Age in Bonds

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stemikger
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Age in Bonds

Post by stemikger » Wed Dec 23, 2015 5:16 pm

How many folks hold age in bonds?

The Target Retirement Income Funds hold 30% in stocks and stays there for the remainder of our lifetime. However, if we listen to Jack and view Social Security as part of our fixed income allocation what do you think would be appropriate. My guess is 50/50 or 60/40 forever would be appropriate.

What do you think.
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jdb
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Re: Age in Bonds

Post by jdb » Wed Dec 23, 2015 5:21 pm

I am an age in bonds investor. Though bonds include TIPS ladder and muni bond ladder and near cash equivalent short term bond funds etc. Better if call it "Fixed Income in age" syndrome. But lets me sleep well at night.
Last edited by jdb on Thu Dec 24, 2015 9:35 am, edited 1 time in total.

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Steelersfan
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Re: Age in Bonds

Post by Steelersfan » Wed Dec 23, 2015 5:22 pm

I'm past Medicare eligible age and I'm at 55%/45% and plan to stay there for the long haul.

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jhfenton
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Re: Age in Bonds

Post by jhfenton » Wed Dec 23, 2015 5:27 pm

I believe that age in bonds is rarely appropriate. If you go through a complicated calculation and factor in social security and pensions, then it might be appropriate in more cases. But at that point it's also not a really a rule of thumb.

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Re: Age in Bonds

Post by itstoomuch » Wed Dec 23, 2015 5:28 pm

Instead of CDs, we use annuities.
Instead of bonds, we use utilities.

Saw Jack Bogle on wallstreetweek with Louis R. Circa 1975. Wellington and Windsor were The funds. Bogles Index, has a net asset of less than 50millions. He did not like bonds then because he thought the combination of equity plus divs will beat bonds.
Rev012718; 4 Incm stream buckets: SS+pension; dfr'd GLWB VA & FI anntys, by time & $$ laddered; Discretionary; Rentals. LTCi. Own, not asset. Tax TBT%. Early SS. FundRatio (FR) >1.1 67/70yo

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Re: Age in Bonds

Post by mindboggling » Wed Dec 23, 2015 5:32 pm

I am approximately age-in-bonds. I am 62. I do not receive SS yet, but I will not count it as a bond when I do. I think age-in-bonds is a good rule for people near retirement or retired, unless you are investing for heirs or have so much money that it doesn't matter if you lose a bunch.

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tennisplyr
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Re: Age in Bonds

Post by tennisplyr » Wed Dec 23, 2015 5:34 pm

Am 66, wife 64 both retired collecting SS. My AA is 50/50 and likely be close to that in near future.
Last edited by tennisplyr on Wed Dec 23, 2015 5:36 pm, edited 1 time in total.
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ruralavalon
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Re: Age in Bonds

Post by ruralavalon » Wed Dec 23, 2015 5:34 pm

We are both age 70, and retired drawing Social Security but have no pension or annuity.

Our asset allocation is 50/50.

We plan to stay with that asset allocation for the foreseeable future.
Last edited by ruralavalon on Wed Dec 23, 2015 5:44 pm, edited 1 time in total.
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bengal22
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Re: Age in Bonds

Post by bengal22 » Wed Dec 23, 2015 5:42 pm

I am 64 with a semi-pension and will be drawing S.S. at a later date. These sources of income allow me to do Age-20 and I have no plans to change.
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Re: Age in Bonds

Post by Lafder » Wed Dec 23, 2015 5:45 pm

Age - 12 for me, Age - 16 for partner. We are 47 and 51 and at 65/35, 30% International.
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cfs
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Re: Age in Bonds

Post by cfs » Wed Dec 23, 2015 5:53 pm

Couch Potato

In my opinion the 50/50 solution is a good one. Don't be surprised if one day Vanguard launches their "50/50 Series" of funds consisting of:

