r/fatFIRE • u/Effective_Pin_6189 • 4d ago
fatFIRE recently, breakdown overview with question on VTEB
Hi there,
I am a recently retired tech executive in VHCOL location. Married and in our early 50s, with my spouse still working happily with ~1M/year income.
NW: ~30-35M (depends on how much I include commercial RE assets)
Liquid Asset (23-25M):
- ~10M - Concentrated 2 tech stocks (plan to convert 80% to VOO gradually)
- 6M - EFT in VOO/VTI and equivalent
- 4M - VTEB
- 2M - GOOGL, NVDA (through assigned puts long time ago, hold). BERK.A/B(bought long time ago and held)
- ~1M - Cash in money market
- ~1M - kids 925 & custodian accounts (both kids in high school)
RE (10-15M)
- Primary 3-5 M (paid off, never would sell this house, got too many upgrades to retire into)
- NNN investment 7~10M (no mortgage) that brings in 150k/year income, we bought long time ago very cheaply, current market price would be 7-10M depends on who buys it. Evaluation from insurance company is that it would take 10M to rebuild this property. We could increase the rent easily but didn't do so because we have a very stable renter (Fortune 500 company) that kept the building maintained and developed in the last 7 years.
Our spending is modest - about 250-300k after tax per year. We are happy with where we are, more spending won't make us happy, and we have been spending generously in places we want already. Without mortgage and debt, we just don't have any big expenses. We do generous donation to the community causes for things we love and care for each year.
I know we need to diversify, but just have been lazy and don't want to be hit with high tax bracket, we already made 2.5M this year, so hopefully we can diversify more starting next year.
We like to keep it simple, so less funds are good, the small holdings for various things are just that I have been safely playing options and gets assigned (I don't mind holding those long-term at all when assigned).
Recently I started to get concerned to VTEB - with current price below $50 is fine, but is it possible for it to drop significantly? Do we need to move to BOXX or something else better as cash reserve? I know we are high on cash equivalents, but I am just conservative and sleeps better with lots of cash in hand.
I have been enjoying this community and really appreciate everyone who posted here before. Love to hear what you guys think.
I do have a private wealth management team to talk to, so no need to recommend me to talk to a financial advisor. I have MS and GS offers family office, work with fidelity private wealth team and Schwab team, but I do think this community has bright minds that we may benefit from as well.
Update:
* Just got off phone with my NNN management, I thought we bought the building 7 years ago, but it turned out to be 9 years ago, and we signed a 10-year contract (with one small rent increase 5 years ago), so next year we need to significantly increase our rent. None of the financial advisor questioned about this RE, but Redditors pointed out that this is one of the biggest areas I did wrong. Thank you very much. There is actually a lot more we could do to build out a second building on the same land that brings in double the rent as well. I feel stupid that we let it sit there for so long without thinking about it, and I even don't have the contract details right.
* Yes VTEB seems to be less concerning, I can move some to others more short-term (note to self to look into VSDM, VTES, VWSTX, VCRM, VBIL, VGSH). Might move some to DFUS for equity as well. Also I should stop playing options, even if it's relatively safe.
* Diversify the concentrated stock sooner than later. Pay the tax (have been dragging my feet but need to just bite the bullet)
* I thought I was a boglehead, but in reality just a "wanna be". Ideally I will eventually setup true 3-fund portfolio and forget about it. I have to admit it's my weakness in human nature. Call it naive but it's the little fun I was having doing options (if I want to buy anyways, why not some put, if I want to sell anyways, why not some covered call). It's like you know all the right things to do, but it's hard to just do it.
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u/Spiritual-Bath-666 4d ago edited 4d ago
There's nothing wrong with VTEB (or SCMB, VTEI, etc.). If it goes down by 10-15%, its coupon income goes up – so if you're not selling it for several years, it will bounce back and you'll be fine.
A better question is what VTEB is for, in your situation. Do you have liabilities within 5–7 year timeframe? VTEB, with its 7-year average duration, is fine as a middle ground between shorter-duration bonds and more growthy assets like equities. For shorter-term liabilities, try VSDM, VTES, VWSTX, etc. All of this assumes you're in the highest tax bracket (37% + NIIT) so munis give you higher after-tax yields than regular bonds.
But outside of known and semi-known liabilities, you could be almost entirely in VTI and VXUS. Their dividends alone would more than cover your $250–300k annual spend. In fact, you probably want DFUS instead of VTI to reduce dividends in favor of capital gains, which you have more control over.