Using base rates for retirement spending forecasts

In this episode we answer emails from Jeffrey, Bryan, and Erik.  We discuss the trade-offs of direct indexing in small cap value, why modest leverage on a diversified mix can outperform stock-heavy portfolios with fewer drawdowns, and modelling an early extra spending plan for retirement.  And talk about forecasting with Base Rates.

And THEN we our go through our weekly and monthly portfolio reviews of the eight sample portfolios you can find at Portfolios | Risk Parity Radio.

Links:

Fairfax CASA Donation Page:  Donate - Fairfax CASA

Father McKenna Center Donation Page:  Donate - Father McKenna Center

Bigger Pockets Money Small Cap Value Discussion:  Small Cap Value Funds for FI: Why AVUV?

Bryan's Risk Parity Explainer Videos:  Kardinal Financial - YouTube

Bryan's Leveraged Golden Ratio Portfolios:  testfol.io/?s=jXswQKw6avr

RSST and GDE Comparisons:  testfol.io/?s=dc0nz7avynF

Ben Felix Video On Leverage:  Investing With Leverage (Borrowing to Invest, Leveraged ETFs) (youtube.com)

Erin on Money Truth About Spending Smirk and LTC:  The Retirement Spending Smile Is Dead (Here’s What the Data Actually Shows)

Breathless Unedited AI-Bot Summary:

Markets don’t hand out easy wins, so we lean into clarity: what actually works for DIY investors, what’s noise, and how to make choices you’ll stick with when regimes shift. We start with a pointed look at direct indexing in small cap value. The promise of tax loss harvesting sounds great, but the reality is messy: hundreds to thousands of tiny positions, frequent graduations at index cutoffs, and “optimized” portfolios designed to hug an index rather than truly replicate it. We break down why small cap value behaves more like equal weight, why that raises the bar for tracking and taxes, and where direct indexing makes more sense—large caps, cap-weighted sectors, and places where a handful of names dominate the exposure.

From there, we unpack a smarter use of risk: applying modest leverage to a diversified portfolio instead of dropping diversifiers to chase higher returns. Think of it as scaling a better mix rather than concentrating into stocks. We compare tools like NTSX, GDE, GOVZ, and managed futures, and discuss why the 1.25x to 1.7x range often hits the sweet spot for return per unit of pain. We also stress-test composite ETFs against DIY equivalents for transparency and control. The goal is a higher Sharpe ratio and fewer bone-crushing drawdowns, not bravado.

Planning meets practice when we tackle a common early-retirement question: how to model a 10,000-dollar travel burst for the first decade. The simplest answer is often best—set aside 100,000 dollars and spend it down—or use a Monte Carlo tool that handles time-varying cash flows. Keep three to five years in cash, refill from gains, and let base rates guide expectations. Research shows a spending bump near retirement and a gentle decline afterward for most households, with far fewer late-life spikes than fear-based sales pitches suggest.

We close with portfolio reviews across eight sample allocations, highlighting how gold, commodities, and managed futures have led while mega-cap tech cooled and small cap value caught a bid. 

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