Why Morgan Stanley Says the 60/40 Portfolio Is Doomed

Have a question about your personal investments? No matter how simple or complex, you can ask it here.
Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

60/40 split at 70 year old?

Post by Boulous » Tue Jun 16, 2020 4:50 pm

Hi
I am single, and debt free.
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
Thanks
B

montanagirl
Posts: 1326
Joined: Thu Nov 19, 2009 4:55 pm
Location: Montana

Re: 60/40 split at 70 year old?

Post by montanagirl » Tue Jun 16, 2020 4:57 pm

That's what I'm doing. SS covers my expenses and I find the upside of 60/40 is more fun than the downside is scary.

FWIW I'm 71.

sport
Posts: 9301
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 60/40 split at 70 year old?

Post by sport » Tue Jun 16, 2020 5:03 pm

montanagirl wrote:
Tue Jun 16, 2020 4:57 pm
That's what I'm doing. SS covers my expenses and I find the upside of 60/40 is more fun than the downside is scary.

FWIW I'm 71.
I am also in my 70's. I find the downside more scary than the upside is fun. I am at 35/65. It's a personal decision. How will you feel if the value of your stock holding drops in half? If you would panic and sell at the bottom, then that allocation is too risky for you. OTOH, if you be happy to buy more at the new low prices, then it would be a better allocation for you. Only you can answer this question.

User avatar
David Jay
Posts: 8658
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: 60/40 split at 70 year old?

Post by David Jay » Tue Jun 16, 2020 5:04 pm

Asset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
Last edited by David Jay on Tue Jun 16, 2020 5:28 pm, edited 2 times in total.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
ruralavalon
Posts: 18539
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 60/40 split at 70 year old?

Post by ruralavalon » Tue Jun 16, 2020 5:09 pm

Boulous wrote:
Tue Jun 16, 2020 4:50 pm
Hi
I am single, and debt free.
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
Thanks
B
For what it is worth we are age 74, retired, debt free, with no pension or annuity, and our asset allocation over all accounts is 50/50.

In my opinion an asset allocation of 60/40 is within the range of what is reasonable.

You mention that this is "in a taxable account". What is your tax bracket, both federal and state?

Do you also have tax-advantaged accounts? What is your asset allocation over all accounts?

You said "I do have a two-year cash reserve?", which is confusing.

Asset allocation is a very personal decision. You must decide on an allocation which is comfortable for you based on your own ability, willingness and need to take risk.
Last edited by ruralavalon on Tue Jun 16, 2020 5:15 pm, edited 2 times in total.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

ososnilknarf
Posts: 72
Joined: Mon Feb 18, 2019 7:08 pm

Re: 60/40 split at 70 year old?

Post by ososnilknarf » Tue Jun 16, 2020 5:12 pm

I wouldn't personally have an issue with 60/40 at your age, but risk tolerance is a personal thing. You have to ask yourself, if the market took a 50% decline, you could lose ~30% of your capital. Could you live with that.

Take a look at the Variable Percentage Withdraw method (search this board for VPW). The VPW method is designed mathematically to never run out of money, but you could be forced to adjust to lower withdraw rates if the market declines. Plugging into the VPW spreadsheet, you should be able to withdraw $2706/month at age 70, but be prepared that if the stock market has a major decline of %50, you will only be able to withdraw $1894/month, so you have to have that flexibility built into your budget.

Another popular method is the 4% rule, which according to that, you could withdraw $2000/month.

I would look into these methods and read more about them, and come back here with more questions if you have them. But I think you would be fine since as another poster mentioned, $1200/month is only 2.4% withdrawl rate, which is extremely low and would never have run out of money historically in any past period of time.

dbr
Posts: 32854
Joined: Sun Mar 04, 2007 9:50 am

Re: 60/40 split at 70 year old?

Post by dbr » Tue Jun 16, 2020 5:19 pm

This is a question of objectives and risks. You say your objective is to take $1200/mo or $14,400/year for 20 years from a portfolio currently worth $600,000.

Well, right off that is $288,000 for the whole out of $600,000. So, really it would appear that you could just put the whole thing in a couple of savings accounts at a couple of banks, spend what you need and still have a reserve. You might want the money for more than twenty years and you might want to spend more money than that. What are you going to do if you need assisted living or nursing care eventually?

For about $210,000 you could probably buy an immediate annuity paying you $1200/mo for life, so you would not have to worry about how long you are going to live and still have a lot of money left over to grow for the future and for contingencies.

