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I have read many sources and used the Vanguard asset allocation tool and understand that AA is a personal matter with many factors to consider, but I nonetheless would appreciate any observations on our current asset allocation.
We are a 53 year old couple. I have recently transitioned from my profession from full time to part time (and my income will vary significantly depending upon how much I choose to work). My spouse does not work outside the home and we have the following assets and no debt.
Equity -- 47%
Fixed -- 38%
Alternative -- 8%
Cash -- 7%
We also own our home outright which is not included in the above (it increases assets by another 15%).
For now we will spend/withdraw about 1% of our assets on annual living expenses because my part time income will cover most items. If I discontinue work completely our withdrawal rate will be around 3.5 %. Eventually we will receive social security (I believe it will exist when we reach eligibility age).
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Looks fine to me. I assume you are diversified broadly within the equity asset class, and fixed-income is high-quality.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein
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I think it is fine too, but the important factor is not the asset allocation but the rate of spending. The single most important number in the long run will be the rate of withdrawal after SS, which seemingly will be reasonably conservative. Possibly the biggest risk is that you have underestimated your expenses and/or not included a contingency factor. I have some planning I have done which allows a percentage add-on for expenses and also can test shocks to the system such as needing to meet a major expense of 10% of assets or something like that at some time.
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We are in a similar situation, but have no cash allocation and are currently: 57% equities, 35% bonds, 8% commercial real estate.
I see no reason to have 7 years of withdrawals (1% x 7) sitting in cash.
It's all about market timing, uh, I mean rebalancing, uh, I mean opportunistic rebalancing, uh, I mean short-term opportunistic rebalancing due to a short-term change in one's asset allocation.
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