Do I, will I, ever need a bond fund?

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gromit
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Do I, will I, ever need a bond fund?

Post by gromit » Wed Mar 07, 2018 8:23 pm

Bogleheads- I got it wrong for a long time I'm sure but I think I got lucky. I'm the last of the dinosaurs that got a full pension at 55. I also had good period of time that both wife and I had the VIIIX available to us in separate 457b accounts.

Details are:

The good stuff-
Very recent retiree. Wife retired early as well.
My pension is $65,000 per year. If my spouse (53) pre-deceases me, it rises to $73,000. It is a government pension.
Health insurance costs us $350 per month, the first $3000/yr comes out of a 457B account without ever seeing taxes.
The health insurance costs should be relatively stable, it's part of my retirement.
My 457b has $350k, wife's has $300k. AA of the $650k is 80% in S&P 500 index and 20% in Russell 2500 index.
Wife's pension of $21,000 per year begins in early 2020. Her pension does not continue if she pre-deceases me.
My SS will be $20k per year starting at 62 in 2024
Wife's SS will be $14k per year in 2027 (also at 62)
We own our home outright and will be selling soon for roughly $140k
We own a condo outright that we plan to live in after our house sells. It runs $400 per month common fee. Market value is $150K. Taxes are negligible at $500/yr.

The dumb stuff-
We owe $60k in CC debt and $60k on an RV. We will pay this off when our house sells this summer (we are in a good market here and expect it to go quickly)
Current lifestyle (including payment of debt) is $100k/yr
I am taking $33,000 out of my 457b this year to maintain our lifestyle. That will hopefully end (except for the tax free $3k for health insurance) in 2019 when we have one house and no debt.


All that to ask: Do we, will we, need to move into bonds at some time in the future or is our pension income enough?
Is there anything else (other than the dumb debt) that I should be adressing?

Thanks in advance and don't worry about hurting my feelings. I know I came to this late and anything good about my situation is due to luck and us both landing in some of the last jobs with pensions.
Last edited by gromit on Thu Mar 08, 2018 12:22 am, edited 1 time in total.

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Re: Do I, will I, ever need a bond fund?

Post by whodidntante » Wed Mar 07, 2018 9:01 pm

Welcome to the forum. I apologize that I track in mud from time to time.

I hereby wag my finger for your RV and CC sins. I'm going to assume that you will be more disciplined for the rest of your life.

The new, more disciplined gromit does not need bonds. Those pensions are solid and are covering your needs. Why did YOU think you need bonds?

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Re: Do I, will I, ever need a bond fund?

Post by itstoomuch » Wed Mar 07, 2018 9:12 pm

No bonds for us.
We substituted purchased annuities that mimicks a Tier1 PERS pension. And used Roths and taxables for rental units. Very little of our retirement is now exposed to either the stock or bond markets. I maintain small trading Discretionary accts and is < 10% of assets.
Last edited by itstoomuch on Wed Mar 07, 2018 9:16 pm, edited 1 time in total.
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Re: Do I, will I, ever need a bond fund?

Post by Dominic » Wed Mar 07, 2018 9:15 pm

You can consider the pensions to be a fixed income allocation. Do the pensions have a cost of living adjustment? If they do, you'll never need bonds. If not, it's probably a good idea to allocate at least some of your portfolio to some combination of CDs, Treasuries, and TIPS.

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Re: Do I, will I, ever need a bond fund?

Post by tibbitts » Wed Mar 07, 2018 9:19 pm

A few bonds might be handy to keep that cash flow going for a new/different RV every few years, but really, you have no need to take out loans for them. Lots of Bogleheads have RVs, it's the loan that some will object to. And even with your amazing COLAed pension I'd have some bonds for diversification.

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Re: Do I, will I, ever need a bond fund?

Post by arcticpineapplecorp. » Wed Mar 07, 2018 9:30 pm

gromit wrote:
Wed Mar 07, 2018 8:23 pm
Health insurance costs us $350 per month, the first $3000/yr comes out of a 457B account without ever seeing taxes.
My 457b has $350k, wife's has $300k. AA of the $650k is 80% in S&P 500 index and 20% in Russell 2500 index.

I am taking $33,000 out of my 457b this year to maintain our lifestyle. That will hopefully end (except for the tax free $3k for health insurance) in 2019 when we have one house and no debt.
welcome to the group.

