Does anticipated SS alter today’s allocation?

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Rexindex
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Does anticipated SS alter today’s allocation?

Post by Rexindex » Sun May 27, 2018 6:57 pm

In my early 50’s and currently almost 60/40. I anticipate taking SS at 67, or 70 and am wondering, since this will constitute between 15-20% of my retirement source
, am I allocated properly?

On the one hand, if I am close to realizing my “number”,should I dial back and be more like 50/50? On the other hand, I could take more risk and go something like 75/25 or 80/20 and if all goes well retire 3-5years earlier.

Do others view SS similarly in these scenarios?
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mhalley
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Re: Does anticipated SS alter today’s allocation?

Post by mhalley » Sun May 27, 2018 7:10 pm

Some like to treat ss as a bond, some don’t. Total personal preference. One of many previous threads

viewtopic.php?t=112827

“If all goes well” sound like famous last words to me. After you have won the game, stop playing.
In other words, once the game has been won by accumulating enough safe assets to retire on, it makes little sense to keep playing it, at least with the “number”: the pile of safe assets sufficient to directly provide or indirectly purchase an adequate lifetime income stream.

Bernstein, William J (2012-06-18). The Ages of the Investor: A Critical Look at Life-cycle Investing (Investing for Adults) (Kindle Locations 51-52). Efficient Frontier Publications. Kindle Edition.
I.

beardsworth
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Re: Does anticipated SS alter today’s allocation?

Post by beardsworth » Sun May 27, 2018 7:15 pm

That search box at the top of the forum page can be your friend. Aspects of this question have been discussed on the forum quite a few times, as indicated by these results for "Social Security" "fixed income" and "Social Security" allocation, which you may find helpful.

https://www.google.com/search?sitesearc ... +income%22

https://www.google.com/search?sitesearc ... allocation

delamer
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Re: Does anticipated SS alter today’s allocation?

Post by delamer » Sun May 27, 2018 7:39 pm

If SS is going to make up just 20% of your desired retirement income, then you are hugely dependent on your portfolio for your lifestyle.

I would not dial back your stock allocation.

Are you retiring before you collect SS?

Dandy
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Re: Does anticipated SS alter today’s allocation?

Post by Dandy » Sun May 27, 2018 9:01 pm

I never count my chickens - I'm aware of them and happy about them but wait until they actually hatch. That goes for Social Security, Pension, inheritance, bonus, tax refunds, ...

I would modify my equity allocation to moderate as I approached my number or retirement. As human capital declines the ability to make up significant losses also declines. Just make sure you have a good handle on "the number".

goblue100
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Re: Does anticipated SS alter today’s allocation?

Post by goblue100 » Mon May 28, 2018 11:41 am

One of the many questions I've been pondering lately. I'm 57 and getting close to a number, if not "the" number. On the one hand, if I maintain an aggressive stock allocation I may get to the the number faster, or I could end up much farther from it than I thought possible. If only that crystal ball wasn't cracked.

One retirement planning tool I was on recently had a slider bar that asked how much I could tolerate losing, in a dollar amount. That was a little eye opening, since I normally think in percentage terms. I'd place a link to it, but I can't recall which one it was. You can figure it out for yourself, I think for an 80/20 portfolio they were calculating about a 35% loss, for a 60/40 it was about 20 or 25%. 50/50 was about 15 or 20 percent. I know for myself the idea of a 35% loss at this stage was not something I wanted to really contemplate, so my recent actions to move closer to a 60/40 are in line with my need and willingness to take risks.
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TravelforFun
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Re: Does anticipated SS alter today’s allocation?

Post by TravelforFun » Mon May 28, 2018 12:04 pm

Dandy wrote:
Sun May 27, 2018 9:01 pm
I never count my chickens - I'm aware of them and happy about them but wait until they actually hatch. That goes for Social Security, Pension, inheritance, bonus, tax refunds, ...
The closer you get to your SS age, the more you can count on your SS benefits.

