A Look Inside My Retirement Plan

Editor’s note: Over the next few weeks, we’re going to do something a little different. We’re going to make things personal… and give you an inside look at our Editors very own retirement plans. As our retirement guru, Charles is up first. He’s not only the Boom & Bust Portfolio Manager, but also editor of Dent’s 401K Advisor and our new Peak Income service. For more details, watch this space!

I pay my bills by telling other people what to do with their money. But I’m often asked: What do I do with my own money?

Well, that’s a very legitimate question, and I’m happy to share.

Before I get into it, I have to throw out a few common-sense caveats. Remember, I’m 39, have two young boys in the house that can clean out a pantry faster than a swarm of locusts, and a stay-at-home wife. I’m also in the prime of my career and trying to stash as much cash away as possible for retirement.

You might be in a very different stage of life or have a very different situation. What makes sense for me might be absurd for you.

So with that said, let’s get into it.

The backbone of my retirement planning is remarkably conventional.

I max out my 401(k) plan by the full $18,000 I’m allowed every year, like clockwork. The precise allocation of the 401(k) plan will change, and you can always get an idea of my latest thoughts in my retirement letter, Dent 401k Advisor. But my number one priority is dumping that first $18,000 in savings into my retirement plan.

I also have a decent amount of “side hustle” income that I do my best to shelter as well via a SEP IRA. (Yes, if you have income from both a normal W2 job and separate 1099 income from side projects, you can contribute to and even max out both a 401(k) and a SEP IRA.) This is fairly common with doctors that are employees of a hospital but also have self-employment income from a private practice.

And finally, like virtually everyone else in America these days, I’ve been corralled into a high-deductible health insurance plan, but I do what I can to turnrn that to my advantage.

I dump the maximum $6,750 into my health savings account and effectively use it as a spillover IRA. (There are big differences between HSAs and IRAs that I don’t have time to get into here, but this is how I personally allocate my investment dollars.)

The key takeaway here?

I focus on getting the money in the right accounts before I spend a second worrying about what specific investments to buy. This makes all the sense in the world, because as I wrote a few years ago, the “returnrns” you get from tax savings and employer matching absolutely obliterate the returnrns you’re likely to earnrn from the investments themselves.

We’re talking annual “returnrns” in excess of 40% for investors in the highest tax brackets. Not even George Soros or Warren Buffett, in their primes of their careers, were able to consistently generate returnrns like those.

Now What?

Once I have the cash in the proper account, I focus on what to actually do with it.

Like everyone else, my 401(k) options are limited to a smattering of mutual funds. I do the best with the options I have and invest along the lines of what you see in Dent 401k Advisor. Company rules don’t allow me to purchase any stock I specifically recommend to readers, but I follow the same basic allocation guidelines.

I have the most freedom with my non-401(k) savings, as I’m not limited to a menu of mutual funds. And this is where I get more creative, and where my new service, Peak Income, comes squarely into play.

I’m a big believer in the closed-end funds (CEFs) I recommend in Peak Income, and I invest a large block of my non-401(k) savings in these kinds of funds. Like I said with my 401(k) recommendations, I’m unfortunately not allowed to buy the funds I recommend per company rules, but the CEF space is large enough to allow me to get close enough.

I do make one big deviation though. Remember, Peak Income is dedicated to generating current income for people in or near retirement. Well, I’m a long way from retirement, so I automatically reinvest my dividends in new shares. This transforms “boring” income-focused CEFs into growth compounding machines.

The remainder of my portfolio is allocated a little more exotically.

I have some money invested in real estate (still mostly boring, conservative mini-storage units and the like), in long/short strategies and in a few other concepts I still consider experimental at this point. But one thing that all of these options have in common is that they are uncorrelated… both to each other and to the stock market. That’s a big deal, as diversification is worthless if everything you own rises and falls together.

I also have one final “investment.”

Like most Americans, I have a house with a 30-year mortgage. But I despise having debt… the very idea roils my stomach. So I “invest” in paying down my mortgage early. I’m running about 10 years ahead of schedule with a goal of having the house paid for in another few years.

Then I suppose I’ll have one additional asset allocation decision to make… convincing my wife that we don’t need a bigger, more expensive house. But that’s a decision for another day.




Charles Sizemore

Editor, Peak Investor

Charles Sizemore

Charles specializes in finding value opportunities and income plays outside of the mainstream stock market.