If you have plenty of money, why not 100% stocks in retirement?

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miamivice
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If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 9:21 am

If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by flyingaway » Sun Apr 14, 2019 9:23 am

Why do you need so much money?

dbr
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 9:26 am

Of course. 100% stocks is a possible answer to need, ability, and willingness to take risk for a retired person, but you have to actually do the thinking and not just speculate. The "if you have plenty of money" part is just one of many considerations that might or might not lead to that asset allocation.

The specific answer to why not is that the investor does not have ability to take that risk and/or they do not have willingness to take that risk.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Jags4186 » Sun Apr 14, 2019 9:26 am

Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?

dbr
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 9:27 am

Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
A retired person can have financial objectives beyond supporting actual expenses.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by RickBoglehead » Sun Apr 14, 2019 9:30 am

Avid user of forums on variety of interests-financial, home brewing, F-150, PHEV, home repair, etc. Enjoy learning & passing on knowledge. It's PRINCIPAL, not PRINCIPLE. I ADVISE you to seek ADVICE.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Jags4186 » Sun Apr 14, 2019 9:33 am

dbr wrote:
Sun Apr 14, 2019 9:27 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
A retired person can have financial objectives beyond supporting actual expenses.
Usually when people want to be aggressive in retirement its either because they don’t have enough money and need to take more risk or have a lot of money and can afford bigger downturns. That said, you still need to be able to support yourself. If you have “plenty” of money, you of course can be more aggressive, but most people don’t have enough money to be 100% equities without risk of catastrophic failure.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by averagedude » Sun Apr 14, 2019 9:36 am

You could make the same argument, why not 100% in bonds. It is best to take an approach that accomplishes your goals and at the same time sleep well at night. If you have legacy goals, having a high stock allocation is reasonable if you have plenty of money. For most people, taking a balanced approach is the best.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by willthrill81 » Sun Apr 14, 2019 9:38 am

Jags4186 wrote:
Sun Apr 14, 2019 9:33 am
dbr wrote:
Sun Apr 14, 2019 9:27 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
A retired person can have financial objectives beyond supporting actual expenses.
Usually when people want to be aggressive in retirement its either because they don’t have enough money and need to take more risk or have a lot of money and can afford bigger downturns. That said, you still need to be able to support yourself. If you have “plenty” of money, you of course can be more aggressive, but most people don’t have enough money to be 100% equities without risk of catastrophic failure.
There is always a risk of catastrophic failure, no matter what you do.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 9:39 am

Jags4186 wrote:
Sun Apr 14, 2019 9:33 am
dbr wrote:
Sun Apr 14, 2019 9:27 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
A retired person can have financial objectives beyond supporting actual expenses.
Usually when people want to be aggressive in retirement its either because they don’t have enough money and need to take more risk or have a lot of money and can afford bigger downturns. That said, you still need to be able to support yourself. If you have “plenty” of money, you of course can be more aggressive, but most people don’t have enough money to be 100% equities without risk of catastrophic failure.
So one answer to the OP is the one I gave, which is they don't have the ability to take risk. But the premise is that they have plenty of money, and you could translate that as they do have ability to take risk.

dbr
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 9:41 am

averagedude wrote:
Sun Apr 14, 2019 9:36 am
You could make the same argument, why not 100% in bonds. It is best to take an approach that accomplishes your goals and at the same time sleep well at night. If you have legacy goals, having a high stock allocation is reasonable if you have plenty of money. For most people, taking a balanced approach is the best.
This is exactly right. The person in question has to be thoughtful and the answer is a question of individual judgement and preference considering what objectives that person has. I agree the most common outcome for most people would be a balanced allocation of both stock and bonds.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by tibbitts » Sun Apr 14, 2019 9:43 am

miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
Over some periods in some places, equities have returned more than bonds. Your statement "stocks return better than bonds" appears to be about the future, which is unknown.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Jags4186 » Sun Apr 14, 2019 9:43 am

dbr wrote:
Sun Apr 14, 2019 9:39 am
Jags4186 wrote:
Sun Apr 14, 2019 9:33 am
dbr wrote:
Sun Apr 14, 2019 9:27 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
A retired person can have financial objectives beyond supporting actual expenses.
Usually when people want to be aggressive in retirement its either because they don’t have enough money and need to take more risk or have a lot of money and can afford bigger downturns. That said, you still need to be able to support yourself. If you have “plenty” of money, you of course can be more aggressive, but most people don’t have enough money to be 100% equities without risk of catastrophic failure.
So one answer to the OP is the one I gave, which is they don't have the ability to take risk. But the premise is that they have plenty of money, and you could translate that as they do have ability to take risk.
That’s why the first question I asked was define plenty of money. To me, enough money is 25x expenses. Plenty of money could be 30x expenses. To others, 25x expenses is plenty of money. To others 10x expenses + pension income is plenty of money.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Clever_Username » Sun Apr 14, 2019 9:44 am

