Retiring in 3 years and sitting on 85% cash since 2008

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Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sat Aug 31, 2013 9:13 pm

First post, great site!
I am going to leave the grindstone in 3 years max. Liquidated 90% of my equities assets after recovering most of my 2007-09 losses.
Back in 2007-08, I was 90% equities. Ouch... Learned my lesson the hard way. Even had 75% of that sizeable money with high paid "professionals" that
I realize now, do not have a clue.... TRUTH. Anyway (wounds licked and moving on), even though my cash is all in MM or various worthless bank accounts not making squat (actually losing due to inflation), I am ok with that. My question: What are other Bogleheads in my similar position doing? Mostly cash and wondering what to do next and when???
Thanks
Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby livesoft » Sat Aug 31, 2013 9:38 pm

Welcome. I would think that most Bogleheads retiring in 3 years are at least 50% equities.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby The Wizard » Sat Aug 31, 2013 9:40 pm

As long as you have WAY ENOUGH money, keeping it all in cash is what some folks who have "won the game" like to do.
Myself, newly retired, I have 50% of my unannuitized investments in equities, because I need to plan for the next 30 years...
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Texas hold em71 » Sat Aug 31, 2013 9:55 pm

Welcome! There is a very good wiki here that you should read. It will take a while to read and digest it all.

http://www.bogleheads.org/wiki/Main_Page

There are a number of people here who have annuities (called SIPAs in posts). That, SS and pensions give them a guaranteed income stream for life. For the risk averse that might be the best course.

http://www.bogleheads.org/wiki/Category:Annuities

Otherwise you will likely need some equities in retirement. Depends on the size of your portfolio and your gap between pension/ SS and expenses.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby BolderBoy » Sat Aug 31, 2013 9:57 pm

slipp1229 wrote:my cash is all in MM or various worthless bank accounts not making squat (actually losing due to inflation), I am ok with that. My question: What are other Bogleheads in my similar position doing?

As the others said, most BHs have at least some equity position. I'm sitting about 40% in total stock market index, for example.

Even though you say you are "okay with [being all in cash]", unless you have many, many millions you may not in fact "be okay" going forward.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sat Aug 31, 2013 10:02 pm

Thanks for the fast responses.... looking forward to more! This is great.
I have been researching the Indexed (Hybrid) annuities and thought laddering 3 or 4 $100K Hybrids might provide a cash stream into my 60's.
I just don't like the 7-10 year holding period before you can exercise this rider profitably. Sorry, I know the insurance co. terminology is all wrong, but I hope you know what I mean.
Also, annuities were regarded as bad investments just 10 years ago... now they seem to be all the craze because of the lousy equities market and unstable economy.
Does this make these any better now? Even Hybrids have huge questions in my opinion. You all know more than I though.
Thanks
Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby joe8d » Sat Aug 31, 2013 10:03 pm

Just an observation,several recent threads indicate that many Bogleheads maintain a 50% equity exposure at and through retirement.Myself included.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby livesoft » Sat Aug 31, 2013 10:10 pm

slipp1229 wrote:... because of the lousy equities market and unstable economy.

You may wish to change where you get your news. Equities have been on a roll for many years now and the economy is doing great.

Here is a report on the economy where the real GDP was revised upwards to 2.5% for the 2nd quarter of 2013: http://www.bloomberg.com/news/2013-08-2 ... text-.html

And the Total US Stock Market index fund is up 17% so far year-to-date (source: Vanguard)

Sometimes we seek out only news & articles that fit our world view and not the facts.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sat Aug 31, 2013 10:28 pm

Yes,
I know the Market has been doing well for the last 3-4 years... I have always been 90% in stocks since 1980, so have made a great deal of money.
But.... Then 2000 happened and then the "Big One" 2007-8-9". As I approach retirement, there is no room for 40-50% losses in my retirement funds.
Thus, I am in Cash and have been since the 2008-9 meltdown. That said... My primary question is: What are you 55+ Bogleheads doing to protect yourselves from another 2008 meltdown that has the potential to put you 5-10 years behind in your retirement financial plans... or worse yet if you are currently in retirement... cause you to run out of money before your body is ready to leave this earth??

Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Texas hold em71 » Sat Aug 31, 2013 10:35 pm

slipp1229 wrote:Yes,
I know the Market has been doing well for the last 3-4 years... I have always been 90% in stocks since 1980, so have made a great deal of money.
But.... Then 2000 happened and then the "Big One" 2007-8-9". As I approach retirement, there is no room for 40-50% losses in my retirement funds.
Thus, I am in Cash and have been since the 2008-9 meltdown. That said... My primary question is: What are you 55+ Bogleheads doing to protect yourselves from another 2008 meltdown that has the potential to put you 5-10 behind in your retirement financial plans... or worse yet if you are currently in retirement... cause you to run out of money before your body is ready to leave this earth??

Slipp


Spending less than they make, investing in bonds and equity, holding reasonable emergency funds, working part time jobs, collecting pensions and social security. There may be some who are mostly in cash but they have to have a lot of it.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby The Wizard » Sat Aug 31, 2013 10:38 pm

We reduce our equity exposure from 70-80% down to 40-50%, does that make sense?
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sat Aug 31, 2013 11:01 pm

Great feedback... Thanks
If the majority of 55+ year old BH's are 50% or less in equities... what is the the other 50% of your retirment funds in?
Cash, Annuities, Saving Acct... making .1% ?
Thanks
Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby joe8d » Sat Aug 31, 2013 11:19 pm

slipp1229 wrote:Great feedback... Thanks
If the majority of 55+ year old BH's are 50% or less in equities... what is the the other 50% of your retirment funds in?
Cash, Annuities, Saving Acct... making .1% ?
Thanks
Slipp


in My Case:

STIG Bond Fund
NYLT Muni fund
HY Bond Fund
TBM ( as part of my Roth LS Growth Fund )
Ally and Barclays Online Savings accounts
Ally 1 year CD Ladder ( w/3mo rungs)
EE Bonds ( the old 90% of the 5 yr T, double in 17 years )
I bonds ( 1.6 % real)
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby HurdyGurdy » Sat Aug 31, 2013 11:22 pm

What does Vanguard offer in their all-in-one funds, good as a reference?

(a) the Vanguard Target Retirement Income Fund (VTINX), composed of
Vanguard Total Bond Market II Index Fund Investor Shares† 39.2%
Vanguard Total Stock Market Index Fund Investor Shares 21.0%
Vanguard Short-Term Inflation Protected Securities Index Fund Investor Shares 16.8%
Vanguard Total International Bond Index Fund Investor Shares 14.0%
Vanguard Total International Stock Index Fund Investor Shares 9.0%

(b) Vanguard LifeStrategy Conservative Growth Fund (VSCGX), composed of
Vanguard Total Bond Market II Index Fund Investor Shares* 47.8%
Vanguard Total Stock Market Index Fund Investor Shares 28.2%
Vanguard Total International Bond Index Fund Investor Shares 12.0%
Vanguard Total International Stock Index Fund Investor Shares 12.0%

or
(c) Vanguard LifeStrategy Income Fund (VASIX)
Vanguard Total Bond Market II Index Fund Investor Shares* 64.2%
Vanguard Total International Bond Index Fund Investor Shares 16.1%
Vanguard Total Stock Market Index Fund Investor Shares 13.9%
Vanguard Total International Stock Index Fund Investor Shares 5.8%

(info from https://personal.vanguard.com/us/funds/vanguard/onefund)

Of course you are asking a hard question -- what to have in the fixed income part of a portfolio, for the coming 30 years.

(My bet is that most Bogleheads would consider that Vanguard's allocation to International Bonds is high.)

Check http://www.bogleheads.org/wiki/Three-fund_portfolio -- with a nice part "It's 2013. What about bonds?"
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sat Aug 31, 2013 11:26 pm

Joe, All
We must talk ... Thanks. I love detail.
Do you know of a BH topic focused on just this topic?
I need direction being a newbie to this fantastic source of retirement information.
Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Gnirk » Sat Aug 31, 2013 11:28 pm

I've been retired for over 5 years, and I am aiming for:
5% cash/mm
45% bond funds, including a TIPS fund.
50% equities including total stock market, total international, and maybe a taste of REIT.
I also have some SS and a small retirement.

