Anyone else more aggressive in retirement than required?

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Nowizard
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Anyone else more aggressive in retirement than required?

Post by Nowizard »

As retirees in the RMD stage, the combination of available assets, SS, a small pension and spending patterns result in an analysis that my spouse and I should easily be able to fund our retirement and have "Won the game" from that perspective. However, we continue to have a 60/40 portfolio in spite of the above. The short way to state it is that after being retired for a decade, there continues to be a struggle moving from an accumulation to a preservation stage of investing. Though aware that having stable income and investments can produce circumstances where greater risk can be taken, it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?

Tim
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dwickenh
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Re: Anyone else more aggressive in retirement than required?

Post by dwickenh »

I could likely go to all cash and have "enough" due to my low cost of living. I could also grow all my own veggies, raise beef and pork, and have hens laying eggs. I choose to live dangerously by buying these commodities and investing 50% of my monies in equities and 45% in bonds, 5% cash. It makes life more interesting for me, but everyone has to decide what is the best way to live for themselves. I agree that it would be hard
to go to cash after all these years of investing.

Best to you,

Dan
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David Jay
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Re: Anyone else more aggressive in retirement than required?

Post by David Jay »

Tim:

This is not a problem if you intend to leave a legacy. I just retired and I intend to have an increasing Stock allocation for the next 8 years, arriving at 60% stock at age 70 (and holding @ 60%).

I was just reading a Rick Ferri comment on the “60/40 vs. 30/70” thread that “Sandtrap” started. Rick says he has had retired clients who are 90/10.

[edit] Here is the thread, it may be useful for you: viewtopic.php?f=10&t=286097
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msk
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Re: Anyone else more aggressive in retirement than required?

Post by msk »

Retired 20 years ago, current age 75 with COLA pension enough for my needs. 100% stocks portfolio that I plan to retain to my grave. I give away to my potential heirs 3.5% of my portfolio each year. If you can withstand the stomach churns as the market tanks, and have enough NW, I see no special reason to be in anything but 100% stocks. My NW has grown several-fold since retirement. Over the years I have given away large chunks to charity, etc. but at age 74 I felt I might as well spoil the kids on a monthly basis. I give each enough that they can all retire instantly. This could only have happened because I have been dabbling in stocks for nearly 4 decades and in RE prior to retirement. Others might view reassurance about having "enough" as justification for being conservative with your investing. I have never really appreciated what "enough" means. There are unlimited opportunities to help others through charitable donations. Does Bill Gates have "enough"? Is his AA 50/50, 100/0, 0/100? I suspect that he is still closer to 100% stocks :confused
HomeStretch
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Re: Anyone else more aggressive in retirement than required?

Post by HomeStretch »

If 40% fixed income equaled at least 20-25x net spending at age 70-1/2, it wouldn’t seem aggressive to me to have the remaining 60% invested in 100% equities as I would be investing it for legacy purposes.
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Re: Anyone else more aggressive in retirement than required?

Post by Sandtrap »

Nowizard wrote: Tue Aug 20, 2019 10:39 am As retirees in the RMD stage, the combination of available assets, SS, a small pension and spending patterns result in an analysis that my spouse and I should easily be able to fund our retirement and have "Won the game" from that perspective. However, we continue to have a 60/40 portfolio in spite of the above. The short way to state it is that after being retired for a decade, there continues to be a struggle moving from an accumulation to a preservation stage of investing. Though aware that having stable income and investments can produce circumstances where greater risk can be taken, it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?

Tim
Consider that when you have "won the game", you have the "option" to invest to fit your "comfort zone" (what feels right to you).

And, the more substantial your assets, the more options you have. Whereas, those with less of a portfolio margin above their basic retirement needs, do not have that option. They can only do what is optimal (by the numbers).

j :happy
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delamer
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Re: Anyone else more aggressive in retirement than required?

Post by delamer »

I am not clear regarding your dilemma — are you considering going to a less aggressive portfolio because you feel that you don’t need to take the level of risk that you are currently taking?

But you don’t seem to be able to take the needed steps to “derisk?”
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Re: Anyone else more aggressive in retirement than required?

Post by flyingaway »

I would maintain 60/40 if I were you.
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birdog
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Re: Anyone else more aggressive in retirement than required?

Post by birdog »

I'm currently 90/10 and about 3 years from retirement. I'm trying to decide whether or not to transition towards 70/30 as retirement approaches and then hold that for 5 to 10 years into retirement to guard against sequence or returns risk and then trend back to 90/10 after that (bond tent). My other option is just to stay at 90/10 for good. (The 10% that is in bonds represents 5-6 years of living expenses and I feel that guards against SORR.) Bond yields are so poor that I can't see myself buying much more than 6 years of living expenses worth. Going 60/40 for me would equate to 20 years of living expenses in bonds. I won't do that. I think when you get beyond a certain amount and can make over say 100k a year from just dividends and interest that you have more freedom with your asset allocation. So, to answer your question, yes I'm planning to be more aggressive in retirement than required. By the way, I've never considered 60/40 to be aggressive at all.

White Coat Investor has a good recent article which states that too high of a bond allocation can be risky.
https://www.whitecoatinvestor.com/the-r ... rket-risk/
tesuzuki2002
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Re: Anyone else more aggressive in retirement than required?

Post by tesuzuki2002 »

birdog wrote: Tue Aug 20, 2019 1:09 pm I'm currently 90/10 and about 3 years from retirement. I'm trying to decide whether or not to transition towards 70/30 as retirement approaches and then hold that for 5 to 10 years into retirement to guard against sequence or returns risk and then trend back to 90/10 after that (bond tent). My other option is just to stay at 90/10 for good.

