Price Transparency in Medicine

Oh Baby Oh Baby Trump just stuck a shiv in the MBA top heavy medical industry by ordering price transparency in Medicine especially the drug biz. It’s the day the universe changed.

I went to Med school in 1981, it was a heady time of 17% interest rates on student loans. When I was accepted my med school cost 6800/yr and I sold my house and had saved enough to cover 4 years. By the time I walked through the doors 6 mos later it was 8600. The next year was 12,000 and the 3rd year… I ran out of money and I wasn’t going into debt at 17% interest, which started accruing immediately. So I marched down to the NAS Glenview, in Chicago raised my right hand, swore to defend the constitution and the peeps and it was anchors aweigh for this pilgrim. It was actually a great deal they pay 2 years, I pay back 2 years after I complete my residency. They get a fully trained anesthesiologist for LT’s pay which was 36K/yr.

When I got to med school it was the time of the first HMO. My buddy and I looked at each other and said “OH NO! It’s going to be the $39.95 gall bag operation”, because it was dead clear he MBA’s meant to pierce the profit in private practice medicine and hoover it up for themselves and it’s been down hill ever since.

When I started the physician commanded 12 cents of the medical buck and soon enough it was 6 cents then 3 cents. Where did the dough go? Strait into MBA’s pockets. MBA’s and middle men. You can’t run a competitive business unless you know the cost and if you break your wrist what gets paid is who knows? It’s what ever the contract says you get paid plus the slippage of denials.

Transparency is going to change that as he says BIGGLY. A wrist can’t get set without a Doc but it sure as hell can get set without a MBA sucking off the profit or a screw company charging 10K a screw. United health, CVS, all them jokers are heading down. Should be an interesting ride.

Roth Estimator

I’ve written a lot about Roth conversion especially partial Roth conversion. I’m in the middle of Roth conversion which is why its on my mind. I was playing with a simple FV calc to look at conversion over time. This is a non-spreadsheet method of analysis that is pretty good.

My previous analysis says that something like a 500K TIRA is OK to own when RMD happens. It’s payout is small enough to keep you in the 12% bracket for a long time. So lets’ say you’re age 65, the SECURE act passes, have a 1.5M TIRA and 7 year to convert it (post SECURE act RMD won’t start till age 72). You want to clean out the TIRA such that 500K is left in the IRA after 7 years of conversion. Do you just divide 1M by 7? That would be the crudest estimate but wouldn’t get the job done. The TIRA will continue to grow over the course of the 7 years (presumably) so you will have to transfer more than 1/7 per year (142,000/yr). Lets look at a FV calculation

This calculation says at 4% return (return above inflation) you would want to convert 185K/yr not 142K /yr. Taxes on 185K would be $36,538 and $ 25,106 on 142K MFJ standard deduction one spouse over 65. So now you know how much to transfer and what it’s going to cost. What’s the end value of the Roth?

So at the end of conversion you would have 1.461M in the Roth (nearly as much as you had in the TIRA, and 512K left in the TIRA for a nearly 2M total. Your taxes would be 7 x 36,538 or $255,766 or a cost of conversion of .13 cents on the dollar, a pretty good deal IMHO. Well below 22% or 24% marginal costs.

I pay my taxes not from the Roth conversion but from cash I free up from my brokerage account mixed with long term cap loss, so my taxes money comes out tax free. A good reason to consider learning how to tax loss harvest.

The results may not be perfect since they represent averages but a rational estimate of both conversion amount and cost. As you convert you can adjust the rate of conversion if the market happens o hit a home run or has a crash. My goal is to wind up with 500K in the TIRA and more than 1M in the Roth prior to RMD. Simple quick no muss no fuss, no Monte Carlo.

This analysis presumes you are living on cash for the conversion period for max conversion efficiency, but even if you’re living on side gig income or dividends this is how to do the analysis, you would just have higher taxes if not living on cash, but you would be paying taxes anyway.

