Have Enough, Should I now time market?

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Philly_fan
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Have Enough, Should I now time market?

Post by Philly_fan » Sat Jan 27, 2018 3:07 pm

Would appreciate thoughts!

If you have enough to support yourself in retirement (assuming 3% annual inflation) and you know there will be a correction to the economy and market, should you cash out at some point and watch from the sidelines. If I understand Merriman, even he market times to a degree. I don't think with a great economy, virtually no unemployment, low interest rates/inflation that it's time to cash out but we know it won't last forever. If I was 30 or needed a large annual return to catch up, I wouldn't ask the question, but I am close to retirement. I guess it really comes down to a persons risk tolerance. Your thoughts?

livesoft
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Re: Have Enough, Should I now time market?

Post by livesoft » Sat Jan 27, 2018 3:11 pm

Describe what "cash out" actually means? Do you mean selling all assets and putting all your money into a 1.5% to 3% savings account and CD? Or do you mean changing asset allocation a little bit?

Here is the current Bogleheads classic "retreat to cash" thread: viewtopic.php?f=10&t=203792
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spaddlewit
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Re: Have Enough, Should I now time market?

Post by spaddlewit » Sat Jan 27, 2018 3:16 pm

Don't gamble with your 'have enough' money. If you've already won the game, why continue to play?

Now, anything above your 'have enough' portion, you can gamble with it if you so please, because it's effectively play money.

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bottlecap
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Re: Have Enough, Should I now time market?

Post by bottlecap » Sat Jan 27, 2018 3:38 pm

When we say "market timing doesn’t work" it means it results in a lower risk adjusted return than having an appropriate asset allocation and sticking with it.

So the question is whether your current AA is appropriate given the you now have "enough."

Skip the market timing and make sure your AA is appropriate.

Good luck,

JT

Newone88
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Re: Have Enough, Should I now time market?

Post by Newone88 » Sat Jan 27, 2018 3:45 pm

Interesting! I was actually thinking about this exact question and saw your post.

I'm still thinking about the options, but I'm tempted to keep my current asset allocation on the majority of my portfolio, and then any additional "play money" that you don't necessarily need for retirement can have a more aggressive allocation.

Vikings_Fan
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Re: Have Enough, Should I now time market?

Post by Vikings_Fan » Sat Jan 27, 2018 4:06 pm

After some discussion with colleague of mine, I think the correct way to proceed is through your allocation. If you are at 60/40, maybe you go to 50/50 while staying diversified.

Jim Beaux
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Re: Have Enough, Should I now time market?

Post by Jim Beaux » Sat Jan 27, 2018 7:06 pm

Only minutes ago I recommended VPA to another Boglehead.
https://investor.vanguard.com/advice/personal-advisor

Ive turned over most of my retirement portfolio to Vanguard Personal Advisor & so far I like. Considering the low fee, (0.30%)I view it as good investment.
In essence, I "bought the market". 50/50
Total Stock Idx, Total International Idx, Total Bond Idx & Total International Bond Idx
VTSAX
VTIAX
VTABX
VBTLX

TXWill
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Re: Have Enough, Should I now time market?

Post by TXWill » Sat Jan 27, 2018 7:46 pm

Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.

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jmndu99
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Re: Have Enough, Should I now time market?

Post by jmndu99 » Sat Jan 27, 2018 7:53 pm

TXWill wrote:
Sat Jan 27, 2018 7:46 pm
Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.
I hope to be in your position much later. My input to your question, what to do?, is perhaps consider philanthropy

J

stan1
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Re: Have Enough, Should I now time market?

Post by stan1 » Sat Jan 27, 2018 8:04 pm

TXWill wrote:
Sat Jan 27, 2018 7:46 pm
Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.
I'd guess that a 35% loss would be upsetting. You have no need to take risk. You are going to leave money to your heirs. Would you prefer to give money to your heirs now or in the future?

If you prefer to give it to them in the future you can invest your estate with an asset allocation appropriate for children and maybe even grandchildren.