Since you essentially have replicated the total stock market index fund (80% large, 20% small/mid) what would happen to your 457b when the stock market tanks? The value of your 457b will drop accordingly. I get that you're saying you have enough other income, but you do have to make RMDs from your 457b, right? I mean it's not all Roth 457b, right (even if it was, a Roth 457b requires RMDs unless rolled into a Roth IRA which is exempt from RMDs)?

What if we had another 2007-2009 and the market dropped 50%? You're $650k would be worth $325k. If you had to take out say 4% for a RMD and it was based on the previous years $650k you'd be selling $26,000. Taking $26,000 because that was the RMD based on previous year's end balance out of your account now (after a 50% decline) means you'd be taking out 8% of your portfolio ($26,000 / $325,000 = .08). But you'd be selling shares at a loss, at half the price. The goal of investing is to buy low and sell higher. Not sell lower.

So now and again (33% of the time the market is down...1 out of 3 years has been in the past) you will be forced to sell stocks AT A LOSS to satisfy those RMDs. Is that what you want to do? Holding bonds means you could sell the bonds that would either rise (or not lose as much) during times of equity sell-offs and wait for the equities to recover.

This is the main reason I think retirees should have some bonds, provided some assets are in tax deferred and in need of RMDs. It's too risky to have it all in stocks. Now if ALL your money is post tax AND you don't need to tap any of it, then 100% stock is fine provided you can tolerate the losses and not behave badly (sell out of fear).

If you've won the game you could stop playing. Meaning, only take the risk you need to take, have the ability to take and the willingness to take but no more. If you don't need to take risk, why are you taking it? Stocks are risky. Bonds (the right kinds) are not (as risky).
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

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Re: Do I, will I, ever need a bond fund?

Post by abuss368 » Wed Mar 07, 2018 9:38 pm

Warren Buffett's mentor Benjamin Graham recommended that investment portfolios have no less than a 25% allocation to bonds.

Bonds lower the volatility of an investment portfolio and also provide an opportunity to rebalance stocks during periods of market distress.
John C. Bogle - Two Fund Portfolio: Total Stock & Total Bond. "Simplicity is the master key to financial success."

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Re: Do I, will I, ever need a bond fund?

Post by randomizer » Wed Mar 07, 2018 10:08 pm

Seems you don't have much need for bonds (if you count SS and the pension as bond-like income streams). An excess of caution might lead you to have some bonds anyway, perhaps some TIPS?
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Re: Do I, will I, ever need a bond fund?

Post by whodidntante » Wed Mar 07, 2018 10:14 pm

tibbitts wrote:
Wed Mar 07, 2018 9:19 pm
Lots of Bogleheads have RVs, it's the loan that some will object to.
Actually, I object to the RV and not the loan. The loan doesn't destroy wealth assuming the terms are reasonable.

But if the OP can afford an RV and it makes life better, then ante up. An RV would make my life worse.

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Wed Mar 07, 2018 11:49 pm

whodidntante wrote:
Wed Mar 07, 2018 9:01 pm
Welcome to the forum. I apologize that I track in mud from time to time.

I hereby wag my finger for your RV and CC sins. I'm going to assume that you will be more disciplined for the rest of your life.

The new, more disciplined gromit does not need bonds. Those pensions are solid and are covering your needs. Why did YOU think you need bonds?
Finger wags accepted and well deserved. I truly am blessed that my 'youthful' idiocy has not put me in a hole from which I could not recover.

I was not of the opinion I needed bonds but the 'conventional wisdom' I was reading had me subtracting my age from 100 or 120 and buying that % of bonds. My gut said, if that government pension stops paying, my bonds, my investments, pretty much everything but food, guns and ammo would be worthless. Just wanted to toss it out to the group for a range of opinion.

THANKS!

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Wed Mar 07, 2018 11:52 pm

Dominic wrote:
Wed Mar 07, 2018 9:15 pm
You can consider the pensions to be a fixed income allocation. Do the pensions have a cost of living adjustment? If they do, you'll never need bonds. If not, it's probably a good idea to allocate at least some of your portfolio to some combination of CDs, Treasuries, and TIPS.
Great question on the COLA. Answer is yes, kinda. COLA is ½ of the rate of inflation on the first $18,000. This is for both myself and my wife so it will be effectively on the first $36k (after 5 years of retirement)

THANKS

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Thu Mar 08, 2018 12:09 am

arcticpineapplecorp. wrote:
Wed Mar 07, 2018 9:30 pm

welcome to the group.

