Rebalancing to 50/50

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Topic Author
Kayaking
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Joined: Fri Sep 18, 2020 10:42 am

Rebalancing to 50/50

Post by Kayaking »

I am a 70 year old widowed female with a low 7 figure portfolio. I withdraw 3.5 - 4% from it annually.

In the downturn of 2008 - 09 my Vanguard portfolio lost nearly 40%. As the months passed, and the situation didn't improve, I could not bear to open any of my statements from Vanguard. I never moved any money during that period, but I spent many anxious months certain my daughter and I would soon be homeless.

When I became terrified of another stock market precipitous drop last February, I transferred a large part of my portfolio to bonds. I know there are few Bogleheads who would agree my decision was at all sane or wise, but I needed to be able to sleep. It was such a glorious relief for me to be free of the heart-stopping stock market ups and downs these past months. In spite of the market's steady summer climb, I have never felt my decision to leave the stock market this year was a mistake.

I have not always been so stock-market phobic. While my husband and I were saving, I always stayed exclusively in stocks and chose the most aggressive funds. He and I were lucky in the 80s and 90s because the stock market did well and there were no real downturns. I never moved money out of stock funds until after he died.

Now that I am 70 I have a shorter time horizon, but I want to have enough money to have friends for dinner, buy symphony tickets and theater subscriptions, take my daughter on camping/snorkeling vacations, and spend a month in a small apartment in Italy every year when the sidewalks in my town are covered in ice making walking impossible.

After reading the early chapters of McClung's book and the Boglehead column, I do not think it is wise in the long term for me to continue to have a portfolio that is heavily weighted in bonds. Therefore, now I would like to move money from bonds to stock funds so my portfolio is back to a 50/50 AA.

Should I use dollar cost averaging to do that, maybe moving 1% from every fund on a weekly basis?
Or should I just move the funds all at once?
Should I keep the number of funds Vanguard suggested?

The last financial plan I received from Vanguard (2017) suggested these Admiral funds which I held til February, 2020:

Total Stock Market 29%
International Stock 20%
Total 49%

US Short Term Bond 7%
Intermediate Term Bond 11%
Total Bond 18%
International Bond 15%
Total 51%

This is my current portfolio of Vanguard Funds:

Total Stock Market 13%
International Stock 9%
total 22%

Short Term Bond 15%
Intermediate Term Bond 1%
Total Bond 42%
International Bond 11%
Federal Money Market Fund 8%
total 77%

Maybe my questions are silly, but I thought a kind person on this forum might be able to offer me some wisdom.
Last edited by Kayaking on Sat Sep 19, 2020 8:00 pm, edited 1 time in total.
bloom2708
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Re: Rebalancing to 50/50

Post by bloom2708 »

My parents are 35% stocks. Mid 70s.

Between 20% and 50% could all be appropriate, but I think you would be fine to move from 22 to 35 for a period of time and see how it goes.

A jump to 50-50 might be too much in this current environment with so many unknowns.

In fact, staying at 22% stocks might be just fine as well.
"We are here to provoke thoughtfulness, not agree with you." Unknown Boglehead
pkcrafter
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Re: Rebalancing to 50/50

Post by pkcrafter »

Kayaking wrote: Fri Sep 18, 2020 1:26 pm

Now that I am 70 I have a shorter time horizon, but I want to have enough money to have friends for dinner, buy symphony tickets and theater subscriptions, take my daughter on camping/snorkeling vacations, and spend a month in a small apartment in Italy every year when the sidewalks in my town are covered in ice making walking impossible.

First, what is you withdrawal rate (%)?

After reading the early chapters of McClung's book and the Boglehead column, I do not think it is wise in the long term for me to continue to have a portfolio that is heavily weighted in bonds. Therefore, now I would like to move money from bonds to stock funds so my portfolio is back to a 50/50 AA. (You can probably tell that I can't promise I won't move it all back to bonds again if I get really scared.)

Depending on what your withdrawal rate is (%), I'll suggest 40 stock/60 bond might be sufficient.

Should I use dollar cost averaging to do that, maybe moving 1% from every fund on a weekly basis?
Or should I just move the funds all at once?

If you are going to hold 40% or 50% in stock, then hold it now.

Should I keep the number of funds Vanguard suggested?

The last financial plan I received from Vanguard (2017) suggested these Admiral funds which I held til February, 2020:

Total Stock Market 29%
International Stock 20%
Total 49%

Too much international. Bogleheads seem to prefer 20-30% of stock in international.

US Short Term Bond 7%
Intermediate Term Bond 11%

Total Bond ~ 40%
International Bond ~11%
Total 51%


Maybe my questions are silly, but I thought a kind person on this forum might be able to offer me some wisdom.

Question's are not silly. You will get up to speed quickly.

Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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BL
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Re: Rebalancing to 50/50

Post by BL »

bloom2708 wrote: Fri Sep 18, 2020 4:18 pm My parents are 35% stocks. Mid 70s.

Between 20% and 50% could all be appropriate, but I think you would be fine to move from 22 to 35 for a period of time and see how it goes.

A jump to 50-50 might be too much in this current environment with so many unknowns.

In fact, staying at 22% stocks might be just fine as well.
Suggestions here sound reasoned and reasonable. I might go up gradually, rather than all at once. It is very important to be able to sleep well, and not spend your life worrying.
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

bloom2708 wrote: Fri Sep 18, 2020 4:18 pm My parents are 35% stocks. Mid 70s.

Between 20% and 50% could all be appropriate, but I think you would be fine to move from 22 to 35 for a period of time and see how it goes.

A jump to 50-50 might be too much in this current environment with so many unknowns.

In fact, staying at 22% stocks might be just fine as well.
Thank you! I am so surprised that you suggest moving to only 35 instead of 50, and that even 22% might be OK. I was thinking I would have to buckle up and climb on to the roller coaster to climb into the 50% range, a climb I was dreading a bit. I find it is very calming that you think I don't have to do that.
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Brianmcg321
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Re: Rebalancing to 50/50

Post by Brianmcg321 »

Given your age and time horizon I think your current allocation is fine. Like the others said if you want to bump it to 30% that would be fine also. No need to go to 50%.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
aarondearu
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Re: Rebalancing to 50/50

Post by aarondearu »

Anywhere between 30-50% equities seems reasonable.

“Is anyone here allocated 30/70 a la Rick Ferri's new center of gravity?”
viewtopic.php?t=219989
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

pkcrafter wrote: Fri Sep 18, 2020 5:16 pm
Kayaking wrote: Fri Sep 18, 2020 1:26 pm

Now that I am 70 I have a shorter time horizon, but I want to have enough money to have friends for dinner, buy symphony tickets and theater subscriptions, take my daughter on camping/snorkeling vacations, and spend a month in a small apartment in Italy every year when the sidewalks in my town are covered in ice making walking impossible.

