What is a typical (ballpark) AA for age 65?

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spdoublebass
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What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sat Jul 15, 2017 12:19 pm

I've read the wiki and searched the forum, I know this is a loaded question. Im not asking for peoples individual take, but rather what is a BH approach to an AA at 65?

I'm still new at this and have been trying to figure out a beginning stock/bond AA im comfortable with. I think what might help me out is knowing where people typically end up at 65.

In the target date funds with Vanguard they have you roughly at 87/13 at age 40, 64/36 age 55, and 44/56 at age 65. Then in "retirement" they suggest 30/70. They do not add tips until roughly age 60.

I'm 34, I am ok with age - 10 in bonds. But that would put me at 45/55 at age 65.
For myself at this moment, I'm even ok with 90/10 because I've just started out.

So, to be clear, I'd be curious if people recommend following vanguards path, or if there are other ways of looking at it.
I think knowing where to end up at 65 would help me decide on where to start.
Last edited by spdoublebass on Sat Jul 15, 2017 5:25 pm, edited 1 time in total.
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Re: What is a typical (ballpark) AA for age 65?

Post by whodidntante » Sat Jul 15, 2017 12:21 pm

I think using the glide path from target date funds as guidance is reasonable. You wouldn't go far wrong by doing exactly what they do.

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Re: What is a typical (ballpark) AA for age 65?

Post by KlangFool » Sat Jul 15, 2017 12:32 pm

OP,

Some of the questions that you should ask

1) How likely that you will work until 65 years old? At age 34, this is 31 years into the future. Personally, I would not assume that I could see that far into the future. So, I would probably take a safer assumption like I would retire in 20 years like 55 years old.

2) How much would the pension and/or social security cover your annual expense? 50%? 10%?

3) Please read this book. It was useful to me.

https://www.amazon.com/Spend-Til-End-Ra ... 1416548912

4) I settle on 60/40 as my final AA when I reach 25 times my current annual expense. I assume that I would not work until 62 years old. I will be Financially Independent before that age. I assume that social security could cover about 50% of my annual expense when I am 67 years old.

KlangFool

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Re: What is a typical (ballpark) AA for age 65?

Post by retiredjg » Sat Jul 15, 2017 12:44 pm

Trying to predict what will be right in 30 years is not really possible. You may run into a windfall and decide to take less risk than "average". Or you may run into a windfall and decide you can afford to take a lot of risk because you don't need all your money anyway.

I would not worry about what is "right" for you at age 65 at this point. Decide what is right for you now. Pick the target fund that is closest to that.

Every couple of years, see what the stock to bond ratio of the fund is. If it is migrating too quickly or too slowly toward bonds, simply adjust to the next younger or older target fund.

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Re: What is a typical (ballpark) AA for age 65?

Post by David Jay » Sat Jul 15, 2017 12:56 pm

Wait until you have been through a major pullback (say, 30% minimum) with a half million dollars in stocks. Then work towards an AA based on your personal need, willingness and ability to take risk.

I would say a 2SD range would be 70/30 to 30/70, with a good number of outliers...
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: What is a typical (ballpark) AA for age 65?

Post by rgs92 » Sat Jul 15, 2017 1:07 pm

What troubles me about glide-paths / target funds is that Firecalc and the Trinity Study don't use it.
Why not 60/40 (or thereabouts) constantly at all ages?
Is there a study that shows an SWR and portfolio-survival probabilities with a glide path? I can't recall seeing one.

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Re: What is a typical (ballpark) AA for age 65?

Post by ruralavalon » Sat Jul 15, 2017 1:49 pm

spdoublebass wrote:I've read the wiki and searched the forum, I know this is a loaded question. Im not asking for peoples individual take, but rather what is a BH approach to an AA at 65?

I'm still new at this and have been trying to figure out a beginning stock/bond AA im comfortable with. I think what might help me out is knowing where people typically end up at 65.

In the target date funds with Vanguard they have you roughly at 87/13 at age 40, 64/36 age 55, and 44/56 at age 65. Then in "retirement" they suggest 30/70. They do not add tips until roughly age 60.

I'm 34, I am ok with age - 10 in bonds. But that would put me at 55/45 at age 65.
For myself at this moment, I'm even ok with 90/10 because I've just started out.