Since you essentially have replicated the total stock market index fund (80% large, 20% small/mid) what would happen to your 457b when the stock market tanks? The value of your 457b will drop accordingly. I get that you're saying you have enough other income, but you do have to make RMDs from your 457b, right? I mean it's not all Roth 457b, right (even if it was, a Roth 457b requires RMDs unless rolled into a Roth IRA which is exempt from RMDs)?

Nothing in Roth, the 457 was all pretax. Mandatory RMD's don't start for me for 15 years, 18 years for wifey. I'll probably continue to withdraw 4% if we need it but as wife's pension and our SS comes online, I'd like it to be 'extra money' rather than must have to live on money.

What if we had another 2007-2009 and the market dropped 50%? You're $650k would be worth $325k. If you had to take out say 4% for a RMD and it was based on the previous years $650k you'd be selling $26,000. Taking $26,000 because that was the RMD based on previous year's end balance out of your account now (after a 50% decline) means you'd be taking out 8% of your portfolio ($26,000 / $325,000 = .08). But you'd be selling shares at a loss, at half the price. The goal of investing is to buy low and sell higher. Not sell lower.

So now and again (33% of the time the market is down...1 out of 3 years has been in the past) you will be forced to sell stocks AT A LOSS to satisfy those RMDs. Is that what you want to do? Holding bonds means you could sell the bonds that would either rise (or not lose as much) during times of equity sell-offs and wait for the equities to recover.

This is the main reason I think retirees should have some bonds, provided some assets are in tax deferred and in need of RMDs. It's too risky to have it all in stocks. Now if ALL your money is post tax AND you don't need to tap any of it, then 100% stock is fine provided you can tolerate the losses and not behave badly (sell out of fear).


If you've won the game you could stop playing. Meaning, only take the risk you need to take, have the ability to take and the willingness to take but no more. If you don't need to take risk, why are you taking it? Stocks are risky. Bonds (the right kinds) are not (as risky).
Your logic now is starting to get through my thick skull here. Fifteen years (first RMD) really isn't that far away.

THANKS

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Thu Mar 08, 2018 12:10 am

whodidntante wrote:
Wed Mar 07, 2018 10:14 pm
tibbitts wrote:
Wed Mar 07, 2018 9:19 pm
Lots of Bogleheads have RVs, it's the loan that some will object to.
An RV would make my life worse.
I used to have a boat.... :oops:

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Re: Do I, will I, ever need a bond fund?

Post by MathIsMyWayr » Thu Mar 08, 2018 12:28 am

What if we had another 2007-2009 and the market dropped 50%? You're $650k would be worth $325k. If you had to take out say 4% for a RMD and it was based on the previous years $650k you'd be selling $26,000. Taking $26,000 because that was the RMD based on previous year's end balance out of your account now (after a 50% decline) means you'd be taking out 8% of your portfolio ($26,000 / $325,000 = .08). But you'd be selling shares at a loss, at half the price. The goal of investing is to buy low and sell higher. Not sell lower.

So now and again (33% of the time the market is down...1 out of 3 years has been in the past) you will be forced to sell stocks AT A LOSS to satisfy those RMDs. Is that what you want to do? Holding bonds means you could sell the bonds that would either rise (or not lose as much) during times of equity sell-offs and wait for the equities to recover.

This is the main reason I think retirees should have some bonds, provided some assets are in tax deferred and in need of RMDs. It's too risky to have it all in stocks. Now if ALL your money is post tax AND you don't need to tap any of it, then 100% stock is fine provided you can tolerate the losses and not behave badly (sell out of fear).
You have to take RMD, but don't have to spend it. You may buy the same fund back in a taxable account after paying tax on RMD. As long as you have other fund to pay tax, a down-market does not affect your net worth.

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Re: Do I, will I, ever need a bond fund?

