The last couple of months have been me processing information and refining my retirement plans. Pondering next steps can seem like an eternity but I feel pretty good a few refinements:
- Reducing my savings rate for the rest of the year (and likely 2021)
- Accelerating my mortgage payoff since I may have to move mid-2021
- Revisiting my Master Stock List plus creating a little more portfolio structure
- Identifying stocks I’m willing to dollar-cost average my way into building a position
Finite resources (money) means choices and trade-offs are necessary. And as new information or events hit the current plan, adjustments are made. There is no doubt that I’m blessed to have a pension, which will become a future income floor. Without it I’d be in big trouble and my late retirement planning start would bite me right in the butt.
Everything I’m building is to enable me to retire at 62. The pension plus 5-years of non-qualified restoration payments will provide me with $100,000 yearly until 67. At that time, I’ll determine when I will take my social security but it will be somewhere between 67-70 years old.
My taxable portfolio and 401(k) will provide my flexible spending funds. Vacations, gifts, travel trailer, and more will fund flexible purchases. Most of my focus now is building the taxable dividend stock portfolio. The thinking behind this portfolio has evolved over the last couple of years to where it is today. I’m excited about the future and next steps.
And yes, it was hard to start and mistakes were made. Starting included tracking expenses and building a plan. I took small steps to action the plan but starting was the most important thing. There will be more tweaks but now it’s time to jump back in and action the plan.
Continue Actioning the Plan
Since I’ve reached the $100,000 taxable portfolio amount, I’m feeling much more patient about future purchases. It’s kinda weird but for some reason I feel calmer and more in charge of what I buy. I can’t explain the feeling but maybe I was just racing (too fast?) to get to the $100,000.
Regardless, having patience plus a list of solid stocks to watch is comforting. I took my first step this week and finally got into the Johnson & Johnson (JNJ) stock. It’s not a large amount (20 shares) but it felt good starting a position that will eventually become the bedrock of my portfolio.
I’ll continue adding to JNJ under $145. Dollar cost averaging into the stock with a periodic larger purchase if it drops hard in a down market. JNJ will be a core position and a foundation piece of my portfolio.
The five Level 1 core positions in my portfolio will be Johnson & Johnson, Coca-Cola, Exxon Mobil, Procter & Gamble, and Nestle. These stocks will hold positions up to 6% each (30% total) of my taxable portfolio. I’m guessing I’ll hold between 30-35 stocks overall by the time I retire.
Buying Stocks via Dollar Cost Averaging
I used to purchase stocks with a minimum of $4,000-$5,000 in one purchase. But since Vanguard (and others) has moved to free stock trades (no commissions), I’m feeling much more comfortable initiating much smaller positions.
And putting my money to work earlier is great, especially when interest rates are so low. I build a position over time because we never know when the bottom of a stock price will be hit. Adding money to a stock when they are not over priced is excellent way to grow wealth.
My favorite ways to build a position are doing BOTH of these things:
- Dollar cost averaging (DCA) at a specific or optimal price
- Larger purchases when a stock is at a target price
Do this over time and total returns will be maximized. It’s what I’m doing with Level 1 stocks Johnson & Johnson, Exxon Mobil, and Coca-Cola. I’ll be doing the same with my other Level 1 & 2 stocks too. For example, I plan to dollar cost average and have larger purchase as follows:
- Johnson & Johnson: DCA under $145 and larger purchases under $125
- Phillip Morris: DCA under $72 and larger purchases under $63
- Pepsico: DCA under $120 and larger purchases under $110
- 3M: DCA under $150 and larger purchases under $130
You get the idea. All my watch list stocks have prices identified for both dollar cost average and larger purchases. Remember, dollars are a scarce finite resource so I can’t purchase everything. I just don’t have that much cash sitting around so I have to be patient.
Summary
Most people are stymied by building and executing a retirement plan. I understand, it’s taken me decades of experience and hard lessons. But it really doesn’t have to be hard. In fact, the earlier you start saving the more mistakes you can make because time is your friend.
When you have clarity in your plan (like I do now) things seem to be so much simpler. It’s like when NFL quarterbacks say the game slows down for them … that’s how I feel. The more refined my plan is the easy it is to implement. I suppose that’s why so many people suggest you automate many elements of your plan because it’s simpler.
Under the right conditions, I’m open to the potential purchase of any stock on my Master Stock List. But with that, I’m still focused on designing my portfolio with certain stocks.
With today’s market conditions plus a messy presidential election in November, my near-term focus will be building my cash position and being very selective in what I buy. Again, I’m feeling much more patient now and I’m not in a rush to buy something.
Thanks for reading!
Mr. TLR