White Coat Investor has a good recent article which states that too high of a bond allocation can be risky.
https://www.whitecoatinvestor.com/the-r ... rket-risk/
I also planning to stay 90/10... Are you going to completely NO income when you retire?? I work here and there on contract and if it really got bad I could go back into more 3/4 time on contract and make another $100K to invest during a time the market is suffering or at least to stop pulling money out at that time...

Equities have a lot of growth potential...
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birdog
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Re: Anyone else more aggressive in retirement than required?

Post by birdog »

tesuzuki2002 wrote: Tue Aug 20, 2019 1:26 pm
birdog wrote: Tue Aug 20, 2019 1:09 pm I'm currently 90/10 and about 3 years from retirement. I'm trying to decide whether or not to transition towards 70/30 as retirement approaches and then hold that for 5 to 10 years into retirement to guard against sequence or returns risk and then trend back to 90/10 after that (bond tent). My other option is just to stay at 90/10 for good.

White Coat Investor has a good recent article which states that too high of a bond allocation can be risky.
https://www.whitecoatinvestor.com/the-r ... rket-risk/
I also planning to stay 90/10... Are you going to completely NO income when you retire?? I work here and there on contract and if it really got bad I could go back into more 3/4 time on contract and make another $100K to invest during a time the market is suffering or at least to stop pulling money out at that time...

Equities have a lot of growth potential...
Yes, no planned earned income at retirement. My plan is to take advantage of that to complete annual Roth conversions from my IRA to fill the 12% income tax bracket each year.

I wish I had your option of going back to part time work for high income later on. Once I leave my current job I fear my high income days are over.
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Re: Anyone else more aggressive in retirement than required?

Post by Steelersfan »

I'm taking RMD's, have an income stream that covers my living expenses, have been 60%/40% for a decade and plan to keep it that way for the duration. My intention is to leave my heirs a nice sum. and 60%/40% seems like a nice spot to keep it growing without taking too much risk.
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Re: Anyone else more aggressive in retirement than required?

Post by megabad »

If you are not an emotional investor, I believe allocations should be exclusively based on time horizon. This might mean that I will eventually be more or less aggressive than some generalized asset allocation model "requires" but I believe it is a vastly more appropriate method than merely placing every single 50 year old on exactly the same allocation. If you have $20 million and you want to leave $19 million to your grandchildren (ie. long time horizon), I think it is very reasonable to have very high equity allocation.
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Re: Anyone else more aggressive in retirement than required?

Post by celia »

Nowizard wrote: Tue Aug 20, 2019 10:39 am ...it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?
Of course, it is difficult to change habits you've developed over many years (accumulation). However, 60/40 is often the recommended AA for 65yo anyways.

But if you intellectually think it is wise to become more conservative, turn off automatic re-investment (in the same funds) and, instead, use all your distributions and dividends to be re-invested in bonds instead (except in Roth which should be invested in stock funds).
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Anyone else more aggressive in retirement than required?

Post by tennisplyr »

Retired, late sixties and at roughly 50/50. I'm probably a drop higher than I need to be on equities but I've been tending to leave it alone. After running some simulations I've noticed than minor AA changes (~5pp) would have minimal impact on my portfolio.
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tesuzuki2002
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Re: Anyone else more aggressive in retirement than required?

Post by tesuzuki2002 »

birdog wrote: Tue Aug 20, 2019 1:35 pm
tesuzuki2002 wrote: Tue Aug 20, 2019 1:26 pm
birdog wrote: Tue Aug 20, 2019 1:09 pm I'm currently 90/10 and about 3 years from retirement. I'm trying to decide whether or not to transition towards 70/30 as retirement approaches and then hold that for 5 to 10 years into retirement to guard against sequence or returns risk and then trend back to 90/10 after that (bond tent). My other option is just to stay at 90/10 for good.

White Coat Investor has a good recent article which states that too high of a bond allocation can be risky.
https://www.whitecoatinvestor.com/the-r ... rket-risk/
I also planning to stay 90/10... Are you going to completely NO income when you retire?? I work here and there on contract and if it really got bad I could go back into more 3/4 time on contract and make another $100K to invest during a time the market is suffering or at least to stop pulling money out at that time...

Equities have a lot of growth potential...
Yes, no planned earned income at retirement. My plan is to take advantage of that to complete annual Roth conversions from my IRA to fill the 12% income tax bracket each year.

I wish I had your option of going back to part time work for high income later on. Once I leave my current job I fear my high income days are over.
I understand... it is hard and demanding work... the high income only comes with a lot of hard work... It would be a last resort case.. Once I leave my career... this job would be hard to come by after 50... Multiple income streams helps even when they are small.
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Re: Anyone else more aggressive in retirement than required?

Post by RadAudit »

Nowizard wrote: Tue Aug 20, 2019 10:39 am aware that having stable income and investments can produce circumstances where greater risk can be taken,
Just because you can doesn't mean you have to or should.
Nowizard wrote: Tue Aug 20, 2019 10:39 am there is no dissatisfaction with either the current allocation or the results.
If you are happy with allocation and the results - stay the course. Anyway, it probably doesn't / wouldn't matter all that much if you were 60 / 40 or 40 / 60.

Personally, I'm closing in on 10 years in retirement and I'm taking RMDs. All I have is SS, a small pension, and a little IRA with a 50 / 50 AA. SWR is 3% plus inflation. Don't know if I have won the game; but, that's the plan and I'm sticking to it.
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Re: Anyone else more aggressive in retirement than required?