A word on how assets come out of the TIRA. My goal is to store my blonds in my TIRA. Your best placement of bonds is in a pretax or Roth account. My asset transfer is to get the highest return asset out first and into the Roth. Second highest next. The idea is to get the growth into the Roth to avoid paying more taxes on the appreciation. Moving growth first may change the calculus slightly but it’s a trivial matter to adjust every year now that you have a method to judge. Simply place the assets on the efficient frontier plane and read off which one pays the most. Alternatively you can move the riskiest first but depends on your goal. My goal is to have the bonds in the IRA and enough stock to own a “tangent portfolio” which is the AA which pays the most return for the least risk. If you owned BND and VTI the AA of the tangent would be 12% VTI and 88% BND. You may want higher growth but higher growth brings more taxes and moving out of 12% bracket sooner since this account RMD’s, so I’ll get my growth in the Roth which grows tax free. You get the tangent portfolio from the efficient frontier curve of the assets

The really good news is $185K/yr avoids all the tax cliffs and surcharges built into the tax code. If you convert to the top of the 24% you go off the cliff and pay more taxes than need be, but that’s a subject for another discussion.

My brokerage (FIDO) allows transfer of assets whole or pratial between Roth and TIRA so I don’t even need to convert to money, just transfer and pay the taxes.

Here Comes the Crypto

I own BTC. I bought it not as an investment but as a currency. Back in 2015 Greece froze up. There wasn’t a dollar to be had. No checks worked. Credit cards were frozen. If your money was in “the bank” you could go stand in line for 5 hours to be allowed to withdraw $50. I read a story about a guy who was vacationing in the Greek Islands. When he was ready to go home he couldn’t buy plane ticket. He was a rich guy with plenty of means, but his means were all tied up in banks and the banks all had the windows closed. He owned BTC. He used BTC to buy some Ouzo, some Gyros and a plane ticket home. I had just sold some penny stock at a good profit and used the proceeds to by my kids a car. What was left I split between BRK.B and BTC. I became intrigued at the idea of bank-less currency and true point to point transaction guaranteed by the block chain technology. Also I was intrigued by the fact BTC had an upper limit. It was infinitely divisible but there were only 21 million BTC that would ever exist. The limit guaranteed a bubble like the tulip bubble would not happen. Tulips are trashy flowers, easy to grow. BTC is VERY hard to mine, I know I tried my hand at it, and it becomes asymptotically harder with every BTC mined, so the BTC universe is capped at 21M. I bought my BTC at $275 a coin and went off and took a nap. A year or 18 mos later it became a speculation and doubled and doubled etc till it was worth $19,000 a coin, YIKES! I looked at the BTC charts and the volatility was +- 40% or an 80% spread. At $19000 if I lost 80% I’d still be way ahead about 1300% so I sold my initial stake and let the rest ride. This is called creating a free trade since all you own after the trade is profit as the principal was removed. I put the principal into BRK.B This was totally speculative money, I won’t even call it an investment, but by selling the principal my risk was zero. Worst that could happen is I’d loose my unrealized gains and not have to pay the taxes. As of today I’m 8800% ahead since I took the principal off the table. Wild ride.

What I like about BTC is there is no banking and governmental involvement. You can be a purse maker on a mountain top in Peru, get on the satellite phone and sell 50,000 purses to Nordstrom or Neiman, do the deal and have the BTC in your account by lunch. All you need now is logistics to get 50K purses to NYC. Logistics? Sounds like a job for Bezos! This opens the world to commerce. A form of this already exists in China where your account is linked to your cellphone and you can buy Bahn Mi with a tap of a button or a QR code. This is creative destruction at its finest! BTC was further legitimized as a currency when the options market was established so you could effective short BTC and hedge the risk and better control the volatility. My prediction was BTC would stabilize at 9000/coin and today its 8800.

Facebook backed by Visa and Mastercard is creating it’s own Crypto. Be very clear what is happening. Facebook has 2 billion users and God knows how many hold Visa and Mastercard. Elon Musk is launching a satellite network that will blanket the planet in wifi. I’ve participated in this kind of technology through my ham radio interest, it’s called LEO low earth orbit. The satellite plant is just down the road from me, and the launch pad is 13 miles southeast from my sun room. Amazon and Space-X are involved and its called project Kuiper. I can sit and watch the launch from my couch and hear the roar of the rockets as they leave then hear the roar as the boosters return 6 minutes later for reuse. This is happening folks world wide non governmental dominated commerce. The results are staggering. Imagine a currency where the USA is NOT the reserve currency. In the block chain value transfer is automatic and requires no middle man. If your not the reserve currency you can’t just print money.