But what are you going to do about inflation? Right now you probably can shop carefully and still get a yield around zero real dollars, which would pace inflation, or you could invest in TIPS.

I think the advisor is thinking more of how to get a paycheck from your money than he is in giving you a good analysis. How much is he going to charge to hold your money -- a 1% AUM ripoff?

But, seriously, there is some risk here. I think you should take a more serious look at how to handle a need for increased spending and for elder care. That does not mean investing at 60/40 solves those problems, but it is an allocation that might compensate better for inflation and grow some for future needs. 40/60 would do that as well and is a better choice for you. If you end up paying the advisor too much for advice that will sabotage everything.

User avatar
ruralavalon
Posts: 18539
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 60/40 split at 70 year old?

Post by ruralavalon » Tue Jun 16, 2020 5:26 pm

dbr raises a good issue. Are you paying this advisor a fee based on a percentage of assets under management (AUM)?

Or is this a planner being paid a one-time-only fee for advice to help set up your investment plan?

What fee do you pay?
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

nanameg
Posts: 390
Joined: Fri Mar 20, 2020 10:57 am

Re: 60/40 split at 70 year old?

Post by nanameg » Tue Jun 16, 2020 5:29 pm

David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!

sport
Posts: 9301
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 60/40 split at 70 year old?

Post by sport » Tue Jun 16, 2020 5:32 pm

nanameg wrote:
Tue Jun 16, 2020 5:29 pm
David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!
30% of 60% =18%

Beehave
Posts: 727
Joined: Mon Jun 19, 2017 12:46 pm

Re: 60/40 split at 70 year old?

Post by Beehave » Tue Jun 16, 2020 5:35 pm

Social Security gives inflation protection and hopefully the stocks also do. The bonds help if there's a downturn especially if you rebalance.

For me, a 50/50 might be more comfortable, but 60/40 is within that range. Maybe 50/50 instead of 60/40, and of the 50% bonds, some inflation protected ones?

Good luck and best wishes!

User avatar
ruralavalon
Posts: 18539
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 60/40 split at 70 year old?

Post by ruralavalon » Tue Jun 16, 2020 5:37 pm

nanameg wrote:
Tue Jun 16, 2020 5:29 pm
David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!
There is no need to calculate the drop, you could just look at a fund with a 60/40 asset allocation such as Vanguard Balanced Index Fund (VBIAX).
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

nanameg
Posts: 390
Joined: Fri Mar 20, 2020 10:57 am

Re: 60/40 split at 70 year old?

Post by nanameg » Tue Jun 16, 2020 5:42 pm

sport wrote:
Tue Jun 16, 2020 5:32 pm
nanameg wrote:
Tue Jun 16, 2020 5:29 pm
David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!
30% of 60% =18%
So u don’t take the bond portion in mind at all? Just calculating on the basis of the stock allocation?

jjface
Posts: 3037
Joined: Thu Mar 19, 2015 6:18 pm

Re: 60/40 split at 70 year old?

Post by jjface » Tue Jun 16, 2020 5:47 pm

Asset allocation is personal. It can be too risky but it can be perfectly fine at your age to have 60:40. Just know for $14400 a year from $600,000 that is just 2.4% so you don't have the need to take on a lot of risk. 30:70 should be fine but whether you want to go anywhere from there to 60:40 is up to you. I'd consider 40:60 or 50:50 personally.

Just think how you'd feel if your portfolio dropped about $200k in a crash. That is about how much you could see with 60:40.

UpperNwGuy
Posts: 3664
Joined: Sun Oct 08, 2017 7:16 pm

Re: 60/40 split at 70 year old?

Post by UpperNwGuy » Tue Jun 16, 2020 6:07 pm

I keep reading about people who plan to be 60/40 for life.

sport
Posts: 9301
Joined: Tue Feb 27, 2007 3:26 pm
Location: Cleveland, OH

Re: 60/40 split at 70 year old?

Post by sport » Tue Jun 16, 2020 6:23 pm

nanameg wrote:
Tue Jun 16, 2020 5:42 pm
sport wrote:
Tue Jun 16, 2020 5:32 pm
nanameg wrote:
Tue Jun 16, 2020 5:29 pm
David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!
30% of 60% =18%
So u don’t take the bond portion in mind at all? Just calculating on the basis of the stock allocation?
That is for a stock market drop of 30%. The bond market change, if any, would be separate and could be a plus, minus, or zero change.