- Vanguard 50/50 Fund
- Vanguard 50/50 International Fund
- Vanguard 50/50 World Fund

Already then, wishing everyone a productive Wall Street's Window Dressing Week and a Feliz Navidad.
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Phineas J. Whoopee
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Re: Age in Bonds

Post by Phineas J. Whoopee » Wed Dec 23, 2015 6:05 pm

Bogle suggested age in bonds as a starting place to determine one's asset allocation, if one had no better starting place. It isn't even a rule of thumb. It isn't even a guideline. It's a spot for those without other reasoning from which to begin thinking about what might be good.
PJW

ddurrett896
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Re: Age in Bonds

Post by ddurrett896 » Wed Dec 23, 2015 6:07 pm

Age - Age for me

I'm 29...bring on the bear!

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siamond
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Re: Age in Bonds

Post by siamond » Wed Dec 23, 2015 6:20 pm

Phineas J. Whoopee wrote:Bogle suggested age in bonds as a starting place to determine one's asset allocation, if one had no better starting place. It isn't even a rule of thumb. It isn't even a guideline. It's a spot for those without other reasoning from which to begin thinking about what might be good.
Yes, this is well put.

OP, this topic has been discussed in many threads in the past. There isn't that much support for the glidepath model on this forum, although opinions vary quite a lot on what's the right thing to do, and some people do use such glidepath.

Personally, I invest for myself (and my spouse) as much as I invest for my children, and I never saw the point of a glidepath (which doesn't backtest well at all, by the way). So I'm sticking to a fixed allocation, period. I might tune it as some point in time if by extraordinary we reach a high milestone, but that's it.

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warowits
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Re: Age in Bonds

Post by warowits » Wed Dec 23, 2015 7:25 pm

ddurrett896 wrote:Age - Age for me

I'm 29...bring on the bear!
32 and of a similar mind set. But if I were 52 I would likely have 20-30% in bonds, maybe more depending on how much 52 year old me learns from a few decades of 100% stock allocation.

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Re: Age in Bonds

Post by ugaDAWGS09 » Wed Dec 23, 2015 7:35 pm

My wife and I are both 30, and we have our AA set at 70/30. I know some people think 30% seems like too much bonds/fixed income at a young age, but I feel like I can sleep better at night and don't worry as much about the market "drops." I'm going to stay the course and keep maxing my 401k and Roth IRA each year and keep adjusting my AA as I get older. I'm hoping to retire somewhere in my late 50's, but I don't know if being 100/0 or 70/30 will help me reach that goal quicker, but I know I don't want to see a 50% decline in my account.

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Re: Age in Bonds

Post by hudson » Wed Dec 23, 2015 7:42 pm

stemikger wrote:How many folks hold age in bonds?

The Target Retirement Income Funds hold 30% in stocks and stays there for the remainder of our lifetime. However, if we listen to Jack and view Social Security as part of our fixed income allocation what do you think would be appropriate. My guess is 50/50 or 60/40 forever would be appropriate.

What do you think.
When I first read about "Age in Bonds", I blinked...it made me wonder. I found it to be a very useful starting point.

I'm retired...not yet 70...and probably 90/10 bonds/stocks. Some day I'll swap the stocks for more bonds. I would not sleep well with a higher allocation to stocks. I don't see a problem with 100% bonds. I know all the arguments for having more equities.
Last edited by hudson on Sun Dec 27, 2015 9:00 am, edited 3 times in total.

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nisiprius
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Re: Age in Bonds

Post by nisiprius » Wed Dec 23, 2015 7:46 pm

I'm at about age in bonds, but with no plans at the moment to reduce stocks. However, since I used about 1/4 of my portfolio to buy SPIAs (income annuities), and I receive social security, so in terms of risk there's a case to be made that my risk level is a good deal lower than age in bonds.
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Re: Age in Bonds

Post by FelixTheCat » Wed Dec 23, 2015 7:54 pm

I always thimk what could I stomach to loose in a severe market like 2009/2009. That's how I determined my Bond allocation.
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Re: Age in Bonds

Post by longinvest » Wed Dec 23, 2015 7:57 pm

I'm a 50/50 forever guy. I find both stocks and bonds risky, but in a different way. I have the same division within my stock allocation between domestic and international.