Post by Vanguard Fan 1367 »

Nowizard wrote: Tue Aug 20, 2019 10:39 am As retirees in the RMD stage, the combination of available assets, SS, a small pension and spending patterns result in an analysis that my spouse and I should easily be able to fund our retirement and have "Won the game" from that perspective. However, we continue to have a 60/40 portfolio in spite of the above. The short way to state it is that after being retired for a decade, there continues to be a struggle moving from an accumulation to a preservation stage of investing. Though aware that having stable income and investments can produce circumstances where greater risk can be taken, it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?





I am planning to retire this Halloween. The wife is comfortable with a 60/40 AA also, just like you. So far it is working ok for us. If the market drops 50 percent hopefully we will be ok.
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Re: Anyone else more aggressive in retirement than required?

Post by willthrill81 »

If you're still alive, how do you know that you've 'won the game'?

How do you know what level of 'aggressiveness' with regard to your AA is needed to meet your goals?

Those who can seemingly afford to take on a more bond heavy approach often have the ability to maintain their current AA or one with even more stocks. For that reason, the Bernstein saying makes little sense to me.
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Re: Anyone else more aggressive in retirement than required?

Post by Stinky »

msk wrote: Tue Aug 20, 2019 11:03 am Retired 20 years ago, current age 75 with COLA pension enough for my needs. 100% stocks portfolio that I plan to retain to my grave. I give away to my potential heirs 3.5% of my portfolio each year. If you can withstand the stomach churns as the market tanks, and have enough NW, I see no special reason to be in anything but 100% stocks. My NW has grown several-fold since retirement. Over the years I have given away large chunks to charity, etc. but at age 74 I felt I might as well spoil the kids on a monthly basis. I give each enough that they can all retire instantly. This could only have happened because I have been dabbling in stocks for nearly 4 decades and in RE prior to retirement. Others might view reassurance about having "enough" as justification for being conservative with your investing. I have never really appreciated what "enough" means. There are unlimited opportunities to help others through charitable donations. Does Bill Gates have "enough"? Is his AA 50/50, 100/0, 0/100? I suspect that he is still closer to 100% stocks :confused
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Re: Anyone else more aggressive in retirement than required?

Post by MotoTrojan »

I don’t find 60/40 particularly aggressive even in retirement.
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Re: Anyone else more aggressive in retirement than required?

Post by pkcrafter »

Nowizard wrote: Tue Aug 20, 2019 10:39 am As retirees in the RMD stage, the combination of available assets, SS, a small pension and spending patterns result in an analysis that my spouse and I should easily be able to fund our retirement and have "Won the game" from that perspective. However, we continue to have a 60/40 portfolio in spite of the above. The short way to state it is that after being retired for a decade, there continues to be a struggle moving from an accumulation to a preservation stage of investing. Though aware that having stable income and investments can produce circumstances where greater risk can be taken, it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?

Tim
If we consider need, ability and willingness, it appears you have both financial ability and emotional ability, plus willingness to go 60/40. If the market dropped 50%, your portfolio will drop about 30%. At 40/60 it would drop about 20%. These decisions always involve a trade-off of potential returns vs safety of what you already have. My own financial ability could put me at 60/40, but it also covers 40/60. My emotional ability and willingness put me at 45% equity.


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Steelersfan
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Re: Anyone else more aggressive in retirement than required?

Post by Steelersfan »

MotoTrojan wrote: Tue Aug 20, 2019 3:50 pm I don’t find 60/40 particularly aggressive even in retirement.
I agree. I think it's a nice middle ground. to let a portfolio grow without undue risk. And as someone pointed out earlier, anything between 40/60 to 60/40 yields similar performance.
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Re: Anyone else more aggressive in retirement than required?

Post by MotoTrojan »

Steelersfan wrote: Tue Aug 20, 2019 7:32 pm
MotoTrojan wrote: Tue Aug 20, 2019 3:50 pm I don’t find 60/40 particularly aggressive even in retirement.
I agree. I think it's a nice middle ground. to let a portfolio grow without undue risk. And as someone pointed out earlier, anything between 40/60 to 60/40 yields similar performance.
Anything between 40/60 and 60/40 has yielded similar performance. Bonds have been a tear for almost the last 4 decades, that may not persist forever. I personally wouldn't want less than 50-60% equity exposure but that is just me.
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Re: Anyone else more aggressive in retirement than required?

Post by grabiner »

In regular threads comparing age and asset allocation among Bogleheads, there are always several retirees with stock-heavy portfolios because they are not living on the portfolio. If your investments are intended to fund your children's retirement and your not-yet-born great-grandchildren's college, they should be invested as appropriate for your heirs' ages rather than yours.
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Re: Anyone else more aggressive in retirement than required?

Post by BuddyJet »

My concern about being aggressive is the unknown of medical, assisted living or other unknowns. Bonds dampen the value swings.
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Re: Anyone else more aggressive in retirement than required?

Post by Steelersfan »

MotoTrojan wrote: Tue Aug 20, 2019 7:42 pm
Steelersfan wrote: Tue Aug 20, 2019 7:32 pm
MotoTrojan wrote: Tue Aug 20, 2019 3:50 pm I don’t find 60/40 particularly aggressive even in retirement.
I agree. I think it's a nice middle ground. to let a portfolio grow without undue risk. And as someone pointed out earlier, anything between 40/60 to 60/40 yields similar performance.
Anything between 40/60 and 60/40 has yielded similar performance. Bonds have been a tear for almost the last 4 decades, that may not persist forever. I personally wouldn't want less than 50-60% equity exposure but that is just me.
I agree. That's why I'm on the 60/40 team.
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Re: Anyone else more aggressive in retirement than required?

Post by Sandtrap »

65+
AA: 50/50

Is that more aggressive than required?
Not sure.
There's not much difference between 60/40 and 40/60 so halfway seems good enough for now.

What's "required"?
With +45X, likely 30/70 would be fine as well. According to Bernstein's LMP, 50/50 for me is close enough.

