Today marks the first financial transparency post at the Raptor.

music selection:  “The Wild & The Young” — Quiet Riot

I’m going to do these posts in five categories; Assets, Liabilities, Other, Withdrawal Rate, and Spending.  There will be nothing to report in the Spending category until next month.

ASSETS:

I have two taxable brokerage accounts and one traditional IRA brokerage account, as well as a checking account.  These make up the entirety of my invest-able assets.

Wells Fargo (taxable): 23,309 – this account holds mostly closed end municipal bond funds.

Interactive Brokers (taxable): 213,223 – this account holds my discounted bonds, high yield securities, and options trades.

Interactive Brokers (tIRA): 106,722 – this account holds dividend growth plays and insurance companies with strong underwriting histories.

Checking: 6,401 – boring old cash.

This brings my total liquid net worth to 349,655.  A lot of people will try to tell you it is impossible for an American to retire on that little money.  Check back with me in 40 years and we’ll see if they are right or wrong.

 

LIABILITIES:

I have no debt.  But I’m doing this analysis not in the sense of US GAAP assets and liabilities but in the sense of investing.  In that case, I consider my home and my care financial liabilities.

Home: It is paid for and has a market value of about 110,000.  It costs me about 4,000 dollars a year in insurance, real estate taxes, and maintenance.

Car: The raptor-mobile is a paid for 2002 Chevy Cavalier with 150,000 or so miles.  It has no mechanical problems but consumes fuel and oil.  It requires about 400 dollars a year to keep minimum liability insurance on it.  It also eventually needs to be replaced.  This goes against the early retirement community grain, but I like to buy my cars new so I’m looking about a 15,000 dollar need in the not too distant future.

Income tax: My options strategy used to be quite different and focused on writing options at LEAP expiries.  I later discovered the time decay curve and that the sweet spot was at six weeks.  But I have some legacy positions that close this 15th that will generate just under 46,000 in short term capital gains.  At my 25% marginal tax rate, I owe an un-budgeted 11,500 in additional tax liability.  I’ll need about 1,300 in additional monthly options trading income to fund this liability so 2106 is going to be tight.

 

OTHER:

I have some low quality numismatic gold and silver coins.  Their value is primarily driven by their metal content and are thus not something I consider a performing asset.  I hold them as zombie apocalypse level financial disaster insurance.  These have a market value of about 3,500 dollars.

 

WITHDRAWAL RATE:

I have my main taxable account set to send me 2,800 dollars a month to my checking account via direct deposit.  That is 33,600 a year.  Against my liquid net worth of 349,655 that is a withdrawal rate of 9.61%, quite a lot higher than the conventional wisdom says is plausible.  My projected 12 month take from dividends, distributions, and interest is 31,578.  So 93.98% of my need is met before any options trades.  I normally need about 170 dollars a month in options trades to cover the shortfall, a low hurdle.  This year however has the big income tax bill hanging over me and requires closer to 1,500 in monthly options premiums.  I may end up drawing down from the stockpile to meet needs this year.

 

SPENDING:

Spending runs about 2,000 a month but varies widely.  I’ll report a summary next month as my totals withdrawn from checking by direct draft and for each of  my credit cards.  I don’t see much point in making this another budget blog.  I’m not that frugal and there isn’t much to be learned from me on that front.

 

Devour your prey raptors!

Financial Transparency as of 31DEC2015

Never miss another opportunity to devour prey!

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9 thoughts on “Financial Transparency as of 31DEC2015

  • January 2, 2016 at 10:52 pm
    Permalink

    Thanks for sharing the details – I have a couple questions if you don’t mind…

    1) Do you have some threshold (portfolio value, income, or other) in mind at which you’d decide retirement was at risk and take some action like part time work or cut spending etc. ?

    2) Is there some % of the income you feel needs to be re-invested in order to keep up with inflation ?

    Reply
    • January 2, 2016 at 11:32 pm
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      Pacer,
      1) I’ve never set an emergency threshold. I suppose I’d dial back spending first. Declining markets have increased volatility and thus increased options premiums so I think my strategy should be pretty robust. I might have some short term contract work lined up at 85 dollars an hour. It isn’t a done deal yet but I think I will take it if it comes on offer.
      2) I feel like I’m making enough over my needs with respect to trading income that is being reinvested that I’m staying ahead of inflation, which I view more as a falling withdrawal rate than as a race with inflation. That is going to be challenging this year with the tax bill hanging over my head.

      Reply
  • January 3, 2016 at 3:30 am
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    Thanks for sharing. That withdrawl rate is very eye opening. I suspect a lot of the puts you write for income tend to go ITM

    Does your portfolio value fluctuate wildly when chasing high yield and how do you deal with these temporary setbacks? I don’t have the balls to draw at 9.8% a year it would be instant panic as soon as my cash gets tied up from all those puts that go deep ITM and call premium can’t salvage it.

    Reply
    • January 3, 2016 at 2:59 pm
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      JW, getting assigned happens some times. You do the best you can until you price recovers. You may have noticed my last three puts were written somewhat out of the money to get more downside protection. The market is somewhat down over the last 360 day period and is guilty until proven innocent. I’m still getting 12% with 5-7% downside protection over 6 weeks.

      Assignment is the reason I have the bulk of my portfolio in bonds and high yield though. I don’t need lot of trading income to cover the gap that way. So I can afford to wait out positions that move against me.

      Reply
  • January 4, 2016 at 1:32 am
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    I guess you’ll be driving that 2002 Chevy Cavalier till the wheels fall off. Just curious, at what point did you decide just to go with liability insurance for minimum coverage? I have an 2009 Honda Civic but have more comprehensive insurance. Nice list of assets in your accounts. Funny how cash is termed “boring.” I think when looking long term the magical “withdrawal rate” is something we all must calculate with certainty. It can be tough to calculate that accurately. I guess as long as your projected dividends can meet some of your expenses you are OK but as we have seen with KMI and the like, sometimes projected income can be off.

    Reply
    • January 4, 2016 at 1:59 am
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      DH, I hope to drive the Cavalier at least another 100k miles. It has no mechanical problems, so why replace?

      KMI and VNR both kicked me in the teeth. I’m still OK though. With zero percent returns my money will last about a decade. I figure there is plenty of time to decide on a part time gig if things turn south.

      Reply
  • January 4, 2016 at 6:24 pm
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    That 9.61% withdrawal rate is indeed pretty high compared to common “wisdom”. You’ve stated a couple times that you pick assets with a higher return rate than the typical investor, but that’s still pretty scary to me.

    Good luck, hopefully I’ll still be around (and your site too) to check in 40 years

    Reply
  • January 5, 2016 at 12:47 am
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    Thanks for posting this, your “experiment of one” is very interesting.

    One question… If expenses average about 2000 and you withdraw 2800/month, what do you do with the excess in the less spendy months? Recycle back into taxable accounts? Put excess toward tax bill?

    Reply
    • January 5, 2016 at 1:25 am
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      Rich,

      Previously, I was sending about 800/month into my taxable Wells Fargo account to accumulate a larger position in closed end municipal bond funds. This year, it will be earmarked for quarterly tax payments. Twelve times 800 will come close to covering the shortfall.

      Reply

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