Should you rebalance when you’re in your seventies?

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John151
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Should you rebalance when you’re in your seventies?

Post by John151 » Wed Oct 25, 2017 5:04 pm

I faithfully rebalanced into stocks during the bear market of 2000-2002, and again during the bear market of 2007-2009. That worked out quite well. Stocks eventually recovered, and the shares I bought when stock prices were low have risen in value substantially.

But now that I’m in my seventies, with a life expectancy of about ten years, I’m not sure that I want to endure yet again the stress of funneling money into a sinking market, particularly since this time I might not be around long enough to benefit from the recovery.

I have about a third of my investments in stocks, with the rest in bonds. My pension covers my basic needs, and my bonds should be more than enough to see me through to the end of my days. Given this, is there any reason to rebalance into stocks during the next bear market?
Last edited by John151 on Wed Oct 25, 2017 5:34 pm, edited 1 time in total.

EHEngineer
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Re: Should you rebalance where you’re in your seventies?

Post by EHEngineer » Wed Oct 25, 2017 5:11 pm

Let it ride is reasonable. If your needs are covered by pension income, you can invest as you wish. All cash or all stocks are both acceptable. But be sure to stay the course; don't sell low.
Or, you can ... decline to let me, a stranger on the Internet, egg you on to an exercise in time-wasting, and you could say "I'm probably OK and I don't care about it that much." -Nisiprius

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Re: Should you rebalance when you’re in your seventies?

Post by Sandtrap » Wed Oct 25, 2017 6:43 pm

At 1/3 to 2/3, I would leave it alone and relax if it were me. Less stress. Simplicity.
My FIL just passed away at 96. Around your age he just left things as is. Didn't want to mess with it.
A close friend from golf is 82, he says he doesn't want to mess with his portfolio anymore. It's on track enough.
So I guess it depends on personal preference. If you rebalanced, great. If you did not, no great harm.
mahalo,
j
Last edited by Sandtrap on Wed Oct 25, 2017 10:08 pm, edited 1 time in total.

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Re: Should you rebalance when you’re in your seventies?

Post by Levett » Wed Oct 25, 2017 6:50 pm

"I have about a third of my investments in stocks, with the rest in bonds. My pension covers my basic needs, and my bonds should be more than enough to see me through to the end of my days. Given this, is there any reason to rebalance into stocks during the next bear market?"

In my mid-70s here. Other than legacy (mental accounting on my part ;-)) , I can't think of a compelling reason.

Lev

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Re: Should you rebalance when you’re in your seventies?

Post by bobcat2 » Wed Oct 25, 2017 7:02 pm

I would advise asymmetric rebalancing of the equity portion of the portfolio. I would rebalance aggressively the equity portion of the portfolio when the equity is above the target percentage. For example, if the equity portion is 2% above the target, then I would rebalance back to the target percentage.

OTOH I wouldn't rebalance back into equity after a stock market decline until the market is at least 10% above the trough. Even then, just in small steps as the market continues to recover.

BobK
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Re: Should you rebalance when you’re in your seventies?

Post by Johm221122 » Wed Oct 25, 2017 7:17 pm

It sounds like your "need,ability and willingness to take risk " have changed
I would change my asset allocation

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Re: Should you rebalance when you’re in your seventies?

Post by jb1 » Wed Oct 25, 2017 7:27 pm

"life expectancy of 10 years"

Damn man that hit me hard. Im 27 also

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Re: Should you rebalance when you’re in your seventies?

Post by krow36 » Wed Oct 25, 2017 7:37 pm

Does your pension have a COL adjustment? You could live another 20 or more years! I think your asset allocation is still worth keeping to. We're in our early 80s, have an AA of 40/60 stocks/bonds and have set a 5% band for rebalancing. It got to 45/65 a few days ago and I sold some stock fund, bought some bond fund and we are back at 40/60. Yes, it's a bit uncomfortable to sell a stock fund that is doing great (YTD >20%), but. . . .
Last edited by krow36 on Wed Oct 25, 2017 8:58 pm, edited 1 time in total.

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Re: Should you rebalance when you’re in your seventies?

Post by joe8d » Wed Oct 25, 2017 7:47 pm

75. Never rebalanced.
All the Best, | Joe

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Re: Should you rebalance when you’re in your seventies?

Post by JW-Retired » Wed Oct 25, 2017 8:10 pm

John151 wrote:
Wed Oct 25, 2017 5:04 pm
I have about a third of my investments in stocks, with the rest in bonds. My pension covers my basic needs, and my bonds should be more than enough to see me through to the end of my days. Given this, is there any reason to rebalance into stocks during the next bear market?
IMO, it's entirely up to you. I'm 70+ with a long time target AA = 60/40, but I believe in keeping enough bonds to be comfortable in retirement come what may. In 2007/08/09/10 that meant not re-balancing into stocks except via new money, which didn't get the AA back up to 60/40 territory until 2012. That was fine with us.

Since then we needed to actively reduce stocks a few times to stay near the 60/40. A fair portion of this was done by gifting appreciated equities to kiddos. A twofer! :)
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Re: Should you rebalance when you’re in your seventies?

