Age vs retirement year

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Blueberry2009
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Age vs retirement year

Post by Blueberry2009 »

Just curious how most of you bogleheads handle your asset allocation relative to your age. For example if you own a target date fund do you go with your retirement year even if you may only be 55 when you hit that year? I know the typical response is "whatever I am comfortable with". Like most folks I am trying to determine what I'm comfortable with so just interested how most of you handle it. Vanguard's target date funds say they are based on an age of 65 but if I retire at 58 wouldn't most folks want to think more about being a little more aggressive since they are younger? Or would most of you stick with the year you retire? If you're comfortable with age - 20 in bonds do you stick with that throughout the rest of your life or do you slowly get closer to age - 10 the older you get? I know it's whatever I am comfortable with but what are most of you comfortable with?
livesoft
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Re: Age vs retirement year

Post by livesoft »

Went to 70/30 at about age 50. Then 60/40 at age 55 when I stopped working. Staying at about 60/40 until I die.

After reading this forum for more than a decade, I can tell you that people are all over the AA spectrum and there is no consensus. Plus people change based on what they perceive the stock market and economy is doing or is going to do.
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chipperd
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Re: Age vs retirement year

Post by chipperd »

Went 50 stocks/25 bonds/25 cash when left work at age 52 due to plan to have 6 years living expenses in cash until wife and I take social security.
Once we see what social security will bring in, will probably be more aggressive and move to something like 70/25/5, as most of our funds will be for the next generation or beyond.
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jimkinny
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Re: Age vs retirement year

Post by jimkinny »

A long time ago there was poster on this forum who suggested you should assume that your equities will go down by 50% and that should be your benchmark. I have seen variations on this but 50% is close enough for me. Then I think that there is a not insignificant probability that equities will not bounce back in months to several years but will stay down in that range for years. Just imagine if the Covid-19 virus was as deadly as the smallpox virus and transmissible as the measles virus and a vaccine is 5 years in development.

Many assume stocks market will always make a rapid recovery but I don't think we should count on that.

I think your ability to earn money is also very important. How protected are you to a prolonged and deep depression?
hnd
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Re: Age vs retirement year

Post by hnd »

look at the glide path on their website. find the fund that matches your own. VG TDF's begin around 8-10% bonds and at 20 years to target date begin the slide.
Escapevelocity
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Re: Age vs retirement year

Post by Escapevelocity »

I'm retiring at age 55 and currently age 53. Last year I reduced my equity allocation from 60% down to around 45%. I view it as managing sequence of returns risk as I begin drawing down my portfolio. If things are going reasonably well after several years, I will start increasing it back towards 55-60% unless we receive a significant inheritance which would cause me to remain more conservative.
JEC
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Re: Age vs retirement year

Post by JEC »

I do age minus 25 in bonds and plan to do so forever. I'm 28 and plan to retire between 40 and 45.
flaccidsteele
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Re: Age vs retirement year

Post by flaccidsteele »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Just curious how most of you bogleheads handle your asset allocation relative to your age... I know it's whatever I am comfortable with but what are most of you comfortable with?
Since there’s no benefit with preset asset allocations for me I never spent time on it. And now, with people talking about setting it relative to age... portfoliovisualizer shows me that it adds extra complexity for no benefits in long term volatility management, risk, or performance

The US market always recovers. It’s never different this time. So to answer your question, I’m comfortable with buy regularly and buy more during crashes. Mindlessly simple and the least complex treatment of equities I’ve seen anywhere short of Bogle’s 50/50 portfolio

I beat the US index by buying... the US index

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Last edited by flaccidsteele on Wed Sep 09, 2020 11:32 am, edited 1 time in total.
The US market always recovers. It’s never different this time. Retired in my 40s. Investing is a simple game of rinse and repeat
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vineviz
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Re: Age vs retirement year

Post by vineviz »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Just curious how most of you bogleheads handle your asset allocation relative to your age. For example if you own a target date fund do you go with your retirement year even if you may only be 55 when you hit that year? I know the typical response is "whatever I am comfortable with". Like most folks I am trying to determine what I'm comfortable with so just interested how most of you handle it. Vanguard's target date funds say they are based on an age of 65 but if I retire at 58 wouldn't most folks want to think more about being a little more aggressive since they are younger? Or would most of you stick with the year you retire? If you're comfortable with age - 20 in bonds do you stick with that throughout the rest of your life or do you slowly get closer to age - 10 the older you get? I know it's whatever I am comfortable with but what are most of you comfortable with?
If your retirement date is within +/10 years of the Vanguard TDF date, you are within the range of “close enough”: almost any TDF in that range is going to produce better outcomes than a simple “age-X” rule of thumb.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
Chris K Jones
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Re: Age vs retirement year

Post by Chris K Jones »

I was (foolishly) 100% stocks until I was 58. I am 62 and plan to retire sometime in next couple of years and my asset allocation is 60% stocks and 40% fixed income. I plan to leave it there forever.
bubbadog
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Re: Age vs retirement year