Actually, I've recently learned that such a naive asset allocation stands up surprisingly well to academic analysis:
http://papers.ssrn.com/sol3/papers.cfm? ... _id=676997
How Inefficient are Simple Asset-Allocation Strategies? , DeMiguel, Victor, Garlappi, Lorenzo and Uppal , Raman, “How Inefficient are Simple Asset-Allocation Strategies?” (February 2005).

Abstract:
In this paper, we wish to evaluate the performance of simple asset-allocation strategies such as allocating 1/N to each of the N assets available. To do this, we compare the out-of-sample performance of such simple allocation rules to about ten models of optimal asset-allocation (including both static and dynamic models) for ten data sets. We find that the simple asset allocation rule of 1/N is not very inefficient. In fact, it performs quite well out-of-sample: it typically has a higher Sharpe ratio, a higher certainty equivalent value, and a lower turnover than the policies from the optimal asset allocation. The intuition for the good performance of the 1/N policy is that the loss from naive rather than optimal diversification is smaller than the loss arising from having to optimize using moments that have been estimated with error. Simulations show that the performance of policies from optimizing models relative to the 1/N rule improves with the length of the estimation window (which reduces estimation error) and also with N (which increases the gains from optimal diversification). But, even with an estimation window of 50 years, the difference in the performance of the 1/N policy and the policies from models of optimal asset allocation is not statistically significant.
Last edited by longinvest on Wed Dec 23, 2015 7:59 pm, edited 1 time in total.
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burt
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Re: Age in Bonds

Post by burt » Wed Dec 23, 2015 7:57 pm

Age 60. Retiring end of year.
My goal is to maintain my modest standard of living for 30 years.
(maintain my take home pay for 30 years.)

30% stocks/ 70% bonds

I think I've "won the game".
No need, ability, or desire to take more risk.

burt

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Peter Foley
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Re: Age in Bonds

Post by Peter Foley » Wed Dec 23, 2015 8:07 pm

I think there is a reasonable argument for age in bonds if you are cutting it close (as in just having enough to retire) and your risk tolerance supports it.
In this calculation, I have never bought into the premise that SS is part of one's bond allocation.

As one approaches retirement and in the early years of retirement think there is a stronger argument for being a bit more conservative so that one is not badly hurt by a poor sequence of returns when one's net worth is at it's highest. (See Wade Pfau's recent work.) After 5 years in retirement one can look at one's portfolio and set one's AA accordingly (and/or buy an immediate annuity if need be).

For my wife and me - we were age in bonds for only a short period of time before we retired in May and June of 2012 - part of that was because of the 2009 market downturn, not conscious planning. I was much more aggressive when we were younger and planned and executed (sold into a rising market in late 2011 and 2012) for roughly 45/55 on my retirement date. Now we are back to about 50/50 and I plan to stay there. (I'm 65 and my wife is 60.)

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Toons
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Re: Age in Bonds

Post by Toons » Wed Dec 23, 2015 8:08 pm

Age 65
70/30 stock bond allocation.
Slowly,slowly reducing equities. :happy
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Re: Age in Bonds

Post by Big Dog » Wed Dec 23, 2015 9:02 pm

similar to toons.

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jfn111
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Re: Age in Bonds

Post by jfn111 » Wed Dec 23, 2015 9:24 pm

I'm pretty much spot on age in bonds 41/59 AA. As I approach my 60th birthday I plan to move towards a 50/50 AA. I wanted to be a bit more conservative in the early years of retirement as I figured out our spending and withdrawal rate, currently <2.8%.

