Retired at 50. Staying 100% in stock Index Funds. Anyone else?

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scdevon
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Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 10:16 am

I've been investing since 1984. Current age is 53. I have a State Government Pension that covers all of my living expenses +. I'm used to volatility and I've ridden out several nasty market corrections and recessions and it always seems like I've come out ahead compared to a mixed stock / bond portfolio by just holding index funds long term. I haven't had to touch any savings / deferred comp. or IRA money and I didn't plan to until age 59 1/2 anyway.
(Debt-free lifestyle, no kids only a dog and a lady-friend).

My point is that Bond returns are boring long-term even if they are more stable and act as sort of a "shock absorber" against stock volatility. I'm a big fan of Fidelity's FSTVX fund which is a broad index fund that tends to mimic the Dow Jones Total Market Index almost to the penny and has a current yield of 1.6% and has a low expense ratio of .05%. I have almost everything ($780k) in FSTVX and I keep about $55k in cash (Money Market) for emergencies.

I feel there must be other young retirees out there who stay aggressive in the market who don't sweat market volatility and corrections and who don't buy into the "balanced portfolio" that the industry hypes so much. My reasoning is that stocks always seem to snap back hard after corrections and it always seems like I'm way ahead of a "60/40" stock bond portfolio that gets hyped all the time. Even the 2008 correction never made me really question my long term strategy. Any other "Aggressive Retirees" out there or am I just crazy?

jjface
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by jjface » Sun Feb 04, 2018 10:18 am

Easy to recommend anything when all your living expenses are met already.

TN_Boy
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by TN_Boy » Sun Feb 04, 2018 10:31 am

jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.
Yes. First congratulations -- you seem to be well set for an enjoyable retirement.

That said, I'm always truly baffled by posts that say (and we get a lot of them) "All my expenses are covered by SS/pension/whatever. I'm not worried about stock market volatility!"

It's the people who ARE affected by the stock market volatility, and sequence of return problems, etc that ponder a less aggressive asset allocation. You WOULD sweat stock market volatility if you really needed the money and saw a 50% draw-down in your investments while you were taking more money out to live on.

I care somewhat about volatility because all of my expenses will not be met by a secure pension and/or SS. But since you don't have that problem, there are two things you might consider:

1) Spending more money -- use some of those investments -- to do something new and different and cool.
2) Decide about whether you have legacy concerns -- charities, nieces and nephews, etc.

Mitchell777
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Mitchell777 » Sun Feb 04, 2018 10:33 am

Is the pension indexed for inflation? Will you get SS? Either way, I guess my question would be what are you investing for? If you have no children or spouse, where does the money go? Usually I think some people, with pensions/SS, get aggressive investing for future generations. If you've won the game many would not take the risk BUT maybe you are investing for charitable causes. I'd just remember that the stock market does not always come back quickly.

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 10:37 am

jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.
I've taken a ~40% haircut before too like in 2008 so it hasn't always been a cake walk. There always seems to be a payoff for riding out stock market volatility and all bonds seem to accomplish for younger people is a boring middle ground that maybe helps people sleep better at night. A balanced portfolio can cost you a lot of money long term in exchange for a little peace of mind short term. (personal opinion).

If every stock that FSTVX holds tanks, I think not being able to stay in retirement would be the least of our worries.

Katietsu
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Katietsu » Sun Feb 04, 2018 10:39 am

jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.
+1

Think if some of the words associated with owning bonds - such as lower volatility and safety. That describes your state pension. I have often thought that conversations and articles about asset allocation and net worth are pointless without information about pensions.

student
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by student » Sun Feb 04, 2018 10:44 am

Congratulations on the retirement. Since your expenses are covered, you only have to plan for unexpected future needs. Is there any possibility of getting married? I think you are fine unless you do something "crazy" with your investment. Staying 100% is not unreasonable.

dbr
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by dbr » Sun Feb 04, 2018 10:44 am

Katietsu wrote:
Sun Feb 04, 2018 10:39 am
jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.
+1

Think if some of the words associated with owning bonds - such as lower volatility and safety. That describes your state pension. I have often thought that conversations and articles about asset allocation and net worth are pointless without information about pensions.
Of course. That is why one advocates the need/ability/willingness approach to asset allocation because it includes pensions, among many other things, in thinking about those three considerations and eventually arriving at a judgement and a preference for how much risk to take for how much expected return (provided one understand what the words expected return mean).