User avatar
David Jay
Posts: 8658
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: 60/40 split at 70 year old?

Post by David Jay » Tue Jun 16, 2020 6:25 pm

UpperNwGuy wrote:
Tue Jun 16, 2020 6:07 pm
I keep reading about people who plan to be 60/40 for life.
I intend to be 60/40 after the start of SS (age 70). But then again, I was 100/0 to age 58, so I am dialing it way back. :wink:
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

User avatar
David Jay
Posts: 8658
Joined: Mon Mar 30, 2015 5:54 am
Location: Michigan

Re: 60/40 split at 70 year old?

Post by David Jay » Tue Jun 16, 2020 6:27 pm

nanameg wrote:
Tue Jun 16, 2020 5:42 pm
sport wrote:
Tue Jun 16, 2020 5:32 pm
nanameg wrote:
Tue Jun 16, 2020 5:29 pm
David Jay wrote:
Tue Jun 16, 2020 5:04 pm
Aset allocation is very personal and comes down to what you can hold through the ups-and-downs of the market. In the recent virus downturn the market was down about 30%, so a 60/40 portfolio would have been down about 18%. Could you hold through that and not sell out your stock holdings?

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
I’m trying to learn math and percentages... it’s not clear to me how a 60/40 portfolio is down 18% when the market is down 30%.

Can u “ show your work”?

Thanks!
30% of 60% =18%
So u don’t take the bond portion in mind at all? Just calculating on the basis of the stock allocation?
Bonds don't move much. Which is why they provide stability for a portfolio.
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

montanagirl
Posts: 1326
Joined: Thu Nov 19, 2009 4:55 pm
Location: Montana

Re: 60/40 split at 70 year old?

Post by montanagirl » Tue Jun 16, 2020 8:07 pm

sport wrote:
Tue Jun 16, 2020 5:03 pm
montanagirl wrote:
Tue Jun 16, 2020 4:57 pm
That's what I'm doing. SS covers my expenses and I find the upside of 60/40 is more fun than the downside is scary.

FWIW I'm 71.
I am also in my 70's. I find the downside more scary than the upside is fun. I am at 35/65. It's a personal decision. How will you feel if the value of your stock holding drops in half? If you would panic and sell at the bottom, then that allocation is too risky for you. OTOH, if you be happy to buy more at the new low prices, then it would be a better allocation for you. Only you can answer this question.
I bought and rebalanced into equities on two RBDs in March. March 23 for one..

sandan
Posts: 18
Joined: Wed Apr 03, 2013 12:48 pm

Re: 60/40 split at 70 year old?

Post by sandan » Tue Jun 16, 2020 9:30 pm

As dbr posted above, please read up on "Single Premium Immediate Annuity" SPIA. There are many nice discussion threads on the topic.

I don't think there is any magical stock/bond asset allocation as long it hovers near 50%, but adding an SPIA should help insure a solid income stream.

montanagirl
Posts: 1326
Joined: Thu Nov 19, 2009 4:55 pm
Location: Montana

Re: 60/40 split at 70 year old?

Post by montanagirl » Wed Jun 17, 2020 5:53 pm

sandan wrote:
Tue Jun 16, 2020 9:30 pm
As dbr posted above, please read up on "Single Premium Immediate Annuity" SPIA. There are many nice discussion threads on the topic.

I don't think there is any magical stock/bond asset allocation as long it hovers near 50%, but adding an SPIA should help insure a solid income stream.
Interest rates would be terrible right now wouldn't they?

Or maybe it gets even worse. :shock:

User avatar
Steelersfan
Posts: 3812
Joined: Thu Jun 19, 2008 8:47 pm

Re: 60/40 split at 70 year old?

Post by Steelersfan » Wed Jun 17, 2020 7:48 pm

UpperNwGuy wrote:
Tue Jun 16, 2020 6:07 pm
I keep reading about people who plan to be 60/40 for life.
That's me. :D

My annual expenses are covered by SS and a pension.

hulburt1
Posts: 413
Joined: Tue Jul 15, 2014 9:17 pm

Re: 60/40 split at 70 year old?