General allocation advice is given with the idea in mind of having a good amount of money, but not necessarily far more than needed. Once you've "won the game," your ability and need to take risk changes. For example, suppose you pass 25x expenses and decide to keep working. Do you keep the same asset allocation? Some people will. Others will increase their stock allocation, perhaps to have a larger legacy they leave behind. Some will increase bond allocation to have a lower volatility (that's what I'd likely do in that situation).
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_ | | I survived my first downturn and all I got was this signature line.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by quantAndHold » Sun Apr 14, 2019 9:45 am

averagedude wrote:
Sun Apr 14, 2019 9:36 am
You could make the same argument, why not 100% in bonds. It is best to take an approach that accomplishes your goals and at the same time sleep well at night. If you have legacy goals, having a high stock allocation is reasonable if you have plenty of money. For most people, taking a balanced approach is the best.
100% bonds sets you up for wealth destruction via inflation risk. If I had to pick between the two for long term investing, I’d probably sleep better with stocks.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Wiggums » Sun Apr 14, 2019 9:51 am

miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
OP: What do you think the answer is?

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by 2pedals » Sun Apr 14, 2019 10:05 am

miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
1) You may not outlive a downturn.
2) For legacy reasons I can see 80/20 stocks/bonds as max equity because you bonds can perform better for long periods of time.
3) You may not be able to sleep well a night watching your money go away even if you don't need the money.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:18 am

Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
I haven't really thought too much about it, but I am thinking that if my retirement income is double my retirement expenses, that'd be plenty of money.

For us, it is Retirement Income = 2 Social security + 2 monthly pension checks plus .00667 * Retirement Account Value. If that total is double what we need, I think I would be safe 100% stocks.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:20 am

2pedals wrote:
Sun Apr 14, 2019 10:05 am
miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
1) You may not outlive a downturn.
I am not sure why not outliving a downturn is a problem. If I (or my wife if she outlives me) die during a downturn, it won't hurt us at all. It just means the kids have a smaller inheritance. But if they keep the money invested 100% stocks, then the stock market will rebound and they'll ride the upswing.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by grabiner » Sun Apr 14, 2019 10:27 am

If you have more than enough money, your portfolio in retirement is not for you, but for your heirs. In particular, some retirees have more than enough to live on from Social Security, pensions, and annuities.

And in that situation, the asset allocation should depend on the needs of the people who will spend it. If your portfolio will be part of the retirement fund for your son who is far from retirement, and the college fund for your not-yet-born great-granddaughter, it can be 100% in stock.
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Stinky » Sun Apr 14, 2019 10:27 am

miamivice wrote:
Sun Apr 14, 2019 10:18 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
I haven't really thought too much about it, but I am thinking that if my retirement income is double my retirement expenses, that'd be plenty of money.

For us, it is Retirement Income = 2 Social security + 2 monthly pension checks plus .00667 * Retirement Account Value. If that total is double what we need, I think I would be safe 100% stocks.
Seems that if your expenses are covered 2X by guaranteed retirement income, you could invest your assets whatever way you’d like. All the way from 100% stocks to 100% cash.

Your call.
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by KlangFool » Sun Apr 14, 2019 10:30 am

miamivice wrote:
Sun Apr 14, 2019 10:18 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
I haven't really thought too much about it, but I am thinking that if my retirement income is double my retirement expenses, that'd be plenty of money.

For us, it is Retirement Income = 2 Social security + 2 monthly pension checks plus .00667 * Retirement Account Value. If that total is double what we need, I think I would be safe 100% stocks.
miamivice,

Let's assume that your retirement income = retirement expense, your retirement account value has to be 1/0.00667 residue retirement expense. It means that it has to be 150 times your residue retirement expense. What is this number?

But, you claimed that you want double the retirement expense. So, the number has to be a lot larger.