That oughtta spice up your weekend

Cardiac Surgery Recovery Update

I’m on POD 47 so a little over 6 weeks. Immediately post op in the ICU My BP crashed and the Curly shuffle ensued. The surgeon walked in at 5 AM and asked me “how ya doing” I told him I need blood, and a few minutes later it hit the fan. They worked on me for 5 hours and finally the guy gave me blood and I stabilized. When he saw me later he said “I wish I had listened to you in the first place”. I find that hilarious. It’s a subtle anesthesiologist/surgeon kind of thing. And after standing toe to toe with these guys for 35 years it’s rare I’m wrong. I’m not knocking this guys skills, I consider him a minor god, but I was already doing anesthesia the same year he was going to his Prom

The ensuing Curly shuffle bought me an extra 35 lbs of edema. If you don’t think it’s a bitch getting out of bed or a chair post sternotomy with an extra 35 lbs strapped to you think again. My albumin dropped to 2 indicating I was under significant metabolic stress. The food was horrible mostly carbs, and healing is made out of protein so like Lynard Skynard: “I did what I could do” and 6 weeks out my albumin is over 4 with resolution of the metabolic component. at 16 days I was actually catabolic and loosing weight beyond the edema but at home I was finally able to get complete control of my diet and level off. I felt like a dive bomber diving into the ground and pulling up at the last minute, but the plane held together and pull up I did.

I managed to get an infection in the saphaneous canal where they harvest the vein. The C&S was unknown at that point. but likely staph so I started on Augmentin . It blew up over night literally. I was measuring the circumference of my leg and it grew an inch in a day. I DID NOT want to go back in the hospital. It would have been a week admission, so I called up my surgeon buddy who brought me to his office on a Sunday and Incised and Drained the saphenous canal. Got about 40 cc out, got a culture. I proceeded to drain more over the next 2 weeks. The bug was Proteus Mirabilis a gram neg rod so it had potential for very bad juju. I got on the right antibiotic and things have deffervesced nicely, but the infection made me quite ill. I’m also on a anti arrhythmic amiodarone for afib and I swear that stuff is rat poison. A-fib is common post op and the amio converted me but I’ve been in perfect sinus for a month so the pathway swelling has likely subsided so I’m starting a taper on the amio. Tapering is proof God loves me, I would hate to be on that stuff permanently. I’d probably opt for a pace maker instead.

6 weeks is the magic number for driving. The sternum can take 24 months to completely heal, and I can tell my manubrium is not well healed especially on the right (common) so I still have to watch my P’s and Q’s about things like lifting heavy weights, but “I’ll do what I can do”. My surgery included a LIMA to the LAD, so the right internal mammary is still in situ and should aid in healing.

I went to see my surgeon today and he discharged me 2 weeks early because of the progress I’ve made. I’ve been reviewing recovery times and this is going to be a 6 month deal at least. I’ve been doing twice a day workouts to total 40 minutes various activity prescribed by PT and have seen good progress. Yesterday I did 30 min. continuous aerobic exercise at a HR of 150 and had normalized my post workout BP in 3 minutes. Long way to go till I’m back in shape, this incident knocked it out of me, but it will come, totally worth it since I have a 55% EF and a normal echo. On the way home I took my wife out for lunch at a rib joint. We had a great time. The market is up and life goes on!

“Worldwide Retirees Slated to Run Out of Money!!!!!”

saw a Bloomberg story on retirees outliving their money, a quote:

” From the U.S. to Europe, Australia and Japan, retirement account balances aren’t increasing fast enough to cover rising life expectancy, the World Economic Forum warns in a report published Thursday. The result could be workers outliving their savings by as much as a decade or more. “

In the FI movement we make our plans and tend to our knitting better than most I think, but the statistics are not as dire as advertised once you work through the assumptions:

For US males the average post age 65 retirement is 18 years and for women 20.6 years, the average savings for men’s retirement covers only 46% of what is necessary, and for women there is a 47% hole to be filled. The assumption is withdrawal rate is 70% of accumulation wages and does not take SS into account

This means according to this article if you start at 500,000K, made 87K/yr and withdrew 70% (61K) your money would last 10 years. When I inflation adjusted the withdrawal and grew the funds at 4% above inflation my longevity was closer to 8 years not 18. I calculate a 18 year retirement would cost 1.4M. 900K is missing to live 18 years @ 61K/yr inflation adjusted

What about SS? I’m going to guess the average worker who paid into SS for 40 years will get about 25K/yr. It’s likely his income was not 87K for 40 yrs but some smaller number for some decades, so 25K is a FRA thin air estimate, but it will illustrate the argument.

