Start YNAB for Budget & Personal Cap for NetWorth/Investments

I retired last year and need a budget program to control my spend and ensure my funds last a lifetime.  I have used Personal Capital's app to track my Investments and full NetWorth picture for several years.  From what I have read elsewhere the PC app can be my big picture and only the budget spending needs to be in plan of YNAB.  My SSA, a small pension and deposits from investments into my in plan accounts would be tracked in YNAB.  If any one has already done this from scratch and suggestions on how to get started? I am struggling with how much to allow myself.  I expect that I have been spending at an unsustainable rate the last 6 months.  I don't have debt beyond 27% of my home value and a new car loan at 0% interest.  I use Credit cards for travel points and cash back paid off monthly. 

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  • Hi Frugal1SBM !

    One of the most important parts of budgeting is to make sure you're living below your means. If you believe you're spending at an unsustainable rate, you'll want to take a closer look at that rate and how you can pull in the reigns.

    When you have a moment, watch our video on How To Create a Budget Template or take a look at the Set Up Your Budget Workshop. Both of these go over how to incorporate your known expenses and goals into your budget to give you a bigger overall picture.

    I'm hoping a few other users in the forum will chime in here. I know Patzer has been kind enough to share retirement insight on a few other threads. :)

    Like 1
    • nolesrule
    • Stealing From the Future fix is an improvement but is incomplete....
    • nolesrule
    • 2 yrs ago
    • Reported - view

    A 4% withdrawal rate from your investment assets is very likely to last at least 30 years if invested at 40% stock / 60% fixed income or higher. What is your withdrawal rate and how old are you?

    Like
      • Frugal1SBM
      • Slate_Blue_Koala.5
      • 2 yrs ago
      • 1
      • Reported - view

      nolesrule I am turning 69 this month. I waited until 68 1/2 to retire to get a higher SS guarantee income and let investments grow longer.   Some of my retirement funds went to care for my husband the last 5 years of his life which is also why I did not retire until he passed away and the debts from his illness were cleared.   My parent's Trusts are in the process of being settled with some of the assets in real estate.  Estate Cash funds have been flowing in over the last three years into savings accounts.  I have been fine on my earned income last year, these cash funds and proceeds from the selling the home where we had lived.  Part of the funds went to moving into a forever home which is an end unit 1 story townhouse with an HOA doing exterior maintenance.  

      Like 1
  • Frugal1SBM said:
    the PC app can be my big picture and only the budget spending needs to be in plan of YNAB.  My SSA, a small pension and deposits from investments into my in plan accounts would be tracked in YNAB.  If any one has already done this from scratch and suggestions on how to get started? I am struggling with how much to allow myself. 

     I've been doing this for almost three years.  A fine point:  it's not that YNAB tracks "only the budget spending," though it does track that.  It's that the YNAB budget contains a set of accounts that make up the budget universe.  Though this is an artificial distinction, I find it useful to keep the budget universe separate and distinct from the investment portfolio.

    With that clarification, you have the basic picture down.  Social Security, pension, and draws from investment are income to YNAB.  You use YNAB to create a budget that lives within that income.  That's what YNAB does, and it's good at it.

    Investing is a totally different discipline which is also important.  Because you say you've been tracking investments for several years, I'm going to assume you are comfortable with your investment strategy.

    The part of your post I've bolded is the hard part.  An allocation budget such as YNAB assumes income is a given, and seeks to help you live within the income.  Traditional retirement planning assumes that expenses are a given, and seeks to determine how much income you need and how long your portfolio will last at the given level of expenses.  When I asked my Fidelity financial advisor how to turn a stack of investment assets into retirement income, the answers were not particularly helpful.  I ended up having to solve that puzzle myself.

    I do not use Personal Capital.  (pauses to watch Personal Capital demo video)  It appears to be a pretty generic financial tracking/management tool, probably grounded in the same common assumptions that drove my financial advisor's answers and that drive the 4% rule cited by nolesrule earlier.  I'm going to assume you know how to look at the graphs that predict how long your assets will last in retirement.

    The key thing, as you clearly realize, is how much of your portfolio you spend.  There are different ways of looking at this.  The 4% rule is popular.  Investors on other sites I frequent harp on the fact that you need to deduct any advisory fees you pay; if you're paying someone 0.5% to manage your portfolio, the 4% rule becomes a 3.5% rule.  If you're smart enough to do it yourself with low-cost index funds, the 4% rule says you have a significant chance (too lazy to look up the percentage) of having the portfolio last 30 years.  Investing nerds I read on other sites say that if you can get that down to 2.5%, your portfolio is nearly certain to last forever.