Last year I received a mid-six-figure windfall from a relative, which at the time- and still is- currently in individual muni bonds (all paying 5% or more tax free and none longer than 4 years to maturity), and a CD ladder. As they mature, I am investing the proceeds into the appropriate funds to reach and maintain my Asset Allocation.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby kwan2 » Sun Sep 01, 2013 12:48 am

1) My question: What are other Bogleheads in my similar position doing?

2) Mostly cash and wondering what to do next and when???


Have you tracked your expenses for a few years, and are you adequately insured, so they won't be any surprises, eg long term care insurance ? Of course, everyone will have a lot of variables, so the general nature of your inquiry, can't possibly be reasonably responded to, seems to me.

If I was 90 years old and have no progressive illness, and no heirs that needed my help, perhaps I'd be happy to have 5-10 years in cash. I wonder how secure any annuity is, in the 2010s anymore....
The best lack all conviction, while the worst | Are full of passionate intensity-Yeats 1919;Out of every fruition of success,no matter what, comes forth something to make a new effort necessary -Whitman
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby bayview » Sun Sep 01, 2013 4:55 am

slipp1229 wrote:Thanks for the fast responses.... looking forward to more! This is great.
I have been researching the Indexed (Hybrid) annuities and thought laddering 3 or 4 $100K Hybrids might provide a cash stream into my 60's.
I just don't like the 7-10 year holding period before you can exercise this rider profitably. Sorry, I know the insurance co. terminology is all wrong, but I hope you know what I mean.
Also, annuities were regarded as bad investments just 10 years ago... now they seem to be all the craze because of the lousy equities market and unstable economy.
Does this make these any better now? Even Hybrids have huge questions in my opinion. You all know more than I though.
Thanks
Slipp

Lots of people prefer SPIA's (single premium immediate annuities.)

You have to be willing to accept the risk of insurance company default, and find out how much your state guarantees.
bayview
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby sperry8 » Sun Sep 01, 2013 5:27 am

slipp1229 wrote:Yes,
I know the Market has been doing well for the last 3-4 years... I have always been 90% in stocks since 1980, so have made a great deal of money.
But.... Then 2000 happened and then the "Big One" 2007-8-9". As I approach retirement, there is no room for 40-50% losses in my retirement funds.
Thus, I am in Cash and have been since the 2008-9 meltdown. That said... My primary question is: What are you 55+ Bogleheads doing to protect yourselves from another 2008 meltdown that has the potential to put you 5-10 years behind in your retirement financial plans... or worse yet if you are currently in retirement... cause you to run out of money before your body is ready to leave this earth??

Slipp


I am like you Slipp. I retired in 2007... and poured a lot of cash money into the market in a lump sum. Ugh. Poor timing. Luckily the market came back and I pulled it out (a mulligan!). Whew!! So now, I sit on 30% cash. It's a tidy sum too. I do it because now I am able to withstand a 50% drop in equities (not only a 50% drop - but a Japan style 50% drop where it drops and flatlines for decades). By holding this 30% cash - I have enough to fund my retirement for at least 20 years at my current spend.

Now to your question, what do I do with all that cash? I diversify it. Of the 30% cash, about 10% of it is in bonds (yielding about 3%). The remaining 90% of my cash is split with half of it in US banks earning about 1% (so losing to inflation as you say). I have the other half in foreign banks earning about 2.5% interest. So staying even with inflation (but with currency risk). Although personally I don't call it currency risk, I call it diversification. When one currency is up, another is down. I live off the one's that are up. They all don't move together.