If you add inflation adjusted SS income as described, it would account for an additional 571K of the missing 900K, leaving you 329K short. The short amount you would have to make up with portfolio leverage and Asset Allocation. I Monte Carlo’d a 50/50 stock bond portfolio and for a 20 year withdrawal (the closest to 18 the program would allow) Adding 500K plus SS, 50/50 asset allocation portfolio worked out 99.76% of the time

you’d still have a 3/4 million safety net left in the account in the 10% case.

I don’t know about other countries and their Social augmentations, but in the USA an age 65 SS and half a million in retirement money will get you way down the road. The longer you go into retirement past age 85 the more failures occur, but even at age 95, 95% of the portfolio’s still survive. If you save at least 1/2 million dollars your chances of running out of money for an age 65 retirement are small.

I found this report very misleading to say the least.

A Tail of Two Risks

I’m going to create 2 portfolios, one high risk and one low risk, and run them through the meat grinder called Monte Carlo. I’m using a simple 2 fund portfolio of US Stocks and Total US Bonds, such that both portfolios reside on the efficient frontier. One is an asset allocation of 40/60, a bond heavy allocation the other 70/30 a stock heavy allocation. There are plenty of people that run 70/30 or even worse.

I’m starting with 4M in each portfolio, and I’m taking the first 1M off the top and stuffing that in a Roth IRA in each instance. The Roth serves the purpose of a backup portfolio, which I don’t count in the day to day WR of the other 3M. In other words the Roth stays closed to withdrawal unless needed. A portfolio closed to withdrawal does not suffer SORR. It’s end value will simply be it’s start value plus interest, inflation adjusted. A portfolio open to WR is liable to SORR and inflation. This study will look at a 25 year ride (actually 10,000 25 year rides) and create a distribution of what the future might look like for each portfolio.

These are the efficient frontier data for each portfolio. You can read the risk and return and Sharpe ratio for each.

When I plug the 70/30 portfolio /into Monte Carlo I choose 3M and 110,000 as portfolio size and fixed withdrawal rate inflation adjusted. I choose historic inflation. 3M and 110,000 is a WR of 3.7% in either portfolio. Monte Carlo has a cool feature in that it dissects the internals of various statistics and each portfilio has a very different ride through its 10,000 simulations.

You can read off things like Max Drawdown, the percentage of drawdown the portfolio suffered according to centile, quite informative! in 10% of the cases the portfolio suffered a 95.71% drawdown and an ending balance of only $128,636 left in the bank after 25 years. It tells you safe withdrawal rate and perpetual withdrawal rate for 25 years, an important statistic The WR is tied to the term of withdrawal, so you don’t get to pull fuzzy numbers out of the air and try to apply them to other scenarios like assuming if 4% never fails over 30 years it won’t fail over 50 years. If you want to treat the portfolio as a perpetual source of money you have to reduce the WR from 3.7 to 2.94 or $88,500/yr.

Look at the difference between 10% and 25%! Inflation adjusted end value for the 25% cohort is 1.7M while its 65K for the 10% cohort. Here is the graph

In the 70/30 case at the 10% centile if you start with 3M you’ll end with just under 2M and your chances of success are 9887/10000 for 25 years.

Plugging in 40/60 all else the same

In the 40/60 case max drawdown is -40% (not 95%) but the end balance is 1.4M not 65K much safer. Both portfolios give you 25 years of 110,000 buying power inflation adjusted, but the 40/60 is a kinder gentler ride. The success is 9998/10000 only 2 failures. The graph

the inflation adjusted end balance of the 40/60 is 2.27M or 320K more than the 70/30. The reason of course is the drawdown. It takes a LONG time to recover a 95% drawdown. If it’s 95% down it’s 190% back up. Perpetual withdrawal in the 40/60 is a little bit better at 3.02% or $90,900/yr

So there ya go, a quantitative way to determine your post retirement risk profile through number crunching. Remember you also have that Roth over to the side which has been growing unencumbered by SORR. About the only thing that can derail you is if we actually switch to a bullet based economy where money is no good. No need for side gigs

So What About Cash?

