Netherlands, transition to RE [retiring early] portfolio concerns

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

• About 25x residing bills in shares (index funds; worldwide, together with EM and SC)
• About 3x residing bills in money
• Dwelling-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 residing bills beginning 20 years from now (that is principally however not absolutely 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 anxious 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 got a wealth tax that presently is dependent upon the kind of asset:

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

There’s political and authorized dialogue of transferring to a ‘correct’ capital positive aspects tax, but it surely’s not clear what it can appear like and when it can begin. It’s going to possible 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 submit

As you’ll be able to see from above, I get near the second I can ‘pull the plug’ and RE, and it is time to take into account what it means for my asset allocation. Thus far it has been fairly simple: Basically 100% shares all the best way for accumulation long run. However I do know a bit about glidepaths and constructs to scale back SORR, particularly across the second of RE. I’m conscious I most likely must act on this, however undecided how precisely but.

My psychology is fairly risk-tolerant for the most effective long-term positive aspects, so I’ve a bit hurdle to beat to maneuver away from 100% shares. I realise intellectually the previous few many years 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 previously, however I additionally imagine that not every little thing is similar because it was (for higher or worse).

So the precise query I’ve been excited about these days, is what’s one of the best ways to diversify in my state of affairs: Having a snug and dependable cushion in about 20 years with social securty/pension means I can afford a bit extra danger 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 corresponding 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 puzzled, is that gold appears to be a greater diversifier than bonds in lots of circumstances: greater withdrawl charges, decrease danger. However individuals nonetheless use bonds significantly extra usually than gold. I assume on this discussion board there could also be some bias in direction of bonds, however I really feel I is likely to be lacking one thing. Small be aware: I do not actually imagine within the worth of gold, however backtesting suggests it is labored nicely previously 100+ years.

FYI, a few of the backtesting prompt a 3.5% WR primarily based on 100% worldwide shares, rising 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 dwelling market might range rather a lot I assume, and native inflation might have an effect on issues; however the gold-advantage holds when setting dwelling market Netherlands and likewise when setting dwelling market USA (be aware shares are worldwide in each circumstances, so dwelling 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 possibility to maneuver to a smaller dwelling if wanted, which can possible internet me a number of years residing bills even in a depressed real-estate market. This provides me some confidence at the very least that I will cowl the 1-2% failure likelihood a set withdrawl price would give (even in 100% shares situation). 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 positive most, if not all of you agree with that. It is probably not one thing I must 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). Nonetheless, are there any ideas primarily based on our tax system’s unfavorable remedy of bonds (and gold)? I do know these property will not be 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 (be aware: This isn’t a political assertion, only a fact-based and psychological one).

4. I admit I do not absolutely 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 advocate that explains (market) pricing of bond funds a bit extra? Shopping for particular person bonds could also be a great way to take away that pricing fluctuation, but it surely means holding them to maturity which makes them much less liquid (otherwise you simply get the identical danger if promoting early). Nonetheless, 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 to the above (and maybe for context, probably not a query); the bond fund I used to be contemplating is iShares World Combination Bond ESG UCITS ETF EUR Hedged (Acc) ISIN IE000APK27S2. That is an alternate I can simply pay money for, and performs almost equivalent to the same iShares Core World Combination 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 tougher to seek out low-cost choices I’ve entry to)

Thanks in your ideas!