Is anyone here allocated 30/70 a la Rick Ferri's "new center of gravity?" If so, Are you using a three fund portfolio? What does it look like?I believe the center of gravity shifts when a person stops accumulating assets and starts taking income from their assets. The corrected ideal asset allocation for beginning a discussion on asset allocation with a pre-retiree or retiree is 30% stocks and 70% bonds.
https://seekingalpha.com/article/303663 ... r-retirees
Why I ask
- This model appeals to me for the low volatility. Even knowing what I know, I can't safely predict my behavior should we have another 2008-09 type event. Better to acknowledge cowardice than to mistake cockiness for confidence.
- I ran some firecalc projections based on 30/70 AA for 30 and 35 years and got 100% success for both based on 3% withdrawal.
Here is some relevant personal info
We are self-employed. My thinking is that we supplement work income with 30k or less per year withdrawals for the next decade, then income will be replaced by SS and we continue to draw at same rate (adjusted for inflation). Depending on how our income and returns on savings work out in next 5-10 years, we may be better off than planned and hopefully not too much worse. Can easily adjust up. As for adjusting down? Well, we will make do. What's the alternative?
- Husband/wife, ages 60/60.
- 15% tax bracket.
- Both in excellent health, active, low BMIs and follow a healthy lifestyle. Family genetics imply that we should both plan to live into late-80s but should plan for at least early to mid-90s.
- 1M in savings (600k in non-Roth SEP accounts / 400k in taxable account).
- Live in/own 200k condo and plan to stay in it for foreseeable future (i. e., already living a retirement lifestyle/expenses).
- No pensions.
- No inheritance.
- No other assets.
- No debt.
- No heirs—we'd be happy to die broke with just enough money for cremations.
My deepest, darkest financial fears are what I call the 3 strike scenario
- Strike 1: Between health insurance costs and our high deductible policy, an illness or bad accident requiring longterm care/rehab before reaching Medicare age could dent into savings in a big way.
- Strike 2: Inability to work/earn due to strike 1 (wife and I each have specific role in our biz and either being sick would impact biz, not to mention personal life/stress to the other). So scenario where one of us is laid out would have major impact on savings, income and future income (client retention). Used to have disability insurance but had to drop it due to skyrocketing premiums.
- Strike 3: Major market event on the heels of strike 1 and strike 2.
Ergo, a safer portfolio AA for at least the next 5 years (until we become Medicare eligible) seems prudent. Maybe can adjust after.
I see some pitfalls with my plan but since there's no perfect plan, this seems as good as any to me at the moment.
Would love to hear any and all comments and opinions.