Alternately you could gift money to them now and increase your fixed income allocation to preserve your wealth.

aristotelian
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Re: Have Enough, Should I now time market?

Post by aristotelian » Sat Jan 27, 2018 8:05 pm

I think hitting your number is a good enough reason to get more conservative and take money off the table. To me, where you are in your accumulation is just as much of a consideration as age. That you are doing so when stocks are at historically high valuation during a bull market, so much the better. Will you regret it more if you cash out now and the market goes up another 50%, or if you don't cash out and the market drops 50%?

itstoomuch
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Re: Have Enough, Should I now time market?

Post by itstoomuch » Sat Jan 27, 2018 8:14 pm

In 2008, I didn't know our danger. We almost had our cake too. Planned for early retirement at 59/62, 2009. We were handed our cake crumbs in November 2008. We had a 60/40 allocation, -40% from peak.
Whether you should time or not, is your decision and no one elses. I timed the market with our remaining IRA funds, Nov 2008. Dumped the Bond funds and the Blended funds for All-equity using GLWB VA that had all equity funds; +9% CAGR with retirement Income protection since 2008. All Equity in 401k.
YMMV

De-Risking may be appropriate. It is the primary theme of BH.
Last edited by itstoomuch on Sat Jan 27, 2018 8:30 pm, edited 1 time in total.
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

itstoomuch
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Re: Have Enough, Should I now time market?

Post by itstoomuch » Sat Jan 27, 2018 8:28 pm

jmndu99 wrote:
Sat Jan 27, 2018 7:53 pm
TXWill wrote:
Sat Jan 27, 2018 7:46 pm
Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.
I hope to be in your position much later. My input to your question, what to do?, is perhaps consider philanthropy

J
Find a Partner?
Not me. I have a spouse.
We moved much of our "Market" funds into rentals and annuities. Just <10% is Market exposed and that is Discretionary and currently 70% cash (fluctuates since I trade).
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

haban01
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Re: Have Enough, Should I now time market?

Post by haban01 » Sat Jan 27, 2018 10:12 pm

There is a good reason why Vanguard Target Retirement Income Fund is 30% Stocks and 70% Bonds going into Retirement. Ability, Willingness and Need to take risk should be factored in.
Eric | | "Stay the Course" | "Press on Regardless"

Derby
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Re: Have Enough, Should I now time market?

Post by Derby » Sat Jan 27, 2018 11:19 pm

TXWill wrote:
Sat Jan 27, 2018 7:46 pm
Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.
Adopt me? :mrgreen:
Carpe Diem.

TXWill
Posts: 33
Joined: Wed Apr 09, 2014 1:08 pm

Re: Have Enough, Should I now time market?

Post by TXWill » Sun Jan 28, 2018 8:53 am

Thank you to all respondents. At the moment, I am leaning toward reducing exposure to the market. Will report when/if I actually do so. "Stay the course" has been my mantra for over 45 years. May be time to change "the course".

Thanks again to all!

chevca
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Re: Have Enough, Should I now time market?

Post by chevca » Sun Jan 28, 2018 11:11 am

I don't see adjusting AA to be more conservative when one has enough to be market timing. I would call it a smart move... once you've won, stop playing. As long as that's the plan to stick with. If the thought is, when the market corrects, I'll get more aggressive then.... that would be timing.

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David Jay
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Re: Have Enough, Should I now time market?

Post by David Jay » Sun Jan 28, 2018 11:19 am

I think the root issue is changes in asset allocation due to changed in Need, Ability and Willingness versus reacting to market moves.

I have been aggressively taking money out of the market for 4 years in preparation for early retirement. I was 100% equities at age 58, I will be 45/55 at the start of retirement next year. This is because I intend to have all of my living expenses needed from retirement to start of SS (nominally 6 years) in bonds prior to retirement.

This was my plan throughout the last 4 years and it will be completed with an ESOP payout in August. I would have done the same thing if the market was going up, going down or sideways.