It is very simple. I think we are talking about 5 to 10 million.

KlangFool

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:34 am

KlangFool wrote:
Sun Apr 14, 2019 10:30 am
miamivice wrote:
Sun Apr 14, 2019 10:18 am
Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
I haven't really thought too much about it, but I am thinking that if my retirement income is double my retirement expenses, that'd be plenty of money.

For us, it is Retirement Income = 2 Social security + 2 monthly pension checks plus .00667 * Retirement Account Value. If that total is double what we need, I think I would be safe 100% stocks.
miamivice,

Let's assume that your retirement income = retirement expense, your retirement account value has to be 1/0.00667 residue retirement expense. It means that it has to be 150 times your residue retirement expense. What is this number?

But, you claimed that you want double the retirement expense. So, the number has to be a lot larger.

It is very simple. I think we are talking about 5 to 10 million.

KlangFool
In terms of income, Financial Engines projects I will have an annual retirement income of $250,000 (today's dollars). I don't anticipate that my expenses will be above $125,000 and more than likley be $100,000 or less. So, I am not sure why I would not continue to be 100% stocks. Even if there was a 50% extended downturn, I would still have sufficient resources...

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:35 am

KlangFool wrote:
Sun Apr 14, 2019 10:30 am
It is very simple. I think we are talking about 5 to 10 million.

KlangFool
I expect to be in that range when I retire. That's future dollars of course. In today's dollars, probably right about 4- 5 million.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by sport » Sun Apr 14, 2019 10:36 am

If you have already "won the game", why keep playing? Consider a retiree with a 5MM portfolio. That would be "plenty of money" for most people. How would they feel if they made investment choices that resulted in turning that portfolio into 2MM? They worked their whole life to amass that really nice nest egg. Would they be comfortable seeing half of it evaporate, because they were trying to increase it to have additional money they do not even need?

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by JoMoney » Sun Apr 14, 2019 10:36 am

Stocks are not money, if you have "plenty of money" then you're not 100% stocks.
If you have a good emergency fund or whatever you want to call a stash of short-term cash, regular secure fixed income via job/social security/pension/annuities that covers most of your expenses, then if you're comfortable with the risks it might be ok to have the rest of your portfolio all in stocks... but that's not really 100% stocks
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 10:36 am

Is your actual question that you think you have plenty of money and want to know if you could somehow be screwing up to put your assets at 100% stocks? Pending more information the answer to that is actually backwards around, which is to say that if being 100% stocks is screwing up then you don't have plenty of money.

If you want to contemplate actual data go run FireCalc or any similar model at 100% equities with the withdrawal rate representing your concept of plenty of money and see how possible it is that the retirement fails over some given length of time. If the actual experiences of the last 100+ years are not considered to have included some sufficiently severe examples, then the answer is that then you really do not want to be 100% stocks.

But we need to know if this is a real question or a hypothetical discussion.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dknightd » Sun Apr 14, 2019 10:41 am

If I had plenty, or too much, money. I'd probably buy an SPIA that would more than cover my expected expenses. Then leave the rest in an 80/20 portfolio. Sounds like you can do whatever makes you happy. So, be happy!

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:41 am

dbr wrote:
Sun Apr 14, 2019 10:36 am
Is your actual question that you think you have plenty of money and want to know if you could somehow be screwing up to put your assets at 100% stocks? Pending more information the answer to that is actually backwards around, which is to say that if being 100% stocks is screwing up then you don't have plenty of money.

If you want to contemplate actual data go run FireCalc or any similar model at 100% equities with the withdrawal rate representing your concept of plenty of money and see how possible it is that the retirement fails over some given length of time. If the actual experiences of the last 100+ years are not considered to have included some sufficiently severe examples, then the answer is that then you really do not want to be 100% stocks.

But we need to know if this is a real question or a hypothetical discussion.
It's both a real and hypothetical question, more a thought experiment than anything else.

I was just thinking about SWRs. Stocks have returned 8% on average. My return on average for 10 years has been right around 11%. I am trying to think why I would drop down to a 4% return if I didn't need to.

I get the risk, and one would have to have more than needed for retirement to assume the risk.