In setting up for the next traunch of Roth conversion I converted some stock to cash to round out my living expense into my 73rd year. If SECURE passes 73 will be my RMD year. I store my cash in a high yield savings accounts paying 2.45%, so my interest is entirely predictable and government secured. My money market account only pays 1.75% so to me this seems a better deal. Cash at 2.45% is pretty safe. It grows and its growth beats inflation and I don’t have to put up with the variations in valuation of a bond fund like VBMFX. It’s basically as stable as a 3 month T-Bill but pays a lot more interest

Here is a 3 year chart of VBMFX and it has grown 2.13% where as my savings account is paying 2.45%. I also own bonds but I think this provides some diversity

I dont know how to model a savings account on the efficient frontier so I modeled VTI vs BIL which is the 3 month T bill etf and VTI and VBMFX fidelity total bond

You can see the VBMFX has an expected return of 3.83 with a SD of 3.32 vs the T Bill which has an expected return of 0.43 and a SD of 0.31. With a return of 2.45 I would expect the blue line to move up and more closely resemble the red line. My yield would be 2.45% but my SD probably less than .31% since the investment is fixed and government secured like a T bill.

Given bonds keep falling, meaning more volatility. I’ve concluded this is a pretty good investment. Essentially zero risk with a return only 36% less than the bond fund and it is perfectly liquid. It fits my need. I think cash is often ignored as an asset class because it’s paid so little compared to inflation but now that it pays more than inflation it seems both safe and efficient for risk free money, and I think provides some diversity which lowers overall risk in the portfolio. In the olden days before everybody moved out on the risk curve is was quite common for retiree’s to hold laddered CD’s as an income vehicle.

How to Create a Budget Spreadsheet

I down load my expenses from Mint in a CSV file and at the end of every month I cut and paste the months transactions into a spreadsheet from the CSV file. To down load the CSV look for this link at the bottom of the transaction page after everything has updated.

The CSV file looks something like this

This is a partial readout from May. Had a lot of Amazon activity this May because of supplies following my surgery

My spread sheet looks like this

It is simply month after month of the year out to Dec using the same format as the CVS file so I cant cut and paste each month’s data into its place in the spread sheet

I set it up so each year next to a month is linked to the $c$1 value which is the year. So “Spending Feb” has as it’s year as $c$1 Spending Mar has $c$1 etc. In other words wherever I want the year to show up I type =$C$1 in the cell (the = is important. The entire spreadsheet changes to whatever value I put in cell C1. By doing this I can create a new year simply by cutting and pasting

Here is spending year 2021. All I have to do is cut and paste and put the right number in C1 and the whole year changes. I have out to year 2022 created and each year has its own sheet

to populate a given month with data I cut and paste that data Here is a partial of the month from May

I just cut and paste from “date” on down to the bottom of the month. I have to do a slight data massage. Notice how most everything is a debit but there is one credit. On credits I change the sign of the value

Next I merely Autosum the column

and voila the partial sum of May 2019 spending. I can update the month as often as I like till the next month starts. It’s just cut paste change credits to a negative autosum, takes only a couple minutes to have an accurate readout of the month’s spending. I some times transfer money between accounts using command account which is my checkbook. Those transactions I simply set the transfer “value” to 0 in the data column and write the transfer amount out to the side under “notes” to track that transaction. I keep track of tax payments like this also since I consider taxes a transfer and not a monthly expense and it makes it easy to track. taxes paid for the year. My credit card gets paid off on the first of every month and results in a debit and credit of equal value being generated so I simply set credit to negative and that along with debit results in a 0 transaction but any given month I can easily spot my credit card bill and when it was paid.

A bit complicated to set up but EASY to use. I also can track yearly expenses and ask “what if” questions of the data. Since each month is accurate each year is accurate and a “whole year” is merely the sum of each month. Once I have a year’s data it’s trivial to understand how expenses are varying year to year and you can create your own personal inflation index if you like.

Here is a shot of multiple years I have created but not yet populated. I retired is 2017 so the first “year” is actually 17 mos long

I keep my spreadsheet auto-saved in the cloud so if my computer blows up my data doesn’t and I can access my data across computers on my network. Just before completing this post, my power glitched but I was auto-saved so I lost nothing. My wife pays her credit cards using command so I get a readout of her credit card expenses but I DO NOT track her specific spending. If you want to track multiple credit cards just set that up in Mint

Funny thing I thought May 2019 would stand out as an expensive month and it did, but I checked May 2018 and it was nearly as expensive since my kid graduated college in May 2018 which required a lot of plane trips and motel expense and celebration. Looking over May 2018 was a nice walk down memory lane

When and How To Take The Money OUT

Of course we all know market timing is a fools game. It’s the reason we own index mutual funds. We get diversity of a type and efficiency. You don’t make a killing and neither get killed. But your life is also plan-able and you can predict expenses quite a ways into the future. I seem to be in a never ending cycle of Roth conversion optimization. My initial plan was to convert over 4 years which I am 1.5 years into. To do that I made a 600K pile of cash to live on which was designed to cover living expenses and conversion taxes. I sold in 2017 near the top of the market. after a nice run up on my time table. But the congress has decided to alter my conversion schedule with the SECURE act and extending my conversion window by an extra 2 years.

