FX Hedging in FATFIRE
I (47F) am planning to FatFIRE in a year and currently thinking of structuring my cash/bond portfolio to hedge both SORR and FX concerns. Critiques and ideas welcome. All number converted to USD for ease.
Investable NW 20m, total NW 25m. 10% of investable assets in GBP, rest in USD. No debt.
Spend is 400k/yr post tax, currently in GBP and likely to remain so until children out of school in 2035. In extreme circs this could go down to 250k if needed.
(Spend after 2035 assumed to be in USD as we will split our time between several countries with 2/3 pegged to USD.)
Dual US/UK citizenship so tax is tricky.
My current plan is to hold 3-5 years of spend in a Gilt ladder as both a SORR and FX hedge. Everything else in broad based equity ETFs. The Gilts are close to tax exempt in the UK and will be taxed as normal in the US.
Questions for the global fatties out there:
Am I right to view the Gilt ladder as both a SORR hedge AND a FX hedge? The plan would be to extend the ladder each year as rungs are consumed unless equity market down by >X% (where X = 15%?)
Anyone have better ideas than this?
Is a ~5% allocation to cash/bonds too low? We have been 95% equity (outside of RE) until this point.