First, what is you withdrawal rate (%)?

My withdrawal rate is 3.5% - 4%. I will have to start taking RMDs in 2 years so the withdrawals will increase.

After reading the early chapters of McClung's book and the Boglehead column, I do not think it is wise in the long term for me to continue to have a portfolio that is heavily weighted in bonds. Therefore, now I would like to move money from bonds to stock funds so my portfolio is back to a 50/50 AA. (You can probably tell that I can't promise I won't move it all back to bonds again if I get really scared.)

Depending on what your withdrawal rate is (%), I'll suggest 40 stock/60 bond might be sufficient.

Should I use dollar cost averaging to do that, maybe moving 1% from every fund on a weekly basis?
Or should I just move the funds all at once?

If you are going to hold 40% or 50% in stock, then hold it now.

Should I keep the number of funds Vanguard suggested?

The last financial plan I received from Vanguard (2017) suggested these Admiral funds which I held til February, 2020:

Total Stock Market 29%
International Stock 20%
Total 49%

Too much international. Bogleheads seem to prefer 20-30% of stock in international.

US Short Term Bond 7%
Intermediate Term Bond 11%

Total Bond ~ 40%
International Bond ~11%
Total 51%


Maybe my questions are silly, but I thought a kind person on this forum might be able to offer me some wisdom.

Question's are not silly. You will get up to speed quickly.

Paul
Paul, thank you for thinking about this. You mentioned that Bogleheads prefer 20% in International stock. If that is the case, do you think I should forget the International bond fund?
You are the second person here who thinks I might be OK if I didn't go all the way to 50% stock. That is really lovely. When you say, "hold it now" do you mean move the money from bond funds to stock funds in a lump sum without delay?
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WoodSpinner
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Re: Rebalancing to 50/50

Post by WoodSpinner »

Paul, thank you for thinking about this. You mentioned that Bogleheads prefer 20% in International stock. If that is the case, do you think I should forget the International bond fund?
You are the second person here who thinks I might be OK if I didn't go all the way to 50% stock. That is really lovely. When you say, "hold it now" do you mean move the money from bond funds to stock funds in a lump sum without delay?
OP,

One of the most important things in investing is to have a plan that you believe in and can stick with. Nothing good will come from panic selling or not being able to sleep well at night.

My suggestion is pick a figure you can believe in and stick to, regardless of the market gyrations. As others have pointed out, anything in the 30-50% range will likely work for you. Seems like 50/50 is too risky for your temperament at this point. I suggest a LumpSum shift — this is usually the right answer.

WoodSpinner
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

BL wrote: Fri Sep 18, 2020 5:39 pm
bloom2708 wrote: Fri Sep 18, 2020 4:18 pm My parents are 35% stocks. Mid 70s.

Between 20% and 50% could all be appropriate, but I think you would be fine to move from 22 to 35 for a period of time and see how it goes.

A jump to 50-50 might be too much in this current environment with so many unknowns.

In fact, staying at 22% stocks might be just fine as well.
Suggestions here sound reasoned and reasonable. I might go up gradually, rather than all at once. It is very important to be able to sleep well, and not spend your life worrying.
BL, Many thanks. I like what you said about being able to sleep well and be free from worry. Before 2008 I would have told you I had a very high tolerance for risk. I know now I would prefer not to have to worry about my IRA lasting out my lifetime. I take risks in other ways that astonish my friends, but I have become a person who would like to have a portfolio that has little to no risk. This fact surprises me.
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Leif
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Re: Rebalancing to 50/50

Post by Leif »

Kayaking wrote: Fri Sep 18, 2020 7:19 pm Paul, thank you for thinking about this. You mentioned that Bogleheads prefer 20% in International stock. If that is the case, do you think I should forget the International bond fund?
You are the second person here who thinks I might be OK if I didn't go all the way to 50% stock. That is really lovely. When you say, "hold it now" do you mean move the money from bond funds to stock funds in a lump sum without delay?
I'm not so sure about "Bogleheads prefer 20%" for International. I have 1/3 in international. Some go for the world holding of International, which is around 55/45 US/Intl. I like international for diversification. Also, now it is lower PE and higher dividends, as a whole then US.

Perhaps much more important then that US/Intl is your AA between stocks and bonds. You certainly don't want to get into a habit of buying high and selling low. So hold what you can keep.
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Peter Foley
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Re: Rebalancing to 50/50

Post by Peter Foley »

I too think a sleep well range is prudent. 25% stocks is on the low end of what is usually suggested. Something in the 30% to 40% range is as conservative as I would want to be. However, that does not mean that that approach is right for you. Different people have different risk tolerances and if being at 40% would cause one to panic and sell in a market drop, 40% is too high for that individual.

A couple questions. Overall is your health good? If yes, you would be prudent to plan for an additional 20 or more years in retirement.

Is a high percentage of your savings in tax deferred accounts? I'm thinking both in terms of the implications of RMDs and the possibility of tax loss harvesting.

Do note that RMDs need not be spent. Taxes will likely need to be paid, but the money can be saved in a taxable account.

For psychological reasons, I favor dollar cost averaging with respect to the change you are considering.
raiderjkwong
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Re: Rebalancing to 50/50

Post by raiderjkwong »

I think your portfolio of 22% stocks and rest in bonds is perfect. Too many unknowns in the near future. I would only move another 10% over if and when there is another 10%-20% correction.
nolapepper
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Re: Rebalancing to 50/50

Post by nolapepper »

Apparently you were not comfortable with 50/50, so I don't understand why you want to go back now, when there are so many uncertainties.

Since the current ratio made you sleep well, then stay at it.
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

Brianmcg321 wrote: Fri Sep 18, 2020 7:08 pm Given your age and time horizon I think your current allocation is fine. Like the others said if you want to bump it to 30% that would be fine also. No need to go to 50%.
Your comment is very helpful. I never considered having less than 50% in stocks because after reading this forum for many years, I thought the 50/50 ratio was a requirement for retirement. I am relieved you and others believe I could even stick with the current AA, or go to 30/70 or at the most 40/60. Before you wise Bogleheads weighed in on it, I thought my current AA was wastefully conservative and a bit nutty. Thank you.
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

aarondearu wrote: Fri Sep 18, 2020 7:14 pm Anywhere between 30-50% equities seems reasonable.

