Asset Allocation Question/Help

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Bonehead3
Posts: 8
Joined: Mon Nov 05, 2018 8:05 pm
Location: Bangkok TH

Asset Allocation Question/Help

Post by Bonehead3 » Tue Nov 06, 2018 5:35 am

New member here but have been a VG investor for years. I'm about a year out from retirement (at 63) and thinking I should review my allocation to minimize risk.

Here goes:

Married filling jointly, 25% bracket, no state income tax (FL)
Emergency fund: Yes
Debt: No
Assets: No house, car, (employer provided)
Upon retirement, monthly income about 10k, no health care premiums

Portfolio:
80% Domestic Index funds
11% International Index funds
9% cash (MMF, High Yield Savings)

Worth: About 4.5M

I'm invested quite a bit in stocks (91%) at 62. Too much? I really won't need the income upon retirement but wondering if I should not move some monthly stock investments (about 10k) to cash or other(?) as opposed to selling. Move reinvestment CG, Div, Interest to cash funds?

Thank you for the help!

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dwickenh
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Location: Illinois

Re: Asset Allocation Question/Help

Post by dwickenh » Tue Nov 06, 2018 7:54 am

Your 9% cash would be 405K which would be over 3 years of your expenses. I'm not sure you need more cash at this point, but you may want to add some intermediate bond funds for ballast. Since you don't need to spend this money, you could also stay aggressive at 91/0/9. Will you have to buy a house and car when you quit working? That might be a reason to access more cash, or low interest rates for a mortgage.
The market is the most efficient mechanism anywhere in the world for transferring wealth from impatient people to patient people.” | — Warren Buffett

Silk McCue
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Joined: Thu Feb 25, 2016 7:11 pm

Re: Asset Allocation Question/Help

Post by Silk McCue » Tue Nov 06, 2018 8:02 am

Can you clarify where you live as your profile says it it Bangkok Thailand. Also, probably just a typo but you say you are in the 25% bracket which no longer exists. Should that be 24%?

You also reference $10k monthly income in retirement. Is that a pension or what you expect to need from your investments.

Cheers

Jordan4FI
Posts: 127
Joined: Mon May 28, 2018 11:00 am
Location: Honduras

Re: Asset Allocation Question/Help

Post by Jordan4FI » Tue Nov 06, 2018 8:11 am

4.5M thats a lot of money, I would myself, keep that pretty conservative. You don't get to 4.5M by spending so you will likely have a hard time burning though that amount. I would want it to stay above 2M at all times if possible for any heirs you may have. If you really are going to be living in Thailand, 10K a month is a massive lifestyle as you know.

I would mostly land on a 40/60 to 30/70 AA. You could even do a very large CD Ladder.

Bonehead3
Posts: 8
Joined: Mon Nov 05, 2018 8:05 pm
Location: Bangkok TH

Re: Asset Allocation Question/Help

Post by Bonehead3 » Tue Nov 06, 2018 7:37 pm

Yes we are in Thailand and coming back to the US to retire (one year). We will have to buy a house and car which is why I have so much in cash.

10k monthly income is not from investments but pensions.

Sorry, guess it's 24% now. That is a good thing!

Bond accounts now in a rising interest rate environment? I'm not sure that makes sense.

bloom2708
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Joined: Wed Apr 02, 2014 2:08 pm
Location: Fargo, ND

Re: Asset Allocation Question/Help

Post by bloom2708 » Tue Nov 06, 2018 7:45 pm

One one hand you can take the risk of 91/9. On the other hand you don't need to take that much risk.

1 year out, comfortable pension. I'd be 50/50 or maybe 60/40.

Your 40%-50% can be Short/Intermediate Bonds and Cash/CDs.

You've won. You don't need to work one more year. You don't need 90% stocks.
"We are not here to please, but to provoke thoughtfulness." --Unknown Boglehead

delamer
Posts: 6386
Joined: Tue Feb 08, 2011 6:13 pm

Re: Asset Allocation Question/Help

Post by delamer » Tue Nov 06, 2018 7:50 pm

Ultimately, the thing that matters in retirement is how your income compares to your expenses.

That should be a big driver of your allocation.

And you haven’t given us any information on your expenses.

Bonehead3
Posts: 8
Joined: Mon Nov 05, 2018 8:05 pm
Location: Bangkok TH

Re: Asset Allocation Question/Help

Post by Bonehead3 » Tue Nov 06, 2018 7:59 pm

I really have not figured my expenses but they probably won't match my income. Income/property/sales taxes; no state taxes; utilities; insurance; food/gas/etc; and some travel which will be the biggest bite. Still, I have never spent my income and don't expect to do that in retirement.

I'm just thinking I can be fully in stocks but that does not leave much of a soft landing come recession and also, it does not leave much for buying when stocks go on sale.

delamer
Posts: 6386
Joined: Tue Feb 08, 2011 6:13 pm

Re: Asset Allocation Question/Help

Post by delamer » Tue Nov 06, 2018 10:33 pm

Bonehead3 wrote:
Tue Nov 06, 2018 7:59 pm
I really have not figured my expenses but they probably won't match my income. Income/property/sales taxes; no state taxes; utilities; insurance; food/gas/etc; and some travel which will be the biggest bite. Still, I have never spent my income and don't expect to do that in retirement.