Post by arcticpineapplecorp. » Thu Mar 08, 2018 7:20 am

MathIsMyWayr wrote:
Thu Mar 08, 2018 12:28 am
What if we had another 2007-2009 and the market dropped 50%? You're $650k would be worth $325k. If you had to take out say 4% for a RMD and it was based on the previous years $650k you'd be selling $26,000. Taking $26,000 because that was the RMD based on previous year's end balance out of your account now (after a 50% decline) means you'd be taking out 8% of your portfolio ($26,000 / $325,000 = .08). But you'd be selling shares at a loss, at half the price. The goal of investing is to buy low and sell higher. Not sell lower.

So now and again (33% of the time the market is down...1 out of 3 years has been in the past) you will be forced to sell stocks AT A LOSS to satisfy those RMDs. Is that what you want to do? Holding bonds means you could sell the bonds that would either rise (or not lose as much) during times of equity sell-offs and wait for the equities to recover.

This is the main reason I think retirees should have some bonds, provided some assets are in tax deferred and in need of RMDs. It's too risky to have it all in stocks. Now if ALL your money is post tax AND you don't need to tap any of it, then 100% stock is fine provided you can tolerate the losses and not behave badly (sell out of fear).
You have to take RMD, but don't have to spend it. You may buy the same fund back in a taxable account after paying tax on RMD. As long as you have other fund to pay tax, a down-market does not affect your net worth.
that's a good point. also to expand on my earlier post, you don't necessarily need a bond fund (if you're concerned about rising rates for instance), but you could use some other fixed income product. For instance you might have a stable value fund option in your 457b. I do. Many use that option instead of a bond fund in their 457b so they have fixed income that's not going to "lose value" at the time at the precise time in which you want to sell it.
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Re: Do I, will I, ever need a bond fund?

Post by tibbitts » Thu Mar 08, 2018 8:47 am

gromit wrote:
Thu Mar 08, 2018 12:10 am
whodidntante wrote:
Wed Mar 07, 2018 10:14 pm
tibbitts wrote:
Wed Mar 07, 2018 9:19 pm
Lots of Bogleheads have RVs, it's the loan that some will object to.
An RV would make my life worse.
I used to have a boat.... :oops:
Many of the problems with both can be avoided by buying a new one frequently, and being able to throw money at it if the need arises, both of which the OP can afford to do. I've had both an RV and a boat at times and they can both excellent investments, just not in the financial sense - but that's not why you buy them. I will say that both require time and space - but so do pets like large dogs and horses, and lots of people have those.

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Re: Do I, will I, ever need a bond fund?

Post by dandinsac » Thu Mar 08, 2018 10:15 am

You should evaluate delaying social security for a while. This will increase your payments as well as allow you to better manage withdrawals from tax deferred accounts. This may lower your taxes in the future when RMDs are required.

My FIL passed away a couple of years ago and now my MIL is filing as a single taxpayer. For her, there is no escaping the 25% tax bracket (soon to be 22%) with RMDs, social security and a pension.

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Re: Do I, will I, ever need a bond fund?

Post by Toons » Thu Mar 08, 2018 11:14 am

abuss368 wrote:
Wed Mar 07, 2018 9:38 pm
Warren Buffett's mentor Benjamin Graham recommended that investment portfolios have no less than a 25% allocation to bonds.

Bonds lower the volatility of an investment portfolio and also provide an opportunity to rebalance stocks during periods of market distress.




+1
I agree.
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

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Re: Do I, will I, ever need a bond fund?

Post by David Jay » Thu Mar 08, 2018 12:36 pm

gromit wrote:
Thu Mar 08, 2018 12:10 am
I used to have a boat.... :oops:
Ah, yes. A hole in the water, into which you pour money.
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: Do I, will I, ever need a bond fund?

Post by aristotelian » Thu Mar 08, 2018 12:41 pm

Some folks with pensions like to consider their pensions taking the place of bonds for their fixed income. I believe Bogle himself advocates that. If you have the willingness and ability to take risk with your portfolio, go for it.

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Re: Do I, will I, ever need a bond fund?

Post by MotoTrojan » Thu Mar 08, 2018 12:46 pm

arcticpineapplecorp. wrote:
Wed Mar 07, 2018 9:30 pm
gromit wrote:
Wed Mar 07, 2018 8:23 pm
Health insurance costs us $350 per month, the first $3000/yr comes out of a 457B account without ever seeing taxes.
My 457b has $350k, wife's has $300k. AA of the $650k is 80% in S&P 500 index and 20% in Russell 2500 index.

