Any Retirees With AA = 100% Equities?

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TNOA
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Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 2:44 pm

I recently retired and considering going 100% equities. I know this is for most people against the conventional wisdom. However, we are all different. I am truly interested in the insights of any retirees who actually have an asset allocation with 100% equities and that they are (very?) comfortable with it. The longer you have been investing this way the more helpful your story is for me. I’d like to know what got you in this AA, where do you get the mental strength to weather times like these days, what are some of the personal circumstances you are in that may be making it easier for you to sustain this AA through thin and thick (e.g., I am wealthy, I don’t spend much, I am single, etc.). Whatever the case is, I really would like to hear from you and the background picture behind your story. This will help a lot in assisting making my choice. Thank you all.

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Re: Any Retirees With AA = 100% Equities?

Post by Flyer24 » Tue Mar 24, 2020 3:00 pm

Thread has been retitled to remove all caps.

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windaar
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Re: Any Retirees With AA = 100% Equities?

Post by windaar » Tue Mar 24, 2020 3:02 pm

Curious, could you explain why you are considering such intense risk at this stage of your life?
Nobody knows nothing.

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Re: Any Retirees With AA = 100% Equities?

Post by ginrummy » Tue Mar 24, 2020 3:31 pm

In my opinion the only people who survive 100% equities are those who don't look at their accounts. If you are one of those, which if you're on the board, you probably are not, but if you are, you have a chance.

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Re: Any Retirees With AA = 100% Equities?

Post by bloom2708 » Tue Mar 24, 2020 3:34 pm

If you have a $75k COLA pension and live off $60k, you could possibly go 100/0. You could, but I wouldn't recommend it to any friend or pal or buddy.

You could also go 0/100 in that scenario. I wouldn't recommend that either.
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Re: Any Retirees With AA = 100% Equities?

Post by galawdawg » Tue Mar 24, 2020 3:53 pm

I've got a pension that meets all of our monthly needs so our portfolio is for irregular expenses (replacement vehicles, home improvement, giving, travel and other discretionary spending). We were 100% VTSAX until I was a year away from retirement when we adjusted to 80/20 (adding VBTLX). In mid-February, we rebalanced and adjusted to 75/25. DW and I have an annual "financial meeting" in January and evaluate our prior year finances and portfolio performance and plan for the next twelve months. So next January we'll take a look at our IPS and asset allocation and see whether to adjust either at the same time we do our annual rebalancing.

Even though our portfolio is not "needed' for our ongoing necessary living expenses, it is still not much fun to see how the markets are doing right now. It would take a strong will indeed to stay the course with a 100% equity allocation, particularly as a retiree.

Since you mention you are recently retired and "considering" going 100% equities, what is your allocation now? What was your allocation prior to retirement. If not 100% equities, why would you increase risk during your decumulation phase if you were unwilling/unable to tolerate that same risk level when you were working and accumulating? What has changed?

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Re: Any Retirees With AA = 100% Equities?

Post by Call_Me_Op » Tue Mar 24, 2020 3:57 pm

Sorry, I don't want to spend my retirement in abject misery.
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Re: Any Retirees With AA = 100% Equities?

Post by abner kravitz » Tue Mar 24, 2020 3:57 pm

It's a lot easier to consider 100% equities on a day the market is up 10%. I bet a lot of people wish they were 100% bonds on the days it is down 10%.

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Re: Any Retirees With AA = 100% Equities?

Post by vipertom1970 » Tue Mar 24, 2020 4:28 pm

yes, I retired at 50, no pension, 100% equities and zero bonds but my withdraw rate is less then 1.5% of my portfolio. My equities portfolio was 49x yearly expenses, EF is 3x yearly expenses and I assume to survive a 50% hair cut.

I don't understand why you going into 100% equities right before retirement if you were not in prior years ?
Last edited by vipertom1970 on Tue Mar 24, 2020 4:52 pm, edited 2 times in total.

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Re: Any Retirees With AA = 100% Equities?