Katietsu
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Katietsu » Sun Feb 04, 2018 10:45 am

jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.


I also think the same applies if you have a secure job and good disability income.
Last edited by Katietsu on Sun Feb 04, 2018 10:49 am, edited 2 times in total.

ionball
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by ionball » Sun Feb 04, 2018 10:47 am

If you don't have any specific needs for your portfolio to support, then you can be as aggressive as you like. No kids only a dog, so you're probably not crazy.

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 10:47 am

Point is... it has been a cake walk for you. When you have a secure government job with an early pension that meets expenses and you have never really had to worry about needing or dipping into your investments, it's pretty easy to be aggressive. It's easy to boast about no bonds, when your sleep well side is covered by security and guaranteed income. Not to mention, debt free and no dependents.

I'm in a similar spot with security and future pension(s) between DW and I. We are more aggressive because of that also. But, I also realize that's not all that common nowadays and most folks shouldn't take the same plan. No offense, but you're a little out of touch with the majority out there in the private sector, IMO.

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FrugalInvestor
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by FrugalInvestor » Sun Feb 04, 2018 10:51 am

As others have alluded to, I'm sure your perspective would change should you receive a letter stating that your pension would no longer be paid or would be substantially reduced.

I, like you, retired early. I was at 60/40 stocks/bonds. I had no pension or other source of income other than my investments. I rebalanced into stocks during the '08-'09 downturn but couldn't bring myself to go all the way back to 60/40. I ended up at 50/50 so decided that was my true comfort level and have remained there since.

What you are doing makes sense for you but not for everyone.
IGNORE the noise! | Our life is frittered away by detail... simplify, simplify. - Henry David Thoreau

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 10:53 am

scdevon wrote:
Sun Feb 04, 2018 10:37 am
I've taken a ~40% haircut before too like in 2008 so it hasn't always been a cake walk.
And, what were your chances of being laid off during that time? Slim to none, right? Most folks were wondering if they'd have a job the next day. Let alone watching their investments tank. Think those folks might be more comfortable with some bonds.

Different ball game.

cutehumor
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by cutehumor » Sun Feb 04, 2018 10:57 am

I'm 40. I'm at 100% stock (60 US/40 International). I'm weird also. I get happy when the stock market goes up, but I'm also happy when the stock prices drop as I can get the sale.

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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by BolderBoy » Sun Feb 04, 2018 10:58 am

scdevon wrote:
Sun Feb 04, 2018 10:16 am
I've been investing since 1984. Current age is 53. I have a State Government Pension that covers all of my living expenses +.
Are you absolutely, 100%, guaranteed positive that your state government pension cannot be modified detrimentally in any way whatsoever? If you answer this question with a "Yes", then you are living in a fairyland.

Since you cannot tell the future and have a LOT of retirement years left to live, why not hedge your bets, let go of some of your bravado and come up with a reasonable investing plan with which you won't be caught short at an inopportune time?

Under the conditions you outlined, by doing so you would have nothing to lose over a 100% equity portfolio. Notice my byline...
"Never underestimate one's capacity to overestimate one's abilities" - The Dunning-Kruger Effect

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 11:02 am

Mitchell777 wrote:
Sun Feb 04, 2018 10:33 am
Is the pension indexed for inflation? Will you get SS? Either way, I guess my question would be what are you investing for?
The pension plan I'm in gets periodic COLA adjustments, but it isn't strictly indexed to inflation. I've gotten one small increase in 3 years. Yes, I will get SS and I plan to take it as soon as possible (age 62 or whatever). Almost all of my FSTVX is in a traditional IRA at Fidelity and in a self-directed 457b plan still being held with the State. I live in a conservative red state and pension plan solvency isn't a big concern for me. I can't easily spend any this tax-deferred money yet because I'm just not old enough. I think I can start drawing my 457b money at age 55 and only pay ordinary income tax on it, but I'm not 100% sure and I don't want to draw on that money that soon anyhow.

What am I investing for? We plan to cruise the Intracoastal Waterway in Fla during the winter months on a modest to medium sized live-aboard boat once she retires in a few years while we are young enough to do it . When I check out, anything left behind will go to my niece and nephew.