I come back to Bill Bernstein from "Deep Risk": "...mistiming the market is probably the most frequent and severe form of permanent capital loss."
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

reimann
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Re: Have Enough, Should I now time market?

Post by reimann » Sun Jan 28, 2018 11:24 am

I think there is a lot of folks in your (our) shoes with the recent runup in equities. I'm 59 and am thinking of retiring soon. My accounts have grown beyond my wildest dreams and I've achieved enough money to retire which I thought would take me until age 64-65. Part of my luck has been I've been almost 100% equities, now slowly changed to 94% equities/6% bonds. It seems foolish to me not to change my AA to 60/40, like tomorrow, but I'm sticking the course for now. I'm a little nervous about bonds to tell you the truth and might consider a mix of bonds, and 1-3 year CDs. Greed, I guess it is, and I DO worry about a long downturn. A short downturn I could weather but a long downturn would be tough.

I can keep working but the truth is I don't like my job too much. I don't hate it but I'd like to retire as soon as I can. I do have the ability to do some locum work to probably earn enough for health insurance and to avoid tapping the retirement savings for a few years.

I have a whole life policy (I know, bought 30 years ago when I was dumb) with a $350K cash value earning 4.2% which I don't necessarily need to pass on to my heirs which I could tap and consider it somewhat to be a bond holding.

Reimann

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Toons
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Re: Have Enough, Should I now time market?

Post by Toons » Sun Jan 28, 2018 11:26 am

50/50
:happy
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

chevca
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Re: Have Enough, Should I now time market?

Post by chevca » Sun Jan 28, 2018 11:29 am

stan1 wrote:
Sat Jan 27, 2018 8:04 pm
TXWill wrote:
Sat Jan 27, 2018 7:46 pm
Glad you asked this question, as I am in the same circumstance. More than enough assets, no need to take on risk, but I have been buy and hold all my life, and now that I am retired and staring at the big balances am thinking:

a) No need to risk.
b) No need to avoid risk.

Male 67 yoa, retired, widowed, no heirs
Assets 5m, 70/30, rental houses, 400k
Income 125k from pension (far more than I spend) from Inherited IRA, rents, interest and dividends
Marginal tax rate: 28%

What to do? Looking forward to any input.
I'd guess that a 35% loss would be upsetting. You have no need to take risk. You are going to leave money to your heirs. Would you prefer to give money to your heirs now or in the future?

If you prefer to give it to them in the future you can invest your estate with an asset allocation appropriate for children and maybe even grandchildren.

Alternately you could gift money to them now and increase your fixed income allocation to preserve your wealth.
Um, this poster said they have "no heirs", so..... :wink:

Tx, what to you plan to do with this $5M? You have enough income to cover all your expenses and then some. You can do whatever you wish with the portfolio, as you likely would never have to touch it. Leave it as it, put it all in bonds, or even all in stocks. Since you won't likely ever have draw it down or dip into it much, it really matters little. Do whatever is comfortable to you.

Live it up some. Going to the grave with $5M isn't worth $5M to me. :happy (in a no heir situation)

itstoomuch
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Re: Have Enough, Should I now time market?

Post by itstoomuch » Sun Jan 28, 2018 2:11 pm

TXWill wrote:
Sun Jan 28, 2018 8:53 am
Thank you to all respondents. At the moment, I am leaning toward reducing exposure to the market. Will report when/if I actually do so. "Stay the course" has been my mantra for over 45 years. May be time to change "the course".

Thanks again to all!
I view our "stay-the-course" as getting into the port of Retirement safely and continue to the next journey of financing retirement to the port of End-of-Life. I assure you that in our course to Retirement, we encountered many shoals/rocks, storms, sirens, and vessel problems. The path and vessel had to altered or changed to get, There.
YMMV
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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Sandtrap
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Re: Have Enough, Should I now time market?

Post by Sandtrap » Sun Jan 28, 2018 2:40 pm

David Jay wrote:
Sun Jan 28, 2018 11:19 am
I think the root issue is changes in asset allocation due to changed in Need, Ability and Willingness versus reacting to market moves.