I used to wish the government had let me keep and invest my own SS contributions but now I am glad to have this COLA adjusted annuity. I will receive a monthly spousal benefit of $500 in July and my own monthly benefit of $3,600 in four years

To the OP's question, I don't plan on changing my AA with SS benefits because I don't have an AA. I keep 10 years of expenses in bonds and money market, and the rest of my asset is in stock funds.

TravelforFun

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GerryL
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Re: Does anticipated SS alter today’s allocation?

Post by GerryL » Mon May 28, 2018 12:40 pm

I stopped working/earning a wage at 66. Looking forward to age 70, I saw that SS would more than cover my basic living expenses, so I felt comfortable with the risk of a 60/40 AA. In other words, I don't count SS as a part of my AA, but it is an element in making decisions about my risk tolerance.

BTW, about 2 weeks ago I finally submitted my application for SS to start in September!!! :D

dbr
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Re: Does anticipated SS alter today’s allocation?

Post by dbr » Mon May 28, 2018 1:01 pm

Rexindex wrote:
Sun May 27, 2018 6:57 pm
In my early 50’s and currently almost 60/40. I anticipate taking SS at 67, or 70 and am wondering, since this will constitute between 15-20% of my retirement source
, am I allocated properly?

On the one hand, if I am close to realizing my “number”,should I dial back and be more like 50/50? On the other hand, I could take more risk and go something like 75/25 or 80/20 and if all goes well retire 3-5years earlier.

Do others view SS similarly in these scenarios?
No. You should take no more risk than you need to take. How much risk do you need to take? You need to take risk to get the return you need to meet your objectives. Your plan is to know your objectives and see how much return you need to get there within your ability and willingness to take risk.

The Wizard
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Re: Does anticipated SS alter today’s allocation?

Post by The Wizard » Mon May 28, 2018 1:02 pm

I'm 68 and 21 months from maximal SS at 70.
So, having survived the first five years of retirement in fine shape. I'm now letting my AA drift upward from 50/50 to around 60/40.
After age 70, portfolio withdrawals for expenses will be mostly not needed...
Attempted new signature...

SGM
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Re: Does anticipated SS alter today’s allocation?

Post by SGM » Tue May 29, 2018 3:10 am

I don't think receiving delayed SS in the near future will alter our current allocation. We are still a little on the aggressive side for being 4 years into retirement at 70/30. New money will continue to go into bond funds for the most part. If we had been at 50/50 I might change it to 60/40. As it is I was planning to be more conservative anyway as I don't need to take increased risk.

TravelforFun
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Re: Does anticipated SS alter today’s allocation?

Post by TravelforFun » Tue May 29, 2018 7:12 am

GerryL wrote:
Mon May 28, 2018 12:40 pm
I stopped working/earning a wage at 66. Looking forward to age 70, I saw that SS would more than cover my basic living expenses, so I felt comfortable with the risk of a 60/40 AA. In other words, I don't count SS as a part of my AA, but it is an element in making decisions about my risk tolerance.

BTW, about 2 weeks ago I finally submitted my application for SS to start in September!!! :D
Something changed that caused you not wanting to wait to age 70?

TravelforFun

SGM
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Re: Does anticipated SS alter today’s allocation?

Post by SGM » Tue May 29, 2018 8:10 am

TravelforFun wrote:
Tue May 29, 2018 7:12 am
GerryL wrote:
Mon May 28, 2018 12:40 pm
I stopped working/earning a wage at 66. Looking forward to age 70, I saw that SS would more than cover my basic living expenses, so I felt comfortable with the risk of a 60/40 AA. In other words, I don't count SS as a part of my AA, but it is an element in making decisions about my risk tolerance.

BTW, about 2 weeks ago I finally submitted my application for SS to start in September!!! :D
Something changed that caused you not wanting to wait to age 70?

TravelforFun
You can apply 3 months in advance if you have an age 70 August birthday. First payment will be in September.

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ruralavalon
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Re: Does anticipated SS alter today’s allocation?