As to your unasked question - I think you should get some of your cash back into equities, but I would wait until the next crash. Who knows when it will happen, but happen it will. You won't be able to time the bottom, so don't try. Now the number re when you jump back in is up to your risk tolerance. But here is a scenario if you have a limited risk tolerance: when stocks drop 35%+, start moving in. Don't lump sum in (I learned that!), but start moving in. Perhaps in increments of 25% of what you want to allocate at each 5% interval. So you'd put 25% in at 35% down, another 25% chunk at 40% down, another 25% chunk at 45% down... all the way to 50% down. Buy low. Buy low. Yes, it can go lower. But if you buy stocks when they have dropped in half, short of another 1929 like depression, you'll be a happy man. 50% drops are not a common occurrence.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Dandy » Sun Sep 01, 2013 5:44 am

It doesn't sound like you have a good grip on your risk tolerance. You might want to read up on Wm Bernstein's concept of keeping 20 to 25 years worth of residual expenses in safe "investments" e.g. short duration bonds/funds, CDs etc. Residual expenses are those that won't be covered (in retirement) by pensions, social security or annuities. Any "excess" can be invested very aggressively .

This strategy would allow you to have a "safe" portfolio and an aggressive portfolio. No easy to get to the assets needed to meet the safe portfolio guideline.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Sidney » Sun Sep 01, 2013 7:34 am

40% equity, the rest is in bond funds (Investment grade in IRA, muni funds in taxable) or individual TIPS.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby The Wizard » Sun Sep 01, 2013 7:38 am

slipp1229 wrote:Great feedback... Thanks
If the majority of 55+ year old BH's are 50% or less in equities... what is the the other 50% of your retirment funds in?
Cash, Annuities, Saving Acct... making .1% ?
Thanks
Slipp

Mine tends to be in TIAA Traditional earning 3% minimum and in TIAA Real Estate Account earning variable amounts, but currently 6 to 9% but with the risk of going negative that must be watched.
General public doesn't usually have access to these funds...
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby gvsucavie03 » Sun Sep 01, 2013 7:59 am

100% cash is going to erode before your eyes as others have said.

I'm with Livesoft, you've gotta maintain a 50% equity position at this point. I know you lost a ton of $ in the '08 crash, but had you held on (I know, hindsight is 20/20), you would have made most, if not all of that back by now (and probably grew it beyond the height of '07). That's a 5-year turn-around, which most of us can hold our breath through because we set a proper risk tolerance, asset allocation and think long-term.

Because your wounds are still fresh, you might want to be really conservative with your fixed income portion with the tiered CD ladder, cash, TIPs, Bond funds and MMAs for your emergency money.

I'm sorry for what you are facing. It was indeed a huge mistake that hopefully you and the rest of us can learn from this. Develop an Investment Policy Statement that you will stick with from now on, or get yourself a fee-only financial advisor that will help protect you from you so it doesn't happen again in the future.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby bengal22 » Sun Sep 01, 2013 8:04 am

slipp1229 wrote:Great feedback... Thanks
If the majority of 55+ year old BH's are 50% or less in equities... what is the the other 50% of your retirment funds in?
Cash, Annuities, Saving Acct... making .1% ?
Thanks
Slipp


I am 61, retired, and have a 55%equity/45% bond allocation. My bond allocation consists of total bond fund(50%), TIPS(20%), Hi-Yield(15%), My and other(Pimco TR, Wellington, Wellesly(15%). My investment horizon is 30 years or more so I can handle some short term major hits. I will reduce my equity portion as I age.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby JMacDonald » Sun Sep 01, 2013 8:16 am

You might consider Frank Armstrong's two bucket portfolio: http://investorsolutions.com/knowledge- ... /?s=bucket
An effective retirement portfolio must balance several sometimes conflicting needs.

It must support the planned withdrawal rate, provide for sufficient liquidity to withstand down markets, manage risk at close to an optimum point, and control costs.

The ideal policy will maximize the probability of success, which most clients will define as not running out of money while alive.

The first problem that faces the retiree is that “guaranteed” investment products are unlikely to provide sufficient total return to meet his reasonable needs. Meanwhile, equities are far too volatile to provide a reliable income stream. A compromise must be reached. A combination of stocks and bonds will probably best meet the needs.