Post by hulburt1 » Wed Jun 17, 2020 8:28 pm

If you need 14444 to live on you could put 144444 in cash and live for 10 years. Then have 455555 in stocks. every year take out 14444 from your stock and add to your cask. On average your stock could through off 35000 with a 8% return. :sharebeer

RetiredCSProf
Posts: 405
Joined: Tue Feb 28, 2017 4:59 pm

Re: 60/40 split at 70 year old?

Post by RetiredCSProf » Thu Jun 18, 2020 12:44 am

I think 60/40 sounds reasonable. You don't need annuities. I am 72 and single. My portfolio is 65/35. I have Soc Sec and pension, which covers my basic expenses.

Is your financial advisor managing your portfolio? If so, you can likely save a bit by self-managing.

Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

Re: 60/40 split at 70 year old?

Post by Boulous » Thu Jun 18, 2020 7:41 am

I am working with a Vanguard adviser, waiting for his plan

Boulous

nanameg
Posts: 390
Joined: Fri Mar 20, 2020 10:57 am

Re: 60/40 split at 70 year old?

Post by nanameg » Thu Jun 18, 2020 8:56 am

Boulous wrote:
Thu Jun 18, 2020 7:41 am
I am working with a Vanguard adviser, waiting for his plan

Boulous
Please post about the plan the advisor comes up with ...I think they are all basically the same boilerplate and I ask myself why pay .3% AUM for this service instead of buying either a TDF or doing it yourself once you have a plan in place?

Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

Re: 60/40 split at 70 year old?

Post by Boulous » Fri Jun 19, 2020 6:25 pm

I will post the plan when I get it.
- I will definitely go on my own- no need to pay expenses.

I am leaning towards the following splits using ETF's
Total Stock Market 45%
Total International 15%
Total Bond Market 30%
TIPS: 10 %

Thanks
B

randomguy
Posts: 9035
Joined: Wed Sep 17, 2014 9:00 am

Re: 60/40 split at 70 year old?

Post by randomguy » Fri Jun 19, 2020 7:37 pm

David Jay wrote:
Tue Jun 16, 2020 5:04 pm

$1200 a month ($14,400 a year) is only a 2.4% withdrawal rate so you do not need to hold 60% stocks if you are not comfortable there, 30% - 40% stocks is the bare minimum that I would recommend.
On the other hand at a 2.4% SWR, you can hold 70%+ stocks if you wanted. You would trade a more volatile ride for on average having more money in 20 years. Finding the balance between the smooth ride and dealing with volatility is very personal. Tons of people will tell you to stick 300k in TIPs and invest the rest like 60/40. That works and would be very conservative. Other say might as well go 90/10 with your SWR. That works also. Things like 60/40 sort of fall in the middle. You could buy an annuity if you want. On average they work out about the same as investing in bonds. Sometimes you win (i.e. you life far longer than expected), sometimes you lose (you die early). You need to decide which case upsets you more.

The sample portfolio looks fine. You can argue about if you need tips (and if you do need them if 10% is the right number or if it should be 20%) and minor details but we are talking about small differences. You can also ask if you wouldn't be happier just holding some all in one fund? They aren't perfect but they are close enough for most uses.

Chuck107
Posts: 212
Joined: Tue Sep 04, 2012 11:47 pm

Re: 60/40 split at 70 year old?

Post by Chuck107 » Fri Jun 19, 2020 7:58 pm

At age 66, not far from 70, I am currently 35/65 and very happy to stay put at that AA.
That said, IF for some reason the markets go down similar to 2008 (Not saying they will) I can see myself readjusting a bit more aggressively.

There is no set AA per age, In my opinion.
It's a balance of what keeps you living at your standard, and how you sleep at night.

dbr
Posts: 32854
Joined: Sun Mar 04, 2007 9:50 am

Re: 60/40 split at 70 year old?

Post by dbr » Fri Jun 19, 2020 8:19 pm

Please continue to remember that behind all this is to just know or figure out what you want.

I remember I used to work with production people developing new products and they would always be very supportive and tell us to just say what we want and they would do it. It was a very short time before I figured out that those words mean I am responsible for what we are doing here and I had darn well better have it figured out if I am going to come to the plant and spend a week on production equipment with a new product. Want can mean a lot of things.

Outer Marker
Posts: 605
Joined: Sun Mar 08, 2009 8:01 am

Re: 60/40 split at 70 year old?