The idea is that I might work longer than needed just so I can assume higher risk in retirement is a comment that I didn't think about. Maybe I would like to retire earlier and put my money in more safety, so I don't need as much extra.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 10:42 am

dknightd wrote:
Sun Apr 14, 2019 10:41 am
If I had plenty, or too much, money. I'd probably buy an SPIA that would more than cover my expected expenses. Then leave the rest in an 80/20 portfolio. Sounds like you can do whatever makes you happy. So, be happy!
I'm 15-25 years from retirement. This isn't a question about what I do today, but rather, I am thinking about the situation for when it comes later.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Trader Joe » Sun Apr 14, 2019 10:43 am

miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
If you have plenty of money there is no reason not to do this.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dknightd » Sun Apr 14, 2019 10:48 am

miamivice wrote:
Sun Apr 14, 2019 10:42 am
dknightd wrote:
Sun Apr 14, 2019 10:41 am
If I had plenty, or too much, money. I'd probably buy an SPIA that would more than cover my expected expenses. Then leave the rest in an 80/20 portfolio. Sounds like you can do whatever makes you happy. So, be happy!
I'm 15-25 years from retirement. This isn't a question about what I do today, but rather, I am thinking about the situation for when it comes later.
Then I suggest revisiting the question when you get closer to retirement.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dbr » Sun Apr 14, 2019 10:50 am

miamivice wrote:
Sun Apr 14, 2019 10:41 am
dbr wrote:
Sun Apr 14, 2019 10:36 am
Is your actual question that you think you have plenty of money and want to know if you could somehow be screwing up to put your assets at 100% stocks? Pending more information the answer to that is actually backwards around, which is to say that if being 100% stocks is screwing up then you don't have plenty of money.

If you want to contemplate actual data go run FireCalc or any similar model at 100% equities with the withdrawal rate representing your concept of plenty of money and see how possible it is that the retirement fails over some given length of time. If the actual experiences of the last 100+ years are not considered to have included some sufficiently severe examples, then the answer is that then you really do not want to be 100% stocks.

But we need to know if this is a real question or a hypothetical discussion.
It's both a real and hypothetical question, more a thought experiment than anything else.

I was just thinking about SWRs. Stocks have returned 8% on average. My return on average for 10 years has been right around 11%. I am trying to think why I would drop down to a 4% return if I didn't need to.

I get the risk, and one would have to have more than needed for retirement to assume the risk.

The idea is that I might work longer than needed just so I can assume higher risk in retirement is a comment that I didn't think about. Maybe I would like to retire earlier and put my money in more safety, so I don't need as much extra.
A general result in most retirement modeling is that 100% stocks is not at much more risk of running out of money in retirement than allocations with far less in stocks. If by plenty of money one means things like 2% withdrawal rates it is almost inconceivable that 100% stocks will be dangerous. The issue comes down to whether or not a very small risk might be made even less by avoiding 100% stocks. At higher withdrawal rates, such as 4% as an example, there are risks but nearly as much at 50% stocks as at 100% stocks. If one diversifies some possible disaster in stocks by not investing 100% then one could be imposing some other kinds of risks and in the end it is a wash.

Personally I would take a different philosophy toward this which is that if one does not need 100% stocks to meet one's objectives then I would not invest in 100% stocks. So the real question to ask is not why not 100% stocks in retirement but rather why 100% stocks for you.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by KlangFool » Sun Apr 14, 2019 10:51 am

OP,

Why would I be 100% stock if I have plenty of money? Why would I put all my eggs in one basket? My answer would be no. I would diversify across multiple asset classes.

KlangFool

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by dekecarver » Sun Apr 14, 2019 10:56 am

miamivice wrote:
Sun Apr 14, 2019 9:21 am
If you have ample resources that you can afford to weather downturns, why not keep your money 100% stocks in retirement?

Stocks return better than bonds, so you would have better overall portfolio returns. You would have to be willing to sell stocks/funds during downturns to pay for your expenses.
Good question and I can only offer one example of doing so, my 80 year old father who when asked about bonds will simply answer, "they haven't done chit...." and he seems to have done pretty good over the years with his strategy as I've never had to bail him out, lol.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by 3-20Characters » Sun Apr 14, 2019 11:00 am

If I had some way beyond needs amount of money, what would make the most sense for me (given my personality) is to take a chunk in the amount that could be reasonably expected to cover expenses based on a 2.5–3% withdrawal rate and use a 50/50 bogleheads portfolio for that bucket. The rest I would invest as I see fit including 100% stocks, speculative single stocks, etc. if the second bucket was a crazy large amount, I’d consider business ventures as well—not so much for the money but for the experiences. You know what they say about making a million dollars by starting a business? Start with $2 million.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by TravelforFun » Sun Apr 14, 2019 11:02 am

