Time to go on defense? Win by not losing?

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betterinvestor2012
Posts: 56
Joined: Sat Sep 24, 2011 9:55 am

Time to go on defense? Win by not losing?

Post by betterinvestor2012 »

47 and 45 year old couple seeking some advice.....


Through a lot of help on this board, we have rebalanced and simplified our portfolio, THANK YOU!!! Here is the question. Should we be more defensive to meet our "Goal" by going to an allocation of 50/50? Do I now win by not losing?

Goal-$100k retirement income at 60 (for me, 13 years away) to last 30 years
Leave an estate of about $500,000

We currently have a total portfolio of 1.58Mil and no debt at all. Mortgage paid off. IS my 70/30 more risk than I need to take to get to 3Mil?
steve_14
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Joined: Wed Jun 20, 2012 12:05 am

Re: Time to go on defense? Win by not losing?

Post by steve_14 »

Depends on your tax rate, new money invested, and other stuff we don't know. Assuming both of those first two factors are zero, you have a fair chance of hitting $3M in 13 years at 50/50. I'd plan on one of you living past 90, though you can do an SPIA in late retirement if necessary.
Topic Author
betterinvestor2012
Posts: 56
Joined: Sat Sep 24, 2011 9:55 am

Re: Time to go on defense? Win by not losing?

Post by betterinvestor2012 »

steve_14 wrote:Depends on your tax rate, new money invested, and other stuff we don't know. Assuming both of those first two factors are zero, you have a fair chance of hitting $3M in 13 years at 50/50. I'd plan on one of you living past 90, though you can do an SPIA in late retirement if necessary.

Good point, our tax rate is 28% and we anticipate putting in 20k annually in retirement funds.
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ogd
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Re: Time to go on defense? Win by not losing?

Post by ogd »

betterinvestorlately: you're well on track for your goal either way. I'd at least drop it to 60/40 which can also serve as a "permanent allocation" when you're well off and the extra is icing on the cake for your estate, or go one step further to 50/50. The differences are not great and either will work just fine IMHO, particularly with the amounts you're saving. Edit: and props to you for thinking about this during a bull market!
ot1138
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Re: Time to go on defense? Win by not losing?

Post by ot1138 »

You didn't say what your thought process is behind "going defensive". Is this motivated by the size of your portfolio or your opinion of equity prices?

70/30 seems just fine to me and I see little practical difference from 50/50.
poker27
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Re: Time to go on defense? Win by not losing?

Post by poker27 »

so you plan on putting another 260k ish in your retirement acct before you call it quits. This would put you at about 1.8MM. What annual return would you need to get you up to 3mm?
stlutz
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Re: Time to go on defense? Win by not losing?

Post by stlutz »

Don't forget about Social Security when you are considering what you retirement income sources will be. You won't need your investment portfolio to actually generate $100K in income for you.

I personally make top-level asset allocation moves slowly. If you're 70/30 and think you want to get to 50/50, then move there in increments of 5% per year. That gives you time to re-evaluate your decision each year. And you can also focus on getting there by how you direct new contributions instead of selling existing equity holdings with a possible tax hit.
Rexindex
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Re: Time to go on defense? Win by not losing?

Post by Rexindex »

poker27 wrote:so you plan on putting another 260k ish in your retirement acct before you call it quits. This would put you at about 1.8MM. What annual return would you need to get you up to 3mm?
My numbers tell me 3.25 real return, which can be done. A 70/30 mix may well do the job, if there is a big drop a year or two before retirement would you be willing to work another 2-3 years to potentially make up for the losses? Actually, this is a factor I try to put in my own equation.

I guess if you went more conservative at 50/50 and the returns were less than you need you would still ask the same question?????
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