“Is anyone here allocated 30/70 a la Rick Ferri's new center of gravity?”
viewtopic.php?t=219989
Thank you for including this link! I found the thread to be most enlightening, and was surprised there were so many retirees who stick with a lower percentage of stocks. I have decided to wait til the next downturn and then switch to 30 or 35% of stocks. I believe I could stick there without panicking. Before last February when I moved so much out of stocks, I thought people who moved assets during downturns were being foolhardy. In March I was glad to be one of them.
BalancedJCB19
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Re: Rebalancing to 50/50

Post by BalancedJCB19 »

You won the game. As other said, I think you are fine, but go up gradually to test the waters. Sleeping well after all your hard work and success is very important. Now is the time to stop sweating the small stuff and live in the moment. I wouldn't do it all at once during this crisis, too many unknowns at this time. I would never normally say that, but I do think we are in for a lot of uncertainty due to this pandemic. Good Luck! You and your late husband did great and you should be proud.
Topic Author
Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

Leif wrote: Fri Sep 18, 2020 7:39 pm
Kayaking wrote: Fri Sep 18, 2020 7:19 pm Paul, thank you for thinking about this. You mentioned that Bogleheads prefer 20% in International stock. If that is the case, do you think I should forget the International bond fund?
You are the second person here who thinks I might be OK if I didn't go all the way to 50% stock. That is really lovely. When you say, "hold it now" do you mean move the money from bond funds to stock funds in a lump sum without delay?
I'm not so sure about "Bogleheads prefer 20%" for International. I have 1/3 in international. Some go for the world holding of International, which is around 55/45 US/Intl. I like international for diversification. Also, now it is lower PE and higher dividends, as a whole then US.

Perhaps much more important then that US/Intl is your AA between stocks and bonds. You certainly don't want to get into a habit of buying high and selling low. So hold what you can keep.
Your comment on International is interesting, and makes me think I can just keep the international funds. It could be one thing I don't have to worry about right now. It is good to find ways to shed sources of worry. I agree that buying high and selling low is not what I should be doing at all. Thank you.
Tattarrattat
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Re: Rebalancing to 50/50

Post by Tattarrattat »

30-40% stocks would be a solid balance for your situation. Would try to keep the withdrawl rate below 4% or so. International % will likely make ittle difference one way or another, pick anything between 0-40%.
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Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

Peter Foley wrote: Fri Sep 18, 2020 7:54 pm I too think a sleep well range is prudent. 25% stocks is on the low end of what is usually suggested. Something in the 30% to 40% range is as conservative as I would want to be. However, that does not mean that that approach is right for you. Different people have different risk tolerances and if being at 40% would cause one to panic and sell in a market drop, 40% is too high for that individual.

A couple questions. Overall is your health good? If yes, you would be prudent to plan for an additional 20 or more years in retirement.

Is a high percentage of your savings in tax deferred accounts? I'm thinking both in terms of the implications of RMDs and the possibility of tax loss harvesting.

Do note that RMDs need not be spent. Taxes will likely need to be paid, but the money can be saved in a taxable account.

For psychological reasons, I favor dollar cost averaging with respect to the change you are considering.
I am more fit than other 70 year olds I know. It is good to be free of chronic illness at 70, but it is difficult when traveling with friends because they don't have as much energy and prefer to drive rather than bike or walk any distance. Whenever I put numbers into Firecalc I estimate 30 more years.

95% of savings is in an IRA. I have a Roth that is smaller now because I used it to buy a car when my daughter relocated far from public transportation. My neighbors laugh about how little I drive it because I would rather walk everywhere.

Do you think I should plan to dollar cost average over a period of weeks or months if I wait til the next downturn to begin the move to 35%?
retiredjg
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Re: Rebalancing to 50/50

Post by retiredjg »

It is clear from your comments that you should NOT go back to 50% stock. You will not be comfortable. What is the point in having money if it makes you uncomfortable?

You may have been very risk tolerant in the past, but you are not now. That's normal. It seems that 30% to 35% would be much more appropriate for you with your current risk tolerance.

I'd increase it overnight, but over 6 months might fit your temperament better.
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Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

BalancedJCB19 wrote: Sat Sep 19, 2020 7:28 am You won the game. As other said, I think you are fine, but go up gradually to test the waters. Sleeping well after all your hard work and success is very important. Now is the time to stop sweating the small stuff and live in the moment. I wouldn't do it all at once during this crisis, too many unknowns at this time. I would never normally say that, but I do think we are in for a lot of uncertainty due to this pandemic. Good Luck! You and your late husband did great and you should be proud.
You are so kind to say we did a good job! I am happy with what we accomplished. We were a good team. While our friends were buying expensive cars and second homes my husband and I spent our vacations camping while we saved 50% of our incomes from the non-profits where we worked. For 25 years we served as Adventure Tour Leaders so the groups we led covered the cost of our travel to gorgeous natural areas around the globe. We liked the food we cooked at home better than restaurant food so we never ate out. We bought ugly but well built houses on beautiful streets and then fixed them up so they became wonderful places to live.

I am still fixing up one of those types of houses now. When I bought it 6 years ago, my friends thought I was crazy because it had so many problems. Since I have addressed most of its issues, its value has increased by $300,000. I am now trying to figure out how I could afford to add a shower to the first floor bath so I can rent out a bedroom to Airbnb-ers. Another benefit to adding the shower is that it gives the house a first floor bedroom/bath which I will need in the future when I have trouble with stairs. There are no homes with first floor bedrooms with ensuite baths so it would be a rare thing in my neighborhood of historic homes in case I ever needed to sell it.

I will need close to $10,000 for that project which will bring my withdrawal to 4.5% or 5% that year because I would hate taking on the additional debt of a HELOC.

If you have any thoughts on my shower funding quandary, please let me know.

This is probably far more information than you ever cared about or wanted to read. But if you got all the way here, thank you.
BalancedJCB19
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Re: Rebalancing to 50/50

Post by BalancedJCB19 »

Kayaking wrote: Sat Sep 19, 2020 8:47 am
BalancedJCB19 wrote: Sat Sep 19, 2020 7:28 am You won the game. As other said, I think you are fine, but go up gradually to test the waters. Sleeping well after all your hard work and success is very important. Now is the time to stop sweating the small stuff and live in the moment. I wouldn't do it all at once during this crisis, too many unknowns at this time. I would never normally say that, but I do think we are in for a lot of uncertainty due to this pandemic. Good Luck! You and your late husband did great and you should be proud.
You are so kind to say we did a good job! I am happy with what we accomplished. We were a good team. While our friends were buying expensive cars and second homes my husband and I spent our vacations camping while we saved 50% of our incomes from the non-profits where we worked. For 25 years we served as Adventure Tour Leaders so the groups we led covered the cost of our travel to gorgeous natural areas around the globe. We liked the food we cooked at home better than restaurant food so we never ate out. We bought ugly but well built houses on beautiful streets and then fixed them up so they became wonderful places to live.