Post by Dead Man Walking » Wed Oct 25, 2017 11:47 pm

I'm in my 70's and have followed the age in bonds philosophy for several years. I'm currently slightly above my allocation to equities. I'm going to let my equities run. My pension more than covers my expenses; therefore, my portfolio is more of a legacy portfolio than an income portfolio. I'm actually better off than I ever anticipated that I would be; consequently, I count my blessings and continue to live below my means - old habits are hard to break. I don't deprive myself of anything that a typically frugal person would.

DMW

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Re: Should you rebalance when you’re in your seventies?

Post by TinyTim » Thu Oct 26, 2017 12:58 am

I'm 68 and wiil retire in six months and take Social Security at 70. I plan to keep rebalancing my portfolio, aiming for a 60/40 stock/bond mix. That seems pretty conservative considering that I will get a $3100 check from the federal government each month. To get that kind of income from a 4 % annuity would require an initial Investment of about $900,000. If I consider that like a bond, my actual portfolio is about a 30% stock 70% bond mix

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Re: Should you rebalance when you’re in your seventies?

Post by Christine_NM » Thu Oct 26, 2017 1:11 am

LOL at 10 years life expectancy. That has been my personal life expectancy for the past 5 years. I can't make the leap to decreasing below 10. All we can say is, so far so good.

Most of my investments are in balanced funds so they take care of themselves.
10% cash 45% stock 45% bond. Retired, w/d rate 1.5%

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Re: Should you rebalance when you’re in your seventies?

Post by VaR » Thu Oct 26, 2017 1:23 am

What's your withdrawal rate?

Given the market gains over the past 8 years, I'd guess that your withdrawal rate is very low and your success rates are close to if not greater than 100% regardless of your asset allocation.

If it were me I'd continue to follow my IPS which means I'd continue to rebalance. Over the past several years that would mean selling equities and buying fixed income. And when it comes time I'd rebalance from fixed income to equities.

How are you withdrawing from your portfolio for expenses? In many cases, your "rebalancing" can be achieved by selling whichever went up in a given year for expenses - either fixed income or equities.

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Re: Should you rebalance when you’re in your seventies?

Post by Dandy » Thu Oct 26, 2017 7:36 am

I see no need for you to follow strict rebalance "rules". I would lean toward managing risk by making sure the equity portion didn't get too high but would defer the normal selling bonds to buy equities when they plunge. I would reserve the idea of buying some equities when they have dropped a lot -- but not to fully rebalance. Let the equity rebound do that heavy lifting for you.

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Re: Should you rebalance when you’re in your seventies?

Post by carolinaman » Thu Oct 26, 2017 7:37 am

You are in a good position and do not need to re-balance unless you want to.

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Re: Should you rebalance when you’re in your seventies?

Post by RadAudit » Thu Oct 26, 2017 8:18 am

John151 wrote:
Wed Oct 25, 2017 5:04 pm
Given this, is there any reason to rebalance into stocks during the next bear market?
Lot of discussion on the board about this. One book (McClung (?) - Living Off Your Money) reviewed on this site described a withdrawal strategy that advised against rebalancing in a bear market when you had to sell stocks at a loss {[initial value x (1 + inflation)] + 20%} to do the rebalance.

Seems as if you might be in good company if you decide not to rebalance in a bear market.
FI is the best revenge. LBYM. Invest the rest. Stay the course.

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John151
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Re: Should you rebalance when you’re in your seventies?

Post by John151 » Thu Oct 26, 2017 3:50 pm

I’m grateful to all of you for your advice. My pension has a 3% COLA, and it more than covers my basic needs. I also have a year’s worth of expenses in a money market fund that I can tap if need be. I haven’t withdrawn anything from my other investments, except for required minimum distributions, and even those are promptly reinvested in a bond fund in a taxable account. In fact, my bond investments are more than enough to cover my expenses for the rest of my life, so I probably don’t need to put more money at risk by buying more stocks, even in a bear market.

I don’t plan to sell stocks either. My stock index funds have doubled and tripled in value, so I’m disinclined to sell shares and pay a substantial amount in capital gains taxes. Also, my stock funds are yielding about as much as my bond funds, and my stock dividends are taxed at a lower rate (15% versus 28%). So I’ve come to think of my stock funds more as a source of income than as a source of capital. If I need capital, I can raise it by selling bonds.

So I think I’ll let my stocks ride. I don’t plan to sell shares, and I don’t plan to buy shares either. And thank you again for your help!

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Re: Should you rebalance when you’re in your seventies?

Post by Artsdoctor » Thu Oct 26, 2017 3:58 pm

Very balanced discussion. I think I may have missed your goals: are you anticipating spending everything? Or are you really focused on leaving a legacy?

As others mentioned, letting it ride is reasonable. If you have more than you can reasonably spend and truly are interested in a legacy, then you can invest with that in mind.

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Re: Should you rebalance when you’re in your seventies?