Post by Outer Marker » Sat Jun 20, 2020 7:27 am

Boulous wrote:
Tue Jun 16, 2020 4:50 pm
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
The fact that you are asking this question indicates that it is a bit too aggressive - for you. Why not dial it back to 50/50? Jack Bogle was a fan of 50/50, and I believe the quote goes something like "I spend half my time worrying I have too much in stocks, and half my time worrying I have too little. . ." And, yes, stock market valuations right now are crazy out of line with earnings.

User avatar
midareff
Posts: 6932
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: 60/40 split at 70 year old?

Post by midareff » Sat Jun 20, 2020 7:36 am

Boulous wrote:
Tue Jun 16, 2020 4:50 pm
Hi
I am single, and debt free.
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
Thanks
B
72 and at roughly 50% equities, 46% bonds and 4% band cash. State pension and SS.

$1200 a month is $14,400 annually on $600K is a 2.4% withdrawal rate which looks quite safe to me..... maybe a bit overly so but certainly is a sane starting point, even in this day and time.

User avatar
midareff
Posts: 6932
Joined: Mon Nov 29, 2010 10:43 am
Location: Biscayne Bay, South Florida

Re: 60/40 split at 70 year old?

Post by midareff » Sat Jun 20, 2020 7:40 am

ososnilknarf wrote:
Tue Jun 16, 2020 5:12 pm
I wouldn't personally have an issue with 60/40 at your age, but risk tolerance is a personal thing. You have to ask yourself, if the market took a 50% decline, you could lose ~30% of your capital. Could you live with that.

Take a look at the Variable Percentage Withdraw method (search this board for VPW). The VPW method is designed mathematically to never run out of money, but you could be forced to adjust to lower withdraw rates if the market declines. Plugging into the VPW spreadsheet, you should be able to withdraw $2706/month at age 70, but be prepared that if the stock market has a major decline of %50, you will only be able to withdraw $1894/month, so you have to have that flexibility built into your budget.

Another popular method is the 4% rule, which according to that, you could withdraw $2000/month.

I would look into these methods and read more about them, and come back here with more questions if you have them. But I think you would be fine since as another poster mentioned, $1200/month is only 2.4% withdrawl rate, which is extremely low and would never have run out of money historically in any past period of time.
FWIW, it's not a rule, it was a guideline and it is based on very different market circumstances then exist today. You might want to read up on William Bengen...... https://www.retailinvestor.org/pdf/Bengen1.pdf

User avatar
ruralavalon
Posts: 18539
Joined: Sat Feb 02, 2008 10:29 am
Location: Illinois

Re: 60/40 split at 70 year old?

Post by ruralavalon » Sat Jun 20, 2020 10:15 am

Boulous wrote:
Fri Jun 19, 2020 6:25 pm
I will post the plan when I get it.
- I will definitely go on my own- no need to pay expenses.

I am leaning towards the following splits using ETF's
Total Stock Market 45%
Total International 15%
Total Bond Market 30%
TIPS: 10 %

Thanks
B
That allocation seems reasonable in my opinion.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started

User avatar
tennisplyr
Posts: 2589
Joined: Tue Jan 28, 2014 1:53 pm
Location: Sarasota, FL

Re: 60/40 split at 70 year old?

Post by tennisplyr » Sat Jun 20, 2020 12:28 pm

I'm 70, retired 9 years. My AA is ~45/55 and plan on keeping it like that. I've never really went higher than 50/50.
Those who move forward with a happy spirit will find that things always work out.

VaR
Posts: 693
Joined: Sat Dec 05, 2015 11:27 pm

Re: 60/40 split at 70 year old?

Post by VaR » Sat Jun 20, 2020 12:38 pm

I think the recommended 60/40 split is fine.

As a number of previous posters have mentioned, if you're looking to engineer a monthly income of about $1200, you can take most of your bond allocation and purchase a single-premium immediate annuity. As a 70 year old male, you'll be able to buy $1200 monthly income for the rest of your life for about $200,000. This is a payout rate of about 7%.

Then, with all of your spending needs met for the rest of your life, you can rethink what your risk tolerance is and what you would like to achieve with your remaining nest egg.

hudson
Posts: 2888
Joined: Fri Apr 06, 2007 9:15 am

Re: 60/40 split at 70 year old?

Post by hudson » Sat Jun 20, 2020 1:56 pm

Boulous,

I'm 72 and own no stocks. I really like CDs.
I think there's lots of good advice here. If forced to give my opinion, it would be more conservative.
If you haven't already, consider reading William Bernstein's Four Pillars and Ages of the Investor....also Larry Swedroe's bond book. Why? I think they give great advice. Both have long experience putting together many portfolios. Both are "Boglehead" authors.