Post by ruralavalon » Tue May 29, 2018 8:43 am

Rexindex wrote:
Sun May 27, 2018 6:57 pm
In my early 50’s and currently almost 60/40. I anticipate taking SS at 67, or 70 and am wondering, since this will constitute between 15-20% of my retirement source
, am I allocated properly?

On the one hand, if I am close to realizing my “number”,should I dial back and be more like 50/50? On the other hand, I could take more risk and go something like 75/25 or 80/20 and if all goes well retire 3-5years earlier.

Do others view SS similarly in these scenarios?
In my opinion your 60/40 asset allocation is within the range of what is reasonable in the early 50s and as you go into retirement.

I always viewed Social Security primarily as an income stream rather than as an asset. Viewing Social Security as an income stream meant that subtracting it from expected retirement living expenses gave a net spending figure which we needed to fund from our investments.

So Social Security only indirectly affected our asset allocation, and did not justify changing our asset allocation. We are 72, retired since early 2011, and our asset allocation has been 50/50 since late 2008.

I like Larry Swedroe's verbal formula, base asset allocation on your own personal ability, willingness and need to take risk.
Last edited by ruralavalon on Tue May 29, 2018 8:51 am, edited 1 time in total.
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dbr
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Re: Does anticipated SS alter today’s allocation?

Post by dbr » Tue May 29, 2018 8:47 am

ruralavalon wrote:
Tue May 29, 2018 8:43 am
Rexindex wrote:
Sun May 27, 2018 6:57 pm
In my early 50’s and currently almost 60/40. I anticipate taking SS at 67, or 70 and am wondering, since this will constitute between 15-20% of my retirement source
, am I allocated properly?

On the one hand, if I am close to realizing my “number”,should I dial back and be more like 50/50? On the other hand, I could take more risk and go something like 75/25 or 80/20 and if all goes well retire 3-5years earlier.

Do others view SS similarly in these scenarios?
In my opinion your 60/40 asset allocation is within the range of what is reasonable in the early 50s and as you go into retirement.

I always viewed Social Security primarily as an income stream rather than as an asset. Viewing Social Security as an income stream meant that subtracting it from expected retirement living expenses gave a net spending figure which we needed to fund from our investments. So Social Security only indirectly affected our asset allocation, and did not justify changing our asset allocation.
Right. Without SS we might have invested more aggressively during working years to try to gain more wealth to make up the income. In retirement it wouldn't affect the asset allocation because a higher stock allocation does not improve how much you can spend and we are not motivated to maximize the wealth we have when we die.

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TheTimeLord
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Re: Does anticipated SS alter today’s allocation?

Post by TheTimeLord » Tue May 29, 2018 8:55 am

Rexindex wrote:
Sun May 27, 2018 6:57 pm
In my early 50’s and currently almost 60/40. I anticipate taking SS at 67, or 70 and am wondering, since this will constitute between 15-20% of my retirement source
, am I allocated properly?

On the one hand, if I am close to realizing my “number”,should I dial back and be more like 50/50? On the other hand, I could take more risk and go something like 75/25 or 80/20 and if all goes well retire 3-5years earlier.

Do others view SS similarly in these scenarios?
SS making up 20% of one's retirement income sounds very low, especially considering the following.
For most people, Social Security is the largest source of retirement income. The majority of retirees (65 percent) get half or more of their income from Social Security. And over a third (36 percent) of people age 65 and older receive at least 90 percent of their income as a monthly Social Security payment.
https://money.usnews.com/money/blogs/pl ... ent-income
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22twain
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Re: Does anticipated SS alter today’s allocation?

Post by 22twain » Tue May 29, 2018 9:04 am

Bogleheads (at least the ones who post on this forum) are skewed towards the high end of the income and net-worth distributions, with correspondingly lower percentages of their income coming from SS in retirement.
My investing princiPLEs do not include absolutely preserving princiPAL.

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TheTimeLord
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Re: Does anticipated SS alter today’s allocation?

