TokyoWart wrote: ↑Wed Aug 12, 2020 1:27 pm
captainspoke
Thank you for the detailed and thought-provoking response. I’m sorry you had to write that twice. Here are my thoughts:
1. Very interesting to see 6 years of yen and 6 years of dollars in cash. Main message to me was 50:50 split between yen and dollars for those safest buckets. ...
2. Like you I have never been a big fan of bonds and I think the opportunity cost of having those two cash buckets not in bonds is lower now than it ever has been. I’ve thought about creating a Treasury Direct account to buy short term T-bills for the cash buckets when I reach retirement but actually US banks currently give better rates on short term instruments.
3. I like your relatively high equity allocation (which I counted as 57% + 19% = 76%) but I am relatively numb to risk. My personal opinion is that if you survived March 2020 without selling you can take anything in market volatility. Maybe a more important point is that if 12 years of expenses (the cash positions) is only 16% of your portfolio you have a generous safety margin.
4. Also sounds like you are pretty tax efficient. I am at the point where I am reluctant to buy high dividend stocks because I hate to pay taxes just to reinvest them. It sounds like those dividends are helping extend the life of your cash bucket.
….
Writing it twice made for a better post—as with any writing situation, the second draft will almost certainly be better. And I think I clarified some things to myself in the process, so it was worth it for me, too.
(1) This point, with 50:50 in yen and dollars, along with the probable timeframes for those, are things that have more or less evolved on their own, rather than being a deliberate plan. While it was a conscious decision to keep my severance here, that was tentative at first—wanting to be cautious and move slowly—and it’s only with a couple few years hindsight, that I think, “yeah, this is working out okay and I’m comfortable with this”, and that I’ll stick with it until something comes up to change my mind. (nothing has, so far) (1a) As you are aware, I’ve had some health issues, and apart from whatever other typical ongoing costs/expenses there are in my life (six months, or six years), my funeral here—and then some—should be covered without having to consider what to sell/liquidate, or even worry about quickly bringing enough for that into the country.
(1b) Apart from that, the calculation that it’ll last six years is kind of a back-of-the-envelope projection. We’ve been tracking our expenses for years, so besides the usual bills, we’re aware of the need for an occasional new appliance, a/c unit, water heater, etc. With some travel right after retiring, I spent more (monthly/yearly), but last year was some hospital time, and this year the virus has us pinned down. I did spend some on a private room, but overall that was comparable to (or less than) traveling. This year I’m almost just living off my pension—kind of like that six year projection has been put on pause.
(1c) And sure, back to that 50:50 split into yen and dollars… looks kind of interesting. Keep lots of cash, and then be smart—hedge the f/x, just in case. Brilliant plan? Well, sorry, but it has just kind of happened that way, due to: wanting to (again, tentatively) hold significant cash here in yen, and on the other side (US acct) being my usual, sort of conservative self (keeping investable cash on hand).
The background is that up to last fall, I had less cash on hand there ($). At that point I sold quite a few things, and cash might have touched 30% by december 1st. And then, virus… I bought a couple things in early March, definitely too early. But I got one purchase right (l think the 23rd), and continued with four(?) buys thru May and later June. Adding to core ETFs, and new positions in a few of the dividend stocks. And in so doing arrived at my current $ cash percentage. It wasn’t a target or goal—the market got so that I didn’t want to spend any more on it. And that cash level seemed/seems prudent. And then I noticed that it was about the same as I had on hand here.
Such a plan, eh?
Let me now post this, and I’ll try to address 2, 3, and 4 later.
(and this part is irrelevant to non-US people) There were two changes that I’m not yet comfortable with. One is that with retirement, I shifted from earned income (and the FEIE), to unearned income (pension, passive) and the FTC. The other is the tax law change (differing deductions, etc). I’m still feeling out the thresholds. I paid about $500 US tax for 2019, but that was due to having sold what I did last fall.