I have been aggressively taking money out of the market for 4 years in preparation for early retirement. I was 100% equities at age 58, I will be 45/55 at the start of retirement next year. This is because I intend to have all of my living expenses needed from retirement to start of SS (nominally 6 years) in bonds prior to retirement.

This was my plan throughout the last 4 years and it will be completed with an ESOP payout in August. I would have done the same thing if the market was going up, going down or sideways.

I come back to Bill Bernstein from "Deep Risk": "...mistiming the market is probably the most frequent and severe form of permanent capital loss."
Good point.
This nearly deserves it's own thread.
I have less of a need to take risk as my portfolio grows. In fact, as it grows I am more risk adverse (averse).
So, should I change my allocation proportional to portfolio size?
This is related to portfolio size rather than market time.
True?
j :D
Wiki Bogleheads Wiki: Everything You Need to Know

TXWill
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Re: Have Enough, Should I now time market?

Post by TXWill » Sun Jan 28, 2018 2:55 pm

Tx, what to you plan to do with this $5M? You have enough income to cover all your expenses and then some. You can do whatever you wish with the portfolio, as you likely would never have to touch it. Leave it as it, put it all in bonds, or even all in stocks. Since you won't likely ever have draw it down or dip into it much, it really matters little. Do whatever is comfortable to you.

Live it up some. Going to the grave with $5M isn't worth $5M to me. :happy (in a no heir situation)
Thank you for the insight. At the moment, I'm leaning toward adjusting AA from 70/30 to something less - maybe 50/50. Problem is that I am not settled in my thinking yet. For most of my life, I have been around 90% equities. I never pulled out in any downturns but I still vividly remember my angst 2007-2009. I'm thinking that I don't need or want to go though that again at this point in my life, so why not accept minuscule returns and minuscule risks (as I see it) from bonds and cds?

Thank you all for your observations, and I sincerely apologize to the OP if I hijacked his/her thread.

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Watty
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Re: Have Enough, Should I now time market?

Post by Watty » Sun Jan 28, 2018 3:04 pm

chevca wrote:
Sun Jan 28, 2018 11:11 am
I don't see adjusting AA to be more conservative when one has enough to be market timing. I would call it a smart move... once you've won, stop playing. As long as that's the plan to stick with. If the thought is, when the market corrects, I'll get more aggressive then.... that would be timing.
+1

Making a permanent change to your asset allocation to be what is right for you now is not market timing.

I didn't follow all the details but it sounds like it might have been reasonable to have started reducing your stock asset allocation years ago.

itstoomuch
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Re: Have Enough, Should I now time market?

Post by itstoomuch » Sun Jan 28, 2018 3:05 pm

^
That is about my conclusion (not necessarily a permanent conclusion) . Discretionary account remains that is Market sensitive. May get urges that need to get satisfied. I am trying to move towards "winning by not losing".
YMMV
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

mnmac1
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Re: Have Enough, Should I now time market?

Post by mnmac1 » Sun Jan 28, 2018 4:07 pm

Philly_Fan, I am in the same boat. We have enough now to pull 60K/year for 30 years and add it to the 40K from social security & pensions for a total of 100k\year for the next 30 years. DW & I can live very well in a rural area on 100k\year before taxes.

I plan on retiring at 66 and pulling from the portfolio for living expenses (70k/year) until age 70 then claim social security. At retirement time we will move a few miles to South Dakota which has no personal income tax. I may do some roth conversions each year up to age 70 or so.

I understand I would be consuming the portfolio principal and ultimately it would go to zero. The big question is what to put the portfolio into IF one were to exit all equities. What a problem eh!

Current portfolio 95% in Wellesley
95% of assets are in traditional IRA's.

mnmac

TXWill
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Re: Have Enough, Should I now time market?

Post by TXWill » Fri Feb 02, 2018 8:12 pm

TXWill wrote:
Sun Jan 28, 2018 8:53 am
Thank you to all respondents. At the moment, I am leaning toward reducing exposure to the market. Will report when/if I actually do so. "Stay the course" has been my mantra for over 45 years. May be time to change "the course".

