Crypto Returns and Sequence Risk from When I Retired Two Years Ago
(This blog was published when I had been retired for two months. This is an update of my real stories from a recent DIY retirement.)
During the first month, I was surprised by how it felt to have a negative cash flow (massive, really) in my checking account after a sizeable inflow from an NG-457 gaffe. You really cannot prepare yourself for financial inconveniences once the income ends.
The next story from my DIY retirement is an update of asset allocation, net worth over the last five years, and, of course, my 1% investment in crypto as I retired in 2022.
Let’s start with Asset Allocation.
Asset Allocation and My Sequence of Returns Risk
I enjoy calculating my net worth and asset allocation when the market is down (and occasionally at market highs).
My goal asset allocation is between 70-80% equities for the long run. Unfortunately, life happened, and I’m 110% equities, buying a home with a margin loan. It’s a long story, but no one wants to buy a house right now, given unfavorable local market conditions.
It’s a modest, like-new house in a mature neighborhood in walking distance of Pizza Hut, my gym, and a home for my children.
My personal sequence of returns risk has not been great since I retired two years ago. There was the worst market almost ever for a 60/40 portfolio in 2022 and 9% transitory inflation.
The 60/40 has been declared dead for decades so TINA into 90/10 and then retire into inflation for the first time since the 70’s. And then, because life happens, you have to buy a home. That’s my sequence of returns retirement risk.
Despite that, markets are up, even after inflation. It is a good time to own equities. It is true since I retired in 2022 and ever since data has been collected on stock markets.
Net Worth Two Years after Retirement
It is fun to calculate your net worth. Retired it is interesting to see your net worth compared to other retired physicians.
Below is my net worth over the last five years.
My net worth is lumpy because I don’t update it often. It started in late 2018 and shows the effect of compounding interest of a paid-off primary home and decades of maxing out pre-tax accounts.
Despite the ups and downs of the stock market, because I only rarely calculate my net worth, it goes up over time. That happens even to W-2 folks who save 15% of their money for 15 years.
Die with Zero suggests that you reach your max net worth in your 40s or 50s. I’m still unsure about the math, even though I have read the book twice. Maybe I need to retire twice to understand.
I Bought Crypto
My asset allocation includes about 2% into three cryptoassets. It has doubled since my retirement in 2022.
As I said two months after retirement:
It is time to get 1% invested. You should expect to lose this money; invest for 5-10 years
Crypto is an equity alternative that I bought in 2020.
Below, I invested 1/3rd in Bitcoin, Ethereum, and Solana. I’m getting paid 3.4 and 5% APY (yet unclear how that gets reported on taxes every year). I bought when bitcoin dropped from 70 to 19 and my thesis at the time is that you can’t kill Bitcoin and maybe 1% of my money would be fun to invest in a diversified crypto portfolio.
So, I picked Bitcoin, like digital gold; Ethereum, which you might program upon; and Solana, the best alternative. Is that diversified?
Real Stories from a Recent DIY Retirement
I used to specialize in Infectious Diseases, and now I specialize in Retirement Planning for DIY Investors.
This is my real story of retirement. I am a DIY retiree, yet I have academic training. After two years of retirement, I don’t have (yet) a fool for a client.
I’m 50 years old and two years into retirement. I decided to take 4% next year because sequence of returns risk no longer bothers me. Although I’m all in equities, I still have two standard deviations.
I’d love to buy bonds, but have a variable 8% hurdle. Historically low. I’ll de-risk just as soon as I can pay down debt.