    Fair disclosure:  That's not how I look at things for my own portfolio. I'm very conservative, and I'm concerned with managing my own investing behavior in the face of greed and fear.  I do not believe that I am a special snowflake immune to those emotions when it comes to investing, so I need rules to manage them.  One of my rules is, I invest in income-producing assets, primarily dividend paying common stocks with a history of increasing their dividends.  Another rule is, I will draw less from my portfolio than the income it throws off.  As long as the dividends keep coming in, I do not need to sell in a down market.  I'm comfortable if I can keep my portfolio payout ratio (draw for budget and income taxes / forward looking annual dividend income) below 60%, I feel secure and I don't feel a need to do anything dumb in a down market.  Of course, this only works if I can live off Social Security, a small pension, and less than 60% of the income my portfolio throws off.   A bit over two years into retirement, this is looking good; but the future is always uncertain.

    Because I am fortunate enough to be able to live off my portfolio's income, I have not put much thought into planning for an orderly draw down of the portfolio over my remaining lifetime.  That is a harder problem to solve, but one which must be solved if you do not have sufficient assets to live off just the income.

    As you probably realize by now, YNAB cannot help you with the decision of how much to allow yourself.  That answer has to come from the investment management discipline.  Once you have that answer, YNAB is great at helping you stay on track and live within your income.  In fact, the YNAB discipline and the investing discipline complement each other.  If I pay myself a consistent monthly income, on the budget side I simply save (a.k.a. budget) for big ticket items, and when it's time to replace my car the money is sitting in on-budget accounts and can be spent without guilt.  The subtle point is, I don't need to generate a spike in taxable income to replace a car or do a major home improvement.  The budget manages the expenses, and that helps the investing manage the taxes.

    I could write quite a bit more about the details, but the bottom line is that you must balance the investing need to preserve your capital with the budget need to be able to live at an acceptable level of comfort.  There is no one right answer, and no simple formula to plug your numbers into.  You simply have to look at the investing consequences, look at how you want to live, and make the best decision you can for your own circumstances.

    Like 5
      • nolesrule
      • Stealing From the Future fix is an improvement but is incomplete....
      • nolesrule
      • 2 yrs ago
      • 3
      • Reported - view

      Patzer I mentioned 4% because it's an easy enough rule of thumb for trying to benchmark for a 30 year drawdown. As you point out there are other considerations. But it's a decent place to start.

      Personal Capital is basically the Mint for investment accounts. It can help you see your asset allocation, and has the added benefit of getting sales calls for their advisory services. For that reason and the fact it sometimes miscategorizes some funds, I stopped using it.

      Like 3
      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 3
      • Reported - view

      nolesrule The 4% rule is commonly cited, so I would have mentioned it even if you didn't.  It is a place to start, and the framework for the 4% is useful for Boglehead type investing, which I don't do.

      The interesting point is that the 4% rule specifies 60% stocks and 40% bonds.  Why?  Because that was common advice for a portfolio mix when the study was done.  It also uses a broad market index and a broad bond index.  Why?  Because that's the historical data that was available to study.  In the real world, some people seek to replicate that mix because of the study; but there's nothing sacred about the investment mix.  It just happens to be what was studied, because studying things other than broad market indices is difficult.

      It may well be that 4% is good for a diversified portfolio of stocks that doesn't match the studied index.  But we don't know, because there are too many variables to study that historically.  It's not that individual stocks are inherently riskier than the index, it's that they're harder to study.

      FWIW, the last time I computed the number my investment draw was about 2.5%.  But that's not how I decide how much to draw or whether my draw is safe.  And my mix is nowhere near 40% in bonds.