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 11:07 am

You can withdraw from your 457b now without penalty. It's different than 401k plans and others, in that you can withdraw penalty free as soon as you leave service. It's good that you don't need to yet. But, also shows what kind of cake walk you have been on when you haven't had to worry about that, or even look into the rules of it. :wink:

student
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by student » Sun Feb 04, 2018 11:07 am

scdevon wrote:
Sun Feb 04, 2018 11:02 am
I think I can start drawing my 457b money at age 55 and only pay ordinary income tax on it, but I'm not 100% sure
It is my understanding that once you have separated from your employer, regardless of age, you may take money out of your 457b and only pay ordinary income tax on it.

rocketdog
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by rocketdog » Sun Feb 04, 2018 11:08 am

The only thing I might add is to consider doing some Roth IRA conversions between now and 59-1/2, but only if you can do so without triggering a big tax bill. You'll need software or a FA to crunch those numbers for you to see what makes sense. A big market downtown might be a good opportunity to shift depreciated assets into the Roth tax shelter so you can ride the market back up without incurring a tax liability. Otherwise, I'd probably keep it all in stocks myself too, at least until I started needing to make withdrawals.

dbr
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by dbr » Sun Feb 04, 2018 11:11 am

I'm starting to hear that money IS going to be spent from investments. Now the conversation is how much? It makes all the difference, except that maybe 100% stocks is still not a problem. I would not be casual about what the expected or hoped for spending is because retirement is about spending rather than about investing.

secondact
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by secondact » Sun Feb 04, 2018 11:13 am

Congratulations! You're in a very good position, with most of your "problems" being good ones. As a single guy (52) looking to retire in 8 years with a relatively secure pension, S.S. at 68 and deferred comp, I have read many informative threads on this forum regarding AA. Having gone "all in" during the 2008 slump, I am tempted to let my Deferred Comp. ride at 100% equities. The reason I do not are as follows: 1) Sequence of returns. In order to reach S.S at age 68, I will need to withdraw approx. $20,000 a year from Deferred Comp. for 8 years. I do not want to sell equities in a bear market in order to accomplish this because that can seriously affect my portfolio balance in later years. For this reason, I have invested 15% in a high-quality, medium duration low expense bond fund. Even in a rising interest rate environment, the higher-yield bonds purchased by the fund over the next 8 years should more than offset any decline in fund NAV. I may drift as high as 20% as retirement approaches, but time will tell. and 2) Dry powder. If things really go into the I tank, I want to be able to exploit any "distortions" in the market that result in fire-sale prices.
I was glad to see your post, because as I am sure you are aware most advice online doesn't address those who need to factor a pension into their plans, although Bogleheads has several good threads on this subject. Good Luck!

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 11:16 am

Yea, if I were the OP, I would take whatever amount was needed for the trip or boat or whatever in a few years and put that in bonds or stable value. Take advantage of the gains and set that amount aside. Leave the rest in stocks. But, if the market is down 40% in a few years, do you want to be selling then even if you have enough to cover it?

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 11:17 am

cutehumor wrote:
Sun Feb 04, 2018 10:57 am
I'm 40. I'm at 100% stock (60 US/40 International). I'm weird also. I get happy when the stock market goes up, but I'm also happy when the stock prices drop as I can get the sale.
That's what I was looking for. Other aggressive "weirdos" who shrug off traditional asset allocation based on age groups and who like market volatility. If you have been investing for any length of time, you know that if you sit tight and dollar cost average, you will always come out ahead given a reasonable time horizon being fully invested. I've ridden out some nasty markets. 1987....1991...2000....2008 and I fully expect another whack to the kneecaps sometime soon. The DOW was at 3000 in early 1992 for reference. Bonds can't even come close to that kind of long term return.

JBTX
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by JBTX » Sun Feb 04, 2018 11:18 am

1. Having a pension is somewhat akin to having fixed income / bonds so if you viewed you pension plan as an asset spitting off yield then your asset allocation looks more typical. If it is spitting off $50,000 a year that is equivalent to having well over $1 million in bonds.

2. Stocks don’t always bounce back quickly. It took over 10-15 years after the depression and approx
15 years from 1967 to 1982. Japan is still a fraction of what it was worth 30 years ago.

In the last 30 years we have been conditioned to think that markets crash then coming roaring back in a few years. (1987, 2000, 2007). It doesn’t always work that way.

I’m approximately your age and have about 60% in stocks. But I don’t have any sort of pensions to fall back on.

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 11:19 am

Well, actually you should check out some bond returns from the 1980 to 2010 period you like to talk about. :happy

TravelGeek
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by TravelGeek » Sun Feb 04, 2018 11:20 am

If I annuitized enough of my portfolio to cover my expenses, I would probably have no problems keeping the rest in equities. That is not the same as selling my bond funds and plowing them into TSM.