These generalized questions usually throw a curve because everyone's portfolio, financial needs (and savvy), and behavioral tendencies are unique.
It's all relative and not too actionable unless others that are in a similar boat than oneself chimes in.

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Re: Anyone else more aggressive in retirement than required?

Post by bada bing »

There can be different perspectives on the same numbers. I retire next year at 60 and my current simple allocation is 60/40. I tend to look at it from a bucket perspective though. I have enough in intermediate term fixed income (the 40% of my current 60/40) to pay all anticipated living expenses from age 60 to age 70. At age 70 I will start my deferred social security and deferred pension which will be enough to pay my anticipated living expenses till my demise. My stock portfolio (the 60% of current allocation) is held for contingency + legacy. Eventually, I may end up close to 100% stocks if I live long enough.
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Re: Anyone else more aggressive in retirement than required?

Post by Nowizard »

Thanks for the responses. The underlying aspect of the post is focused on the psychological implications of investing more than pragmatic ones. Our portfolio is smaller than that of many who have responded, it appears. For example, our SS/Pension covers about half of our annual expenditures. It would be a stretch to live on that amount but could be done. We have no goal of leaving an inheritance but are likely to do so unless the "It is different this time" posts become accurate. At least a few of us can be very stubborn and can adhere to things not pragmatically recommended, but have also benefitted from alternate viewpoints. Trying to differentiate between the two fuels both introspection and, on occasion, modification of behavior.
Tim
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Re: Anyone else more aggressive in retirement than required?

Post by Sandtrap »

Nowizard wrote: Wed Aug 21, 2019 8:13 am Thanks for the responses. The underlying aspect of the post is focused on the psychological implications of investing more than pragmatic ones. Our portfolio is smaller than that of many who have responded, it appears. For example, our SS/Pension covers about half of our annual expenditures. It would be a stretch to live on that amount but could be done. We have no goal of leaving an inheritance but are likely to do so unless the "It is different this time" posts become accurate. At least a few of us can be very stubborn and can adhere to things not pragmatically recommended, but have also benefitted from alternate viewpoints. Trying to differentiate between the two fuels both introspection and, on occasion, modification of behavior.
Tim
Yes. Great thread. Thanks for starting it.

IMHO: our point of view and approach to life changes as we are financially secure (or insecure/"fear factor").
I'm sure there's more of, "making the best of and optimizing what we have" for many in the accumulation stage than for retirees that are financially secure. And, thus, the attitudes toward risk and portfolio strategy differ vastly between the two.

How is all this actionable?
Those in the earlier stages of building a retirement portfolio, or in retirement transition, are able to "look ahead" and strategize based on what others have done before them.
And, retirees, or retirees in transition, are able to either make course corrections or affirm they're on the right course already based on the input of other retirees.

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Re: Anyone else more aggressive in retirement than required?

Post by quisp65 »

I'm 1.5 - 2.5 years away from retirement and I'm doing fine but I still would be happy with a raise, so I'm aggressive. I think being aggressive gives more chances for a raise. I think people weigh the risks of a raise vs a cut in spending and look at the pros & cons and get a feel for the market and decide if it's a gamble worth taking. If I felt the US market had no more bull runs or I was getting old and my activity was decreasing, I would probably get more conservative or at least have enough fixed income for the rest of my estimated life.
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Re: Anyone else more aggressive in retirement than required?

Post by SQRT »

msk wrote: Tue Aug 20, 2019 11:03 am Retired 20 years ago, current age 75 with COLA pension enough for my needs. 100% stocks portfolio that I plan to retain to my grave.

Others might view reassurance about having "enough" as justification for being conservative with your investing. I have never really appreciated what "enough" means. There are unlimited opportunities to help others through charitable donations. Does Bill Gates have "enough"? Is his AA 50/50, 100/0, 0/100? I suspect that he is still closer to 100% stocks :confused
This reflects my view as well. Likely will be in the minority here though. I’m 69 and retired 13 years. All this talk about “winning the game” just doesn’t resonate with me. I also have a generous pension (not cola) that covers our basic needs. If I capitalize the pension my AA is about 60/40. Portfolio is all equities otherwise.

I view it as investing for the next generation and as such expect to leave a large legacy. I, obviously, have a high risk tolerance and the day to day volatility in the market doesn’t bother me. That being the case why wouldn’t I be heavy into equities?
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Re: Anyone else more aggressive in retirement than required?

Post by MnD »

In terrible sequence of returns (like 1966) the only things bonds did for a retiree is cause them to go broke a couple years sooner.
I'm 70/30 and living off roughly a 50/50 mix from pension and portfolio mainly because I can afford to take risk, seem to be missing the asymmetric loss aversion gene and I'm greedy and like spending money. Under a percentage of annual portfolio withdrawal plan, if the market drops 50% my gross income drops 17.5% and my net income less than that. Needs are about 30% of my income with wants and foolishness 70%, so a 15% or so net income haircut would be no big whoop. Absent that, I have and expect to have lots more income to spend versus conservative AA and low inflation-adjusted SWR. It has nothing to do with leaving a legacy. In fact, I personally view retirement withdrawal plans that end up with a retiree checking out with several multiples of starting portfolio balance to be some combination of poor planning, lack of creativity and money-hoarding versus a badge of honor. I'd have utility for 10X my current retirement income - no problemo. :mrgreen:
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Re: Anyone else more aggressive in retirement than required?