Post by pharmermummles » Tue Mar 24, 2020 4:39 pm

Not retired, or close to it, but I'm a big planner, and I've thought about it. Especially in the setting of early retirement and/or longevity insurance. I've done a lot of reading on Big ERN's safe withdrawal series. Larger equity allocations do very well over the long term, allowing for a higher success rate of modest withdrawal rates over long periods of time. More than that, a rising equity glide path helps with sequence of return risk in the early years of retirement. So starting retirement at like 60-80% equities and ratcheting up to 80-100% equities on a glide path would have worked very well in most historical timeframes. It seems aggressive, but the historical data back it up (past performance does not etc etc...).

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Re: Any Retirees With AA = 100% Equities?

Post by Rosencrantz1 » Tue Mar 24, 2020 4:43 pm

Interesting question.

We're not 100% equities - our retirement portfolio (IRAs and Roths) is 70/30 and our taxable portfolio is 100% equities. In spite of having 3 secure COLA pensions that provide about 2X our monthly expenses, it'd be hard for me to be 'all in' on equities. This past month has reminded me why I don't want 100%.

OP: If you're contemplating 100% equities in retirement, I'd suggest you be 100% certain you'll have income streams that'll cover your expenses and travel and health care (at minimum). :beer

EDIT: or, that your net worth is north of $10M.
Last edited by Rosencrantz1 on Tue Mar 24, 2020 4:48 pm, edited 1 time in total.

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Re: Any Retirees With AA = 100% Equities?

Post by baconavocado » Tue Mar 24, 2020 4:44 pm

My guess is that you'll find the 100%-equities-in-retirement folks are the ones who have a large portfolio compared to their expenses, or have other sources of revenue besides their portfolio. But maybe that's obvious.

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Re: Any Retirees With AA = 100% Equities?

Post by Enzo IX » Tue Mar 24, 2020 6:19 pm

I don't think I could go completely 100%, I always in life if possible made sure I had a plan "b" to fall back on.

Looking back, after this virus scare resolves itself, it will probably be a very good entry point to make a considerable amount to money. However, nothing is certain and the extra monies made would just increase the stack that I don't spend. What do they call that, "A low marginal utility of wealth."

If we go down to let say 50% or greater off the high, I will start to reallocate my bonds to stocks, but never be 100% stocks. Greed and ego has messed up more peoples lives than I can think of.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:06 pm

Flyer24 wrote:
Tue Mar 24, 2020 3:00 pm
Thread has been retitled to remove all caps.
Thank you, I was simply not aware they were all caps. My apologies.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:09 pm

windaar wrote:
Tue Mar 24, 2020 3:02 pm
Curious, could you explain why you are considering such intense risk at this stage of your life?
I am 56. Hoping for a long life. I can (albeit barely, but still) survive simply off my dividends and interest. Merging expected life in years (hopeful thinking perhaps) with some capital preservation, but don't have any math to back it up.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:11 pm

ginrummy wrote:
Tue Mar 24, 2020 3:31 pm
In my opinion the only people who survive 100% equities are those who don't look at their accounts. If you are one of those, which if you're on the board, you probably are not, but if you are, you have a chance.
This is my first big bear market test. I am on the board, as well as look at my account every day. But finding myself taking it like a champ, because I worked hard for determining my 70/30 AA to-date and I feel like I can handle 100/0 (last few years, I am not a life long investor like some of you guys - learning, hence the question).

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:12 pm

bloom2708 wrote:
Tue Mar 24, 2020 3:34 pm
If you have a $75k COLA pension and live off $60k, you could possibly go 100/0. You could, but I wouldn't recommend it to any friend or pal or buddy.

You could also go 0/100 in that scenario. I wouldn't recommend that either.
Thank you. I answered some of the other questions above that tangentially may be relevant for your answer or thoughts if interested. I'd love to hear your thoughts.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:15 pm

galawdawg wrote:
Tue Mar 24, 2020 3:53 pm
I've got a pension that meets all of our monthly needs so our portfolio is for irregular expenses (replacement vehicles, home improvement, giving, travel and other discretionary spending). We were 100% VTSAX until I was a year away from retirement when we adjusted to 80/20 (adding VBTLX). In mid-February, we rebalanced and adjusted to 75/25. DW and I have an annual "financial meeting" in January and evaluate our prior year finances and portfolio performance and plan for the next twelve months. So next January we'll take a look at our IPS and asset allocation and see whether to adjust either at the same time we do our annual rebalancing.