Post by bubbadog »

I am 54 and currently at 65/35 (stocks/bonds). Plan to probably go to 60/40 by retirement in about 6 years.
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ruralavalon
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Re: Age vs retirement year

Post by ruralavalon »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Just curious how most of you bogleheads handle your asset allocation relative to your age. For example if you own a target date fund do you go with your retirement year even if you may only be 55 when you hit that year? I know the typical response is "whatever I am comfortable with". Like most folks I am trying to determine what I'm comfortable with so just interested how most of you handle it. Vanguard's target date funds say they are based on an age of 65 but if I retire at 58 wouldn't most folks want to think more about being a little more aggressive since they are younger? Or would most of you stick with the year you retire? If you're comfortable with age - 20 in bonds do you stick with that throughout the rest of your life or do you slowly get closer to age - 10 the older you get? I know it's whatever I am comfortable with but what are most of you comfortable with?
There is a lot of variability, there is no general consensus. Forum discussions "Equity Glide Paths . . . . ", and "What is your age and asset allocation ".

I think a pension, or absence of a pension, makes a huge difference in "whatever I am comfortable with" and in setting an asset allocation. (I don't have a pension).

Our asset allocation was 65/35 equity/fixed income until age 63, we were hit by the 2008 crash 3 years before planned retirement, when we switched to 50/50 where we remain today. I retired in 2011 on schedule.
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matti
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Re: Age vs retirement year

Post by matti »

Hi.

I'm 41yo and have all retirement funds invested in Vanguard Target Retirement 2040. In reality, my hope is that I retire in my mid 50s. My wife and I don't have kids and live in a LCOL area, so I feel comfortable now with the risk.
LeftCoastIV
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Re: Age vs retirement year

Post by LeftCoastIV »

Mid-40s, and we are roughly 50/50 AA, with the fixed income in cash because I don't see the risk/return value in bonds. I worry as much about downside protection as I do about growth. I'd say we are financially able to retire now, but for various reasons probably won't do so for at least six years.
CoAndy
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Re: Age vs retirement year

Post by CoAndy »

Will be 50 at the end of this month. My entire 401(k) is invested in Vanguard 2035. This is a bit aggressive but I plan on tapping that in about 2035. My 457 is 60-40 and I plan on whittling that down to 50-50 and tapping that when I retire in 5-6 years.
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Peter Foley
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Re: Age vs retirement year

Post by Peter Foley »

As hnd indicated, Target Retirement Funds have glide paths. Those paths differ from company to company so a Fidelity 2030 might be more aggressive than a Vanguard 2030. You need to select a fund with a glide path you are comfortable with. If your investment policy statement says that you want to have a 50/50 allocation at retirement, then choose a Target retirement fund with a date that will provide that AA for you.

Edited to add: Of course one's AA is related to one's need to take risk, ability to take risk, and willingness to take risk.
Topic Author
Blueberry2009
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Re: Age vs retirement year

Post by Blueberry2009 »

Thanks for all the great comments and input!
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tennisplyr
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Re: Age vs retirement year

Post by tennisplyr »

This calculator allows you to select "stock market crashes" and your age at that point:

www.retirementsimulation.com
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Watty
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Re: Age vs retirement year

Post by Watty »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Vanguard's target date funds say they are based on an age of 65 but if I retire at 58 wouldn't most folks want to think more about being a little more aggressive since they are younger?
I actually retired when I was 58 a few years ago.

In my situation that meant that I needed to be invested much less aggressively overall.

The reason is that my income needs from my investments will be lot higher until I start Medicare and get on Social Security so a lot of my money will be needed in near future so that part of the money should be invested less aggressively.

In very very rough numbers my retirement budget is roughly $60K a year which is enough for a nice middle class lifestyle where I live since I also have a paid off house.

For simplicity assume that I will start Social Security at 65 when I start Medicare. When Medicare starts that will lower my budget by about $5,000 a year and I will also get something like $35K a year in Social Security. That will lower my income needs from my portfolio from $60K to about $20K a year.

That means that from 58 to 65 I will need to be spending about $40K more a year from my nest egg which is $280K. (7*40). That $280K would need to be invested a lot less aggressively than a target date fund based on my retirement year or my age.

That is greatly simplified and there were a lot more details to my actual situation so it was more complicated since I am married and my wife and I will be starting Social Security and Medicare but that is the general idea. Basically I set up a rough liability matching portfolio that overall is less aggressive than a target date fund.