Post by desiderium »

pkcrafter wrote: Tue Aug 20, 2019 4:49 pm
Nowizard wrote: Tue Aug 20, 2019 10:39 am As retirees in the RMD stage, the combination of available assets, SS, a small pension and spending patterns result in an analysis that my spouse and I should easily be able to fund our retirement and have "Won the game" from that perspective. However, we continue to have a 60/40 portfolio in spite of the above. The short way to state it is that after being retired for a decade, there continues to be a struggle moving from an accumulation to a preservation stage of investing. Though aware that having stable income and investments can produce circumstances where greater risk can be taken, it feels like more of an inability to implement generally recommended allocation changes. I can state the logical approach as well as anyone. Implementation is the issue, and there is no dissatisfaction with either the current allocation or the results. Do other retirees have this same challenge?

Tim
If we consider need, ability and willingness, it appears you have both financial ability and emotional ability, plus willingness to go 60/40. If the market dropped 50%, your portfolio will drop about 30%. At 40/60 it would drop about 20%. These decisions always involve a trade-off of potential returns vs safety of what you already have. My own financial ability could put me at 60/40, but it also covers 40/60. My emotional ability and willingness put me at 45% equity.


Paul
Well said, Paul

I am approaching retirement with a comfortable sum and arrived at 45% equities because of SORR. Choosing this, I focused on potential 50% drop in equities and considered both financial and especially my emotional ability to take this in stride--based on my experience in 2008-9. I have missed some returns, but experience very little regret.
msk
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Re: Anyone else more aggressive in retirement than required?

Post by msk »

MnD wrote: Wed Aug 21, 2019 8:45 am I personally view retirement withdrawal plans that end up with a retiree checking out with several multiples of starting portfolio balance to be some combination of poor planning, lack of creativity and money-hoarding versus a badge of honor. I'd have utility for 10X my current retirement income - no problemo. :mrgreen:
It would be interesting to hear what your age is :confused Enjoy your investments while you have the energy and enthusiasm. I found that by age 75 both wither as age progresses. And even those start at typical, luke warm, skeptical/cynical, BH levels :oops: Anyone wants a $10 million yacht at age 80? Must be a few weirdos out there...
deikel
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Re: Anyone else more aggressive in retirement than required?

Post by deikel »

I feel there is some general misconception around anyway:

Trinity study and the efficiency frontier suggests that an asset allocation of 80/20 stocks to bonds is the most 'efficient' investment over a long period of time (you can argue with me about the exact number here). So that number makes the most logical sense to me.

Going higher in bonds will cost you return and 'efficiency', but provide you with the psychological advantage of not selling in a downturn, which is actually your biggest risk overall

So, you staying at a higher stock allocation then what you theoretically need to get enough income from the assets to normally live, is not wrong, bad or illogical at all - its actually quite efficient as long as you eliminate the possibility that you fire sell in a downturn.

In fact, its the 100% stock folks that are actually 'off' based on Trinity - but at a current bond yield around 2 % (roughly the same then dividend yield of the S+P500 !), its just hard to swallow that there ever was a time where having 20% bond allocation was beneficial for your overall return....the retirees in the dot com bubble for example

I think that is what you are fighting and you probably should not , you are set up quite right for the current times.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
catalina355
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Re: Anyone else more aggressive in retirement than required?

Post by catalina355 »

deikel wrote: Thu Aug 22, 2019 8:04 am I feel there is some general misconception around anyway:

Trinity study and the efficiency frontier suggests that an asset allocation of 80/20 stocks to bonds is the most 'efficient' investment over a long period of time (you can argue with me about the exact number here). So that number makes the most logical sense to me.

Going higher in bonds will cost you return and 'efficiency', but provide you with the psychological advantage of not selling in a downturn, which is actually your biggest risk overall

So, you staying at a higher stock allocation then what you theoretically need to get enough income from the assets to normally live, is not wrong, bad or illogical at all - its actually quite efficient as long as you eliminate the possibility that you fire sell in a downturn.

In fact, its the 100% stock folks that are actually 'off' based on Trinity - but at a current bond yield around 2 % (roughly the same then dividend yield of the S+P500 !), its just hard to swallow that there ever was a time where having 20% bond allocation was beneficial for your overall return....the retirees in the dot com bubble for example

I think that is what you are fighting and you probably should not , you are set up quite right for the current times.
Do you have a reference for 80/20 being the most efficient allocation?

Why do you say the 100% stock folks are off based on Trinity?
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Mullins
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Re: Anyone else more aggressive in retirement than required?

Post by Mullins »

tesuzuki2002 wrote: Tue Aug 20, 2019 1:26 pm I work here and there on contract and if it really got bad I could go back into more 3/4 time on contract and make another $100K to invest during a time the market is suffering or at least to stop pulling money out at that time
I was thinking that too, if necessary then go back to work, but I'm wondering if, as I've noticed over the years, when the market's suffering, doesn't the perceived lack of prosperity and diminished 401ks and IRAs and associated fear have many business's customers tightening their belts, reducing spending, cutting expenses, all of this impacting, making it more difficult, to get that paycheck?
MnD
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Re: Anyone else more aggressive in retirement than required?

Post by MnD »

msk wrote: Thu Aug 22, 2019 7:41 am
MnD wrote: Wed Aug 21, 2019 8:45 am I personally view retirement withdrawal plans that end up with a retiree checking out with several multiples of starting portfolio balance to be some combination of poor planning, lack of creativity and money-hoarding versus a badge of honor. I'd have utility for 10X my current retirement income - no problemo. :mrgreen:
It would be interesting to hear what your age is :confused Enjoy your investments while you have the energy and enthusiasm. I found that by age 75 both wither as age progresses. And even those start at typical, luke warm, skeptical/cynical, BH levels :oops: Anyone wants a $10 million yacht at age 80? Must be a few weirdos out there...
Age 57, retired age 56.
Yes, having a higher utility for the retirement income one has spent their working life preparing while early in retirement is innate to my AA and SWR. In retirement even without the misfortune of early demise, there are the go-go years, the slow-go years and the no-go years. The problem with ultra-conservative retirement spending plans is that by the time it's blindingly obvious on has greatly over-saved, it's often too late to do much with the "surplus". Given life expectancies it's even a bit late for heirs to enjoy maximum utility if the "saving for retirement" plan ends up just building and growing money mountain, finding no utility for it and passing it on.
70/30 AA for life, Global market cap equity. Rebalance if fixed income <25% or >35%. Weighted ER< .10%. 5% of annual portfolio balance SWR, Proportional (to AA) withdrawals.
deikel
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Re: Anyone else more aggressive in retirement than required?