J295
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Re: Age in Bonds

Post by J295 » Wed Dec 23, 2015 10:19 pm

age 56 couple with three grown children (we are essentially retired).

Generally follow "Age minus 10 in bonds" (with "bonds" meaning corporate bonds, i-bonds, TIPS, CD, company buyout payments, savings, etc.) .... rest in equities (49%) and alternatives (5%)

Ignore our owned home and future social security

This suits are needs and temperaments.

Sidebar ... have never really grasped the "bring on the bear market" comments ..... even in the accumulation phase I never found the bear markets enjoyable (think October 1987, the tech bubble, and more recently 2008-09 ... not fun).

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Re: Age in Bonds

Post by GoldenFinch » Wed Dec 23, 2015 10:22 pm

Age 49 with 21% in bonds. This amount is a huge shift away from our previous 0% in bonds.

Thank you Bogleheads for all of those "Why bonds?" threads.

:sharebeer

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Re: Age in Bonds

Post by cinghiale » Wed Dec 23, 2015 10:58 pm

burt wrote:
Age 60. Retiring end of year.
My goal is to maintain my modest standard of living for 30 years.
(maintain my take home pay for 30 years.)

30% stocks/ 70% bonds

I think I've "won the game".
No need, ability, or desire to take more risk.
Ditto on the age.
Ditto on the retirement.
Ditto on the goals.
Ditto on the allocation.
Ditto on the perspective of need, ability, or desire to take unnecessary risk at this point in life.
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Re: Age in Bonds

Post by bloom2708 » Wed Dec 23, 2015 11:17 pm

Age 45. Currently at 57/43 stocks/bonds. We will move toward 60/40 with our next Roth contribution of $11k. My goal is to stay between 65/35 and 55/45. I'm letting it drift with the market and new purchases are what is out of favor.
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Re: Age in Bonds

Post by Sheepdog » Wed Dec 23, 2015 11:25 pm

At age 65 when I retired I had 56% stock/43% bonds. I had not been "at my age in bonds". I started gradually reducing my stock level annually at age 67 heading toward "my age in bonds"and reached that at age 69 (2002 and 31% stock and 69% bonds and cash. I am now at 82 years of life and i have 23% stock and have been there since I was 77 (my last year at my age in bonds). I live off of this investment and SS only and my savings balance is holding up quite well....actually has grown since that plateau.
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Re: Age in Bonds

Post by saltycaper » Wed Dec 23, 2015 11:49 pm

I have become increasingly suspicious of rules of thumb. "Age in bonds" is one I have discarded, along with anything that uses age as a criteria. When people reference age, what they are really trying to reference is a combination of factors, such as probable remaining working capital, probable size of portfolio, probable time to retirement, probable time left to live, etc.

If you're trying to create a simple rule of thumb, then rolling all these things into "Age" might seem necessary for reasons of simplicity, but you make a lot of assumptions in doing so. When considering your own situation, or any particular person's situation, it is not necessary to make such general assumptions because you have access to better data, even if much of it is still probable.

"Age in bonds" also neglects to consider an individual's personal risk tolerance apart from any empirical data.
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Re: Age in Bonds

Post by toblerone » Thu Dec 24, 2015 12:02 am

Age -10 here, at age 46 (64/36). If I were to suggest a "rule of thumb" I think age -10 is a good starting point, better than age in bonds. But what do I know? :? It works for my risk tolerance, but everyone is different.

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segfault
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Re: Age in Bonds

Post by segfault » Thu Dec 24, 2015 12:14 am

Age 33, currently have age in bonds + cash. May not continue that glidepath once I hit 40% in bonds + cash (60/40 stock/bonds or 50/50 may be the "floor"). Hope and plan to be able to retire around age 50, give or take.

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Re: Age in Bonds

Post by basspond » Thu Dec 24, 2015 1:34 am

As I got closer to retirement I started investing in bonds/cash based on 5 years of retirement living expenses.