I am taking $33,000 out of my 457b this year to maintain our lifestyle. That will hopefully end (except for the tax free $3k for health insurance) in 2019 when we have one house and no debt.
welcome to the group.

Since you essentially have replicated the total stock market index fund (80% large, 20% small/mid) what would happen to your 457b when the stock market tanks? The value of your 457b will drop accordingly. I get that you're saying you have enough other income, but you do have to make RMDs from your 457b, right? I mean it's not all Roth 457b, right (even if it was, a Roth 457b requires RMDs unless rolled into a Roth IRA which is exempt from RMDs)?

What if we had another 2007-2009 and the market dropped 50%? You're $650k would be worth $325k. If you had to take out say 4% for a RMD and it was based on the previous years $650k you'd be selling $26,000. Taking $26,000 because that was the RMD based on previous year's end balance out of your account now (after a 50% decline) means you'd be taking out 8% of your portfolio ($26,000 / $325,000 = .08). But you'd be selling shares at a loss, at half the price. The goal of investing is to buy low and sell higher. Not sell lower.

So now and again (33% of the time the market is down...1 out of 3 years has been in the past) you will be forced to sell stocks AT A LOSS to satisfy those RMDs. Is that what you want to do? Holding bonds means you could sell the bonds that would either rise (or not lose as much) during times of equity sell-offs and wait for the equities to recover.

This is the main reason I think retirees should have some bonds, provided some assets are in tax deferred and in need of RMDs. It's too risky to have it all in stocks. Now if ALL your money is post tax AND you don't need to tap any of it, then 100% stock is fine provided you can tolerate the losses and not behave badly (sell out of fear).

If you've won the game you could stop playing. Meaning, only take the risk you need to take, have the ability to take and the willingness to take but no more. If you don't need to take risk, why are you taking it? Stocks are risky. Bonds (the right kinds) are not (as risky).
If you assume the OP is going to reinvest the RMD into the market at the same AA via taxable, then this isn’t as much of a doom and gloom as you’re making it out to be.

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Re: Do I, will I, ever need a bond fund?

Post by rkhusky » Thu Mar 08, 2018 2:36 pm

Why are you taking SS at 62? Are you in poor health?

Do you need to invest in stocks?

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Re: Do I, will I, ever need a bond fund?

Post by eddot98 » Thu Mar 08, 2018 3:35 pm

gromit wrote:
Wed Mar 07, 2018 8:23 pm
Bogleheads- I got it wrong for a long time I'm sure but I think I got lucky. I'm the last of the dinosaurs that got a full pension at 55. I also had good period of time that both wife and I had the VIIIX available to us in separate 457b accounts.

Details are:

The good stuff-
Very recent retiree. Wife retired early as well.
My pension is $65,000 per year. If my spouse (53) pre-deceases me, it rises to $73,000. It is a government pension.
Health insurance costs us $350 per month, the first $3000/yr comes out of a 457B account without ever seeing taxes.
The health insurance costs should be relatively stable, it's part of my retirement.
My 457b has $350k, wife's has $300k. AA of the $650k is 80% in S&P 500 index and 20% in Russell 2500 index.
Wife's pension of $21,000 per year begins in early 2020. Her pension does not continue if she pre-deceases me.
My SS will be $20k per year starting at 62 in 2024
Wife's SS will be $14k per year in 2027 (also at 62)
We own our home outright and will be selling soon for roughly $140k
We own a condo outright that we plan to live in after our house sells. It runs $400 per month common fee. Market value is $150K. Taxes are negligible at $500/yr.

The dumb stuff-
We owe $60k in CC debt and $60k on an RV. We will pay this off when our house sells this summer (we are in a good market here and expect it to go quickly)
Current lifestyle (including payment of debt) is $100k/yr
I am taking $33,000 out of my 457b this year to maintain our lifestyle. That will hopefully end (except for the tax free $3k for health insurance) in 2019 when we have one house and no debt.


All that to ask: Do we, will we, need to move into bonds at some time in the future or is our pension income enough?
Is there anything else (other than the dumb debt) that I should be adressing?

