My guess is the new plan probably would hit only about 20% of people in the income range, those get hit is by much smaller amount. For a family with $300K AMT income (federal AGI – mortgage interest – charitable contribution), the old AMT tax is $66.9K and new AMT tax is $56.3, a full $10K less.
5) Multiple children and high SALT, high mortgage and high property tax are normally higher earner, thus are already paying AMT and those deduction are not allowed currently any way.ParticipantNo much difference unless you have a large property tax bill. Both the passed senate and house bill now have property tax deduction up to $10K. I wouldn’t think the final compromised house and senate bill will drop that as it as it was added last day in senate for Sen. Collins. Dropping it would cause her to cast No voting in final combined bill.
Participant$500K home sale capital gain exclusion rule is tightened. It used to be 2 out of last 5 years, now it is 5 out of last 8 years for tax-free gain on primary home. The amount is the same $250K for single and $500K for couple.
ParticipantI think there is 70/30 rule on small business to prevent people to abuse the pass-through. 70% income must be paid by his normal tax bracket and only the remaining 30% at low 25% pass-through rate.
When we but Energy MLP, then the pass-through distribution is at 25% delayed tax until we sell it many years later.
ParticipantI have owned Vanguard long term CA muni bond fund since 2009. The fund is so called long term, but it is actually in high spectrum of intermediate term bond fund as the average duration is only 6.4 years. There were many good times to buy it like any time from 2009-2012. The best time was when “star analyst” Whitney called for massive default in muni bond which never happened. True star manager like Bill Gross added massive position in muni bond after Whitney made the call which causeed big selloff in muni bond. My entry point was about 4% YTM and with the yield down to 1.8% now, there is significant risk of losing value when interest goes up. I personally feel it is too late to jump into the boat. Be careful when tempted to the 1.8% yield using bank saving rate as reference.
I am still holding the position, and if Fed raise fed fund rate to 1% (likely in 3 baby steps), I’ll dump the fund and change position to CA muni money fund.
ParticipantI would do the same to walk away from the lease. Sublease basically shift tenant screening authority from landlord to tenant, which can bring unqualified people into the house. I wouldn’t allow things like that.
September 18, 2015 at 9:07 PM in reply to: How will Qualcomm layoff impact SD housing market? #789435ParticipantSome of those group Tai Chi players in 4S Ranch are actually parents of Qualcomm engineers.
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