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Re: Age in Bonds

Post by poppa23 » Thu Dec 24, 2015 1:58 am

70/30 bonds/stocks age 55 semi retired dont need to take the risk as was said earlier..already won the game for me and my children i dont even blink when the market takes a dump now..Thats what I want..to sleep and not even think about it...Happy and Healthy Holidays to all...

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Re: Age in Bonds

Post by hudson » Thu Dec 24, 2015 6:59 am

burt wrote:Age 60. Retiring end of year.
My goal is to maintain my modest standard of living for 30 years.
(maintain my take home pay for 30 years.)

30% stocks/ 70% bonds

I think I've "won the game".
No need, ability, or desire to take more risk.

burt
It looks like you are following Larry Swedroe's rules 1, 2, and 3 of investing:

viewtopic.php?p=1372822#p1372822

hudson
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Re: Age in Bonds

Post by hudson » Thu Dec 24, 2015 7:03 am

nisiprius wrote:I'm at about age in bonds, but with no plans at the moment to reduce stocks. However, since I used about 1/4 of my portfolio to buy SPIAs (income annuities), and I receive social security, so in terms of risk there's a case to be made that my risk level is a good deal lower than age in bonds.
nisiprius: Is there a discussion about your purchase of a SPIA? If possible and appropriate, I would like to read your justification, details, research, etc.

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Re: Age in Bonds

Post by ks289 » Thu Dec 24, 2015 8:00 am

nisiprius wrote:I'm at about age in bonds, but with no plans at the moment to reduce stocks.

Me too.

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Re: Age in Bonds

Post by blueblock » Thu Dec 24, 2015 8:55 am

Age: 63, retired
Bonds: 40%

The risk/volatility doesn't bother me, which I know because I never lost sleep during 2008-09 with this allocation. In part, that's because I can forego all trading for 2-3 years if it comes to that (apart from picking up a few bargains after Really Bad Days).

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Re: Age in Bonds

Post by desiderium » Thu Dec 24, 2015 9:19 am

Age 56 and 50/50, where I intend to stay. This is based on careful consideration of my risk tolerance and need to take risk.

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Re: Age in Bonds

Post by dziuniek » Thu Dec 24, 2015 9:27 am

ugaDAWGS09 wrote:My wife and I are both 30, and we have our AA set at 70/30. I know some people think 30% seems like too much bonds/fixed income at a young age, but I feel like I can sleep better at night and don't worry as much about the market "drops." I'm going to stay the course and keep maxing my 401k and Roth IRA each year and keep adjusting my AA as I get older. I'm hoping to retire somewhere in my late 50's, but I don't know if being 100/0 or 70/30 will help me reach that goal quicker, but I know I don't want to see a 50% decline in my account.
I don't think that's too conservative at all. My wife and I are at 70/30 being 30 and 28 years old. 60/40 seems too low and 80/20 too high, so this works ;p

At this point savings rate trumps the difference of going 10% more in equities by a mile...

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Re: Age in Bonds

Post by Quark » Thu Dec 24, 2015 9:33 am

There are two basic ways to take Social Security into account when considering asset allocation.

1) It's an income stream, therefore you don't need as much from your portfolio. With less need for portfolio return, you could reduce your stock allocation (all else being equal). OTOH, with more safe income, you might be more comfortable taking more risk, so more stocks.

2) It's a bond. You have a larger portfolio with more bonds. With more bonds generating income, you might not need as much return from stocks, so fewer stocks. OTOH, with more safe assets, you might be more comfortable taking more risk, so more stocks. Note that Social Security lacks many characteristics of a normal bond (ability to sell, ability to use to rebalance, etc.), so you might treat it somewhat differently than a normal bond.

Why would changing your analysis of whether Social Security is a bond change your asset allocation?

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Re: Age in Bonds

Post by Intrepyd » Thu Dec 24, 2015 9:41 am

Age 33.
85/15 equity/bonds.

I'm sort of aping the Target Retirement 2035-2040 allocation.