I am still fixing up one of those types of houses now. When I bought it 6 years ago, my friends thought I was crazy because it had so many problems. Since I have addressed most of its issues, its value has increased by $300,000. I am now trying to figure out how I could afford to add a shower to the first floor bath so I can rent out a bedroom to Airbnb-ers. Another benefit to adding the shower is that it gives the house a first floor bedroom/bath which I will need in the future when I have trouble with stairs. There are no homes with first floor bedrooms with ensuite baths so it would be a rare thing in my neighborhood of historic homes in case I ever needed to sell it.

I will need close to $10,000 for that project which will bring my withdrawal to 4.5% or 5% that year because I would hate taking on the additional debt of a HELOC.

If you have any thoughts on my shower funding quandary, please let me know.

This is probably far more information than you ever cared about or wanted to read. But if you got all the way here, thank you.
That all sounds amazing. I think you are spot on about adding the shower bathroom. And your very welcome. i wasn't being kind, you really did an amazing job and sounds it like my wife and myself minus the houses. We bought a brand new Townhome in 93 and stayed. I didn't believe in the idea of a starter home, but I did believe in a mortgage free home which this enabled me to accomplish if I stayed. Don't knock stairs in a house, it is a good free workout. lol. I would just take out the extra for that year I don't like taking on debt either. Also, listen to people like Dave Ramsey for how to handle debt, and come to the Bogleheads for investing and you are good to go. Nice meeting you and hope things work out. Again, you did an awesome job, now it's time to enjoy it.
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Brianmcg321
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Re: Rebalancing to 50/50

Post by Brianmcg321 »

Kayaking wrote: Sat Sep 19, 2020 7:16 am
Brianmcg321 wrote: Fri Sep 18, 2020 7:08 pm Given your age and time horizon I think your current allocation is fine. Like the others said if you want to bump it to 30% that would be fine also. No need to go to 50%.
Your comment is very helpful. I never considered having less than 50% in stocks because after reading this forum for many years, I thought the 50/50 ratio was a requirement for retirement. I am relieved you and others believe I could even stick with the current AA, or go to 30/70 or at the most 40/60. Before you wise Bogleheads weighed in on it, I thought my current AA was wastefully conservative and a bit nutty. Thank you.
As is often quoted around here “If you’ve won the game, stop playing”
https://esimoney.com/youve-won-game-stop-playing/
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

raiderjkwong wrote: Fri Sep 18, 2020 9:07 pm I think your portfolio of 22% stocks and rest in bonds is perfect. Too many unknowns in the near future. I would only move another 10% over if and when there is another 10%-20% correction.
Thank you for these comments. I agree there are a great many unknowns in the future which is why I considered sitting out the entire thing for the duration. I like your recommendation to wait until there is a 10 - 20 % correction. I have decided I will move 10% then. It is great that I have received so many simple suggestions here. I can see now what I need to do.
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goingup
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Re: Rebalancing to 50/50

Post by goingup »

A couple of thoughts.
A big goal for me when I get to 70 and beyond is to rarely think about our portfolio. Many veteran Bogleheads (including Taylor) rarely look at their portfolio. They know they have "enough", are comfortable with their allocation, and let the portfolio drift (within limits) without rebalancing.

At at 70, with a low 7-figure portfolio and a low withdrawal rate, you have enough. However, you may still want enough stocks to provide the growth engine to pull your portfolio into the future. Take a look at the forum wiki about variable withdrawal rates at various ages. It seems that 30% stocks is the minimum listed. https://www.bogleheads.org/wiki/Variabl ... withdrawal

One measure you could take immediately is to take withdrawals exclusively from bonds and cash. This allows stocks to continue to grow (hopefully). This is called a rising equity glide path. I don't think it's imperative that you act immediately to add equity, but allow the portfolio to drift up.

As an incrementalist I like to follow the model of investing suggested by Nisiprius, a wise and prolific poster here: "I think it is wise to form a habit of doing as little as possible, and always less than you feel like doing." :beer
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SquawkIdent
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Re: Rebalancing to 50/50

Post by SquawkIdent »

You've won the game, congratulations.

So, I would do one of two things...leave it as is or to make things real, real simple, put it all in VWIAX (Wellesley Admiral 35% stock/65% bonds) and call it a day. The suggestion of VWIAX is based on a slight increase in stock allocation but that choice also hides the turmoil within the portfolio. That could really help ease your mind with the slight increase in equity allocation.

Good luck to you. :sharebeer
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Brianmcg321
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Re: Rebalancing to 50/50

Post by Brianmcg321 »

Here’s a good visual of three different portfolios you could have during retirement. One is 100% stocks, one 50/50, and one 20/80

For this scenario we are starting in 1999 going until 2020. Withdrawing $40,000 per year.

If you were 70 in 1999 which ride would you want to go on.

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Kayaking
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Re: Rebalancing to 50/50

Post by Kayaking »

Brianmcg321 wrote: Sat Sep 19, 2020 9:24 am
As is often quoted around here “If you’ve won the game, stop playing”
https://esimoney.com/youve-won-game-stop-playing/
I had never read this quote before. It is something that both BalancedJCB19 and SquawkIdent mentioned as well. What an idea. The author of this article is right. Saving money while considering growth is like an engine that starts to run by itself after a while. It is tough to put the brakes on.

It is surprising to me that my pile of accumulation would be viewed by anyone here as being enough. I thought I needed to move back to 50% stocks because I didn't yet have enough to get me to 100 yo if necessary and snorkel with my daughter in the tropics and visit Italy when the pandemic has ended. I didn't know it would be fine for me to view my current assets as having "won the game". That is an amazing idea indeed.
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Re: Rebalancing to 50/50

Post by pkcrafter »

Kayaking, just to clarify a few things,

I said Bogleheads seem to like 20-30% international. That's the usual range, but choices do vary, and in the end it's a personal choice. Most posters agree that Vanguard's 40% is too high; however, those with international history may opt for it.

The recommendation for 40% stock comes from experience. My withdrawal rate is very similar to yours, and when I first retired, I held 30% in stock, but I discovered 30% didn't totally cover withdrawals and inflation, so now I'm at 40% stock and has been fine.


Paul
When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
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Re: Rebalancing to 50/50

Post by retiredjg »

Kayaking wrote: Sat Sep 19, 2020 10:22 am It is surprising to me that my pile of accumulation would be viewed by anyone here as being enough. I thought I needed to move back to 50% stocks because I didn't yet have enough to get me to 100 yo if necessary and snorkel with my daughter in the tropics and visit Italy when the pandemic has ended. I didn't know it would be fine for me to view my current assets as having "won the game". That is an amazing idea indeed.
Herein lies the problem. Nobody knows if it will be enough or not. The 4% withdrawal rate is what has worked in the past for 30 year periods in portfolios that contained a significant allocation to stocks (I think 40%). 5% and 6% have worked a lot of the time as well, but there were failures.

