Retirement Income

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Vanguard Total Stock Market Index etf - VTI

Vanguard Total Stock Market Index etf (VTI) is ETF based on CRSP Total stock market model developed by top UChicago economists. It is a combined index of top 2500 stocks (based on market cap) representing almost 95% of the market cap of total stock market. Vanguard Total Stock Mkt Idx Adm (VTSAX) is underlying mutual fund for this ETF. If one wants to do automatic periodic monthly investment, one should buy VTSAX instead (as most of brokerage allow periodic investment in mutual fund only ). Money invested in a given company is proportional to their market cap weightage and so giant and large cap ones get most of money (70%) and rest goes to mid caps and small caps. S&P 500 based large cap stocks represent approx 70-75% of total domestic stock market capitalization and so investing into a mutual fund/etf based on this index provides a broad large cap  coverage for sure. However remaining 25-30% domestic stocks fall into mid cap (15-20%) and small cap (10-15%) market cap. ...
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William Bengen’s seminal study about 4.5% Safe Withdrawal Rate for 30 years of inflation adjusted retirement income

Most commonly used retirement income planning strategies use actual expences , which I believe is more practical and includes one's spending habits and chosen life style. One of the most popular strategy uses 55/45 stock/bond conservative  retirement portfolio equal to 22 times  of desired initial yearly  needed expences (after accounting social security benefits). For example, say someone retires at age 67 and starts collection 50K social security benefit as joint household. With fully paid house, say household expences are 60K per year. So household needs remaining 10K from retirement portfolio to meet all expenses. Using above rule of 22, one just needs 220K (22*10K) portfolio to provide needed retirement income for rest of retirement years. Now, let's visit other scenario where household wants to retire earlier , say by age 62. Social Security benefits are reduced (25%) to around 40K per year in that case. Now household needs retirement portfolio to provide remaining ...
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How to know if one is fully funded for retirement using Safe Withdrawal Rate approach

  If one's retirement portfolio is more than 22 times of their net retirement expenses (net is after adjusting for social security income), such retiree in essence has overfunded portfolio. If portfolio is 50% or more overfunded (say more than 33 times of one's net retirement expenses), such retiree does not have risk of running out of money, even if faced with significant portfolio drop during initial years of retirement. This allows such retiree capacity to go for more calculated risk such as potentially all stock portfolio without worrying about outliving their portfolio. Following excerpt from above referenced Bengen safe withdrawal study illustrates that decently overfunded (say 50%-100% overfunded) investor could potentially accrue several times of initial portfolio value if they are willing to leverage their capacity of 100-percent stock portfolio: "Can you imagine how much wealth would have accrued to an investor who had a 100-percent stock portfolio o...
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