Post by TheTimeLord » Tue May 29, 2018 9:14 am

22twain wrote:
Tue May 29, 2018 9:04 am
Bogleheads (at least the ones who post on this forum) are skewed towards the high end of the income and net-worth distributions, with correspondingly lower percentages of their income coming from SS in retirement.
Maximum FRA benefit is a bit of 33,456, so that would be what $50,184 for a single income couple. If it is 20% of their retirement income then their income would be $250,920 annually. It would likely be around $300,000 for a dual income couple.
A household making $250,920.00 annually was percentile 96.1% in 2017. This percentile ranged from $249,663.00 to $251,101.00 a year.
Between 2015 and 2016, US median household income rose 3.2% from $57,230 to $59,039, according to a new report released by the U.S. Census Bureau on Tuesday.Sep 12, 2017
Last edited by TheTimeLord on Tue May 29, 2018 9:27 am, edited 2 times in total.
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Ron
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Re: Does anticipated SS alter today’s allocation?

Post by Ron » Tue May 29, 2018 9:25 am

The Wizard wrote:
Mon May 28, 2018 1:02 pm
I'm 68 and 21 months from maximal SS at 70.
So, having survived the first five years of retirement in fine shape. I'm now letting my AA drift upward from 50/50 to around 60/40.
After age 70, portfolio withdrawals for expenses will be mostly not needed...
Same situation here, except that my wife/me are already drawing our respective age-70 SS.

A few years before retirement (at age 59), we kept a joint 90/10 AA (90% equities).

In preparation for retirement, we moved to a 50/50 AA a couple of years before pulling the plug.

Now that we only need our joint portfolio to satisfy less than 10% of our retirement budget (and actually, RMD's contribute much more than that 10%), we've let our joint AA to rise to 60% equities with the remainder in bond funds and around 1% cash and foresee it remaining there for the future.

As to the OP's question, I/we did not look at the possibility of future SS payments when we were both still working and in the accumulation phase. We felt comfortable with our 90% equity target at that time, regardless of what the future may have held decades away.

- Ron

wolf359
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Re: Does anticipated SS alter today’s allocation?

Post by wolf359 » Tue May 29, 2018 9:47 am

I am also in my early 50's, and anticipate taking Social Security at 70. Anticipated SS does not alter today's allocation at all. According to the statement currently provided by SS, the full benefit will not be paid if the trust fund gets depleted. There will be a haircut if no political action is taken. That event is 15-20 years off, just about the time I'd be claiming.

15-20 years is too far to predict what the numbers will be like. It's impossible to know if the politics will work out. Their estimates may be off in a positive or negative way.

Therefore, I'd just keep saving full bore with the objective of making SS redundant. If you achieve it, you can decide whether or not to retire early. If you don't, you'll be better prepared regardless of what the SS numbers end up being. When the claiming date is 5 years off or less, we should have a better picture. By waiting until 70, I always could change my mind and claim earlier if that made sense or became necessary.

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GerryL
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Re: Does anticipated SS alter today’s allocation?

Post by GerryL » Tue May 29, 2018 1:19 pm

SGM wrote:
Tue May 29, 2018 8:10 am
TravelforFun wrote:
Tue May 29, 2018 7:12 am
GerryL wrote:
Mon May 28, 2018 12:40 pm
I stopped working/earning a wage at 66. Looking forward to age 70, I saw that SS would more than cover my basic living expenses, so I felt comfortable with the risk of a 60/40 AA. In other words, I don't count SS as a part of my AA, but it is an element in making decisions about my risk tolerance.

BTW, about 2 weeks ago I finally submitted my application for SS to start in September!!! :D
Something changed that caused you not wanting to wait to age 70?

TravelforFun
You can apply 3 months in advance if you have an age 70 August birthday. First payment will be in September.
Yup. Close. Turn 70 in September. First SS check should be deposited in my checking acct when I return from France I October. SSA actually sent me a letter this month reminding me that it was time to apply.

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