Even though our portfolio is not "needed' for our ongoing necessary living expenses, it is still not much fun to see how the markets are doing right now. It would take a strong will indeed to stay the course with a 100% equity allocation, particularly as a retiree.

Since you mention you are recently retired and "considering" going 100% equities, what is your allocation now? What was your allocation prior to retirement. If not 100% equities, why would you increase risk during your decumulation phase if you were unwilling/unable to tolerate that same risk level when you were working and accumulating? What has changed?
Thank you for your thoughtful response. My allocation (also included in my answers to some of the other questions in this thread above) was 70/30 before retirement. I am 56. With 70/30, I didn't have the experience yet to know I can live off of dividends and interest off 100/0 (just as the case is 70/30). Not a long time investor, in markets last few years basically and gave back 30+% or so from ATHs in this collapse too.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:15 pm

Call_Me_Op wrote:
Tue Mar 24, 2020 3:57 pm
Sorry, I don't want to spend my retirement in abject misery.
I don't want you to either.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:16 pm

abner kravitz wrote:
Tue Mar 24, 2020 3:57 pm
It's a lot easier to consider 100% equities on a day the market is up 10%. I bet a lot of people wish they were 100% bonds on the days it is down 10%.
Good point. This question didn't come up to me today. But I understand the skepticism and the subsequent pointing in case it did. Very helpful, and I mean it.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:20 pm

vipertom1970 wrote:
Tue Mar 24, 2020 4:28 pm
yes, I retired at 50, no pension, 100% equities and zero bonds but my withdraw rate is less then 1.5% of my portfolio. My equities portfolio was 49x yearly expenses, EF is 3x yearly expenses and I assume to survive a 50% hair cut.

I don't understand why you going into 100% equities right before retirement if you were not in prior years ?
Thank you for the response and some color by giving tangible numbers. Maybe I should put aside n years of EF, good point. On the other stuff, is your 49x yearly expenses on pure nominal basis? Do you have a better ratio for me that accounts for $$ in year 49 being worth less than today? I answered some of your questions above on other threads. 70/30 portfolio dividends and interest appears very similar to 100/0. At age 56, today, I want some capital preservation in inflation-adjusted terms.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:22 pm

pharmermummles wrote:
Tue Mar 24, 2020 4:39 pm
Not retired, or close to it, but I'm a big planner, and I've thought about it. Especially in the setting of early retirement and/or longevity insurance. I've done a lot of reading on Big ERN's safe withdrawal series. Larger equity allocations do very well over the long term, allowing for a higher success rate of modest withdrawal rates over long periods of time. More than that, a rising equity glide path helps with sequence of return risk in the early years of retirement. So starting retirement at like 60-80% equities and ratcheting up to 80-100% equities on a glide path would have worked very well in most historical timeframes. It seems aggressive, but the historical data back it up (past performance does not etc etc...).
reading on Big ERN's safe withdrawal series this is very interesting and I am not familiar with it. Is there any particular reading (or previous threads) you would recommend me to read up on? because just from what you're writing I simply don't quite understand it but I can see there is something very interesting in there. Thanks again.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:25 pm

Rosencrantz1 wrote:
Tue Mar 24, 2020 4:43 pm
Interesting question.

We're not 100% equities - our retirement portfolio (IRAs and Roths) is 70/30 and our taxable portfolio is 100% equities. In spite of having 3 secure COLA pensions that provide about 2X our monthly expenses, it'd be hard for me to be 'all in' on equities. This past month has reminded me why I don't want 100%.

OP: If you're contemplating 100% equities in retirement, I'd suggest you be 100% certain you'll have income streams that'll cover your expenses and travel and health care (at minimum). :beer

EDIT: or, that your net worth is north of $10M.
Great points. I do not have "alternative" income streams that'll cover my retirement expenses however at 70/30 dividends and interests are sufficient for that, at least in today's world. On your last point, can you please elaborate your thinking as to why that number ($10 MM) is the threshold for you. How do you pick that up, and not $6 MM or $16 MM? Very curious.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:26 pm

baconavocado wrote:
Tue Mar 24, 2020 4:44 pm
My guess is that you'll find the 100%-equities-in-retirement folks are the ones who have a large portfolio compared to their expenses, or have other sources of revenue besides their portfolio. But maybe that's obvious.
It is obvious but I am just as much grateful for the time you took to respond as any other: thank you!