I have most of my assets at Fidelity. Fidelity allows for a nice thing, they will transfer assets from a TIRA to a Roth without first turning them into cash. Quite convenient. All I generate is a tax bill. I went through the sequence of conversion and found it best to transfer the highest risk assets first, getting the volatility out of the TIRA and into the Roth. It proved to be a wise choice since the market has done so well. I merely transferred my “so well” part out of a tax deferred vehicle into a tax free vehicle and let the growth happen tax free. I also had also paid post tax money into my IRA since I always made too much money to qualify for the pretax write down. My IRA’s therefore have a component of pretax and a post tax basis. I kept track of the 8606 (actually my tax software kept track since I always used the same tax software) and my basis is 94 cents on the dollar so for every dollar I pull out I pay taxes on only 94 cents. My wife also had post tax money in her IRA’s at a much bigger %. She had to pay tax on something like 83 cents of every dollar converted. So first thing I did was Roth convert ALL of her IRA which allowed me to convert a bigger amount that the limit I set for myself and still Remain in the same tax bracket I set for my conversion. My 6 cent tax break will continue for as long as I own the TIRA. So in a year and a half I’ve managed to get about half of my Roth conversion done

The SECURE act has changed my timing since I have longer to convert I can convert smaller amounts and pay proportionally less tax. A nice windfall. In order to fund the extra 2 years I realized I needed another 2 years of living money. When to raise that money? I decided now is the time. The market has continued to run up and the rule is buy low sell high so I sold and locked in my profit. I took some money out based on my predicted need. My cash is stored in a high yield savings account paying 2.45% so it keeps up with inflation so far.

Just some examples of when to take the money out

Retirement and AA

PoF ran a recent article on asset location and tax efficiency in early retirement. Interesting article. As such he proposed the following AA in retirement:

I decided to model this portfolio on the Efficient Frontier plane

The efficient frontier plane looks at both risk and return for any given asset. You can look at this plane and see where your asset choices place you. For example owning Emerging Markets buys you a lot of risk for mediocre return compared to owning US Stocks. These are averages since 1995 so any one year EM could outperform but on the average it under performs decade after decade.

The stats

The correlations

Rank ordered Bonds provide most diversity about half as good are REITS. From a risk perspective Bonds are least risky and US stocks are next. In this portfolio you pay for your “diversity” with excessive risk, and you own way more risk than you need to own

For every 9 cents of return you pay with 12 cents of risk

The more efficient AA

Same return but under a dime of risk. The first portfolio is an AA of 80/20 the second an AA of 67/33. I find this important. owning 33% bonds is more stable than 20% and in retirement stability is more important to me than emerging markets. It means when the recession comes you drop less and recover sooner both very desirable. A portfolio isn’t open to SORR till you start withdrawing money. In time of accumulation you don’t really care because you live on a W2 income. If recession comes just work another year. In the above portfolio if the US market dropped in half (50%) you could expect the above portfolio to drop 40% If you owned the efficient portfolio a 50% drop in US would yield only a 33% drop in portfolio value. To get even in the 50% case you need to make 100%, in the 40% case you need to make 80% and in the efficient case only 66%. I can assure you 66% comes faster in recovery than 80 or 100. It means your recession is milder than the economy’s recession.

So I think AA makes a big difference. I think not owning risk makes a big difference once the portfolio is open to SORR. Like the article says optimize optimize optimize. I don’t really care what you own but you should understand the cost of owning it. A given portfolio may have made you wealthy and brought you to the retirement party but because of SOR it may not be the one to carry you into the future once you leave the retirement party. Do I hear 50/50?

Here is a 50/50 portfolio made of the top 3 diversifies from the previous example

It provides 8.5 cents of return at only 7.5% risk. At some point you may ask yourself how much return is enough a different question that how much is enough. The 80/20 paid 9.4 cents at 12 cents risk. This one pays 8.5 cents at 32% less net risk. Maybe 8.5 cents is good enough to sustain your retirement.