So, to be clear, I'd be curious if people recommend following vanguards path, or if there are other ways of looking at it.
I think knowing where to end up at 65 would help me decide on where to start.
According to this collection of information from 2007, 2011, and 2015: " What ratio are you stocks/bonds and how old are you?", the typical asset allocation at age 65 has been somewhere around 50/50 plus or minus 2-3% at different times. But as you can see from a prior post there has been enormous variation.

The variation may be because of personal circumstances such as whether the particular Boglehead -- is retired by age 65, has a pension, is eligible for Social Security, and has annuity income.

We are both 71, retired at age 66, receive Social Security but no pension or annuity income, and have had a 50/50 asset allocation since age 63.
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Re: What is a typical (ballpark) AA for age 65?

Post by Toons » Sat Jul 15, 2017 1:52 pm

66 here,
70/30 :happy
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Re: What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sat Jul 15, 2017 4:46 pm

Thank you for all of the responses.
KlangFool wrote:
1) How likely that you will work until 65 years old?
My wife and I are both classical musicians, usually it's up to us when we stop playing. Today I'm sitting next to a man who's 72 playing just fine. Many musicians play into their 80's. It all depends on how the body holds up.
2) How much would the pension and/or social security cover your annual expense? 50%? 10%?
At this moment, it's not looking good, BUT it should hopefully be much better upon retirement.
In September I finish a doctorate and will have different options through teaching at a university etc.

3) Please read this book. It was useful to me.
https://www.amazon.com/Spend-Til-End-Ra ... 1416548912
I will, thank you
4) I settle on 60/40 as my final AA when I reach 25 times my current annual expense. I assume that I would not work until 62 years old. I will be Financially Independent before that age. I assume that social security could cover about 50% of my annual expense when I am 67 years old.

KlangFool
David Jay wrote:Wait until you have been through a major pullback (say, 30% minimum) with a half million dollars in stocks. Then work towards an AA based on your personal need, willingness and ability to take risk.

I would say a 2SD range would be 70/30 to 30/70, with a good number of outliers...
David Jay your statement is what brought on my post. If I had a large nut in my accounts, I would be conservative with it, however, I'm just starting all of this and feel I need do be more aggressive than if I were starting this 15 years ago. That being said, from what I read on the forum, I do not personally feel a need to go 100% equities, and would probably go no more than 90/10. Another way of wording my question which I didn't do a good job of in my OP is that I feel since I am starting out at 34, I should be a little on the aggressive side. A lot of the advice on this forum is outstanding, but not geared towards someone making 50K a year or less. I'm ok with a little more risk, I was surprised that Vanguard had the percentages they did for a glide path.
If I'm 90/10 now, I was just trying to find an end AA to shoot for at 65. I know one cannot predict the future and my thoughts might change along the way, but I'd like to have as much of this in my IPS as possible. From what I have gathered so far, if my plan is "good enough" it may not be the best but it could be a lot worse. That phrase really makes me sleep well at night.
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Re: What is a typical (ballpark) AA for age 65?

Post by 123 » Sat Jul 15, 2017 4:50 pm

If retired at age 65 then 50/50 stocks/bond.

If still working beyond age 65 then could go up to 60/40 stocks/bonds.

But that's just my opinion.
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Re: What is a typical (ballpark) AA for age 65?

Post by PFInterest » Sat Jul 15, 2017 4:55 pm

spdoublebass wrote:I'm 34, I am ok with age - 10 in bonds. But that would put me at 55/45 at age 65.
Do you mean 45:55? That sounds reasonable for retirement at 65.

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Re: What is a typical (ballpark) AA for age 65?

Post by randomizer » Sat Jul 15, 2017 5:08 pm

50:50

But 40:60 or 60:40 wouldn't be bad either.

Heck, even 25:75 or 75:25.

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Re: What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sat Jul 15, 2017 5:24 pm

PFInterest wrote:
spdoublebass wrote:I'm 34, I am ok with age - 10 in bonds. But that would put me at 55/45 at age 65.
Do you mean 45:55? That sounds reasonable for retirement at 65.
Yes! I'll edit it. Thank you.
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Re: What is a typical (ballpark) AA for age 65?