Post by my name » Thu Oct 26, 2017 6:57 pm

John151 wrote:
Wed Oct 25, 2017 5:04 pm
But now that I’m in my seventies, with a life expectancy of about ten years, I’m not sure that I want to endure yet again the stress of funneling money into a sinking market, particularly since this time I might not be around long enough to benefit from the recovery.
Thanks for your post. I've tried in a round-about way to ask similar in posts, but you were more to the point. Good topic and replies.

I've now also heard several people in this and other topics say that in retirement they use balanced funds to manage things. They don't want to have to keep rebalancing and such. It may be time to say I have sources of income to nicely support my lifestyle, and investments that are "enough:. Time to reduce the worry about stock funds, with the potential for wild swings, and move a big chunk to balanced. It would be less in returns, but a smoother ride. A better chance to preserve what we have - I agree with you we may not be around to benefit from any recovery from a steep stock decline.

Thanks for the post. It is what I was looking for.

my name
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Re: Should you rebalance when you’re in your seventies?

Post by my name » Thu Oct 26, 2017 7:02 pm

I"ll add how one poster said he used half Wellington and half Wellesley for his balanced funds, giving him an AA of 50/50.

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Re: Should you rebalance when you’re in your seventies?

Post by Wildebeest » Thu Oct 26, 2017 7:57 pm

Questions are how long do you expect to live? Does it really make a difference as in your financial security?

It does not for us.

I will never rebalance again.

It makes me so happy to set it and forget it.
The Golden Rule: One should treat others as one would like others to treat oneself.

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Re: Should you rebalance when you’re in your seventies?

Post by Taylor Larimore » Thu Oct 26, 2017 8:18 pm

John151:

I think it is important for investors of any age to maintain their desired stock/bond allocation (which can change as we get older).

My own strategy in retirement is to keep money that I cannot afford to lose in safe fixed-income securities. I use Vanguard Total Bond Market and cash in my bank checking account.

The remainder of my savings are in stocks. I sleep like a baby. :happy

Best wishes.
Taylor
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Re: Should you rebalance when you’re in your seventies?

Post by pkcrafter » Thu Oct 26, 2017 8:22 pm

John151 wrote:
Wed Oct 25, 2017 5:04 pm
I faithfully rebalanced into stocks during the bear market of 2000-2002, and again during the bear market of 2007-2009. That worked out quite well. Stocks eventually recovered, and the shares I bought when stock prices were low have risen in value substantially.

But now that I’m in my seventies, with a life expectancy of about ten years, I’m not sure that I want to endure yet again the stress of funneling money into a sinking market, particularly since this time I might not be around long enough to benefit from the recovery.

I have about a third of my investments in stocks, with the rest in bonds. My pension covers my basic needs, and my bonds should be more than enough to see me through to the end of my days. Given this, is there any reason to rebalance into stocks during the next bear market?
You don't need to rebalance, just hold and let the market rebound on it's own.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.

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Re: Should you rebalance when you’re in your seventies?

Post by Gorees » Sat Nov 11, 2017 12:00 pm

I would just leave it as it's not worth the stress at your age.

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Re: Should you rebalance when you’re in your seventies?

Post by 2015 » Sun Nov 12, 2017 12:39 pm

my name wrote:
Thu Oct 26, 2017 6:57 pm
John151 wrote:
Wed Oct 25, 2017 5:04 pm
But now that I’m in my seventies, with a life expectancy of about ten years, I’m not sure that I want to endure yet again the stress of funneling money into a sinking market, particularly since this time I might not be around long enough to benefit from the recovery.
Thanks for your post. I've tried in a round-about way to ask similar in posts, but you were more to the point. Good topic and replies.

I've now also heard several people in this and other topics say that in retirement they use balanced funds to manage things. They don't want to have to keep rebalancing and such. It may be time to say I have sources of income to nicely support my lifestyle, and investments that are "enough:. Time to reduce the worry about stock funds, with the potential for wild swings, and move a big chunk to balanced. It would be less in returns, but a smoother ride. A better chance to preserve what we have - I agree with you we may not be around to benefit from any recovery from a steep stock decline.

Thanks for the post. It is what I was looking for.
+1
Your money or your Life. In your seventies, do you really want to spend a single second of your daily diminishing Life expectancy on chasing money (under the guise of "returns", legacy, or otherwise)? When you're dead, you're dead. Money won't mean a thing to you. In fact, nothing will mean anything to you because your Life is gone.

For those approaching retirement or those younger than 70, here's some sobering news:

http://business.financialpost.com/perso ... ory-decade
This is very close to the little Canadian data that is available (from 1997) and suggests that, while there will be many exceptions, our 60s will probably be our last really good decade of life.

So what does this mean for people who are approaching retirement now?

The guiding principle is simple: Do the things you want to do when you can do them. Don’t wait too long to take that three-month trip around the world or to finally take some golf or scuba-diving lessons. As for less active things you can do equally well in your 70s, like scrap-booking or gardening, it may make sense to put them off until you get to that age. Your 60s is your glory decade.

As for working in your 60s, you may have no choice financially but if you do have a choice and like your work, then maybe consider working part-time instead of full-time.

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