How big a difference this makes also depends on your age. If you are 30 then you have a log time until you will be 58 so this would not make a lot of difference and a target date fund may be fine to use. If you are in your 50s and retiring soon this would be real important.
LearningAlot
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Re: Age vs retirement year

Post by LearningAlot »

retired at 58, went to 40% equity/ 60% bonds. Plan to stay there for 5 years, then move to 50/50 forever thereafter.
Juice3
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Re: Age vs retirement year

Post by Juice3 »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Just curious how most of you bogleheads handle your asset allocation relative to your age.
My AA is not related to my "age" but rather to my retirement date. I believe in FI tilt around (both before and after) retirement date - commonly known as tenting. I believe that having flexibility in retirement date is a factor in this decision. I do not in this forum distinguish between bond and cash (HYSA/MM/CD) like investments, although I do in my own analysis.

How big my tilt is, will depend upon how much flexibility I can maintain in retirement date and spending.
GAAP
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Re: Age vs retirement year

Post by GAAP »

I don't and won't use age to determine a portfolio mix until someone is able to accurately tell me how long the portfolio needs to last -- including how much or little my heirs will need it.

I retired at 58, and manage the portfolio with the goal assumption that it needs to provide real income growth forever.
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Broken Man 1999
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Re: Age vs retirement year

Post by Broken Man 1999 »

We have been at an AA of 50% equity/50% bond since age 62 (2015).

In 2015 I received my MegaCorp pension as a lump-sum, and that allowed me to rapidly increase our bonds/bond funds. By the end of 2015, our portfolio was near our desired 50/50 split.

Prior to 2015, we had a much lower bond component in our portfolio. Much lower overall balance as well.

In the 5 years since 2015 (even including this year) we have had a nice run-up of our portfolio, even in our bond funds via capital gains.

Over the rest of this year, I might let the equities % increase to 55%, as we have so much in bonds/bond funds at present. Each year DW and I age means one less year our portfolio needs to support us. We can weather a stock downturn with ease.

At this moment in time we are at 45.6% equities/54.4% bonds/bond funds.

Broken Man 1999
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Malinois000
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Re: Age vs retirement year

Post by Malinois000 »

I retired this year at 59. I'm at 65/35 and plan to remain with that allocation for the most part. I have a pension that covers all my needs so I'm comfortable taking on a little more risk.
togb
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Re: Age vs retirement year

Post by togb »

I'm close to retirement, still working. I don't have a pension.
I'm at about 65/35-- but not less than five years living expenses in bonds and cash. That's comfortable for me since I still have income.
When I retire, I'll probably go 60/40, or 7-10 years expenses in bonds/income. If I had a pension, I'd be a little less conservative but that's what makes me feel secure.

I like the combination of the AA and the number of years of less risky holdings-- which should avoid selling equities in a down market.
TheDDC
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Re: Age vs retirement year

Post by TheDDC »

Blueberry2009 wrote: Wed Sep 09, 2020 5:04 am Just curious how most of you bogleheads handle your asset allocation relative to your age. For example if you own a target date fund do you go with your retirement year even if you may only be 55 when you hit that year? I know the typical response is "whatever I am comfortable with". Like most folks I am trying to determine what I'm comfortable with so just interested how most of you handle it. Vanguard's target date funds say they are based on an age of 65 but if I retire at 58 wouldn't most folks want to think more about being a little more aggressive since they are younger? Or would most of you stick with the year you retire? If you're comfortable with age - 20 in bonds do you stick with that throughout the rest of your life or do you slowly get closer to age - 10 the older you get? I know it's whatever I am comfortable with but what are most of you comfortable with?
100/0, though plan is to retire with a healthy emergency (cash) fund which I do not count as part of my allocation, as well as a pension.

-TheDDC
Rules to wealth building: 90-100% VTSAX piled high and deep, 0-10% VIGAX tilt, 0% given away to banks, minimize amount given to medical-industrial complex
Toadvine
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Re: Age vs retirement year

Post by Toadvine »

66.5 years old and 3.5 years from retirement. Boglehead philosophy has paid off handsomely over past decade or so. Thank you so much Jack. Now sitting with no mortgage and enough savings to last until my wife and I are 135 years old. No more need for risk. So now allocation is 100% treasury backed MM funds.
soccerbogle
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Re: Age vs retirement year

Post by soccerbogle »

I found it hard to randomly decide "what you are comfortable with"

What worked for me was to put potential near-term expenses in bonds/cash. Near-term can be defined by you. My current plan as I approach retirement will define near-term as 8-10 years. So I will need 8-10 years of expenses in bonds/cash. Whatever else will go into stocks. And that will create the AA that I am comfortable with.

Currently I am 20+ years from retirement, so there are no near-term expenses to come from my retirement account, so it is invested aggressively (100/0).

I do currently have other money in taxable that is aimed at planned or unplanned near-term expenses. Potential near-term expenses are invested in bonds/cash (emergency fund, car fund, etc), just as my near-term expenses in retirement will be in bonds/cash. Obviously my normal salary covers all my normal expenses, so this is for extra things)

So, I invest toward separate goals (e.g., retirement in 20 years vs car in 1-4 years), and the AA is the end result. This is how I have found the correct AA for me. First I tried thinking about AA based on age, but that seemed random. This way, there is a specific logical reason for the AA that I have.
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