User avatar
1789
Posts: 1516
Joined: Fri Aug 16, 2019 3:31 pm

Re: 60/40 split at 70 year old?

Post by 1789 » Sat Jun 20, 2020 9:43 pm

UpperNwGuy wrote:
Tue Jun 16, 2020 6:07 pm
I keep reading about people who plan to be 60/40 for life.
Sounds like a good number
"My conscience wants vegetarianism to win over the world. And my subconscious is yearning for a piece of juicy meat. But what do i want?" (Andrei Tarkovsky)

reln
Posts: 296
Joined: Fri Apr 19, 2019 4:01 pm

Re: 60/40 split at 70 year old?

Post by reln » Sat Jun 20, 2020 10:57 pm

Boulous wrote:
Tue Jun 16, 2020 4:50 pm
Hi
I am single, and debt free.
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
Thanks
B
I would get a SPIA.
https://www.immediateannuities.com/

For example, a $210k life only SPIA would give you 1200/mo.
Or, a $239k cash refund SPIA would give you 1200/mo.

With the rest of your money, you can get into a 50/50.

drzzzzz
Posts: 506
Joined: Sat Sep 22, 2012 9:56 pm

Re: 60/40 split at 70 year old?

Post by drzzzzz » Sat Jun 20, 2020 11:06 pm

Has your $600,000 cash account always been in cash? We just had a market tumble of $30 in March, how did you feel and what did u want to do since that might give you more insight into your risk tolerance and what percentage of stocks and bonds you should likely hold - the decision is really a personal one based upon your risk tolerance and how well you sleep at night.

Big Dog
Posts: 1848
Joined: Mon Sep 07, 2015 4:12 pm

Re: 60/40 split at 70 year old?

Post by Big Dog » Sat Jun 20, 2020 11:32 pm

David Jay wrote:
Tue Jun 16, 2020 6:25 pm
UpperNwGuy wrote:
Tue Jun 16, 2020 6:07 pm
I keep reading about people who plan to be 60/40 for life.
I intend to be 60/40 after the start of SS (age 70). But then again, I was 100/0 to age 58, so I am dialing it way back. :wink:
We must have read the same financial planning books, except that I was 100% until age 62....dialed it back to 55%/45%, and plan to spend down the bond portion until age 70, at which time we should be back to 60/40 when SS kicks in.

User avatar
celia
Posts: 10820
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: 60/40 split at 70 year old?

Post by celia » Sun Jun 21, 2020 12:17 am

Boulous wrote:
Tue Jun 16, 2020 4:50 pm
For my $600,000 cash account, the advice from a financial planner to invest 60% stocks mutual funds and 40% bonds in a taxable account for my capital to last 20 years, is 60% at my age of 70 a bit aggressive, especially in this Market? I do have a two-year cash reserve? this adviser does not recommend annuities and our aim is to generate $1200/month income from the $600,000, also receive $1700/month Social Security,
If you need $1200 for living expenses on top of SS and there is no inflation (ie, you would never need more than that), then just leaving it as cash gives us:
$600,000 / $1,200 a month = 500 months
Your money would last 500 months (which is 41.6 years).

But you said you want your $600,000 capital to last 20 years while you live off dividends or gains or interest generated by that money. Is that what you mean? If so, the financial planner’s recommendation is for $360,000 (60%) to be invested in stock funds and $240,000 (40%) to be invested in bonds.

Now, this next part is my estimate based on historical growth, and is a conservative average that will fluctuate each year. If we assume stocks return 6% growth (or distributions) per year, the $360,000 in stock funds can provide $21,600 of income. If we assume bonds can generate a conservative 2% in interest per year, $240,000 of bond funds can generate $4,800 of interest income. Now let’s see if we have enough to spend $1,200 per month:
(21,600 + 4,800) / 12 months =
(26,400) / 12 months =
$2,200 per month.

So there is certainly room to dial down the risk and still get $1,200 per month and probably not have the original $600,000 shrink.

User avatar
Toons
Posts: 13641
Joined: Fri Nov 21, 2008 10:20 am
Location: Hills of Tennessee

Re: 60/40 split at 70 year old?