I may not be scientifically correct, but I mentally consider your pension the equivalent of the bond portion of my portfolio, just not as liquid and perhaps safer (or not).

JBTX
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by JBTX » Sun Feb 04, 2018 11:22 am

scdevon wrote:
Sun Feb 04, 2018 11:17 am
cutehumor wrote:
Sun Feb 04, 2018 10:57 am
I'm 40. I'm at 100% stock (60 US/40 International). I'm weird also. I get happy when the stock market goes up, but I'm also happy when the stock prices drop as I can get the sale.
That's what I was looking for. Other aggressive "weirdos" who shrug off traditional asset allocation based on age groups and who like market volatility. If you have been investing for any length of time, you know that if you sit tight and dollar cost average, you will always come out ahead given a reasonable time horizon being fully invested. I've ridden out some nasty markets. 1987....1991...2000....2008 and I fully expect another whack to the kneecaps sometime soon. The DOW was at 3000 in early 1992 for reference. Bonds can't even come close to that kind of long term return.
If you had invested your money in long term 30 year zero coupon bonds, and every year rolled them into new zero coupon bonds, you would have beaten the stock market by a large margin.

It serves to demonstrate that much of the 35 year rise in stocks has been due to interest rate drops. That has pretty much now been exhausted.

Your listing of crashes and returns proves my earlier point of being conditioned to quick market bounce backs.

Beehave
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Beehave » Sun Feb 04, 2018 11:31 am

I'm a bit surprised at some of the answers OP has received, such as "being out of touch." OP is in OP's financial condition and is asking questions about that, and not about what people not in that situation should do. That seems to me to be quite "in touch."

The basic response-theme above to OP's question, that if your living needs are covered by guaranteed income you can reasonably take more risk with your investments, makes sense.
So do the questions to OP about whether that guaranteed income is inflation protected.
So does the question raised to OP in at least one response above about whether unexpected and emergency expenses are covered.

My opinion is that OP needs to review his/her situation carefully to look at the three major considerations that could throw a big monkey wrench into the machinery of the OP's retirement set-up:
- the state (for whatever reason) reneges on the pension some at time in the future
- there is a big inflation that the stock indexes and the pension do not keep up with
- there are emergency expenses that come up exactly at a time when the stock indexes are depressed in price.

Each possible major problem calls for a solution that includes something beyond stock indexes and pension to cover. Some bonds, cash, TIPS, annuities, and the like in some combination would seem to be prudent additions for insurance. Since the acquisition of these pieces of insurance would not affect OP's current living standard at all, they would seem to me to be extremely worthwhile.

dbr
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by dbr » Sun Feb 04, 2018 11:34 am

I think the above is well-stated. How far those considerations weigh against just keeping 100% stocks is a matter for consideration. It really is a matter of judgement and preference. Most of what is involved is beyond the specific topic of asset allocation, a fact that is often lost in these discussions.
Last edited by dbr on Sun Feb 04, 2018 11:38 am, edited 1 time in total.

autopeep
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by autopeep » Sun Feb 04, 2018 11:36 am

My dude....

1. I do not invest for entertainment. I do not care if bonds are boring. You say weird middle ground, I say "efficiency frontier". I am at high risk for sequence of return effects as I do not have a pension.

2. You are not an "aggressive weirdo". You have a huge amount of fixed income in your pension. Your stock to fixed income ratio may be lower than mine and you have no dependents.

If it makes you feel good to have 100% equities, just think how you will feel if you leverage!!!

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 11:41 am

Thanks for the input, everybody. I like Index funds because you can just sit there and let them do their thing. The current 1.6% yield is nice especially in a tax deferred account assuming a reasonably stable NAV. (Unlikely stable in the near term).

Smarter people than me could have probably actively manage and trade a bond portfolio and have done much better, but for me a broad market index fund is the right balance of yield, cap gains and low fees and long term total return. "Set it and forget it".

Again, If the Stock Market tanks so badly that it takes a permanent 50% to 75% whack out of me, we are going to have much more dire problems in America than my retirement getting derailed.

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 11:42 am

(double. sorry).
Last edited by scdevon on Sun Feb 04, 2018 11:43 am, edited 1 time in total.