We don't know if the future will look like the past. There is no guarantee that 4% will be safe during your withdrawal period. And we don't actually know how you calculated your 4%.

Are your taxes included in that withdrawal? If not, your withdrawal rate is higher than you think.

Are those trips included in the $30k to $40k you withdraw annually? Do you mean a $15k trip every year or a $10k trip one time? Or a $5k trip every few years? Lots of unknowns here.

What is not unknown is that you are prone to making what could be disasterous investing mistakes when fearful. You've done it in the past. You pretty much said you will do it in the future. That is a really good way to lose a chunk of money and end up with inadequate money for your very old age.

You may feel like your latest market timing venture was a success but chances are it was not. You did get lucky on when to get out but of the market and you may think you prevented losses. Unfortunately you completely missed the time to get back in the market. There is a good chance your portfolio is smaller today than if you had simply let it ride and maybe rebalanced a little on the way down and up.
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Re: Rebalancing to 50/50

Post by Kayaking »

retiredjg wrote: Sat Sep 19, 2020 8:22 am It is clear from your comments that you should NOT go back to 50% stock. You will not be comfortable. What is the point in having money if it makes you uncomfortable?

You may have been very risk tolerant in the past, but you are not now. That's normal. It seems that 30% to 35% would be much more appropriate for you with your current risk tolerance.

I'd increase it overnight, but over 6 months might fit your temperament better.
I am glad you said that. I often forget that I am 70. I mean I have to type my DOB into lots of forms, but the reality of being an "older person" or a "senior citizen" is completely foreign to me because I don't feel that way at all. But of course it makes sense and is normal[!!], as you said, that I would be less risk tolerant now. So although my body doesn't acknowledge my age, a quiet part of my brain is keeping track of exactly how old I am so it is telling me to apply caution, something I have never had to think about before.

After reading the responses you and others have posted to my question, I have decided I will not return to 50% stocks because if I did that I it would cause me to again ratchet up the alarm every time the stock market plummets. That is part of the reason I like to go to Europe. When I am there, I don't have to hear anyone talk about the Dow Jones or the S&P 500.
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Re: Rebalancing to 50/50

Post by Leif »

Kayaking wrote: Fri Sep 18, 2020 1:26 pm After reading the early chapters of McClung's book and the Boglehead column, I do not think it is wise in the long term for me to continue to have a portfolio that is heavily weighted in bonds. Therefore, now I would like to move money from bonds to stock funds so my portfolio is back to a 50/50 AA. (You can probably tell that I can't promise I won't move it all back to bonds again if I get really scared.)
To help avoid getting really scared it is probably a good idea to keep a portion of your fixed income in cash. Although you might hear that cash is not paying much return now, which is true, neither are bonds. You may want to consider having 2-3 years of portfolio withdrawals in cash. That can help you sleep when the market takes a dive because you know you're covered.

I see you have 8% in a money market. Taxable or retirement account? Your Required Minimum Distribution will start in 2 years. That should be part of your portfolio withdrawal calculation at that time.
Last edited by Leif on Sat Sep 19, 2020 2:41 pm, edited 1 time in total.
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Re: Rebalancing to 50/50

Post by Brianmcg321 »

Kayaking wrote: Sat Sep 19, 2020 11:13 am
retiredjg wrote: Sat Sep 19, 2020 8:22 am It is clear from your comments that you should NOT go back to 50% stock. You will not be comfortable. What is the point in having money if it makes you uncomfortable?

You may have been very risk tolerant in the past, but you are not now. That's normal. It seems that 30% to 35% would be much more appropriate for you with your current risk tolerance.

I'd increase it overnight, but over 6 months might fit your temperament better.
I am glad you said that. I often forget that I am 70. I mean I have to type my DOB into lots of forms, but the reality of being an "older person" or a "senior citizen" is completely foreign to me because I don't feel that way at all. But of course it makes sense and is normal[!!], as you said, that I would be less risk tolerant now. So although my body doesn't acknowledge my age, a quiet part of my brain is keeping track of exactly how old I am so it is telling me to apply caution, something I have never had to think about before.

After reading the responses you and others have posted to my question, I have decided I will not return to 50% stocks because if I did that I it would cause me to again ratchet up the alarm every time the stock market plummets. That is part of the reason I like to go to Europe. When I am there, I don't have to hear anyone talk about the Dow Jones or the S&P 500.
Anytime someone starts bringing up the market from now on, talk about your bond fund and how wonderful being properly diversified is. They will look at you like you have two heads. They may even say “But that’s boring “. And you say, “Yes it is, isn’t it wonderful”.
Rules to investing: | 1. Don't lose money. | 2. Don't forget rule number 1.
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Re: Rebalancing to 50/50

Post by BarbBrooklyn »

You know how they say that past performance is not guarantee of future returns? I've modified that to "my past risk tolerance has no bearing on my future risk tolerance".

As I approached retirement 2 years ago, I realized that the greatest risk I faced was a poor sequence of returns early in retirement. I gradually pulled back from my early 60's 60/40 to a very conservative 30/70.

I was on a cruise during February and March and bought some cheap equities for my taxable account. Being at 30/70 (now at 34/66 due to equity growth and bit of buying) feels very comfortable for me.

Just as our parenting skills have to change as our kids grow up, our risk tokersnce changes as we grow older and are not contributing new funds.

This doesn't make us old. This makes us careful and wise.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
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Re: Rebalancing to 50/50

Post by ruralavalon »

Welcome to the forum :) .

What is your percentage annual withdrawal rate?

Kayaking wrote: Fri Sep 18, 2020 1:26 pmI am a 70 year old widowed female with a low 7 figure portfolio. I withdraw $30,000 - 40,000 from it annually.
. . . . .
After reading the early chapters of McClung's book and the Boglehead column, I do not think it is wise in the long term for me to continue to have a portfolio that is heavily weighted in bonds. Therefore, now I would like to move money from bonds to stock funds so my portfolio is back to a 50/50 AA. (You can probably tell that I can't promise I won't move it all back to bonds again if I get really scared.)

Should I use dollar cost averaging to do that, maybe moving 1% from every fund on a weekly basis?
Or should I just move the funds all at once?
Should I keep the number of funds Vanguard suggested?
,
In my opinion an asset allocation of 50/50 is within the range of what is reasonable at age 70. Anywhere in the range 60/40 to 30/70 might be reasonable for you. Please see: Rick Ferri, Forbes (2/6/2015) "The Center of Gravity for Retirees".