Post by Toons » Sun Jun 21, 2020 10:14 am

60/40
Excellent Advice
In my humble opinion

Fast approaching 70 here
70/30
:mrgreen:
"One does not accumulate but eliminate. It is not daily increase but daily decrease. The height of cultivation always runs to simplicity" –Bruce Lee

User avatar
bt365
Posts: 55
Joined: Thu Mar 26, 2020 1:13 pm

Re: 60/40 split at 70 year old?

Post by bt365 » Sun Jun 21, 2020 10:46 am

Think you could pick just about anyone's advice on this thread with good probability of obtaining the income you said you need, while growing your stock nest egg. Alongside this, Americans nearing retirement need best Medicare/gap coverage they can afford. Some include LTC coverage premiums as part of their healthcare/assisted living financial planning. I realize some on forums dislike LTC insurance. LTC premiums are cheaper if one does not wait too long to enroll. There are of course other strategies to put aside resources for assisted living besides paying LTC premiums.

User avatar
aj76er
Posts: 784
Joined: Tue Dec 01, 2015 11:34 pm
Location: Portland, OR

Re: 60/40 split at 70 year old?

Post by aj76er » Sun Jun 21, 2020 11:11 am

Boulous wrote:
Fri Jun 19, 2020 6:25 pm
I will post the plan when I get it.
- I will definitely go on my own- no need to pay expenses.

I am leaning towards the following splits using ETF's
Total Stock Market 45%
Total International 15%
Total Bond Market 30%
TIPS: 10 %

Thanks
B
Look into Vanguard’s 2025 target date fund, VTTVX. It is 60/40.
Another choice would be Vanguard’s 2020 target date fund, VTWNX. It is closer to 50/50, with about 7.7% in short term tips.

You can’t beat the simplicity. And if you have multiple accounts, you can hold just a single fund across all of them.
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

nanameg
Posts: 390
Joined: Fri Mar 20, 2020 10:57 am

Re: 60/40 split at 70 year old?

Post by nanameg » Sun Jun 21, 2020 12:09 pm

bt365 wrote:
Sun Jun 21, 2020 10:46 am
Think you could pick just about anyone's advice on this thread with good probability of obtaining the income you said you need, while growing your stock nest egg. Alongside this, Americans nearing retirement need best Medicare/gap coverage they can afford. Some include LTC coverage premiums as part of their healthcare/assisted living financial planning. I realize some on forums dislike LTC insurance. LTC premiums are cheaper if one does not wait too long to enroll. There are of course other strategies to put aside resources for assisted living besides paying LTC premiums.
LTC Insurance is definitely something that needs to be addressed more ...or I least I need to find out where it’s addressed.

retiredjg
Posts: 40853
Joined: Thu Jan 10, 2008 12:56 pm

Re: 60/40 split at 70 year old?

Post by retiredjg » Sun Jun 21, 2020 12:13 pm

I think it is important to consider why you are currently in cash. If it is because you've just moved your money, that is one thing. If you've been sitting in cash for awhile, 60% stock may be too aggressive for your risk tolerance.

Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

Re: 60/40 split at 70 year old?

Post by Boulous » Sun Jun 21, 2020 2:53 pm

montanagirl wrote:
Tue Jun 16, 2020 4:57 pm
That's what I'm doing. SS covers my expenses and I find the upside of 60/40 is more fun than the downside is scary.

FWIW I'm 71.
Hi Monatagegirl
can you share with me what your portfolio is: fund name and percentages?
Thanks
B

Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

Re: 60/40 split at 70 year old?

Post by Boulous » Sun Jun 21, 2020 3:05 pm

Toons wrote:
Sun Jun 21, 2020 10:14 am
60/40
Excellent Advice
In my humble opinion

Fast approaching 70 here
70/30
:mrgreen:
Hi Toons
can you share with me your portfolio's make up,
fund names and percentages?
Thanks
B

Topic Author
Boulous
Posts: 37
Joined: Sun May 24, 2020 3:42 pm

Re: 60/40 split at 70 year old?

Post by Boulous » Sun Jun 21, 2020 3:08 pm

retiredjg wrote:
Sun Jun 21, 2020 12:13 pm
I think it is important to consider why you are currently in cash. If it is because you've just moved your money, that is one thing. If you've been sitting in cash for awhile, 60% stock may be too aggressive for your risk tolerance.
Hi
I sold my rental property if 60% of stocks sound aggressive / what would you do instead? examples would be appreciated.
Thanks
B

Post Reply