      Like 3
  • I use personal capital advisors to help manage half of my investments which garners a 1% fee but the investments are in very low fee index funds so that the portfolio 0.10% ave. fees + 1%.  The other half is in Vanguard accounts which are at 0.12% ave fees.  The Advisors of course would like me to roll all the funds there for tax withdraw advise but since most of my investments are before tax retirement accounts my accountant is sufficient for that advise.  If it becomes too complex for me to make my own decisions on Vanguard I could at a later date roll all the funds to PC and they will cut me a monthly "income" transfer which will ensure I don't outlive those funds.  I get 24/7 view (I only look occasionally) on how they are "robo" balancing my investments across Asset classes and US sectors which has been a good learning process for me.  If the stock market is chaotic then I don't look.  My brother was a broker at one time and he reminds me not to react.  If I get tempted to tinker it is with a small % of assets in the Vanguard and not more than I can afford to lose.  I cashed out $6,000 in TEL last month that had been flat for 18 months for transfer out to my savings account for upping my reserve on hand fund.   I plan to move some funds into a High Interest Online Savings account so that in a downturn I can go without a draw.  I was trying to decide whether these should be in the YNAB budget or off budget until they are transferred to checking.  How do you manage your rainy day funds aka 3-6 months living expenses?

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 5
      • Reported - view

      Frugal1SBM If you're paying Personal Capital 1% to manage your money, the 4% Safe Withdrawal Rate is only 3% in your case.  This is because 1% off the top goes to PC, not to you.

      It really isn't worth paying 1% of your portfolio to be told to put your money into low cost index funds.  You can do that for free.  In fact, I'm really annoyed that I have to pay 0.4% fee in my HSA to invest in a low cost index fund; it's a rip-off, but I need the tax structure and Fidelity won't do an HSA for an individual account.

      Like 5
      • Agamede
      • Agamede
      • 2 yrs ago
      • Reported - view

      Patzer Hey, not sure if you're aware, but Fidelity recently started offering HSAs to individuals. I just opened mine and there's no catch I can see.  Plenty of low cost index funds to choose from.

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 2
      • Reported - view

      Agamede I was not aware of that, and I'm not seeing it online.  I will have to give Fidelity a call when I have time.

      Edit to add:  Found it online.  The sweep is only FDIC insured bank (read: low interest, which beats the microscopic interest at HEQ); but even if I can get a Fidelity S&P 500 index fund without paying the HEQ wrap fee, that's a win.

      Like 2
      • Agamede
      • Agamede
      • 2 yrs ago
      • Reported - view

      Patzer Try going to Open an Account on their website-- it's in the laundry list of options-- or here for more info: https://www.fidelity.com/go/hsa/why-hsa. Not sure why they've made that page so hard to find.

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 1
      • Reported - view

      Agamede Found the web page.  I plan to talk to them first; sometimes they will do things for me that don't appear as options on the web site, and I need to talk about transferring an existing HSA.

      Like 1
      • Agamede
      • Agamede
      • 2 yrs ago
      • Reported - view

      Patzer Fair enough! They might give a loyal customer access to a better sweep account, for instance. Though just the absence of a cash minimum makes it better than a lot of HSAs I've looked at.

      I was able to open the account and transfer funds from my employer's HSA without any trouble, though I did need to snail mail a form. 

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      • Patzer
      • Retired at age 60. Thank you, YNAB!
      • Patzer
      • 2 yrs ago
      • 1
      • Reported - view

      Agamede Follow up.  Found time to talk to Fidelity Tuesday.  They won't do anything for me that the web site doesn't let everyone do.  Opened the account, then initiated an HSA contribution to it yesterday. 

      The rep I talked to pointed out that I needed to apply for a debit card after the account was opened, it isn't part of the default package.  Got the application in.  I will need to request a trustee to trustee transfer from my existing HSA.  That will take 3 to 5 weeks, and at some unspecified time the transfer will lock the existing account for a few days with no access to funds.  Hence, funding the new account before I start that process.  My medical spending needs are smaller than the annual contribution limit, but I do need to spend from the HSA most months.

      I'm really looking forward to having no-fee, conservative investments in the HSA that pay more than microscopic interest.  It's still not as good as a plain vanilla brokerage account; I'm stuck in the low-interest FDIC insured sweep.  But even that low-interest sweep is better than the microscopic interest sweep and wrap fees for mutual funds that I have at HEQ.

      Like 1
      • Agamede
      • Agamede
      • 2 yrs ago
      • 1
      • Reported - view

      Patzer Thanks for the update! It is good to know about the debit card. I hadn't considered it because I'm keeping my employer's HSA (held at a local credit union and bearing 0.25% interest) open to receive their contributions. If I need to spend a small amount of HSA dollars, I already have a debit card for that account.

      I believe my trustee to trustee transfer took just over 3 weeks.

      Like 1
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