I'm just thinking I can be fully in stocks but that does not leave much of a soft landing come recession and also, it does not leave much for buying when stocks go on sale.
The less dependent you are on your portfolio to cover expenses, the more aggressive you can be since volatility won’t affect your lifestyle much. On the other hand, you could choose to be more conservative since you don’t need to take risk.

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ruralavalon
Posts: 14242
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: Asset Allocation Question/Help

Post by ruralavalon » Wed Nov 07, 2018 2:44 pm

Bonehead3 wrote:
Tue Nov 06, 2018 5:35 am
New member here but have been a VG investor for years. I'm about a year out from retirement (at 63) and thinking I should review my allocation to minimize risk.

Here goes:

Married filling jointly, 25% bracket, no state income tax (FL)
Emergency fund: Yes
Debt: No
Assets: No house, car, (employer provided)
Upon retirement, monthly income about 10k, no health care premiums

Portfolio:
80% Domestic Index funds
11% International Index funds
9% cash (MMF, High Yield Savings)

Worth: About 4.5M

I'm invested quite a bit in stocks (91%) at 62. Too much? I really won't need the income upon retirement but wondering if I should not move some monthly stock investments (about 10k) to cash or other(?) as opposed to selling. Move reinvestment CG, Div, Interest to cash funds?

Thank you for the help!
Bonehead3 wrote:
Tue Nov 06, 2018 7:37 pm
Yes we are in Thailand and coming back to the US to retire (one year). We will have to buy a house and car which is why I have so much in cash.

10k monthly income is not from investments but pensions.

Sorry, guess it's 24% now. That is a good thing!

Bond accounts now in a rising interest rate environment? I'm not sure that makes sense.
Bonehead3 wrote:
Tue Nov 06, 2018 7:59 pm
I really have not figured my expenses but they probably won't match my income. Income/property/sales taxes; no state taxes; utilities; insurance; food/gas/etc; and some travel which will be the biggest bite. Still, I have never spent my income and don't expect to do that in retirement.

I'm just thinking I can be fully in stocks but that does not leave much of a soft landing come recession and also, it does not leave much for buying when stocks go on sale.

At age 62 and a year from retirement I suggest around 60/40 stocks/fixed income. Fixed income can include bond funds, I-bonds, CDs, money market funds, and savings.

Here are outstanding write ups on the 60/40 stock/bond allocation by Peter Bernstein, Bloomberg Personal Finance (2002) , "The 60/40 Solution", and by Rick Ferri, etf.com (2/25/15), "Wisdom Of 60/40 Portfolios Timeless"".
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

alex_686
Posts: 4024
Joined: Mon Feb 09, 2015 2:39 pm

Re: Asset Allocation Question/Help

Post by alex_686 » Wed Nov 07, 2018 2:52 pm

Bonehead3 wrote:
Tue Nov 06, 2018 5:35 am
I'm invested quite a bit in stocks (91%) at 62. Too much? I really won't need the income upon retirement but wondering if I should not move some monthly stock investments (about 10k) to cash or other(?) as opposed to selling. Move reinvestment CG, Div, Interest to cash funds?
First, figure out your goals. Second, figure out your risk tolerance - both your ability and willingness.

For example, you state you don't need retirement income. This implies you have a high ability to take risks. If you goal is to maximize your estate for gifting purposes - either to family or for charity - then it makes sense to load up on equities.

So don't put the cart in front of the horse. Figure out goals and risk - your AA should follow.

SimplicityNow
Posts: 477
Joined: Fri Aug 05, 2016 10:31 am

Re: Asset Allocation Question/Help

Post by SimplicityNow » Thu Nov 08, 2018 9:23 am

You really need to sit down and figure your expenses in retirement. That includes how much of your savings will be used for a house. IMO that will be a factor in determining asset allocation.

It all comes down to the old balancing act of need, willingness and ability to take risk. Assuming you aren't going to be purchasing a multi million dollar home then it is unlikely you have any great need to take risk. You certainly have the ability to take risk especially with a 120k/year pension. Is there a COLA component to it or not? From your current allocation you obviously have a willingness to take the risk.

What are your objectives? Are you investing for yourselves or are you looking to pass a sizable inheritance to heirs or charity? If you are looking to your heirs then a high asset allocation makes more sense. If not I think at your age 90% stocks is more risk then I would take.

Bonehead3
Posts: 8
Joined: Mon Nov 05, 2018 8:05 pm
Location: Bangkok TH

Re: Asset Allocation Question/Help

Post by Bonehead3 » Thu Nov 08, 2018 10:10 pm

COLA is a part of my pensions. I will try and figure my retirement expenses. I know, based on my lifestyle, it won't equal or exceed my pension. Based on that, I suspect my investments will be mainly for inheritance. Life may impact this. :(

Thank you all for the help. :happy

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