Post by tennisplyr » Sat Jul 15, 2017 5:29 pm

Retired, midsixties here and due to recent home downsizing am at 45/45/10 (stocks/bonds/cash) at the moment. Not making millions but sleep at night. Probably stay in this range for at least 5 years.
Last edited by tennisplyr on Sat Jul 15, 2017 8:30 pm, edited 1 time in total.
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Re: What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sat Jul 15, 2017 5:36 pm

It seems like the range is from 40-60 in bonds at age 65. I guess age -10 isn't that far off.

I can't imagine being in my sixties and having less than 40 in bonds. Even if I didn't hit my goal, I'd want to protect whatever I accumulated.
Another issue is that my wife is older then myself by 6.5 years. Doesn't change much, but I need to factor that in. I haven't read up on anything regarding approaching retirement or what happens in retirement. I just wanted to make sure I set us up well beforehand.
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Re: What is a typical (ballpark) AA for age 65?

Post by Jags4186 » Sat Jul 15, 2017 5:48 pm

I would think it has to do with how large your portfolio is, how much guaranteed income you have, and what your expenses are.

For example if between you and your spouse you are receiving $40k in annual social security benefits, you have a $2 million portfolio, and want $100k/yr to spend, I think it's very reasonable to be 75/25 since you only need a 3% withdrawal rate to achieve that. You could lose 50% of your equity position and only be forced to withdraw 5% of the remaining portfolio--not ideal but by no means disastrous. You also could always cut back a little on expenses as well.

If you and your spouse only receive $25k in social security benefits, you have a $500k portfolio, and you need $45k/yr, any less would be very tight, I would be closer to 50/50 or even 40/60 as you can really not weather a big downturn.

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Re: What is a typical (ballpark) AA for age 65?

Post by blueblock » Sat Jul 15, 2017 6:35 pm

spdoublebass wrote:If I'm 90/10 now, I was just trying to find an end AA to shoot for at 65. I know one cannot predict the future and my thoughts might change along the way, but I'd like to have as much of this in my IPS as possible.
I'm 65. After many years at 60/40, I went to 55/45 when I retired two years ago. By the time I'm 70, I plan to be at 50/50. To be honest, I don't think any of that shaving will make a material difference, I just do it as an exercise in investing responsibility.

As several have already noted, at your age it seems unfruitful to spend much time thinking about this. When I think about the difference between myself in my 30s and myself now.... suffice it to say, a hell of a lot can and probably will happen in your life over the next 30 years that will render plans made today not worth much.

Better for you, to my mind, would be to incorporate the solid fundamentals of wealth-building into your IPS, things like budget discipline and realistically increasing savings goals—maybe you're already doing that—and leave this question for later years.

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Re: What is a typical (ballpark) AA for age 65?

Post by Iliketoridemybike » Sat Jul 15, 2017 6:59 pm

Use one of the planning tools. I recommend Firecalc. That will tell you exactly the AA you need for your goals. Backtested with a Monte Carlo analysis. Without data like that, everything else is a guess.
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Re: What is a typical (ballpark) AA for age 65?

Post by Tyler Aspect » Sat Jul 15, 2017 7:08 pm

Image

Right now the 2008 recession is about ten years behind us that people are trending more aggressive in this bull market. But still, the typical allocations during retirement is bracketed by (60% stock / 40% bond) and (40% stock / 60% bond).
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Re: What is a typical (ballpark) AA for age 65?

Post by itstoomuch » Sat Jul 15, 2017 7:14 pm

Depends on what you want.
We are well diversified. see notes below.
Discretionary is about 70/0/30 (s/b/c)
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Re: What is a typical (ballpark) AA for age 65?

Post by MotoTrojan » Sat Jul 15, 2017 7:47 pm

Some studies show 90/10 or 100/0 to be more resilient HISTORICALLY to a 3-4% withdrawal rate. Emotionally though, that is very risky.

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Re: What is a typical (ballpark) AA for age 65?

Post by David Jay » Sat Jul 15, 2017 9:33 pm

spdoublebass wrote:
David Jay wrote:Wait until you have been through a major pullback (say, 30% minimum) with a half million dollars in stocks. Then work towards an AA based on your personal need, willingness and ability to take risk.