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 11:43 am

Beehave wrote:
Sun Feb 04, 2018 11:31 am
I'm a bit surprised at some of the answers OP has received, such as "being out of touch." OP is in OP's financial condition and is asking questions about that, and not about what people not in that situation should do. That seems to me to be quite "in touch."
Except, not really. Yes, the OP is in OP's financial situation. But, OP is asking if there are others like them, assuming there must be others like them, and saying bonds are boring and implying they're not needed. OP doesn't seem to realize that their situation doesn't apply to very many folks out there and it's just not simple and easy for most to say, no bonds while retiring at 50. You really feel that's in touch with the majority of folks out there.

OP didn't ask anything about their own situation and really only asked about others. :wink:

sparky123
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by sparky123 » Sun Feb 04, 2018 11:44 am

If you are still working, wouldn't it make sense to be 100% equities? If the market tanks near retirement commencement, keep working a few more years. (I do see the logic of diversification after retirement.)

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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by JBTX » Sun Feb 04, 2018 11:46 am

scdevon wrote:
Sun Feb 04, 2018 11:41 am
Thanks for the input, everybody. I like Index funds because you can just sit there and let them do their thing. The current 1.6% yield is nice especially in a tax deferred account assuming a reasonably stable NAV. (Unlikely stable in the near term).

Smarter people than me could have probably actively manage and trade a bond portfolio and have done much better, but for me a broad market index fund is the right balance of yield, cap gains and low fees and long term total return. "Set it and forget it".

Again, If the Stock Market tanks so badly that it takes a permanent 50% to 75% whack out of me, we are going to have much more dire problems in America than my retirement getting derailed.
As to your last comment I’ve seen others say the same thing. It really isn’t totally true, and makes no sense as to why one would just throw up their hands and ignore particular scenarios. People in Japan aren’t living in the streets even though the market is permanently down by over 50%.

scdevon
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by scdevon » Sun Feb 04, 2018 11:56 am

chevca wrote:
Sun Feb 04, 2018 11:43 am
OP doesn't seem to realize that their situation doesn't apply to very many folks out there and it's just not simple and easy for most to say, no bonds while retiring at 50. You really feel that's in touch with the majority of folks out there.

OP didn't ask anything about their own situation and really only asked about others. :wink:
I was pointing out that historically a "Buy and Hold" 60/40 (or whatever) portfolio can't keep up with a 100% index fund portfolio if you have a time horizon longer than the typical market correction. Yes, "this time could be different", but it probably won't be. I'm not talking about an actively traded bond portfolio. I'm talking about buy and hold which is what most retirement savers do with bond funds.

Given market history, I can't see a good case for anyone under 65 of 70 holding a significant % of bonds. History also shows that you leave a lot of money on the table long term with a 60/40 portfolio.

TravelGeek
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by TravelGeek » Sun Feb 04, 2018 11:56 am

sparky123 wrote:
Sun Feb 04, 2018 11:44 am
If you are still working, wouldn't it make sense to be 100% equities? If the market tanks near retirement commencement, keep working a few more years. (I do see the logic of diversification after retirement.)
Would like to hear someone chime in who was near planned retirement in 2007, was 100% in equities, and lost their job.

TravelGeek
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by TravelGeek » Sun Feb 04, 2018 11:59 am

scdevon wrote:
Sun Feb 04, 2018 11:56 am

Given market history, I can't see a good case for anyone under 65 of 70 holding a significant % of bonds. History also shows that you leave a lot of money on the table long term with a 60/40 portfolio.
Seems to me you might have left a lot of money on the table by picking a job with a pension instead of one that instead pays more in salary that you could have invested in equities ;)

bmelikia
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by bmelikia » Sun Feb 04, 2018 12:02 pm

“I have a State Government Pension that covers all of my living expenses”


Humblebrag much? Why don’t you tell us-does your 100% position matter?
"I would rather die with money, than live without it...." - Bogleheads member Ron | | "The greatest enemy of a good plan, is the dream of a perfect plan." | -Bogle

john4546
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by john4546 » Sun Feb 04, 2018 12:02 pm

What if the stock market goes down or stays flat for the next 10, 15, 25 or more years? It has indeed done that in the past (Google it). What if bond returns are the best that an investor can get in the coming years? The long term can be very long term when it comes to stocks. Stocks don't have to give you the returns that you want or need. Personally I think it is a mistake for any investor to not have any bond component in their portfolio, unless one is already immensely wealthy (e.g., Warren Buffet is worth $75 billion, if his portfolio is cut in half or more, he is still a billionaire and won't be eating ramen noodles).