Because at least part of the portfolio will be volatile, the question of risk management moves to the forefront. Our first step is to construct a two bucket portfolio.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby SSN688 » Sun Sep 01, 2013 8:20 am

Sitting on cash since 2008? As a local told Mike Hynson in Endless Summer, "You really missed it...You should've been here yesterday!"
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby MN Finance » Sun Sep 01, 2013 8:59 am

A high quality balanced portfolio is up significantly between 2000 and today despite the two significant bear markets. You will forever be inefficiently chasing returns if you look at your portfolio by each component rather than the whole thing. Each portfolio and risk level has a historic risk/return characteristic, and an expected set going forward. You need to identify the portfolio(s) that will allow you to achieve your goals, period. It doesn't make any difference whatsoever if you experience x% decline during a particular period, if the long term results are effective. The bottom line is that we all retain portfolio risk. Right now you are retaining significant risk, though its not volatility risk, you have just traded one risk for another. It's entirely impossible to give portfolio advice based on the singular data point that you're almost all cash. 2M in cash with the need to generate 20K per year is viable with cash. 40K per year requires a very small equity position, 80K requires a very balanced portfolio, etc.

Any variation of a fixed annuity can reasonably be seen as a cash substitute, though not ideal. You will not achieve anything beyond cash return rates, which doesn't address your cash problem. If you are unwilling to take market risk, you will be required to live on a very small income draw from your money. That's it. Your going to be investing for many decades, so figure out what amount of volatility you can emotionally handle and from there it will be easy to tell you if your plan is sustainable.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby WendyW » Sun Sep 01, 2013 9:11 am

slipp1229 wrote:Thus, I am in Cash and have been since the 2008-9 meltdown.

Ouch; that hurts. $1 million in equities on Jan 1st 2009 would be worth $2 million today.

Your story is a great argument against people managing their own investments.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby livesoft » Sun Sep 01, 2013 9:25 am

slipp1229 wrote:.... Liquidated 90% of my equities assets after recovering most of my 2007-09 losses.

It hard to tell what slipp1229 did during 2007-2013. Since it appears they recovered most of their losses before selling equities, I can't tell when they sold equities. I can tell that some lesson was learned and a different lesson was not learned.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Sbashore » Sun Sep 01, 2013 10:18 am

In 2008-2009 I was 70/30 equity/fixed. I am now 50/50 and have no plans to change anytime soon. I retired in 2005. I consider inflation to be my biggest risk at this stage of my life.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby steve roy » Sun Sep 01, 2013 10:49 am

In my (our) case: We're three years from retirement, 72% bonds (short-term tilt), 28% equities (Small cap value tilt; 26% international) One year return: 5.8%.

We follow the Swedroe formula. We'll be keeping our allocation in the 62%-72% bond range because we have enough to be conservative. If stocks crashed and Total Stock Market, say, dropped to a P/E of 9x earnings, we would rebalance from 70% bonds to 60%-65% bonds. (Market Timing! Market Timing!) Everybody's needs are different, so everyone has a (slightly) different take on asset allocation.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby WendyW » Sun Sep 01, 2013 11:00 am

slipp1229 wrote:had 75% of that sizeable money with high paid "professionals" that I realize now, do not have a clue....

Who made the decision to hold 85% cash from 2009 - 2013 ? That's where your portfolio went off the rails.

I doubt that any investment professional would have suggested this.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby BolderBoy » Sun Sep 01, 2013 11:49 am

Gnirk wrote:currently in individual muni bonds (all paying 5% or more tax free and none longer than 4 years to maturity)

Where do you find munis paying 5% or more with short durations?
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby gkaplan » Sun Sep 01, 2013 11:56 am

I am retiring at the end of the year and will maintain my current asset allocation of 60/40 (equities/fixed income).
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Gnirk » Sun Sep 01, 2013 12:02 pm

BolderBoy wrote:
Gnirk wrote:currently in individual muni bonds (all paying 5% or more tax free and none longer than 4 years to maturity)

Where do you find munis paying 5% or more with short durations?

