Retirement Allocation & Rebalancing

Allocating Your Assets

Retirement Allocation (now)

Liquid versus Growth

Set Ratios based on risk tolerance, and rebalance if they shift over time

  • How much near term flexibility do you need in the? [Contingency Fund]

  • Buffer for bad assumptions

  • How will create your paycheck for the next 5 years? [Income Reserve or Income Floor]

  • Psychological cover

  • How will you grow your future self? [Upside or Long Term Portfolio]

  1. Define Your Gap between Guaranteed Income and Annual Spending need (X)

  2. X is what you plan to withdraw from your assets each year—rebalancing and filling your paycheck

  3. Have 1X-2X in Cash or High Yield MoneyMarket (Emergency)

  4. Pre-fund paychecks with 5X Income Reserve for Down/Bear Market. To avoid selling equities when they are at a low. Instead, let them recover over a few years and pull your paycheck from the reserve. When markets recover, then refill those reserves. CDs, bond ladders, short-term bond funds, T-bills.

  5. Rebalance no more than once a year

e.g. Annual budget of $170k, - $160k salary+deferred, + $50k tax, + $40 529 & HSA = $100k/yr gap

  • $200k Emergency Fund (5%)

  • $500k Income Reserve (13%)

  • $M Longterm Upside (82%)

Michael Wei