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 9:28 pm

Enzo IX wrote:
Tue Mar 24, 2020 6:19 pm
I don't think I could go completely 100%, I always in life if possible made sure I had a plan "b" to fall back on.

Looking back, after this virus scare resolves itself, it will probably be a very good entry point to make a considerable amount to money. However, nothing is certain and the extra monies made would just increase the stack that I don't spend. What do they call that, "A low marginal utility of wealth."

If we go down to let say 50% or greater off the high, I will start to reallocate my bonds to stocks, but never be 100% stocks. Greed and ego has messed up more peoples lives than I can think of.
Thank you. I agree, a plan B - if available - allows for better sleep at night, no doubt. It was important for me to read your thought. Appreciate it.

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Re: Any Retirees With AA = 100% Equities?

Post by 209south » Tue Mar 24, 2020 9:40 pm

US investors (including me) have led charmed lives the past few decades. BUT consider what happened in Japan over the past 30 years - it may not, but COULD happen here, in which case 100% equities in retirement may be imprudent.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Tue Mar 24, 2020 10:12 pm

209south wrote:
Tue Mar 24, 2020 9:40 pm
US investors (including me) have led charmed lives the past few decades. BUT consider what happened in Japan over the past 30 years - it may not, but COULD happen here, in which case 100% equities in retirement may be imprudent.
Agree and good point. However, Japanese investors only suffered if they were 100% invested in their home country. I am a US investor, and have (and would still have at 100/0) 60/40 VTI/VXUS. Would this change your opinion?

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Re: Any Retirees With AA = 100% Equities?

Post by galawdawg » Wed Mar 25, 2020 5:45 am

You mention that you put a lot of thought/work into setting your AA at 70/30. I think that was a wise process and am a subscriber to the "if it ain't broke, don't fix it" philosophy in many areas of life.

A few thoughts about "living off dividends".

1. If you are serious about your plan to live off dividends, why are you invested in index funds rather than individual dividend paying stocks (or a dividend focused index fund such as VHYAX or VDIGX)? Some of the stocks held in VTI don't pay dividends, thus while you have paid to purchase them, you are not receiving income from them.

2. Realize that some companies have reduced or eliminated their dividend payments in the past and that could certainly occur in the future.

3. By focusing on dividends rather than total return, IMHO you are undertaking risk that may not be necessary. For example, if you feel you need to be 100% stock to get your desired dividend income, you may find that a 70/30 allocation (or even 60/40 or 50/50) may give you equal or greater total return at much less risk. So with less risk you may realize an equal or higher income with the 70/30 allocation. Your income results from both dividends and from selling holdings in a strategic planned manner. If you haven't already, you may want to check out www.firecalc.com and run the numbers using your desired annual income and various asset allocations.

4. You mention living off dividends and interest. If you are 100% stock, there is no interest. Equities don't pay interest.

As you've probably seen mentioned in this forum many times, I'd recommend you "stay the course"!

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Re: Any Retirees With AA = 100% Equities?

Post by Rosencrantz1 » Wed Mar 25, 2020 10:51 am

TNOA wrote:
Tue Mar 24, 2020 9:25 pm
Rosencrantz1 wrote:
Tue Mar 24, 2020 4:43 pm
Interesting question.

We're not 100% equities - our retirement portfolio (IRAs and Roths) is 70/30 and our taxable portfolio is 100% equities. In spite of having 3 secure COLA pensions that provide about 2X our monthly expenses, it'd be hard for me to be 'all in' on equities. This past month has reminded me why I don't want 100%.

OP: If you're contemplating 100% equities in retirement, I'd suggest you be 100% certain you'll have income streams that'll cover your expenses and travel and health care (at minimum). :beer

EDIT: or, that your net worth is north of $10M.
Great points. I do not have "alternative" income streams that'll cover my retirement expenses however at 70/30 dividends and interests are sufficient for that, at least in today's world. On your last point, can you please elaborate your thinking as to why that number ($10 MM) is the threshold for you. How do you pick that up, and not $6 MM or $16 MM? Very curious.
Nothing super special about me picking 10M - just that if I were 100% equities (and no pensions), I'd want $10M because if the market suffered a significant drawdown ( say 70%), that'd leave $3M and at 4% withdrawal rate, that equals ~$120K/year of income. A lot of IFs I know - but, that's where the $10M number came from me. If a couple were very careful and frugal, they could probably get buy on a couple of million (with no pension income). Others may think this scenario a bit 'rich', but, speaking for us, I actually like having more income each month than expenses require.