You need to pick an asset allocation that you can stick with no matter what the stock market does in the future. Asset allocation is a very personal decision which must be based on your own personal ability, willingness and need to take risk.

For what its worth we are both age 75, we have no pension or annuity, our annual withdrawal rate is about 3%, our asset allocation is currently 50/50 and has been since 2008. Our only bond fund is Vanguard Intermediate-term Bond Index Fund (VBILX). We do not have a cash allocation.

Once you have decided on an asset allocation you think you can stick with through thick and thin, and the funds you want to use, just go ahead and make the switch all at once. I see no benefit to making the change in stages.

Kayaking wrote: Fri Sep 18, 2020 1:26 pmThe last financial plan I received from Vanguard (2017) suggested these Admiral funds which I held til February, 2020:

Total Stock Market 29%
International Stock 20%
Total 49%

US Short Term Bond 7%
Intermediate Term Bond 11%
Total Bond 18%
International Bond 15%
Total 51%

This is my current portfolio of Vanguard Funds:

Total Stock Market 13%
International Stock 9%
total 22%

Short Term Bond 15%
Intermediate Term Bond 1%
Total Bond 42%
International Bond 11%
Federal Money Market Fund 8%
total 77%
I personally do not use or suggest international bonds, short-term bonds, or a cash allocation. In my opinion four bond funds is needlessly complex.
"Everything should be as simple as it is, but not simpler." - Albert Einstein | Wiki article link:Getting Started
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Re: Rebalancing to 50/50

Post by Kayaking »

retiredjg wrote: Sat Sep 19, 2020 10:49 am
Kayaking wrote: Sat Sep 19, 2020 10:22 am It is surprising to me that my pile of accumulation would be viewed by anyone here as being enough. I thought I needed to move back to 50% stocks because I didn't yet have enough to get me to 100 yo if necessary and snorkel with my daughter in the tropics and visit Italy when the pandemic has ended. I didn't know it would be fine for me to view my current assets as having "won the game". That is an amazing idea indeed.
Herein lies the problem. Nobody knows if it will be enough or not. The 4% withdrawal rate is what has worked in the past for 30 year periods in portfolios that contained a significant allocation to stocks (I think 40%). 5% and 6% have worked a lot of the time as well, but there were failures.

We don't know if the future will look like the past. There is no guarantee that 4% will be safe during your withdrawal period. And we don't actually know how you calculated your 4%.

Are your taxes included in that withdrawal? If not, your withdrawal rate is higher than you think.

Are those trips included in the $30k to $40k you withdraw annually? Do you mean a $15k trip every year or a $10k trip one time? Or a $5k trip every few years? Lots of unknowns here.

What is not unknown is that you are prone to making what could be disasterous investing mistakes when fearful. You've done it in the past. You pretty much said you will do it in the future. That is a really good way to lose a chunk of money and end up with inadequate money for your very old age.

You may feel like your latest market timing venture was a success but chances are it was not. You did get lucky on when to get out but of the market and you may think you prevented losses. Unfortunately you completely missed the time to get back in the market. There is a good chance your portfolio is smaller today than if you had simply let it ride and maybe rebalanced a little on the way down and up.
I agree with you that the future is unknown. I wish I could withdraw more from my portfolio because I am restoring an old house, but I do try to keep my withdrawals under 4%/year. This year the withdrawal will be 3.2% because I only had a fence installed.

Of course I include taxes in the withdrawals I take. They are the painful part of the withdrawals.

I would never take a $15,000 trip. I spend four weeks every year visiting Europe inexpensively. I sometimes stay with families and tutor their children while I improve my French or Italian. I sometimes stay with a friend who lives in Paris. I sometimes share an apartment with a kitchen with friends. We never go out to eat because I am always willing to cook if they do not feel like it. The food is better in Europe than it is in the US and I love shopping in little markets. We take public transportation and never rent cars or stay in hotels. The European trips I take are in the $2-3k range.

I do not agree that I am "prone to making what could be disastrous investing mistakes". And I do not agree that my transferring stocks to bonds even in that instance could be described as a so-called "disastrous investing mistake". I think it was wise of me to do that because it stopped all my worry, and I think it ended up being a excellent learning opportunity for me. It was because of that move that I posted a question on this forum and received from generous Bogleheads a course in Investing For Retirees that was designed for me. I am very grateful. And I am much more clear-eyed about my direction. I know I can tolerate 35% in stocks. I will let the stock side inch up a bit higher if it can. That is what I was letting it do before February. Although Vanguard kept reminding me to rebalance, my portfolio AA at that time was 62/38.

It is funny that you mention market timing. When I used to hear that the people who left the market during a downturn couldn't possibly time their market re-entries so they all missed the market climbs, I always felt very smart. I could see my portfolio was ascending along with those other wise investors who didn't make rash moves. So I was expecting to become concerned about that last summer until I realized I just did not care what the market was doing. I felt safe being out of it. It has become so volatile that I expected it to crash back down at any moment, and much of the summer's rise was due to the market climbing out of a deep hole. At the same time I was watching my Roth which is in Vanguard's Total Stock Market. It recovered, but it is now only slighter higher than it was last January.

So while it is true my portfolio would be slightly higher now if I had stayed in, I would have had a great many sleepless nights while it dropped; it would not be a great deal higher than it is now; and I would have learned nothing. So in my mind the whole "venture", as you call it, was a great success.
Last edited by Kayaking on Fri Sep 25, 2020 7:34 pm, edited 1 time in total.
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Re: Rebalancing to 50/50

Post by Kayaking »

goingup wrote: Sat Sep 19, 2020 9:36 am A couple of thoughts.
A big goal for me when I get to 70 and beyond is to rarely think about our portfolio. Many veteran Bogleheads (including Taylor) rarely look at their portfolio. They know they have "enough", are comfortable with their allocation, and let the portfolio drift (within limits) without rebalancing.

At at 70, with a low 7-figure portfolio and a low withdrawal rate, you have enough. However, you may still want enough stocks to provide the growth engine to pull your portfolio into the future. Take a look at the forum wiki about variable withdrawal rates at various ages. It seems that 30% stocks is the minimum listed. https://www.bogleheads.org/wiki/Variabl ... withdrawal

One measure you could take immediately is to take withdrawals exclusively from bonds and cash. This allows stocks to continue to grow (hopefully). This is called a rising equity glide path. I don't think it's imperative that you act immediately to add equity, but allow the portfolio to drift up.

As an incrementalist I like to follow the model of investing suggested by Nisiprius, a wise and prolific poster here: "I think it is wise to form a habit of doing as little as possible, and always less than you feel like doing." :beer
I looked up the definition of an Incrementalist. Seems like a rational way to make changes.