I would say a 2SD range would be 70/30 to 30/70, with a good number of outliers...
David Jay your statement is what brought on my post. If I had a large nut in my accounts, I would be conservative with it, however, I'm just starting all of this and feel I need do be more aggressive than if I were starting this 15 years ago. That being said, from what I read on the forum, I do not personally feel a need to go 100% equities, and would probably go no more than 90/10. Another way of wording my question which I didn't do a good job of in my OP is that I feel since I am starting out at 34, I should be a little on the aggressive side. A lot of the advice on this forum is outstanding, but not geared towards someone making 50K a year or less. I'm ok with a little more risk, I was surprised that Vanguard had the percentages they did for a glide path.
If I'm 90/10 now, I was just trying to find an end AA to shoot for at 65. I know one cannot predict the future and my thoughts might change along the way, but I'd like to have as much of this in my IPS as possible. From what I have gathered so far, if my plan is "good enough" it may not be the best but it could be a lot worse. That phrase really makes me sleep well at night.
I was 100% equities into my mid-50s, but to do that one must be immune to volatility. Selling due to market conditions is a portfolio killer.

I now have enough in bonds to fund my expenses from age 62 to age 70 (when I will file for SS benefits), so sequence of returns issues are minimized. I intend to be perhaps 80/20 or 70/30 in later retirement as we aggressively give to good causes and build a legacy.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

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Re: What is a typical (ballpark) AA for age 65?

Post by Iliketoridemybike » Sat Jul 15, 2017 9:39 pm

Equities give you the greatest chance at a larger portfolio. Bonds assure you that you have a portfolio.
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Re: What is a typical (ballpark) AA for age 65?

Post by Jimmar » Sat Jul 15, 2017 9:46 pm

I've been saving for retirement since the age of 20 I'm now 58 and plan on retiring in 7 years i have read many opinions on the best way to go about it but the simplest way I've found is bond allocation to reflect your age IE. in your 20's 20% bonds 30's 30% bonds 40's 40% bonds 50's 50% bonds 60's 60% bonds and so on. The only problem i have is how much to leave to my Daughter either 2m or more

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Re: What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sun Jul 16, 2017 12:01 am

Tyler Aspect wrote: Right now the 2008 recession is about ten years behind us that people are trending more aggressive in this bull market. But still, the typical allocations during retirement is bracketed by (60% stock / 40% bond) and (40% stock / 60% bond).
Thank you for this info. I just wanted to make sure I was plotting to end up where I should.
Iliketoridemybike wrote:Equities give you the greatest chance at a larger portfolio. Bonds assure you that you have a portfolio.
I couldn't agree more. As I said, I don't mind being a bit conservative now, but I plan on being pretty conservative as I acquire more in my IRA and 401K.
Iliketoridemybike wrote:Use one of the planning tools. I recommend Firecalc. That will tell you exactly the AA you need for your goals. Backtested with a Monte Carlo analysis. Without data like that, everything else is a guess.
A few people have mentioned this on the forum. I need to check it out. Thanks.
Jags4186 wrote:I would think it has to do with how large your portfolio is, how much guaranteed income you have, and what your expenses are.
This is one of the reasons I was asking. I read many things about what to do if you are young, and then what to do as you approach retirement. In my case, I feel like I'm starting later than I should have (but still grateful to have started at all). You point is something that has me thinking about this. My portfolio isn't large now, so I don't mind being 90/10, but I just wanted to make sure I ended up where I should.
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Re: What is a typical (ballpark) AA for age 65?

Post by spdoublebass » Sun Jul 16, 2017 11:00 pm

blueblock wrote: Better for you, to my mind, would be to incorporate the solid fundamentals of wealth-building into your IPS, things like budget discipline and realistically increasing savings goals—maybe you're already doing that—and leave this question for later years.
Thank you for your response. I agree with everything you said 100%. To be clear though, I wasn't concerned with where I'd end up, I was looking to find a place to start. I am having a hard time figuring out how much to have in bonds. I was hoping to decide on an end point, or goal at 65 years old, and then count back from there. If 50/50 is where I "should" be at 65, then I could be 71/29 now since I am 34. That's what I was trying to figure out.

I just feel a little odd because in this moment, I could be 90/10 or 75/25 and be happy, but I'd like whatever my allocation in now to have some context with where I'd end up. Maybe this isn't important, but I think if I don't decide on a plan I might screw something up or have a inkling to change something later on which I don't want to do.
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