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TNOA
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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Wed Mar 25, 2020 10:58 am

galawdawg wrote:
Wed Mar 25, 2020 5:45 am
You mention that you put a lot of thought/work into setting your AA at 70/30. I think that was a wise process and am a subscriber to the "if it ain't broke, don't fix it" philosophy in many areas of life.

A few thoughts about "living off dividends".

1. If you are serious about your plan to live off dividends, why are you invested in index funds rather than individual dividend paying stocks (or a dividend focused index fund such as VHYAX or VDIGX)? Some of the stocks held in VTI don't pay dividends, thus while you have paid to purchase them, you are not receiving income from them.

2. Realize that some companies have reduced or eliminated their dividend payments in the past and that could certainly occur in the future.

3. By focusing on dividends rather than total return, IMHO you are undertaking risk that may not be necessary. For example, if you feel you need to be 100% stock to get your desired dividend income, you may find that a 70/30 allocation (or even 60/40 or 50/50) may give you equal or greater total return at much less risk. So with less risk you may realize an equal or higher income with the 70/30 allocation. Your income results from both dividends and from selling holdings in a strategic planned manner. If you haven't already, you may want to check out www.firecalc.com and run the numbers using your desired annual income and various asset allocations.

4. You mention living off dividends and interest. If you are 100% stock, there is no interest. Equities don't pay interest.

As you've probably seen mentioned in this forum many times, I'd recommend you "stay the course"!
Thank you very much, I will certainly look at the link and review it that you've provided. Thank you for that. I would like to mention this (I have on some of the above threads but here again) and see if this changes your advice to me: at 70/30, or at 100/0 the amounts of dividends I receive are sufficient (both AA scenarios) for me to live off of. The reason why I don't invest in individual dividend paying stocks (your point 2) is the reason why I invest as in your point 1. In VTI, despite the fact there are many companies who don't pay dividends, I can still live off of those who do (overall dividend yield of VTI is sufficient). Which leaves room for capital appreciation as well. I am trying to maximize ERP (Equity Risk Premium), while at the same time living off of the dividends the portfolio as is throws. I don't know if your advice changes, and if it doesn't, I am very interested in hearing the specific reason why not after reading this additional info. Thank you...

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Re: Any Retirees With AA = 100% Equities?

Post by pharmermummles » Wed Mar 25, 2020 11:14 am

TNOA wrote:
Tue Mar 24, 2020 9:22 pm
pharmermummles wrote:
Tue Mar 24, 2020 4:39 pm
Not retired, or close to it, but I'm a big planner, and I've thought about it. Especially in the setting of early retirement and/or longevity insurance. I've done a lot of reading on Big ERN's safe withdrawal series. Larger equity allocations do very well over the long term, allowing for a higher success rate of modest withdrawal rates over long periods of time. More than that, a rising equity glide path helps with sequence of return risk in the early years of retirement. So starting retirement at like 60-80% equities and ratcheting up to 80-100% equities on a glide path would have worked very well in most historical timeframes. It seems aggressive, but the historical data back it up (past performance does not etc etc...).
reading on Big ERN's safe withdrawal series this is very interesting and I am not familiar with it. Is there any particular reading (or previous threads) you would recommend me to read up on? because just from what you're writing I simply don't quite understand it but I can see there is something very interesting in there. Thanks again.
The main article has the index of the different chapters/discussions. What I was referring to here is mostly this article describing the impact of overall higher equity allocations in withdrawal, and this and this other section discussing rising equity glidepaths. It is sort of like a mini-bond tent, only without the huge bond allocation you see sometimes. The emphasis is more on the rising equity than the initial high bond allocation in retirement. Starting at 60-80% equity and increasing to 100% during the first years of retirement would have alleviated a good amount of sequence of returns risk in the available historical cohorts.

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Re: Any Retirees With AA = 100% Equities?