Post by deikel »

catalina355 wrote: Thu Aug 22, 2019 9:11 am
deikel wrote: Thu Aug 22, 2019 8:04 am I feel there is some general misconception around anyway:

Trinity study and the efficiency frontier suggests that an asset allocation of 80/20 stocks to bonds is the most 'efficient' investment over a long period of time (you can argue with me about the exact number here). So that number makes the most logical sense to me.

Going higher in bonds will cost you return and 'efficiency', but provide you with the psychological advantage of not selling in a downturn, which is actually your biggest risk overall

So, you staying at a higher stock allocation then what you theoretically need to get enough income from the assets to normally live, is not wrong, bad or illogical at all - its actually quite efficient as long as you eliminate the possibility that you fire sell in a downturn.

In fact, its the 100% stock folks that are actually 'off' based on Trinity - but at a current bond yield around 2 % (roughly the same then dividend yield of the S+P500 !), its just hard to swallow that there ever was a time where having 20% bond allocation was beneficial for your overall return....the retirees in the dot com bubble for example

I think that is what you are fighting and you probably should not , you are set up quite right for the current times.
Do you have a reference for 80/20 being the most efficient allocation?

Why do you say the 100% stock folks are off based on Trinity?

I put efficient in quotation marks since you can define efficiency differently in this context. For asset allocations, efficient sometimes is defined as the return related to the variation, however for Trinity I and II (and better yet the Bengen study) success (my efficiency) was defined as not running out of money for x amount of years taking out y % every year (inflation adjusted) over different periods in time (backtested).

Here is Bengen: http://www.retailinvestor.org/pdf/Bengen1.pdf

Trinity Study summary wiki: https://en.wikipedia.org/wiki/Trinity_s ... Bengen1994

Some meta analysis/summary here: https://web.stanford.edu/~wfsharpe/retecon/4percent.pdf)

Bengen basically shows that at withdrawel rates of 4% and above and worst case market conditions, a 100% stock portfolio last LESS years then a portfolio with 25% bonds in it (and in fact 50/50 performed best); at even higher bond allocation the inflation overwhelmed the return of the stock portion.

Many side aspects to consider of course, but hence my broad brush 80/20 is 'best' at current times
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
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Re: Anyone else more aggressive in retirement than required?

Post by catalina355 »

deikel wrote: Thu Aug 22, 2019 10:31 am
catalina355 wrote: Thu Aug 22, 2019 9:11 am
deikel wrote: Thu Aug 22, 2019 8:04 am I feel there is some general misconception around anyway:

Trinity study and the efficiency frontier suggests that an asset allocation of 80/20 stocks to bonds is the most 'efficient' investment over a long period of time (you can argue with me about the exact number here). So that number makes the most logical sense to me.

Going higher in bonds will cost you return and 'efficiency', but provide you with the psychological advantage of not selling in a downturn, which is actually your biggest risk overall

So, you staying at a higher stock allocation then what you theoretically need to get enough income from the assets to normally live, is not wrong, bad or illogical at all - its actually quite efficient as long as you eliminate the possibility that you fire sell in a downturn.

In fact, its the 100% stock folks that are actually 'off' based on Trinity - but at a current bond yield around 2 % (roughly the same then dividend yield of the S+P500 !), its just hard to swallow that there ever was a time where having 20% bond allocation was beneficial for your overall return....the retirees in the dot com bubble for example

I think that is what you are fighting and you probably should not , you are set up quite right for the current times.
Do you have a reference for 80/20 being the most efficient allocation?

Why do you say the 100% stock folks are off based on Trinity?

I put efficient in quotation marks since you can define efficiency differently in this context. For asset allocations, efficient sometimes is defined as the return related to the variation, however for Trinity I and II (and better yet the Bengen study) success (my efficiency) was defined as not running out of money for x amount of years taking out y % every year (inflation adjusted) over different periods in time (backtested).

Here is Bengen: http://www.retailinvestor.org/pdf/Bengen1.pdf

Trinity Study summary wiki: https://en.wikipedia.org/wiki/Trinity_s ... Bengen1994

Some meta analysis/summary here: https://web.stanford.edu/~wfsharpe/retecon/4percent.pdf)

Bengen basically shows that at withdrawel rates of 4% and above and worst case market conditions, a 100% stock portfolio last LESS years then a portfolio with 25% bonds in it (and in fact 50/50 performed best); at even higher bond allocation the inflation overwhelmed the return of the stock portion.

Many side aspects to consider of course, but hence my broad brush 80/20 is 'best' at current times
Thank you for the references. I do see where Bengen found 50/50 performed best. I'm wondering why you are suggesting 80/20?
aristotelian
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Re: Anyone else more aggressive in retirement than required?

Post by aristotelian »

There are plenty of posters with 100% stock. If you have won the game with room to spare, you have less need but more ability to take risk. There is always social security if your stocks go up in smoke. I doubt you will be eating dog food.
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Re: Anyone else more aggressive in retirement than required?

