portfolio allocation for retirement

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elgringo
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Joined: Fri Jul 30, 2021 2:01 pm

portfolio allocation for retirement

Post by elgringo »

Just curious about what others have found when comparing portfolio recommendations between Schwab, Fidelity and Vanguard.

I answered questions on each website and then looked at the recommended portfolio. Vanguard said I was very conservative, while the others said I was moderate. As a result, Vanguard recommended 37% stock while the others recommended around 46% - 48%.

Has anyone else had a similar experience?
homebuyer6426
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Re: portfolio allocation for retirement

Post by homebuyer6426 »

These are just broad-brush stroke estimates that the web apps use. You should always do your own research to determine your desired asset allocation. For many people, it's "age in bonds" or 60-40, as a ballpark. But you need to determine your own risk tolerance, and how you respond to downturns. If you just go with what the site tells you, it might be good enough, but you're letting a computer with a small handful of data points do your thinking for you.
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enad
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Re: portfolio allocation for retirement

Post by enad »

elgringo wrote: Wed Sep 21, 2022 6:42 am Just curious about what others have found when comparing portfolio recommendations between Schwab, Fidelity and Vanguard.

I answered questions on each website and then looked at the recommended portfolio. Vanguard said I was very conservative, while the others said I was moderate. As a result, Vanguard recommended 37% stock while the others recommended around 46% - 48%.

Has anyone else had a similar experience?
I remember going through the Q&A at Vanguard and other sites at different times and came up with different results. In the end we looked at our current expenses and our current income stream and decided to be more aggressive with our portfolios (60/40 for me, 70/30 for my wife) as we have no plans on drawing from them outside of the RMD when the time comes.
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Varsh
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Joined: Fri Mar 18, 2022 9:50 am

Re: portfolio allocation for retirement

Post by Varsh »

I did the same and similar risk and timeline simulators, Mine came out 70/30. However, I seem to read too much and seek the opinions and knowledge needed to make better financial decisions and find that my research tells me that a 60/40 has better risk adjusted return, so that is what I am going with.
That being said, I've never liked or had good experience with bonds (sorry I digress), so now my 60/40 does not look that great. I use a mix of MF's and ETF's. On the bond side, in my taxable, I use Muni's and in my tax deferred, I use Intermediate Government funds -- SCHR and VGIT.... I am eyeing up VGLT...thinking I'll add a LTGB fund...some say do this for the first 20% of your bond allocation...who really knows... I continue to DCA through all of this with the focus on long term.... I have about 11 years to retire and have other more balanced accounts including now treasuries on my fixed side, treating them as CD alternatives that for now, are competitively positioned and safe ...3.5% and higher...al, as well as I bonds to help diversify out overall portfolio.

Further, I believe unless things change, my retirement allocation will be more like 40/60, adding TIPS like SCHP and VTIP to name two. Hope this helps!

Cheers to my Bogle Family!! :sharebeer
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ruralavalon
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Re: portfolio allocation for retirement

Post by ruralavalon »

Welcome to the forum :) .

elgringo wrote: Wed Sep 21, 2022 6:42 am Just curious about what others have found when comparing portfolio recommendations between Schwab, Fidelity and Vanguard.

I answered questions on each website and then looked at the recommended portfolio. Vanguard said I was very conservative, while the others said I was moderate. As a result, Vanguard recommended 37% stock while the others recommended around 46% - 48%.

Has anyone else had a similar experience?
In my opinion those tools have a value only in that they can make you stop and think about risk, and how much or little the questions they ask apply to you. This can only be a starting point, not an end point in your individual asset allocation decision.

How have you reacted to market crashes in the past? Will you have a vested pension in addition to Social Security benefits? How much of your annual retirement spending will be covered by Social Security benefits and any other guaranteed sources of income? Do you have debt, and will it be paid off by the time you retire? Do you have dependents?

You need to base a desired asset allocation on your own risk tolerance and your own personal circumstances.
Last edited by ruralavalon on Wed Sep 21, 2022 10:57 am, edited 1 time in total.
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David Jay
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Re: portfolio allocation for retirement

Post by David Jay »

I would just forget about what any application or website suggests as an asset allocation for you. Asset allocation is intensely personal. It becomes even more so after retirement when your employment income ends and your portfolio must support you for the rest of your days.

Asset allocation isn't about math at all, it is a negotiation between your head and your gut. Your head says: "More stocks, more opportunity for gains". But when a 2020 hits, your gut screams" "Get me out of here!!!". We had so many people on this forum insisting that "this time it's different" and selling their stock portfolios after the market crashed.

I would select the highest asset allocation that allows you to sleep well at night and that allows you to face a 40% drop in the market without selling your stock allocation. Even in retirement, you are likely to see 2-3 40% downturns through your golden years. You have to be ready for that eventuality.

Some people can't hold any stocks at all. That is unfortunate because fixed income is unlikely to keep up with inflation over time. But it is better than selling out after a downturn.

Rick Ferri suggests that 30% stocks is a "sweet spot" for retirees because that AA is likely to keep up with inflation. Some folks can go 50%. A few can go 70%. Very few can go higher without worry. And who needs worry in retirement?
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Leif
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Re: portfolio allocation for retirement

Post by Leif »

Welcome to the site!

Besides reading a number of personal finance books, and wisdom I've gained by being from this site for the last 15 years, I also look at the asset allocation used by target date funds. All that needs to be adjusted by your retirement withdrawal rate. Also consider any short term goals to keep that money safe. If you feel pretty secure then consider investing for charity and the next generation. There are a lot of pieces to consider.
the_wiki
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Re: portfolio allocation for retirement

Post by the_wiki »

elgringo wrote: Wed Sep 21, 2022 6:42 am Just curious about what others have found when comparing portfolio recommendations between Schwab, Fidelity and Vanguard.

I answered questions on each website and then looked at the recommended portfolio. Vanguard said I was very conservative, while the others said I was moderate. As a result, Vanguard recommended 37% stock while the others recommended around 46% - 48%.

Those are honestly not as different as they may sound. Looking back for the past 35 years, 37% in stock averaged 7.4% returns per year, with the worst drop being -17.5%. 47% in stock averaged 7.9% with the worst drop being -23.4%. So adding 10% stock gets you the potential for more money, but with the potential for some more pain during downturns.

Some financial organizations want you to have a smoother ride in retirement and will recommend less stock, others think you should take a little more risk in order to ensure your money doesn't run out or get eaten by inflation. But nobody really knows what is going to happen, so it's up to you.

A lot of the classic portfolio examples, and all-in-one funds have a 40% Stock/60% Bond options, so that kind of splits the difference for you. Easier to calculate portfolio when you use multiples of 5 anyway.
Topic Author
elgringo
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Joined: Fri Jul 30, 2021 2:01 pm

Re: portfolio allocation for retirement

Post by elgringo »

thanks to everyone for their insight and experience. I will probably ratchet down my exposure to stocks.
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