Post by galawdawg » Wed Mar 25, 2020 11:52 am

If you can meet your annual needs with the VTI dividend yield (which has gone as low as about 1.6% annually), you may be fine with a portfolio of 100% equities. But if your withdrawal rate is that low, I'm not sure why you would seek to significantly increase risk for a modest increase in reward.

For example, from 1926-2018, a 100% equity portfolio has had an average annual return of 10.1% while a 70/30 allocation has had an average annual return of 9.1%. That is only a one percent difference in average annual return. However, a 100% equity portfolio had a drop of 43.1% in its worst year while the worst one year drop for a 70/30 portfolio was a much lower 30.7%.

https://personal.vanguard.com/us/insigh ... llocations

But of course, only you can decide how much risk you want to take for the amount of reward you seek to gain.

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Re: Any Retirees With AA = 100% Equities?

Post by pahkcah » Wed Mar 25, 2020 12:42 pm

DW and I are both retired (fairly recently) and have pensions with COLAs, along with DW’s Social Security…and my SS in the future. This covers all of our financial needs, both normal and emergency, which makes it easy to be comfortable with an AA of 100% equities.

Our current situation is based on decisions we made 40 years ago to work for an employer that offered a defined benefit, contributory retirement system. The choice was between making higher pay elsewhere, or having the guaranteed pensions. Although we chose what seemed like the more conservative approach at the time, our pensions now allow us to invest as aggressively as we want in retirement.

One other reason to be so aggressive is that the balances in our 401(k) and Thrift Savings Plan (TSP) accounts will ultimately go to our children. Since their retirements are still at least 30 years away, DW and I base the AA in our retirement accounts on their potential retirement dates, not ours.

Sorry that the only way to follow this strategy would require the use of a time machine, but I do wish you success in whatever choices you make.

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Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Thu Mar 26, 2020 12:06 am

pahkcah wrote:
Wed Mar 25, 2020 12:42 pm
DW and I are both retired (fairly recently) and have pensions with COLAs, along with DW’s Social Security…and my SS in the future. This covers all of our financial needs, both normal and emergency, which makes it easy to be comfortable with an AA of 100% equities.

Our current situation is based on decisions we made 40 years ago to work for an employer that offered a defined benefit, contributory retirement system. The choice was between making higher pay elsewhere, or having the guaranteed pensions. Although we chose what seemed like the more conservative approach at the time, our pensions now allow us to invest as aggressively as we want in retirement.

One other reason to be so aggressive is that the balances in our 401(k) and Thrift Savings Plan (TSP) accounts will ultimately go to our children. Since their retirements are still at least 30 years away, DW and I base the AA in our retirement accounts on their potential retirement dates, not ours.

Sorry that the only way to follow this strategy would require the use of a time machine, but I do wish you success in whatever choices you make.
Thank you, this was helpful in that it goes to show everyone has very personal and diverse circumstances. I love the scenario you are in, good luck and God speed.

Topic Author
TNOA
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Joined: Fri May 24, 2019 6:08 am

Re: Any Retirees With AA = 100% Equities?

Post by TNOA » Thu Mar 26, 2020 12:09 am

galawdawg wrote:
Wed Mar 25, 2020 11:52 am
If you can meet your annual needs with the VTI dividend yield (which has gone as low as about 1.6% annually), you may be fine with a portfolio of 100% equities. But if your withdrawal rate is that low, I'm not sure why you would seek to significantly increase risk for a modest increase in reward.
For example, from 1926-2018, a 100% equity portfolio has had an average annual return of 10.1% while a 70/30 allocation has had an average annual return of 9.1%. That is only a one percent difference in average annual return. However, a 100% equity portfolio had a drop of 43.1% in its worst year while the worst one year drop for a 70/30 portfolio was a much lower 30.7%.

https://personal.vanguard.com/us/insigh ... llocations

But of course, only you can decide how much risk you want to take for the amount of reward you seek to gain.
This was one of the most helpful responses I have received. Just looking at this, the link you provided shows I don't really care to go 100% equities simply because the reward isn't marginally as much higher than my current 70/30. I like this a lot, and first response that directly related to my dilemma, thank you for that. PS: VTI yield 1.6% however VXUS yield close to 4% and my equities are 60%VTI, 40%VXUS. That helps. Thank you again.

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