I didn't find them, they were already part of the relative's holdings. Which is why I am holding them to their maturities, and fortunately they are high-rated bonds.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby JW Nearly Retired » Sun Sep 01, 2013 12:06 pm

slipp1229 wrote:Yes,
I know the Market has been doing well for the last 3-4 years... I have always been 90% in stocks since 1980, so have made a great deal of money.
But.... Then 2000 happened and then the "Big One" 2007-8-9". As I approach retirement, there is no room for 40-50% losses in my retirement funds.
Thus, I am in Cash and have been since the 2008-9 meltdown. That said... My primary question is: What are you 55+ Bogleheads doing to protect yourselves from another 2008 meltdown that has the potential to put you 5-10 years behind in your retirement financial plans... or worse yet if you are currently in retirement... cause you to run out of money before your body is ready to leave this earth??
Slipp

What we do is resolve never to hold any more equities than we can stay with in the event of a 2008-9 meltdown kind of loss. Retired Bogleheads holding 50% equities are pretty darn sure they can suffer through a 25% overall portfolio loss. IMO, another 50% stock market drop is more likely than not to happen again during our retirement years. If you have no tolerance for 40-50% transient losses in your retirement funds without panic selling, could you stand say a 20% loss? If so then you could perhaps hold 40% equities, or make it 30% to be safe. You need to come up with your own number if you want to own equities.

If can't stomach even a little equities, then I would periodically "invest" some of your cash in SPIAs. See http://www.immediateannuities.com/ to get an idea what they would pay at various ages. Don't do it all at once since you get more $/month for the same price as you get older and if/when long term interest rates rise.

As to what Bogleheads invest their "bond" allocation in, I don't have an answer. For no particular reason, I have mine as roughly 1/3rd intermediate bond, 1/3rd TIPS, and 1/3rd my 401k stable value fund. I doubt it is even keeping up with inflation. I hope to rely on my equities for that.
JW
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby LAlearning » Sun Sep 01, 2013 12:14 pm

slipp1229 wrote:First post, great site!
I am going to leave the grindstone in 3 years max. Liquidated 90% of my equities assets after recovering most of my 2007-09 losses.
Back in 2007-08, I was 90% equities. Ouch... Learned my lesson the hard way. Even had 75% of that sizeable money with high paid "professionals" that
I realize now, do not have a clue.... TRUTH. Anyway (wounds licked and moving on), even though my cash is all in MM or various worthless bank accounts not making squat (actually losing due to inflation), I am ok with that. My question: What are other Bogleheads in my similar position doing? Mostly cash and wondering what to do next and when???
Thanks
Slipp


Welcome to The Forum!
Please edit your original post (upper right corner) after reading this for more detailed responses from our retired members: Asking Portfolio Questions.

By definition a Boglehead takes no more risk than they are comfortable with, and while we wonder what will come next, we have a plan that hopefully will take us through thick and thin.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby jebmke » Sun Sep 01, 2013 12:16 pm

Gnirk wrote:
BolderBoy wrote:
Gnirk wrote:currently in individual muni bonds (all paying 5% or more tax free and none longer than 4 years to maturity)

Where do you find munis paying 5% or more with short durations?

I didn't find them, they were already part of the relative's holdings. Which is why I am holding them to their maturities, and fortunately they are high-rated bonds.

Are these really 5% YTM or are they 5% coupon?
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Abe » Sun Sep 01, 2013 12:56 pm

I like this strategy here: http://whitecoatinvestor.com/bernstein- ... -the-game/
It may not be for you, but the article is worth reading anyway.
Slow and steady wins the race.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby slipp1229 » Sun Sep 01, 2013 1:44 pm

Wow! ... What a great bunch of responses/people.
Thanks!. I will carefully review each of your situations and decide which works best for me.
My only reservation now is "timing". I feel waiting until the next equities correction takes place
might be wise before jumping in with 50% ... but when will that be? Being a follower of
demographic trends ala Harry Dent, I cannot help believe a mini crash will happen in the not
so distant future. ??