I'm in a similar situation to the OP, but younger - high income "safe and stable" federal government job, federal FERS pension, large TSP balance, ample taxable accounts, very little debt, no dependents, but I still have bonds using a 60/40 stock/bond allocation.

Investing is not meant to maximize your wealth potential by using the riskiest investments (which also can maximize your potential for making you poorer), but to reduce your chances of being poor in retirement. Read the investment books by William Bernstein and Harry Brown.
Last edited by john4546 on Sun Feb 04, 2018 12:06 pm, edited 1 time in total.

chevca
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by chevca » Sun Feb 04, 2018 12:04 pm

scdevon wrote:
Sun Feb 04, 2018 11:56 am
chevca wrote:
Sun Feb 04, 2018 11:43 am
OP doesn't seem to realize that their situation doesn't apply to very many folks out there and it's just not simple and easy for most to say, no bonds while retiring at 50. You really feel that's in touch with the majority of folks out there.

OP didn't ask anything about their own situation and really only asked about others. :wink:
I was pointing out that historically a "Buy and Hold" 60/40 (or whatever) portfolio can't keep up with a 100% index fund portfolio if you have a time horizon longer than the typical market correction. Yes, "this time could be different", but it probably won't be. I'm not talking about an actively traded bond portfolio. I'm talking about buy and hold which is what most retirement savers do with bond funds.

Given market history, I can't see a good case for anyone under 65 of 70 holding a significant % of bonds. History also shows that you leave a lot of money on the table long term with a 60/40 portfolio.
Anyone? Again, you're only looking at this through your eyes which had a secure government career and early pension to look forward to. You seem to think anyone and everyone has the exact same situation as you did/do.

I'm not saying you're wrong about leaving money on the table. But, not everyone has the same need, ability, or willingness to take risk. Don't use such a broad brush in your thinking of how anyone and everyone should invest.

You're ignoring a lot of questions about howl likely you were to get laid off in 2008, or how you might be invested if you didn't have a pension to cover expenses after a secure career......

Dandy
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Dandy » Sun Feb 04, 2018 12:13 pm

You are in great shape. What is your investment goal? Since you don't have heirs and your pension covers your expenses what will you do with your investments? Vacations? vacation home? charity? private island? You have maybe 35 or more of retirement so you can't totally spike the ball, but you should think of what you want to do with your good fortune and actual fortune rather than just watch it grow bigger and bigger--though that is pretty nice also.

In any case - enjoy.

bb
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by bb » Sun Feb 04, 2018 12:18 pm

Can we put all the threads where someone's pension fund covers all there expenses in a single thread similar to the wealth progression thread :D

dbr
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by dbr » Sun Feb 04, 2018 12:20 pm

In all fairness, If I had enough SS/pension/annuity income to cover all my spending plans allowing for contingencies and probable inflation, I would not hesitate to invest at 75/25 or so. I would not be 100% stocks because I think the extra risk is too much for the increment in return. That would be my judgement and preference for the matter. As it is I do take portfolio withdrawals and invest at 50/50 in order to take no more risk (meaning volatility) than needed to meet objectives. Those objectives are not necessarily limited to supporting withdrawals for x years, or some such thing.

I don't relate to investments having emotional properties such as boring, and I think words like aggressive and conservative aren't useful to apply to investing.

tesuzuki2002
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by tesuzuki2002 » Sun Feb 04, 2018 12:22 pm

scdevon wrote:
Sun Feb 04, 2018 10:16 am
I've been investing since 1984. Current age is 53. I have a State Government Pension that covers all of my living expenses +. I'm used to volatility and I've ridden out several nasty market corrections and recessions and it always seems like I've come out ahead compared to a mixed stock / bond portfolio by just holding index funds long term. I haven't had to touch any savings / deferred comp. or IRA money and I didn't plan to until age 59 1/2 anyway.
(Debt-free lifestyle, no kids only a dog and a lady-friend).

My point is that Bond returns are boring long-term even if they are more stable and act as sort of a "shock absorber" against stock volatility. I'm a big fan of Fidelity's FSTVX fund which is a broad index fund that tends to mimic the Dow Jones Total Market Index almost to the penny and has a current yield of 1.6% and has a low expense ratio of .05%. I have almost everything ($780k) in FSTVX and I keep about $55k in cash (Money Market) for emergencies.