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stemikger
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Re: Age in Bonds

Post by stemikger » Thu Dec 24, 2015 9:45 am

Thanks for weighing in everyone. I always find it helpful to see what the smartest investors on the web are doing. Merry Christmas and Happy Holidays!

Steve G. :beer
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bengal22
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Re: Age in Bonds

Post by bengal22 » Thu Dec 24, 2015 9:49 am

Quark wrote:There are two basic ways to take Social Security into account when considering asset allocation.

1) It's an income stream, therefore you don't need as much from your portfolio. With less need for portfolio return, you could reduce your stock allocation (all else being equal). OTOH, with more safe income, you might be more comfortable taking more risk, so more stocks.

2) It's a bond. You have a larger portfolio with more bonds. With more bonds generating income, you might not need as much return from stocks, so fewer stocks. OTOH, with more safe assets, you might be more comfortable taking more risk, so more stocks. Note that Social Security lacks many characteristics of a normal bond (ability to sell, ability to use to rebalance, etc.), so you might treat it somewhat differently than a normal bond.

Why would changing your analysis of whether Social Security is a bond change your asset allocation?

I agree. In retirement, I believe one needs to understand the gap between expected income and expected expenses. Income would include pension, social security, part-time jobs, distributions in taxable accounts, etc. Once this gap is understood, then I think you can make a good judgement on your AA. I look at it a little differently than some. If the gap is small(example 10K) and my portfolio is large(example 1M) then I can take more risk with my AA and look toward gifting my monies to my family and church when I depart this earth. I do not count my projected income as a bond but I use it to determine the amount my portfolio must supply to my living.
"Earn All You Can; Give All You Can; Save All You Can." .... John Wesley

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Re: Age in Bonds

Post by dc81584 » Thu Dec 24, 2015 11:25 am

I follow Vanguard's glidepath by investing in VFIFX. I'm young and lead a simple, unremarkable life. If I feel the need to deviate from Vanguard's glidepath, I won't hesitate to do so, but for now, I'm fine with it.

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Re: Age in Bonds

Post by Dude2 » Thu Dec 24, 2015 12:06 pm

I like these sort of posts that provide evidence that not everybody is 100/0 which is the feeling you get from reading most other posts. Smart or dumb, we don't all have the same need or willingness to take risk. My IPS says age in bonds plus or minus 1.

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Re: Age in Bonds

Post by MidFlorida1214 » Thu Dec 24, 2015 12:16 pm

I pretty much have my age in bonds-- 63 years. Retirement account is Wellesley and taxable is Tax Managed Balanced

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Re: Age in Bonds

Post by abuss368 » Thu Dec 24, 2015 12:31 pm

We have been allocating about "age less10" to bonds. Jack Bogle has also mentioned this approach over the years. In other words, an allocation that increases with age.

Best.
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Re: Age in Bonds

Post by rgs92 » Thu Dec 24, 2015 12:40 pm

The problem with age in bonds is that it implies that you reduce your stock allocation over time, and a Firecalc/Trinity income-withdrawal scenario assumes a constant asset allocation like 50/50 to 60/40 (stock/bond) over the long term.

If you are 70 and have a 30 year horizon in theory, arbitrarily selling stocks to produce a 30/70 allocation simply due to your age would not support the constant safe inflation-adjusted withdrawal rate.

In other words, Firecalc does not assume a glidepath. In fact, I don't even think it calls for a super high stock allocation when younger.
(Correct me please if I'm off-base here, especially since I myself keep my A/A pretty constant.)

That's why I think the lazy-man's approach of just putting everything in VBIAX (Vanguard Balanced Index) during accumulation and decumulation periods regardless of age and not doing anything else is the almost best and easiest way to be a pure Boglehead and is the advice I give anyone who asks me what to do.
Merry Christmas.
Last edited by rgs92 on Thu Dec 24, 2015 12:54 pm, edited 2 times in total.

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