Before I posted my question here I never considered a "Pretty Much Leave it Alone" portfolio, but now that you and others have suggested it, it would be a good goal for me. I probably have too many funds. I do agree with you my stock allocation is low right now, but now that I have read all the answers to my question, I plan to increase it to 35% and let it drift upward for the reason you state: so that stocks can "provide the growth engine to pull [my] portfolio in the future."

After reading the McClung chapters that I downloaded from his website, I started withdrawing only from bonds. It made absolute sense to me to leave the stocks alone since they, not bonds, would increase.

I looked at the wiki link you included. The withdrawal percentages seem high. I would be afraid to withdraw that much at this point.

I found it interesting that they suggested buying an inflation-indexed Single Premium Immediate Annuity at age 80 to "reduce the financial risk of living past 100". That is another interesting idea, and probably sensible at that point. At my age, lots of people try to sell me annuities, but I don't want to do that. Maybe I should take the Bogleheads' advice and buy one at 80. Talk about a "Leave It Alone" scenario! I would be barely in the market. That would probably be bliss for me.
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Re: Rebalancing to 50/50

Post by Kayaking »

BarbBrooklyn wrote: Sat Sep 19, 2020 12:08 pm You know how they say that past performance is not guarantee of future returns? I've modified that to "my past risk tolerance has no bearing on my future risk tolerance".

As I approached retirement 2 years ago, I realized that the greatest risk I faced was a poor sequence of returns early in retirement. I gradually pulled back from my early 60's 60/40 to a very conservative 30/70.

I was on a cruise during February and March and bought some cheap equities for my taxable account. Being at 30/70 (now at 34/66 due to equity growth and bit of buying) feels very comfortable for me.

Just as our parenting skills have to change as our kids grow up, our risk tokersnce changes as we grow older and are not contributing new funds.

This doesn't make us old. This makes us careful and wise.
You are absolutely right. Before I posted my question I was not acknowledging my increasing worry about risk. I was only thinking I had to take on a lot of it in order to make my portfolio last. I compared it to driving in a snow storm: It can be harrowing but it is necessary to drive in it to get where you are going. (if you can follow that)

I never suspected portfolios could be approached differently, and change as we age, as you said, like our approach to parenting. I plan to move to a similar AA to your 34/66. I am glad you didn't have a poor sequence of returns for the past two years.
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Re: Rebalancing to 50/50

Post by BarbBrooklyn »

Reading Jane Bryant Quiinn's book "Making Your Money Last in Retirement" gave me insight into sequence of return risk AND introduced me to Bogleheads.

I will also mention that a good friend retains a Financial Advisor who teĺls her "my job is to keep you from doing something harmful during a downturn". Consider that.

My technique is to say to myself "if the equities market tanks 50%, will I be okay?"


Right now, my《33/67 makes that a "sleep at night" good deal.
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
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Re: Rebalancing to 50/50

Post by Kayaking »

Tattarrattat wrote: Sat Sep 19, 2020 7:33 am 30-40% stocks would be a solid balance for your situation. Would try to keep the withdrawl rate below 4% or so. International % will likely make ittle difference one way or another, pick anything between 0-40%.
I will do all those things. Thank you for the helpful suggestions. I agree I should keep the withdrawals below 4%. I do try to do that most years, although I sometimes break that rule because I am restoring an old house. But after one more final project I should be completely finished.
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Re: Rebalancing to 50/50

Post by Kayaking »

SquawkIdent wrote: Sat Sep 19, 2020 9:59 am You've won the game, congratulations.

So, I would do one of two things...leave it as is or to make things real, real simple, put it all in VWIAX (Wellesley Admiral 35% stock/65% bonds) and call it a day. The suggestion of VWIAX is based on a slight increase in stock allocation but that choice also hides the turmoil within the portfolio. That could really help ease your mind with the slight increase in equity allocation.

Good luck to you. :sharebeer
The Wellesley Admiral is an interesting idea. It would simplify everything for me. I never considered a single fund of both stocks and bonds. The expense ratio is 0.16% because it is not an index fund. It could be a good idea for me, though. Thank you for suggesting it.
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Re: Rebalancing to 50/50

Post by SquawkIdent »

Kayaking wrote: Sat Sep 19, 2020 7:43 pm
SquawkIdent wrote: Sat Sep 19, 2020 9:59 am You've won the game, congratulations.

So, I would do one of two things...leave it as is or to make things real, real simple, put it all in VWIAX (Wellesley Admiral 35% stock/65% bonds) and call it a day. The suggestion of VWIAX is based on a slight increase in stock allocation but that choice also hides the turmoil within the portfolio. That could really help ease your mind with the slight increase in equity allocation.

Good luck to you. :sharebeer
The Wellesley Admiral is an interesting idea. It would simplify everything for me. I never considered a single fund of both stocks and bonds. The expense ratio is 0.16% because it is not an index fund. It could be a good idea for me, though. Thank you for suggesting it.
Sometimes taking the simpler approach is so much better. And easier to stick with.
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Re: Rebalancing to 50/50

Post by Leif »

Kayaking wrote: Sat Sep 19, 2020 7:10 pm
Tattarrattat wrote: Sat Sep 19, 2020 7:33 am 30-40% stocks would be a solid balance for your situation. Would try to keep the withdrawl rate below 4% or so. International % will likely make ittle difference one way or another, pick anything between 0-40%.
I will do all those things. Thank you for the helpful suggestions. I agree I should keep the withdrawals below 4%. I do try to do that most years, although I sometimes break that rule because I am restoring an old house. But after one more final project I should be completely finished.
I don't think exceeding 4% on occasion, for a capital improvement or maintenance, should be a problem. Particularly for someone that has already reached 70. I also read McClung's book and I recall in his book that he looked at extra expense. That is common occurrence and should not sink your plan. You just need to be flexible on spending (it sounds like you are). It is typical that as we age we spend less (2%/year on average). There is just a bit of uptick in the later years for medical. So, enjoy while you are young!
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Re: Rebalancing to 50/50

Post by Kayaking »

BarbBrooklyn wrote: Sat Sep 19, 2020 6:50 pm Reading Jane Bryant Quiinn's book "Making Your Money Last in Retirement" gave me insight into sequence of return risk AND introduced me to Bogleheads.
I will also mention that a good friend retains a Financial Advisor who teĺls her "my job is to keep you from doing something harmful during a downturn". Consider that.
My technique is to say to myself "if the equities market tanks 50%, will I be okay?"
Right now, my《33/67 makes that a "sleep at night" good deal.
Your choice of mantra is a good one. It is an excellent question to ask in the first place, and would serve to be a comfort when things look especially hopeless. I think I will start asking myself that question too.