I feel there must be other young retirees out there who stay aggressive in the market who don't sweat market volatility and corrections and who don't buy into the "balanced portfolio" that the industry hypes so much. My reasoning is that stocks always seem to snap back hard after corrections and it always seems like I'm way ahead of a "60/40" stock bond portfolio that gets hyped all the time. Even the 2008 correction never made me really question my long term strategy. Any other "Aggressive Retirees" out there or am I just crazy?

Nice! I’m 4% bonds and I’m only 36. I could go all equity, but bonds are still making gains for me. I’m keeping a little flexibility for options.

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Hyperborea
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Hyperborea » Sun Feb 04, 2018 12:27 pm

sparky123 wrote:
Sun Feb 04, 2018 11:44 am
If you are still working, wouldn't it make sense to be 100% equities? If the market tanks near retirement commencement, keep working a few more years. (I do see the logic of diversification after retirement.)
I think that's a perfectly fine option if your retirement date has some flexibility. It's what I did because I was retiring early (51) and could have let it slip if there had been a downturn. If your date is fixed for whatever reason you can't take that approach.

I was at near 100% all of my investing career until a few years before retiring where it slipped to about 95/5 (deferred comp and holding sales from RSUs). However, I have pulled back from there in a short span after retiring and after the sale of my house (in the next month or so) I will be at 60/40. From there it's a glide back up to 80/20 over at most 10 years. Note that I have no pension and am many years from taking SS. The glide path approach is trading top end gain (reducing the potential gain if we are in one of the best sequences) against bringing up the bottom end gain (increasing the potential gain if we are in one of the worst sequences).

If your retirement date is more fixed then a glide path down over a window before retirement can also be useful. But it's important to remember to glide back up as well. You have four main factors on your retirement portfolio - withdrawal rate, equity percentage, expected duration, and survival percentage. You get to adjust three of them and the fourth is dependent of those. Many combinations of duration, WR, and hoped for survival rate imply a larger equity percentage than many seem to take. If you glide down and then back up in retirement you avoid the bad early sequence of return risks and get the longer term growth of higher equity allocations.
"Plans are worthless, but planning is everything." - Dwight D. Eisenhower

FRANK2009
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by FRANK2009 » Sun Feb 04, 2018 12:31 pm

Here is a NY Times article by an economist that agrees with the OP:


https://www.nytimes.com/2016/02/13/your ... of-it.html

sreynard
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by sreynard » Sun Feb 04, 2018 12:37 pm

scdevon wrote:
Sun Feb 04, 2018 11:17 am
That's what I was looking for. Other aggressive "weirdos" who shrug off traditional asset allocation based on age groups and who like market volatility.
And that was what I was looking for.... Off to another thread.... :twisted:

Grt2bOutdoors
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Grt2bOutdoors » Sun Feb 04, 2018 12:43 pm

scdevon wrote:
Sun Feb 04, 2018 10:37 am
jjface wrote:
Sun Feb 04, 2018 10:18 am
Easy to recommend anything when all your living expenses are met already.
I've taken a ~40% haircut before too like in 2008 so it hasn't always been a cake walk. There always seems to be a payoff for riding out stock market volatility and all bonds seem to accomplish for younger people is a boring middle ground that maybe helps people sleep better at night. A balanced portfolio can cost you a lot of money long term in exchange for a little peace of mind short term. (personal opinion).

If every stock that FSTVX holds tanks, I think not being able to stay in retirement would be the least of our worries.
What do you think your pension is, an equity or a bond? You are not 100% "all-in" on equities. Your pension or the fact that you were/are to receive a pension helped/helps you sleep better at night as well. You don't believe that your pension did not come with a cost either? You took a 40% haircut? so did everyone else, but you did not lose your employment, house, spouse, hair, either. Come on, would you be so brave to only hold 100% equity if you only had that one account, no pension, be real now. It's all anonymous here, but unless you had millions in the bank already and your annual expenses were a mere fraction of that, most would not be holding 100% equity, not the richest of billionaires are "all-in".
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

Grt2bOutdoors
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Re: Retired at 50. Staying 100% in stock Index Funds. Anyone else?

Post by Grt2bOutdoors » Sun Feb 04, 2018 12:45 pm

bb wrote:
Sun Feb 04, 2018 12:18 pm
Can we put all the threads where someone's pension fund covers all there expenses in a single thread similar to the wealth progression thread :D
Good idea - perhaps we can lump them in with the Can I retire now threads?
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions

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