"My Cup Runneth Over" Allocation vs. Time Strategy

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"My Cup Runneth Over" Allocation vs. Time Strategy

Postby Bengineer » Tue Jan 29, 2013 2:06 pm

Conventional asset allocation wisdom has one shifting to more fixed income as one ages. The discussion in Adjusting Strategy when you hit your # early is interesting. I found this post by Livesoft most thought provoking. Hopefully others will as well. It seems exactly right - one needs the most predictability in the years surrounding retirement. As one ages after retirement, life expectancy decreases, retirement cash flow needs are more well known, and the defined benefits such as Social Security, Pensions and Annuties will have kicked in.

What I haven't seen before, but makes perfect sense, is that one might invert the glide slope in later years to increase the allocation in equities and the (expected) amount to leave to one's spouse, heirs, or causes.

Have any of you that are approaching or past retirement come to think this way?
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Re: "My Cup Runneth Over" Allocation vs. Time Strategy

Postby billyt » Tue Jan 29, 2013 2:15 pm

This is in fact exactly the way I think of it. I am nearing retirement and have enough, right now, for a very modest lifestyle. At my current (high) savings rate, I will have enough for a comfortable lifestyle in a few years. The last thing I want to do at the moment is risk what I already have or what I can save over the next few years. My personal glide path has me hitting a 40/60 stock/bond allocation in a couple of years. I plan to hold that allocation until I am at least 5 years into retirement and then reassess. By then I will have a better handle on my income streams (SS, pension, portfolio) and my expenses, and may increase my stock allocation to 50 or 60% if my situation permits the added risks.
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Re: "My Cup Runneth Over" Allocation vs. Time Strategy

Postby retiredjg » Wed Jan 30, 2013 12:58 pm

This has been discussed some. If/when you see you will have more money than you could ever possibly use, it is not unreasonable to invest for heirs rather than yourself. I think I'd be very conservative in making that judgement....but sometimes, it's just obvious that the cup is running over.
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Re: "My Cup Runneth Over" Allocation vs. Time Strategy

Postby pastafarian » Wed Jan 30, 2013 1:54 pm

Bengineer wrote: What I haven't seen before, but makes perfect sense, is that one might invert the glide slope in later years to increase the allocation in equities and the (expected) amount to leave to one's spouse, heirs, or causes.

Have any of you that are approaching or past retirement come to think this way?

I tend to think along the same lines as livesoft. James Otar (Unveiling the Retirement Myth ) articulates the idea that portfolio performance (Chapter 9 The Luck Factor, Chapter 10 Sequence of Returns) just prior to and in the first four years of retirement are milestones. Actually to this second point, it's the portfolio size on the 4th anniversary of your retirement compared to the start of retirement.
Here's what he writes in Chapter 22 Other Signs of Diminishing Luck
Here is how this warning signal works: On the fourth anniversary of the start of withdrawals, ask this: “Do I have more money or less money compared to four years ago?” If you have more money, don’t worry; be happy. This is an indication that the sequence of returns is going your way. The chances of having a lifelong income are high.

My retirement is 4 to 9 years away, but our portfolio is currently 40/60. I suspect within the first few years of retirement we'll decide if we want to kick it up to 50/50...for the charities we value.
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Re: "My Cup Runneth Over" Allocation vs. Time Strategy

Postby livesoft » Wed Jan 30, 2013 2:13 pm

I was and am influenced by Otar's book.
It's all about short-term opportunistic rebalancing due to a short-term change in one's asset allocation, uh, I mean opportunistic rebalancing, uh I mean rebalancing, uh I mean market timing.
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