I keep 10 years of expenses in bonds, money market, and CDs; and the rest in stocks. To me, this is still very conservative because the longest bear market in history lasted only three years. Some people get out of the game after they have won. I'll stay in this game until the end.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Dandy » Sun Apr 14, 2019 11:06 am

Depends on your investment goal(s) are. For me in the accumulation phase it was getting to my "number" so I had moderate allocations to equities. In retirement with "enough" my goal is to support our current lifestyle, not run out of money and have assets left over for unexpected expenses and/or inheritance. I can achieve those goals without going 100% equities.

Since I can't take it with me/us and my heirs should get a nice inheritance in any event I invest in a moderate risk fashion.

If I had other goals like lots of around the world cruises, a vacation home, etc. I might invest more aggressively in retirement. When you have been successful with a moderate risk approach your whole life it is difficult to become more aggressive even if you can and especially if you don't need to.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by goodenyou » Sun Apr 14, 2019 11:07 am

Because most people cannot withstand potential extreme fluctuations in stock valuations. For most, it would not be reassuring to be told that history tells us that your recent 50-60-70-80% decline in your stock portfolio "will come back". Extreme volatility is intolerable to most every investor.
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by MathWizard » Sun Apr 14, 2019 11:11 am

Being agressive in retirement is OK, but a minimal percentage of bonds in your AA allows rebalancing, and acts to provide stability to your portfolio balance at a small cost.

Graham recommended at least 25% bonds,

I'm planning rebalancing bands to keep me in the 70 to 80%
equities, which is agressive enough for me.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Christine_NM » Sun Apr 14, 2019 11:26 am

miamivice wrote:
Sun Apr 14, 2019 10:42 am
dknightd wrote:
Sun Apr 14, 2019 10:41 am
If I had plenty, or too much, money. I'd probably buy an SPIA that would more than cover my expected expenses. Then leave the rest in an 80/20 portfolio. Sounds like you can do whatever makes you happy. So, be happy!
I'm 15-25 years from retirement. This isn't a question about what I do today, but rather, I am thinking about the situation for when it comes later.
1. Doesn't matter whether you are retired or have more than you need -- those factors are not part of this equation. What's wrong is "100%" of anything, be it stocks, bonds, cash, RE. No one asset class works in all economies.

2. As for retirement, that long-term average return on stocks involves several extremes that might break you if you choose 100%. Yes, more money has been forfeited by underinvestment than lost by overinvestment. But that is not a mistake because in retirement what matters is the shorter term. Your time horizon after age 70 is too limited for decades of meaningful long-term stock growth. Sorry to say, in mid-to-late retirement your stocks are not growing, they are just going up and down with the momentum of the market.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by randomguy » Sun Apr 14, 2019 11:27 am

Jags4186 wrote:
Sun Apr 14, 2019 9:26 am
Define plenty of money? 40x expenses? 50x expenses? 100x expenses? 400x expenses? Stock market dropped 90% in the depression. If you had 100x expenses all of a sudden you’d only have 10x expenses. Would you feel secure then?
How about a billion x? Or infinite X? Think of all the people living on pensions and SS and still saving 20%. They can do whatever they want with the portfolio. 90%+ stocks is pretty reasonable for someone in that situation with 20+ year time frames.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by drk » Sun Apr 14, 2019 11:31 am

This is almost exactly what Charles Ellis advocates.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by miamivice » Sun Apr 14, 2019 11:40 am

Christine_NM wrote:
Sun Apr 14, 2019 11:26 am
1. Doesn't matter whether you are retired or have more than you need -- those factors are not part of this equation. What's wrong is "100%" of anything, be it stocks, bonds, cash, RE. No one asset class works in all economies.
Over a long period of time, stocks outperform cash, bonds, and real estate.

While stocks may be up and down, a portfolio made up of 100% stocks will lead to greater wealth than a portfolio containing a mixture of asset classes. It's just that, the stock portfolio may not beat the mixed portfolio 100% of the time,but will likely beat over the long run.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Christine_NM » Sun Apr 14, 2019 11:42 am

MVice -

But, see point 2 in my post. Long term doesn't matter anymore.