Thanks in advance and don't worry about hurting my feelings. I know I came to this late and anything good about my situation is due to luck and us both landing in some of the last jobs with pensions.
We are in a very similar position to yours, except my wife doesn't have a pension. I did not take the pop up option, instead taking the joint full option. You addressed what happens if your wife passes away before you do, but not the other way around. I am now 67, retired at 59. I do get Social Security and claimed at FRA so that my wife could claim spousal benefits. I feel like we won the game, so we have taken a lot of the chips off the table, putting 55% of our Deferred Compensation, traditional and Roth IRA's in the Stable Value Fund which yields about 2%. I would not be comfortable taking a 50% hit on our retirement savings. Would you?

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Thu Mar 08, 2018 4:48 pm

eddot98 wrote:
Thu Mar 08, 2018 3:35 pm

We are in a very similar position to yours, except my wife doesn't have a pension. I did not take the pop up option, instead taking the joint full option. You addressed what happens if your wife passes away before you do, but not the other way around. I am now 67, retired at 59. I do get Social Security and claimed at FRA so that my wife could claim spousal benefits. I feel like we won the game, so we have taken a lot of the chips off the table, putting 55% of our Deferred Compensation, traditional and Roth IRA's in the Stable Value Fund which yields about 2%. I would not be comfortable taking a 50% hit on our retirement savings. Would you?
You are very perceptive eddot98! I did NOT mention the continuance of DW's pension should she predecease me. It remains a secret known only to us but we will declare our (only) child as the beneficiary and she will continue to receive the $21K for life. It won't make her rich but she will hopefully have a nice annuity to build her future on. She has no idea it is coming. She is currently 24 and will hopefully help her to set herself up for a worry free retirement. The actuarial cost of doing it was negligible, about 14% down from the (single) full pension amount. Naming me as beneficiary would have been 10% down. Since I will not likely need the money and it will mean a lot to her, decision made.

As far as 'taking the chips off the table', I respect that approach as I have read your and the other's replies that make the point that I may have already 'won'. DW and I have some thinking to do on this. I assure all the Bogleheads that the one thing I WON"T DO is allow us to get sucked into anything that has high costs and that we will STAY THE COURSE should (when) things get rough. We will also always be learning...

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Thu Mar 08, 2018 5:04 pm

rkhusky wrote:
Thu Mar 08, 2018 2:36 pm
Why are you taking SS at 62? Are you in poor health?

Do you need to invest in stocks?
When I ran the simulations the break-even point for SS was age 79 if I chose to take at 67 rather than 62 and age 81.5 if I delayed to age 70. I have no major health problems (but I was in Law Enforcement for most of my career and we statistically die early).

I'm planning to take at 62 for a couple of reasons. First, I don't think I'll be burning through cash when I'm 81.5, I'm expecting that my needs (for the 'fun' spending, anyway) will be less. If I'm wrong and I'm chasing DW around the hotel room in Paris, it's a good way to be wrong. Secondly, as a relatively high income retiree, I see the system being changed in fundamental ways in my lifetime. I believe there will be some kind of means-testing done on SS at some point in the future. I would not be at all surprised to fall on the wrong side of that line. I'm going to take the sure thing and collect at 62.

The second question posed, will take a bit more thought. Others have made the point that I am pretty fortunate and could move into less volatile investments than 100% equities. I am pondering this but will listen to Mr. Bogle and take my time making this decision.

THANKS

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gromit
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Re: Do I, will I, ever need a bond fund?

Post by gromit » Thu Mar 08, 2018 5:10 pm

dandinsac wrote:
Thu Mar 08, 2018 10:15 am
You should evaluate delaying social security for a while. This will increase your payments as well as allow you to better manage withdrawals from tax deferred accounts. This may lower your taxes in the future when RMDs are required.

My FIL passed away a couple of years ago and now my MIL is filing as a single taxpayer. For her, there is no escaping the 25% tax bracket (soon to be 22%) with RMDs, social security and a pension.
Thanks! I responded to rhusky on the same topic just above this response as you and he got me thinking about this.

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arcticpineapplecorp.
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Re: Do I, will I, ever need a bond fund?

Post by arcticpineapplecorp. » Thu Mar 08, 2018 7:36 pm

MotoTrojan wrote:
Thu Mar 08, 2018 12:46 pm
If you assume the OP is going to reinvest the RMD into the market at the same AA via taxable, then this isn’t as much of a doom and gloom as you’re making it out to be.
yes, that point was already made and responded to here:
MathIsMyWayr wrote:
Thu Mar 08, 2018 12:28 am
You have to take RMD, but don't have to spend it. You may buy the same fund back in a taxable account after paying tax on RMD. As long as you have other fund to pay tax, a down-market does not affect your net worth.
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Iliketoridemybike
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Re: Do I, will I, ever need a bond fund?

