Asset Allocation Question?

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Asset Allocation Question?

Post by dcd » Thu Apr 12, 2007 10:47 am

I'm seeking opinions on my asset allocation. I'm 61 and retired with a state pension and will be eligible for Social Securtiy next year if I choose to take it at that time. My wife(age 60) and I have no debt, own our home, and are currently able to live off of my pension and from income she receives as an artist. If my wife decided to retire from her art work, we would still be ok with my pension and Social Security.

We have several hundred thousand dollars in investments-85% in an IRA and 15% in a taxable account. This money is invested in a coffehouse style in Vanguard index funds. The allocation is currently 70/30 stocks/bonds. In the event of a bear market, I think I could stick with this mix or something close like 60/40.

Is this allocation reasonable given the pension and Social Security or is it too aggressive given our age?

Thanks for your help.

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Post by chaz » Thu Apr 12, 2007 10:51 am

Your allocation is not too aggressive if you have considered the risk/reward factor. Also, if you are in good health, delay taking Soc Security until you are older.
Chaz | | “Money is better than poverty, if only for financial reasons." Woody Allen | |

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Re: Asset Allocation Question?

Post by dave.d » Thu Apr 12, 2007 12:27 pm

dcd wrote:In the event of a bear market, I think I could stick with this mix or something close like 60/40.
Unfortunately, you have to decide what to own before you know whether the market goes up or down. :wink:

110-age would put you at 50/50. Plus, your large % in tax-protected makes bonds more attractive than they would be in taxable. If you're thinking what you typed above about 60/40, you probably shouldn't be above 60/40. Your allocation decision should be affected by the size of your pension and potential SS relative to your stash (larger pension and SS --> more stocks).

The taxable should be substantially all in stocks, except what you intend to spend before drawing on tax-protected.


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Post by nick22 » Thu Apr 12, 2007 7:11 pm

It is nice to have a solid pension to draw on, as well as your wife's artist income. If you can get through a market downturn without drawing on significant portfolio assets, you have flexibility with this AA decision. What is the allocation that helpds you sleep well and what is your maximal tolerable loss? With your steady streams of income, there is nothing wrong with 70/30, 60/40, 50/50, etc. You have some flexibiity to decide what is best for you.

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Post by spangineer » Thu Apr 12, 2007 10:47 pm

I agree with dave.d--you need to make the AA decision now, and stick with it regardless of where the market goes. Obviously, you'll need to change the AA as you get older, but don't let market forces push you to be more conservative. If you feel that 60/40 is the most stock you could stomach in a dramatic downturn, switch to 60/40 now, not then. If you decide to go from 70% to 60% stocks when the market is down, you'll be selling low and losing much more than you otherwise would.

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