Slipp
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby LH » Sun Sep 01, 2013 2:09 pm

Texas hold em71 wrote:Welcome! There is a very good wiki here that you should read. It will take a while to read and digest it all.

http://www.bogleheads.org/wiki/Main_Page

There are a number of people here who have annuities (called SIPAs in posts). That, SS and pensions give them a guaranteed income stream for life. For the risk averse that might be the best course.

http://www.bogleheads.org/wiki/Category:Annuities

Otherwise you will likely need some equities in retirement. Depends on the size of your portfolio and your gap between pension/ SS and expenses.


Guaranteed......... Italics and underline added

Social security, backed by the most powerful entity in he world, biggest army, ability to print money and tax, is currently telling me it is NOT guaranteed I will get my money as promised, instead they are projecting 76 cents on the dollar.

Anytime you see guaranteed remember, history and current reality shows that it is not guaranteed. If the biggest most powerful entity cannot swing it, how is some private company going to manage it expectantly "guaranteed"?
Last edited by LH on Sun Sep 01, 2013 2:14 pm, edited 2 times in total.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Sbashore » Sun Sep 01, 2013 2:12 pm

slipp1229 wrote:Wow! ... What a great bunch of responses/people.
Thanks!. I will carefully review each of your situations and decide which works best for me.
My only reservation now is "timing". I feel waiting until the next equities correction takes place
might be wise before jumping in with 50% ... but when will that be? Being a follower of
demographic trends ala Harry Dent, I cannot help believe a mini crash will happen in the not
so distant future. ??

Slipp


Well, you've just articulated another problem with market timing. When to get back in? If you've been sitting and waiting since 08-09, perhaps the time is now? Markets are not at all time highs in real terms. This could be a bottom for all anyone knows. I'd only proceed after you can settle in with an asset allocation that you can stick with, one that you have faith in being able to stay the course with. What I do is project what kind of losses are likely, yes likely, with my asset allocation. I do not take on more risk than fits my needs. I also compute, using a spreadsheet, how many years worth of fixed income I hold at my current distribution rate. That helps me gain perspective. It's pretty helpful, especially in times of market stress, to know that I have say 13 years before I'd have to sell an equity position. Your number one decision, in my view, is to settle on your equity/fixed income allocation. When I say settle I don't mean to just pick something that sounds appealing but to give it some thought, work through it, develop a rationale for why this is where you should be at this point in time. That way you'll be more likely to "stay the course". There are terrific resources on this site to help you with your task. I think you should spend some time exploring them.
Steve | Semper Fi
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby jebmke » Sun Sep 01, 2013 2:15 pm

LH wrote:Guaranteed.........

Social security, backed by the most powerful entity in he world, biggest army, ability to print money and tax, is currently telling me it is NOT guaranteed I will get my money as promised, instead they are projecting 76 cents on the dollar.

Anytime you see guaranteed remember, history and current reality shows that it is not guaranteed. If the biggest most powerful entity cannot swing it, how is some private company going to manage it expectantly "guaranteed"?

Flemming vs. Nestor. It has never been guaranteed.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby LH » Sun Sep 01, 2013 2:18 pm

Since you are timing, and its very relevant to being in cash, what are your thoughts on the risk of a high inflation developing?

I would go 50 stocks, 50 tips nice easy conservative portfolio.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Texas hold em71 » Sun Sep 01, 2013 2:51 pm

LH wrote:
Texas hold em71 wrote:Welcome! There is a very good wiki here that you should read. It will take a while to read and digest it all.

http://www.bogleheads.org/wiki/Main_Page

There are a number of people here who have annuities (called SIPAs in posts). That, SS and pensions give them a guaranteed income stream for life. For the risk averse that might be the best course.

http://www.bogleheads.org/wiki/Category:Annuities

Otherwise you will likely need some equities in retirement. Depends on the size of your portfolio and your gap between pension/ SS and expenses.


Guaranteed......... Italics and underline added


Social security, backed by the most powerful entity in he world, biggest army, ability to print money and tax, is currently telling me it is NOT guaranteed I will get my money as promised, instead they are projecting 76 cents on the dollar.

Anytime you see guaranteed remember, history and current reality shows that it is not guaranteed. If the biggest most powerful entity cannot swing it, how is some private company going to manage it expectantly "guaranteed"?