Post by Iliketoridemybike » Thu Mar 08, 2018 7:43 pm

Bond ladder yes, bond funds never.

MotoTrojan
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Re: Do I, will I, ever need a bond fund?

Post by MotoTrojan » Thu Mar 08, 2018 10:06 pm

arcticpineapplecorp. wrote:
Thu Mar 08, 2018 7:36 pm
MotoTrojan wrote:
Thu Mar 08, 2018 12:46 pm
If you assume the OP is going to reinvest the RMD into the market at the same AA via taxable, then this isn’t as much of a doom and gloom as you’re making it out to be.
yes, that point was already made and responded to here:
MathIsMyWayr wrote:
Thu Mar 08, 2018 12:28 am
You have to take RMD, but don't have to spend it. You may buy the same fund back in a taxable account after paying tax on RMD. As long as you have other fund to pay tax, a down-market does not affect your net worth.
Apologies.

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2pedals
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Re: Do I, will I, ever need a bond fund?

Post by 2pedals » Thu Mar 08, 2018 10:31 pm

gromit wrote:
Thu Mar 08, 2018 5:04 pm
I'm planning to take at 62 for a couple of reasons. First, I don't think I'll be burning through cash when I'm 81.5, I'm expecting that my needs (for the 'fun' spending, anyway) will be less. If I'm wrong and I'm chasing DW around the hotel room in Paris, it's a good way to be wrong. Secondly, as a relatively high income retiree, I see the system being changed in fundamental ways in my lifetime. I believe there will be some kind of means-testing done on SS at some point in the future. I would not be at all surprised to fall on the wrong side of that line. I'm going to take the sure thing and collect at 62.
I wouldn't be only thinking about your needs. Waiting to take SS cheap insurance against longevity for your wife. No one knows what the future laws will be and how they will impact your future. And how is taking SS at 62 a sure thing? It could be the people that take SS early 62 may end up with a bad deal in some way or maybe not but no one know that. I wouldn't speculate and say it's a sure thing. What if you are wrong and your wife lives to 95?

tibbitts
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Re: Do I, will I, ever need a bond fund?

Post by tibbitts » Fri Mar 09, 2018 8:30 am

2pedals wrote:
Thu Mar 08, 2018 10:31 pm
gromit wrote:
Thu Mar 08, 2018 5:04 pm
I'm planning to take at 62 for a couple of reasons. First, I don't think I'll be burning through cash when I'm 81.5, I'm expecting that my needs (for the 'fun' spending, anyway) will be less. If I'm wrong and I'm chasing DW around the hotel room in Paris, it's a good way to be wrong. Secondly, as a relatively high income retiree, I see the system being changed in fundamental ways in my lifetime. I believe there will be some kind of means-testing done on SS at some point in the future. I would not be at all surprised to fall on the wrong side of that line. I'm going to take the sure thing and collect at 62.
I wouldn't be only thinking about your needs. Waiting to take SS cheap insurance against longevity for your wife. No one knows what the future laws will be and how they will impact your future. And how is taking SS at 62 a sure thing? It could be the people that take SS early 62 may end up with a bad deal in some way or maybe not but no one know that. I wouldn't speculate and say it's a sure thing. What if you are wrong and your wife lives to 95?
True about not knowing the future, but the forum has a guideline of going by current law not speculation, and current law says that benefits WILL drop for the OP, so those reduced future benefits have to be the basis for his calculation.

dbr
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Re: Do I, will I, ever need a bond fund?

Post by dbr » Fri Mar 09, 2018 9:25 am

If one applies the concepts of need, ability, and willingness to take risk to the stock/bond allocation question, it is hard to come up with scenarios where a person "needs" to take less risk by holding bonds or more in bonds. That scheme of thinking only needs bonds if the psychological ability to experience downturns in stocks and not do something stupid does not exist. That said, most people in retirement don't benefit from being 100% stock. But that depends on how large an objective it is that one continue to have prospects for large growth of the portfolio. Generally the trump card that applies to low need but high ability to take risk is to not take any risk one does not need to take. Therefore the question, asked by someone else, is how much do you really need in stocks.

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