Thanks again to all!
Thanks again to all who responded. I reduced equity allocation from 70% to 60% this past Tuesday. I feel better!

Grt2bOutdoors
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Re: Have Enough, Should I now time market?

Post by Grt2bOutdoors » Fri Feb 02, 2018 8:26 pm

TXWill wrote:
Fri Feb 02, 2018 8:12 pm
TXWill wrote:
Sun Jan 28, 2018 8:53 am
Thank you to all respondents. At the moment, I am leaning toward reducing exposure to the market. Will report when/if I actually do so. "Stay the course" has been my mantra for over 45 years. May be time to change "the course".

Thanks again to all!
Thanks again to all who responded. I reduced equity allocation from 70% to 60% this past Tuesday. I feel better!
You "timed" that perfectly. :wink:
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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SeeMoe
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Re: Have Enough, Should I now time market?

Post by SeeMoe » Fri Feb 02, 2018 11:39 pm

The market dropped a lot today and my folio is down nearly $20k ( paper losses) just like that! CNBC guests think it will correct more and that makes me want to keep the current AA just as it is! Have been building up the Prime MM account in anticipation of bonds going down and then buying more. Now it may be equities too for a rebalance of the AA.( Plus buy what is down strategy works. )It has worked for us over the years, and we live ok on just pensions..
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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Re: Have Enough, Should I now time market?

Post by pkcrafter » Fri Feb 02, 2018 11:51 pm

Philly_fan wrote:
Sat Jan 27, 2018 3:07 pm
Would appreciate thoughts!

If you have enough to support yourself in retirement (assuming 3% annual inflation) and you know there will be a correction to the economy and market, should you cash out at some point and watch from the sidelines. If I understand Merriman, even he market times to a degree. I don't think with a great economy, virtually no unemployment, low interest rates/inflation that it's time to cash out but we know it won't last forever. If I was 30 or needed a large annual return to catch up, I wouldn't ask the question, but I am close to retirement. I guess it really comes down to a persons risk tolerance. Your thoughts?
What is your current asset allocation? Not just tolerance, also need and ability.


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.

msk
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Re: Have Enough, Should I now time market?

Post by msk » Sat Feb 03, 2018 1:21 am

Philly_fan wrote:
Sat Jan 27, 2018 3:07 pm
Would appreciate thoughts!
If you have enough to support yourself in retirement (assuming 3% annual inflation) and you know there will be a correction to the economy and market, should you cash out at some point and watch from the sidelines. If I understand Merriman, even he market times to a degree. I don't think with a great economy, virtually no unemployment, low interest rates/inflation that it's time to cash out but we know it won't last forever. If I was 30 or needed a large annual return to catch up, I wouldn't ask the question, but I am close to retirement. I guess it really comes down to a persons risk tolerance. Your thoughts?
Data and simulations indicate that a 100% stocks portfolio can support a 5%-of-portfolio withdrawal annually, forever. That 5% will, on average, keep pace with inflation and the remaining portfolio will also keep pace with inflation. I have been in 100% stocks since retirement 18 years ago. When I retired I had enough to keep myself and DW in contented retirement. 18 years later I have enough to keep us and our 4 kids at a reasonable standard of living forever. They do not have to work at all, but I have not told them that! Depends on whether you wish to leave any legacy or to charity... My NW compounded at an average of 11.5% p.a. during my retirement. NB: while inflation has been particularly low recently, it has averaged 4% p.a. compounded over the 50 years 1966 to 2016. If you are now comfortable with a 3% WR, consider going towards 100% stocks. A 50% market drop will still allow you reasonable comfort and still stay within that 5%-of-portfolio rate. Frankly, I never did get the meaning of "enough". Has Bill Gates got enough? There is so much good he can do via the Bill and Melinda Gates Foundation. All of us can, too. True BHs are never the types who will forever hoard just for themselves. Are they?

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