Touché! I know better and should have been more careful with my word choice. Could I say less risky than equities?
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Toons » Sun Sep 01, 2013 2:54 pm

Been in the market since 1980,around 90% equities for most of the time,starting reallocating money in 2010 to bonds (not selling any equities,using new money)before retirement in 2011,around 70/30 stock bond now :happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby Dale_G » Sun Sep 01, 2013 3:57 pm

There is no one answer - different strokes for different folks.

At 76, my SS + tiny pension + fixed annuity more than take care of my spending desires.

The portfolio is 71% equities; 27.5% bonds and 1.5% cash. It is intended to help protect against inflation and provide a legacy.

slipp1229 wrote:...... My only reservation now is "timing". I feel waiting until the next equities correction takes place might be wise before jumping in with 50% ... but when will that be? Being a follower of
demographic trends ala Harry Dent, I cannot help believe a mini crash will happen in the not
so distant future. ??


Waiting for a "correction" makes no sense. I predict that when the next crash comes, mini or otherwise, you will be so frozen that you will not invest. When the crash/correction does comes, please come back and tell me I was wrong. :D

Dale
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby WendyW » Sun Sep 01, 2013 4:33 pm

Dale_G wrote:Waiting for a "correction" makes no sense. I predict that when the next crash comes, mini or otherwise, you will be so frozen that you will not invest.

Great point.
If OP panicked and sold out of equities at the bottom of the last downturn, what are the chances that he'll be brave enough to invest at the bottom of the next downturn ?
Probably not good.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby DiscoBunny1979 » Sun Sep 01, 2013 4:55 pm

Sbashore wrote:
slipp1229 wrote:Wow! ... What a great bunch of responses/people.
Thanks!. I will carefully review each of your situations and decide which works best for me.
My only reservation now is "timing". I feel waiting until the next equities correction takes place
might be wise before jumping in with 50% ... but when will that be? Being a follower of
demographic trends ala Harry Dent, I cannot help believe a mini crash will happen in the not
so distant future. ??

Slipp


Well, you've just articulated another problem with market timing. When to get back in? If you've been sitting and waiting since 08-09, perhaps the time is now? Markets are not at all time highs in real terms. This could be a bottom for all anyone knows. I'd only proceed after you can settle in with an asset allocation that you can stick with, one that you have faith in being able to stay the course with. What I do is project what kind of losses are likely, yes likely, with my asset allocation. I do not take on more risk than fits my needs. I also compute, using a spreadsheet, how many years worth of fixed income I hold at my current distribution rate. That helps me gain perspective. It's pretty helpful, especially in times of market stress, to know that I have say 13 years before I'd have to sell an equity position. Your number one decision, in my view, is to settle on your equity/fixed income allocation. When I say settle I don't mean to just pick something that sounds appealing but to give it some thought, work through it, develop a rationale for why this is where you should be at this point in time. That way you'll be more likely to "stay the course". There are terrific resources on this site to help you with your task. I think you should spend some time exploring them.

-------------------------

In my opinion, since the OP has been more or less out of the market for a while, the OP is starting as a reborn newbie. This means that the OP is just getting his/her feet wet (again) and therefore should consider that Mutual Funds are not for a few years, but for decades so that the average yearly returns can work in one's favor. So, if the OP is just about to retire, but ready to 'invest' in mutual funds or the Vanguard type, the OP should consider that it will be for decades worth of commitment. Is that something the OP is willing to do regardless of the market again, dropping some 50% in the future? The objective to investing needs an updated Investment Policy and the reason for wanting to invest. For me, I know what kind of average yearly return I'd like and have chosen The STAR Fund to help guide by ROTH IRA as the only investment. The OP needs to determine what kind of average yearly return is wanted (and for how long) and then select those Funds that combined can get hopefully achieve it over time. For instance, if you need $ to double every 10 years, then you would select a Fund or core Funds that hopefully can achieve an average 7% yearly return.
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Re: Retiring in 3 years and sitting on 85% cash since 2008

Postby jebmke » Sun Sep 01, 2013 5:02 pm

Taxes and trading costs aside, we are all newbies.
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