Post by SGM »

I I don't think there is an absolutely right answer to choosing an AA. Any dividends or monthly income from outside of my portfolio that I don't spend is reinvested in bond funds. I have been retired 5 years and have decided I ought to be a bit more conservative. From 100% stock in the accumulation phase I am somewhat lighter than 70% stock. I don't know the exact number and don't care as I could live off of other income streams including delayed until 70 SS, a good TIAA-CREF annuity through employment, a pension. and rentals.
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Re: Anyone else more aggressive in retirement than required?

Post by deikel »

catalina355 wrote: Thu Aug 22, 2019 11:46 am
deikel wrote: Thu Aug 22, 2019 10:31 am
catalina355 wrote: Thu Aug 22, 2019 9:11 am
deikel wrote: Thu Aug 22, 2019 8:04 am I feel there is some general misconception around anyway:

Trinity study and the efficiency frontier suggests that an asset allocation of 80/20 stocks to bonds is the most 'efficient' investment over a long period of time (you can argue with me about the exact number here). So that number makes the most logical sense to me.

Going higher in bonds will cost you return and 'efficiency', but provide you with the psychological advantage of not selling in a downturn, which is actually your biggest risk overall

So, you staying at a higher stock allocation then what you theoretically need to get enough income from the assets to normally live, is not wrong, bad or illogical at all - its actually quite efficient as long as you eliminate the possibility that you fire sell in a downturn.

In fact, its the 100% stock folks that are actually 'off' based on Trinity - but at a current bond yield around 2 % (roughly the same then dividend yield of the S+P500 !), its just hard to swallow that there ever was a time where having 20% bond allocation was beneficial for your overall return....the retirees in the dot com bubble for example

I think that is what you are fighting and you probably should not , you are set up quite right for the current times.
Do you have a reference for 80/20 being the most efficient allocation?

Why do you say the 100% stock folks are off based on Trinity?

I put efficient in quotation marks since you can define efficiency differently in this context. For asset allocations, efficient sometimes is defined as the return related to the variation, however for Trinity I and II (and better yet the Bengen study) success (my efficiency) was defined as not running out of money for x amount of years taking out y % every year (inflation adjusted) over different periods in time (backtested).

Here is Bengen: http://www.retailinvestor.org/pdf/Bengen1.pdf

Trinity Study summary wiki: https://en.wikipedia.org/wiki/Trinity_s ... Bengen1994

Some meta analysis/summary here: https://web.stanford.edu/~wfsharpe/retecon/4percent.pdf)

Bengen basically shows that at withdrawel rates of 4% and above and worst case market conditions, a 100% stock portfolio last LESS years then a portfolio with 25% bonds in it (and in fact 50/50 performed best); at even higher bond allocation the inflation overwhelmed the return of the stock portion.

Many side aspects to consider of course, but hence my broad brush 80/20 is 'best' at current times
Thank you for the references. I do see where Bengen found 50/50 performed best. I'm wondering why you are suggesting 80/20?
If you look at Bengen - his Figure 2, the 75/25 is only marginally worse then 50/50 at 4, 5, 6 % withdrawel rate (relative to each other, absolute the successrate dropps since the 5,6,7% withdrawel is too much obviously

when you look here for an updated dataset till 2017:

https://fourpillarfreedom.com/the-trini ... -for-2018/

You can see in the tables the success rate, and the rate is now actually better at 75/25 then it is at 50/50.

I will assume the newer dataset reflects generally lower bond yield numbers and hence the higher stock portfolio wins out more now.

I have seen a dataset before that was similarly constructed, but in 10% steps and the 80/20 looked best - but I can not find the link right now - so based on above; 75/25 it should be and its really close enough anyway.

It would make sense to mention that Bengen expected re-allocation, so in the current low bond yield situation, I think the bonds give you the re-allocation space plus the ability to draw from in an immediate downturn - as such they behave almost like cash. In past downturns, they created an income stream due to their actual yield and truly provided 'income'....I don't think they currently fulfill this function and would not carry you through an immediate market correction...again, the situation around the year 2000 comes to mind. WIth that in mind, I can certainly understand people trending to rather less bonds then more.
Everything you read in this post is my personal opinion. If you disagree with this disclaimer, please un-read the text immediately and destroy any copy or remembrance of it.
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Re: Anyone else more aggressive in retirement than required?

Post by hulburt1 »

66 here 93/7..I will take SS at 70. If I lost everything I could still live nice..have 1.3m and spend 2400 a month.
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siamond
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Re: Anyone else more aggressive in retirement than required?

Post by siamond »

Anyone else more aggressive in retirement than required?
... required by WHO?

This type of pushback increasingly annoys me. It's like a new form of body shaming, only it's "stock exposure shaming". Well, SHAME ON THE SHAMERS. :annoyed

Using cookie-cutter advice like "retirees should start at 30/70" is not only misguided and narrow thinking, it is also incredibly dismissive of the fact that we're ALL DIFFERENT. Everybody is different. Our financial situation. Our personal situation. Our past experiences and acquired knowledge. Our goals, our fears. Our psychology and behavior. Etc. Consequently, our AA decisions should be made on a very personal basis, certainly not following cookie-cutter advice.

OP, if you feel comfortable with 60/40 (and by the tone of your post, you clearly are), then there is absolutely NO ISSUE with it. When one has a solid combination of assets + fixed income vs. low spending habits, this does NOT mean that you must reduce your stock exposure. This means that you can do WHATEVER YOU WANT (well, with reason, of course). And the best choice is then to do whatever you feel is right for your own circumstances. So that you stay the course.