Does your friend find it frustrating that she has to pay someone to keep her in the stock market?

I read some articles by Michael Kitces today after I saw that you had mentioned sequence of return risk. I had read about it before but I didn't realize it at first because I didn't remember the name of it. That idea certainly factored into my alarm about not wanting to lose a great deal since I am in the early years of my retirement.

I have been sleeping well, I am happy to report. I am now waiting until the market loses a bit more steam and then I will start to make transfers back to the Total Stock Market up to 35% and then leave it alone.

Thank you for your help on this. It is a balancing act and you have figured out a way to stay comfortably on the tightrope while taking cruises, discovering a comfortable asset allocation, and sleeping well. Sounds like a good model.
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Re: Rebalancing to 50/50

Post by Kayaking »

Leif wrote: Sun Sep 20, 2020 11:51 am I don't think exceeding 4% on occasion, for a capital improvement or maintenance, should be a problem. Particularly for someone that has already reached 70. I also read McClung's book and I recall in his book that he looked at extra expense. That is common occurrence and should not sink your plan. You just need to be flexible on spending (it sounds like you are). It is typical that as we age we spend less (2%/year on average). There is just a bit of uptick in the later years for medical. So, enjoy while you are young!
Thank you for mentioning McClung allowed for extra expense. Withdrawing the funds for it does worry me a bit so I have to keep reminding myself that doing that project would generate a bit of income which would help keep my withdrawals lower in the future. If it starts to get really expensive I will do it in stages (which drives the contractor crazy), but I have always done projects that way. I do not mind living in a construction zone while I save money to address the next phase. Most people couldn't tolerate that, but I do not mind. That is how we did all the projects we took on. I can wait several years if I have to.
Thank you for your encouragement.
You had asked me in an earlier post if the Money Market was in a taxable or retirement account. It is in my IRA.
Last edited by Kayaking on Sun Sep 20, 2020 8:14 pm, edited 1 time in total.
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Re: Rebalancing to 50/50

Post by Peter Foley »

Dollar cost averaging reply: If I were going to increase my stock allocation by about 12% (in the ballpark of what you are suggesting) I would do 2% per month over a 6 month period. If there were a 10% correction, I would throw an additional 2% in at that time. If a 20% downturn, I would throw in the balance of what I would want to reallocate.

An approach - not necessarily the right one, but that would only be known in hindsight. :happy
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Re: Rebalancing to 50/50

Post by Kayaking »

ruralavalon wrote: Sat Sep 19, 2020 12:21 pm Welcome to the forum :) .

What is your percentage annual withdrawal rate?
You need to pick an asset allocation that you can stick with no matter what the stock market does in the future. Asset allocation is a very personal decision which must be based on your own personal ability, willingness and need to take risk.
For what its worth we are both age 75, we have no pension or annuity, our annual withdrawal rate is about 3%, our asset allocation is currently 50/50 and has been since 2008. Our only bond fund is Vanguard Intermediate-term Bond Index Fund (VBILX). We do not have a cash allocation.
Once you have decided on an asset allocation you think you can stick with through thick and thin, and the funds you want to use, just go ahead and make the switch all at once. I see no benefit to making the change in stages.
I personally do not use or suggest international bonds, short-term bonds, or a cash allocation. In my opinion four bond funds is needlessly complex.
Thank you. I am so glad (and relieved) I posted my question here.
I withdraw 3.5 - 4% annually, although this year I will end up withdrawing only 3.2% because I didn't want to hire anyone to work inside my house during the pandemic. I had some re-pointing done and a fence installed, but those were inexpensive projects.
After reading your suggestions and seeing similar comments from other people on this forum, I have decided to eliminate some of the funds I have.
Would you tell me your thinking on your choice of the Intermediate Term Bond Fund?
The article by Rick Ferri was very interesting and supports many of the comments by others here. I was very surprised he suggested a 30/70 allocation when one stopped being in the accumulation phase. That was a startling idea.
Last edited by Kayaking on Sun Sep 20, 2020 8:56 pm, edited 1 time in total.
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Re: Rebalancing to 50/50

Post by Kayaking »

Brianmcg321 wrote: Sat Sep 19, 2020 11:54 am Anytime someone starts bringing up the market from now on, talk about your bond fund and how wonderful being properly diversified is. They will look at you like you have two heads. They may even say “But that’s boring “. And you say, “Yes it is, isn’t it wonderful”.
I am acquiring a great deal of wisdom here, including suggestions for subjects to raise to bore my friends! But you are right. It would be wonderful to have a boring asset allocation so I could avoid getting nervous during market gyrations. I would really like that.
BarbBrooklyn
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Joined: Fri Aug 24, 2018 9:33 am
Location: NYC

Re: Rebalancing to 50/50

Post by BarbBrooklyn »

Kayaking wrote: Sun Sep 20, 2020 7:00 pm
BarbBrooklyn wrote: Sat Sep 19, 2020 6:50 pm Reading Jane Bryant Quiinn's book "Making Your Money Last in Retirement" gave me insight into sequence of return risk AND introduced me to Bogleheads.
I will also mention that a good friend retains a Financial Advisor who teĺls her "my job is to keep you from doing something harmful during a downturn". Consider that.
My technique is to say to myself "if the equities market tanks 50%, will I be okay?"
Right now, my《33/67 makes that a "sleep at night" good deal.
Your choice of mantra is a good one. It is an excellent question to ask in the first place, and would serve to be a comfort when things look especially hopeless. I think I will start asking myself that question too.

Does your friend find it frustrating that she has to pay someone to keep her in the stock market?

I read some articles by Michael Kitces today after I saw that you had mentioned sequence of return risk. I had read about it before but I didn't realize it at first because I didn't remember the name of it. That idea certainly factored into my alarm about not wanting to lose a great deal since I am in the early years of my retirement.

I have been sleeping well, I am happy to report. I am now waiting until the market loses a bit more steam and then I will start to make transfers back to the Total Stock Market up to 35% and then leave it alone.

Thank you for your help on this. It is a balancing act and you have figured out a way to stay comfortably on the tightrope while taking cruises, discovering a comfortable asset allocation, and sleeping well. Sounds like a good model.
My friend thinks that having a "money guy", for her, is the right approach.

I am fortunate enough to have access to ancertified CFP through my former municipal job and for $25.00 flat fee can have a financial checkup each year to make sure Im on track. Is not allowed to pitch me anything.

Do you ever use calculators like FIRECALC to model your withdrawals, especially for large projects? Those also let me sleep well at night!
BarbBrooklyn | "The enemy of a good plan is the dream of a perfect plan."
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