Netherlands, transition to RE [retiring early] portfolio concerns

Nation of Residence: Netherlands (EUR foreign money)
Worldwide Way of life: No plans to dwell overseas in future
Age: Near 50
Present asset allocation:

• About 25x dwelling bills in shares (index funds; worldwide, together with EM and SC)
• About 3x dwelling bills in money
• House-ownership with about 20% LTV mortgage left, rate of interest at 1.5% (mounted till 2030 when most of it’s paid off)
• No different debt
• Social safety/pension built-up to cowl 100% of dwelling bills beginning 20 years from now (that is largely however not totally inflation protected).

Psychology: Fairly strong ‘keep the course’. No worries on inventory efficiency across the 2000 crash nor the 2008 crash. Perceive psychology modifications in withdrawl section versus accumulation change. Not so apprehensive about this facet (sure, I’ve learn the sheepdog and another threads, very informative!), however it’s on my thoughts when contemplating diversification.

Price mentioning: The Dutch tax system shouldn’t be like most others. For these not acquainted, the spotlight (or lowlight) is – in abstract – that we’ve a wealth tax that presently is determined by the kind of asset:

• Money in financial savings accounts / deposits in banks is taxed at <0.5% of the entire asset worth yearly
• All different (non-home, non-social safety) property are taxed at ±2% of the entire worth yearly. This contains shares, bonds, gold, you title it.

There’s political and authorized dialogue of transferring to a ‘correct’ capital beneficial properties tax, nevertheless it’s not clear what it can appear like and when it can begin. It should seemingly take a few years, so let’s assume for this dialogue the system stays unchanged.

Hello all, thanks for making it this far down my publish

As you may see from above, I get near the second I can ‘pull the plug’ and RE, and it is time to think about what it means for my asset allocation. Thus far it has been fairly straightforward: Primarily 100% shares all the way in which for accumulation long run. However I do know a bit of about glidepaths and constructs to scale back SORR, particularly across the second of RE. I’m conscious I in all probability have to act on this, however undecided how precisely but.

My psychology is fairly risk-tolerant for the perfect long-term beneficial properties, so I’ve a bit of hurdle to beat to maneuver away from 100% shares. I realise intellectually the previous couple of a long time have been fairly good (too good?) for shares, even with the dips ±2000, 2008 and 2020 since they’ve bounced again rapidly. I additionally realise with backtesting it is intellectually clear that diversification has labored many occasions prior to now, however I additionally imagine that not every little thing is identical because it was (for higher or worse).

So the particular query I’ve been enthusiastic about recently, is what’s one of the simplest ways to diversify in my scenario: Having a cushty and dependable cushion in about 20 years with social securty/pension means I can afford a bit extra threat than some; and the Dutch tax system’s particulars make investing in low-return (low-risk) property much less engaging comparatively.

I’ve used calculators akin to ERN and portfoliocharts to estimate affect of assorted asset allocations and properly with ERN I can set an expense ratio of two% to simulate our tax system.

1. One discovering that has me a bit of puzzled, is that gold appears to be a greater diversifier than bonds in lots of circumstances: increased withdrawl charges, decrease threat. However folks nonetheless use bonds significantly extra typically than gold. I suppose on this discussion board there could also be some bias in direction of bonds, however I really feel I could be lacking one thing. Small notice: I do not actually imagine within the worth of gold, however backtesting suggests it is labored nicely prior to now 100+ years.

FYI, among the backtesting prompt a 3.5% WR primarily based on 100% worldwide shares, growing to 4.4% in 80/20 with gold, however solely 3.8% in 80/20 with bonds. In a second calculator it appears 20% gold outperformed 20% bonds by 0.2-0.8% factors WR throughout disaster eventualities.

Any ideas on this? Bond efficiency within the house market could fluctuate quite a bit I suppose, and native inflation could have an effect on issues; however the gold-advantage holds when setting house market Netherlands and in addition when setting house market USA (notice shares are worldwide in each circumstances, so house market ought to solely have an effect on bonds and inflation).

2. I’ve additionally performed with extra variable withdrawl charges. I can cut back my deliberate bills by about 30% for an prolonged time with out struggling an excessive amount of high quality of life (simply no upside for added enjoyable issues in comparison with now). I even have a house that’s largely paid off and an choice to maneuver to a smaller house if wanted, which can seemingly internet me a couple of years dwelling bills even in a depressed real-estate market. This offers me some confidence no less than that I can cowl the 1-2% failure probability a set withdrawl charge would give (even in 100% shares state of affairs). Are there any experiences right here with variable withdrawls like that? Any specific issues to look out for?

3. I suspect know I’m being too grasping and never fearful sufficient of the 100% shares, now that they’re so excessive (CAPE). I am certain most, if not all of you agree with that. It is probably not one thing I have to ask. I additionally suppose that I want to vary my mindset from accumulation (long run upside safety) to withdrawl (shorter time period draw back safety). Nevertheless, are there any ideas primarily based on our tax system’s unfavorable therapy of bonds (and gold)? I do know these property usually are not chosen for the returns they provide, however getting robbed of two% along with the chance of not even maintaining with inflation is an enormous hurdle to recover from (notice: This isn’t a political assertion, only a fact-based and psychological one).

4. I admit I do not totally perceive bond funds but. The final mechanism of bonds I perceive: if rates of interest go up, current bonds with decrease charges are much less engaging, so they are going to be priced decrease to extend the yield (and vice versa). However what useful resource would you suggest that explains (market) pricing of bond funds a bit of extra? Shopping for particular person bonds could also be a great way to take away that pricing fluctuation, nevertheless it means holding them to maturity which makes them much less liquid (otherwise you simply get the identical threat if promoting early). Nevertheless, bond funds constantly run, so it appears you by no means know what to anticipate as there isn’t any ’till maturity’ for the fund.

5. Associated a bit of to the above (and maybe for context, probably not a query); the bond fund I used to be contemplating is iShares International Mixture Bond ESG UCITS ETF EUR Hedged (Acc) ISIN IE000APK27S2. That is an alternate I can simply pay money for, and performs practically equivalent to the same iShares Core International Mixture Bond UCITS ETF EUR Hedged (Acc) ISIN IE00BDBRDM35 that I’ve seen talked about right here on the wiki in easy non-us portfolios. (I’ve not picked a gold fund to contemplate, it appears more durable to seek out low-cost choices I’ve entry to)

Thanks in your ideas!