Now if you need more explicit reasons for which a retiree MIGHT want to keep solid stock exposure, here are a few, largely centered on the facts that risk is NOT short-term volatility, it is truly multi-faceted, and that reward(s) DO matter as well:
- long-term goals and fears (e.g. desire to leave a solid bequest and/or donations; inflation risk; long-term care costs; risk of low return hence low purchasing power; etc), all speak in favor of keeping a solid engine of growth in one's portfolio.
- we have only one life. Truly benefitting from upsides can be viewed as nearly as important as mitigating downsides.
- bonds are NOT safe. They are really not. The worst and most protracted market crisis in the US history was BY FAR the bonds crisis post WW-II. Which itself was nothing compared to corresponding crises in European countries.
- when trying to balance stock-like assets with bonds-like assets, one really should take in account fixed income flows (SS/Pension/Inheritance/etc). John Bogle was very clear about that and (I believe) he was absolutely right.

Some of those things might resonate with you OR they may not. You might agree or disagree with some of those views. That's fine, again, we're all different. I can only encourage the OP to think on his own, formalize his (financial) goals and fears and make his own decision within his own context.

PS. I am 57, early retiree. My AA is 80/20, fixed, no glide path. I don't think I am a reckless imbecile. I studied and modeled and thought long and hard before settling on this decision as the best way to address my goals and fears. This is MY decision. Unashamedly so.
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Re: Anyone else more aggressive in retirement than required?

Post by willthrill81 »

siamond wrote: Thu Aug 22, 2019 1:27 pm
Anyone else more aggressive in retirement than required?
... required by WHO?

This type of pushback increasingly annoys me. It's like a new form of body shaming, only it's "stock exposure shaming". Well, SHAME ON THE SHAMERS. :annoyed

Using cookie-cutter advice like "retirees should start at 30/70" is not only misguided and narrow thinking, it is also incredibly dismissive of the fact that we're ALL DIFFERENT. Everybody is different. Our financial situation. Our personal situation. Our past experiences and acquired knowledge. Our goals, our fears. Our psychology and behavior. Etc. Consequently, our AA decisions should be made on a very personal basis, certainly not following cookie-cutter advice.

OP, if you feel comfortable with 60/40 (and by the tone of your post, you clearly are), then there is absolutely NO ISSUE with it. When one has a solid combination of assets + fixed income vs. low spending habits, this does NOT mean that you must reduce your stock exposure. This means that you can do WHATEVER YOU WANT (well, with reason, of course). And the best choice is then to do whatever you feel is right for your own circumstances. So that you stay the course.

Now if you need more explicit reasons for which a retiree MIGHT want to keep solid stock exposure, here are a few, largely centered on the facts that risk is NOT short-term volatility, it is truly multi-faceted, and that reward(s) DO matter as well:
- long-term goals and fears (e.g. desire to leave a solid bequest and/or donations; inflation risk; long-term care costs; risk of low return hence low purchasing power; etc), all speak in favor of keeping a solid engine of growth in one's portfolio.
- we have only one life. Truly benefitting from upsides can be viewed as nearly as important as mitigating downsides.
- bonds are NOT safe. They are really not. The worst and most protracted market crisis in the US history was BY FAR the bonds crisis post WW-II. Which itself was nothing compared to corresponding crises in European countries.
- when trying to balance stock-like assets with bonds-like assets, one really should take in account fixed income flows (SS/Pension/Inheritance/etc). John Bogle was very clear about that and (I believe) he was absolutely right.

Some of those things might resonate with you OR they may not. You might agree or disagree with some of those views. That's fine, again, we're all different. I can only encourage the OP to think on his own, formalize his (financial) goals and fears and make his own decision within his own context.

PS. I am 57, early retiree. My AA is 80/20, fixed, no glide path. I don't think I am a reckless imbecile. I studied and modeled and thought long and hard before settling on this decision as the best way to address my goals and fears. This is MY decision. Unashamedly so.
:sharebeer

To be honest, there's a lot more art to investing than many of us think there is. As such, criticizing someone else's clearly thought out and informed strategy is more than a bit like saying that 20th century art nouveau is a superior style to 19th century French impressionism or cubism.

We're all making subjective judgments about how to best deal with an uncertain future using the imperfect and incomplete information that we currently have. Definitive statements of 'required' or 'illogical' are hard to make in such an environment.
“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: Anyone else more aggressive in retirement than required?

Post by abuss368 »

I would expect that is a more personal decision based on each investors circumstances, time frame, and tolerance for risk. If one has a very low cost of living and pensions, then yes. I know of retirees who fit that mold. Their portfolio's are much higher now than when they left the workforce.
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Re: Anyone else more aggressive in retirement than required?

Post by Always passive »

msk wrote: Tue Aug 20, 2019 11:03 am Retired 20 years ago, current age 75 with COLA pension enough for my needs. 100% stocks portfolio that I plan to retain to my grave. I give away to my potential heirs 3.5% of my portfolio each year. If you can withstand the stomach churns as the market tanks, and have enough NW, I see no special reason to be in anything but 100% stocks. My NW has grown several-fold since retirement. Over the years I have given away large chunks to charity, etc. but at age 74 I felt I might as well spoil the kids on a monthly basis. I give each enough that they can all retire instantly. This could only have happened because I have been dabbling in stocks for nearly 4 decades and in RE prior to retirement. Others might view reassurance about having "enough" as justification for being conservative with your investing. I have never really appreciated what "enough" means. There are unlimited opportunities to help others through charitable donations. Does Bill Gates have "enough"? Is his AA 50/50, 100/0, 0/100? I suspect that he is still closer to 100% stocks :confused
i love your generosity!
I would have done the same, but I have a wife that is traumatized by not having enough money (she comes from a family that live long), no matter how many times I have proven to her that that is far from reality. So we give to them, but not enough given our situation.
"It is better to give with a warm hand than with a cold one!"
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