We can agree to disagree. However, if you are looking for most wealth and hang the risk, why not own your own business. That can be way more profitable than stock index funds.
16% cash 48% stock 36% bond. Retired, w/d rate 2.85%

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by nisiprius » Sun Apr 14, 2019 11:54 am

The answer to "why not 100% stocks?" does not depend on whether you have "plenty of money." You could just as well say "If you have plenty of money, why not 100% bonds?" If you have plenty of money, then it doesn't matter which you do. The answer simply indicates whether you have decreasing relative risk aversion ("Why not 100% stocks? I can afford to gamble, I'm going to try grabbing for the brass ring, because I will be fine even if I miss") or increasing relative risk aversion ("Why not 100% bonds? I've won the game, why keep playing?") Neither of these is objectively right.

The answer depends on what you know about your risk tolerance, and your best and most accurate understanding of the risks of the stock market.

In order for 100% stocks in retirement to be suitable for you, then one or both of these statements must be true:

a) Your risk tolerance is much higher than mine.

b) You think stocks are much less risky than I do.

You need to be careful with both of these things, because these are both difficult questions. Simplistic statements like "Stocks return better than bonds" suggest that you have not given this careful consideration. At the very least, you should add some necessary qualifications:

1) Stocks have returned (not "return") more than bonds,
2) Over almost every period of 30 years or more,
3) In the United States,
4) From 1802 through the present,
5) except for 1803-1871 (68 years) and 1968-2009 (41 years). (Source: see figure 1)

Even though I think it's a good gamble that stocks will have higher returns than bonds for 2019 through 2050, you still shouldn't reduce a complicated set of facts to a simple "stocks return better than bonds."
Last edited by nisiprius on Sun Apr 14, 2019 11:57 am, edited 5 times in total.
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Wiggums » Sun Apr 14, 2019 11:54 am

Christine_NM wrote:
Sun Apr 14, 2019 11:42 am
MVice -

But, see point 2 in my post. Long term doesn't matter anymore.
You make a very good point about the time horizon left in retirement. Not to mention that you become more conservative and cautious as you get older. Even if I can afford to take more risk, I may choose to focus on other things. After all, money does not buy you happiness, but it can make life a little easier. People all have different goals and needs. Not sure how my preference, risk tolerance and portfolio size helps the OP.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by MathIsMyWayr » Sun Apr 14, 2019 11:56 am

miamivice wrote:
Sun Apr 14, 2019 10:35 am
I expect to be in that range when I retire. That's future dollars of course. In today's dollars, probably right about 4- 5 million.
miamivice wrote:
Sun Apr 14, 2019 10:34 am
In terms of income, Financial Engines projects I will have an annual retirement income of $250,000 (today's dollars). I don't anticipate that my expenses will be above $125,000 and more than likley be $100,000 or less.
Money is not everything, but you should not settle down with your imagined retirement expenses. As your income/asset increases, you will find no difficulty in seeing your expenses go up. Move to a highly desirable location which may set you many millions back. Upgrade your life style without being absurdly lavish if you wish. I don't think many will have "plenty" of money. It is all matter of compromise, sacrifice or risk taking. As your asset grows, you should reassess your needs/want continuously. Again, money is not everything, but it will give you a choice.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by KlangFool » Sun Apr 14, 2019 11:58 am

Christine_NM wrote:
Sun Apr 14, 2019 11:42 am
MVice -

But, see point 2 in my post. Long term doesn't matter anymore.

We can agree to disagree. However, if you are looking for most wealth and hang the risk, why not own your own business. That can be way more profitable than stock index funds.
+1,000.

In a certain part of the world, it can be very profitable to own land if your investment timeframe is 20 to 30 years. One of the basic strategies is to buy lands far enough from the metro area that it is cheap now. But, in 20 to 30 years, the development will reach that area, the land's value will skyrocket. This can only work if you earn nothing from that land over the 20 to 30 years.

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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by KyleAAA » Sun Apr 14, 2019 12:03 pm

Sure, if you have so much that a 2% withdrawal rate will meet your needs, there’s little reason not to go all in on stocks and real estate. But why would you accumulate that much money to begin with? Most would stop when they got to 3-4%. If you enjoy your work, go for it. But most here would rather retire sooner with a smaller nest egg. Stocks could very well under perform bonds over the next 50 years so you’d need to account for that possibility, however small.
Last edited by KyleAAA on Sun Apr 14, 2019 12:05 pm, edited 1 time in total.

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