64 YO, advisor recomends 70/30 AA

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retireIn2020
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64 YO, advisor recomends 70/30 AA

Post by retireIn2020 »

So, I met with my Fidelity advisor today (Premium Services with no fee).

As usual, we went over expenses, taxes, large upcoming purchases etc. which has always been entered into the analyzation software that spits out how much I'll end up with (my heirs) at the end of the game.

Currently I'm self-managing my portfolio (Bogleheads style). My AA currently is 50/50 with a stock asset mix of total stock US/ex-US and Fixed income of MYGA's/MM/401k Stable Value.

Great talk and he commended my portfolio, Said I'm golden, I agreed, no issues and all is well.
He mentioned, they have a new system (2024) for building a comprehensive portfolio investment strategy. I obliged and agreed to listen.

New system uses all accounts, Fidelity and Non-Fidelity, takes all income (SS, Pension, yada yada), looks at taxable, 401k, IRA, Roth, Taxes, and HSA, then tells you what the most efficient AA would be. Since all income, expenses, accounts, taxes, age, etc. are already entered, It only asks one question, risk tolerance from 1 to 10.

My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.

Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA . New System recommends a 70/30 AA .

Either way, it goes to my heirs, barring the need for LTC with dignity.

What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
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BirdFood
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Re: 64 YO, advisor recomends 70/30 AA

Post by BirdFood »

As a total beginner to the Boglehead philosophy, I would nevertheless trust this Fidelity process about as much as I'd trust a horoscope.
FIRWYW
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Re: 64 YO, advisor recomends 70/30 AA

Post by FIRWYW »

We need more info to give you good advice.

1) sounds like goal is to maximize for heirs?

2) what are your expenses- fixed and variable?

3) how much from guaranteed sources: Ss, pension, MYGA?


I suspect 70/30 is reasonable based on what you wrote so far if goal is to maximize inheritance
billfromct
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Re: 64 YO, advisor recomends 70/30 AA

Post by billfromct »

When I left my job at age 69, I wanted 10 years of my latest working gross salary in my rollover IRA, my largest financial asset, in fixed income. That 10 years of my gross salary turned out to be about 35% of my rollover IRA, so I established a 65% stock/35% fixed income allocation in my rollover IRA which I take required minimum distributions (RMDs) each year. My 35% fixed income allocation now covers about 8 or 9 years of RMDs going forward. Of course, the RMDs, as a percentage of the rollover IRA, go up a little each year as I get older.

I take my RMD each January & reallocate from my rollover IRA stocks to fixed income to get back to my 65% stock/35% fixed income allocation.

I’m very comfortable with that 8 or 9 years of RMD coverage in my fixed income allocation, about 60% intermediate term/40% short term, which should allow me to ride out any stock market correction or bear market.

My monthly SS “check”, which covers most of my monthly expenses, gives me that additional cushion should another stock market downturn, like 2020, happen.

In total, including my Roth IRA & taxable account, I’m at about a 70%/30% allocation, of which I am very comfortable. I don’t plan on taking any money out of my Roth IRA & it will go to my beneficiaries when I “move on”.

bill
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Re: 64 YO, advisor recomends 70/30 AA

Post by rossington »

retireIn2020 wrote: Fri May 10, 2024 12:49 am So, I met with my Fidelity advisor today (Premium Services with no fee).

As usual, we went over expenses, taxes, large upcoming purchases etc. which has always been entered into the analyzation software that spits out how much I'll end up with (my heirs) at the end of the game.

Currently I'm self-managing my portfolio (Bogleheads style). My AA currently is 50/50 with a stock asset mix of total stock US/ex-US and Fixed income of MYGA's/MM/401k Stable Value.

Great talk and he commended my portfolio, Said I'm golden, I agreed, no issues and all is well.
He mentioned, they have a new system (2024) for building a comprehensive portfolio investment strategy. I obliged and agreed to listen.

New system uses all accounts, Fidelity and Non-Fidelity, takes all income (SS, Pension, yada yada), looks at taxable, 401k, IRA, Roth, Taxes, and HSA, then tells you what the most efficient AA would be. Since all income, expenses, accounts, taxes, age, etc. are already entered, It only asks one question, risk tolerance from 1 to 10.

My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.

Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA . New System recommends a 70/30 AA .

Either way, it goes to my heirs, barring the need for LTC with dignity.

What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
Hello OP,
I believe the recommendation is based on people in your situation such as this:
billfromct wrote: Fri May 10, 2024 3:04 am In total, including my Roth IRA & taxable account, I’m at about a 70%/30% allocation, of which I am very comfortable. I don’t plan on taking any money out of my Roth IRA & it will go to my beneficiaries when I “move on”.
bill
Your "pre portfolio" income covers all your expenses comfortably.
The fixed income portion of the portfolio is primarily cash equivalents.
So it is assumed you can handle more stock risk because your expenses and spending are for the most part covered.
Something to at least consider but maybe not for you.
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Claudia Whitten
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Re: 64 YO, advisor recomends 70/30 AA

Post by Claudia Whitten »

retireIn2020 wrote: Fri May 10, 2024 12:49 am Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA . New System recommends a 70/30 AA .
Wow. A system that knows the future! Amazing. Hope they have a patent on that thing.

I'm 65 and at 30/70, so if I look at the Fidelity "system" in the mirror, I'm all set.

On a serious note, a person's AA is very personal. Also, the trouble with being our age and seeking "counsel" from businesses is that we're usually getting advice from people much younger than us, with less lived experience, and of course they're different from us, too, with different emotions and tolerances and motivations.

Anyway, regarding the Fidelity advisor and everything he said, I'd say the counsel was worth what you paid for it.
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Re: 64 YO, advisor recomends 70/30 AA

Post by AlmstRtrd »

Claudia Whitten wrote: Fri May 10, 2024 4:28 am On a serious note, a person's AA is very personal. Also, the trouble with being our age and seeking "counsel" from businesses is that we're usually getting advice from people much younger than us, with less lived experience, and of course they're different from us, too, with different emotions and tolerances and motivations.
Very well stated. At 65 & 57 my wife & I only have 35% in stocks, or maybe a bit more because they've done well recently. But being loss averse is a real thing. Choosing an AA should not be based solely on what is likely to end up giving you the highest balance on the day of your death. In the meantime you also have to live with the ups and downs whereas the Fidelity guy does not. Stick with what makes you comfortable. Dying with more money is frequently overrated.
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Re: 64 YO, advisor recomends 70/30 AA

Post by windaar »

Everyone is howling at the moon due to equities doing well lately. 70/30 is not unthinkable for a retired 64 YO, but you have reached the conclusion that 50/50 is right for you, which it probably is. I'm about that age and am 40/60 here on out. 60/40 seems like a sweet spot for many. If you bump up to 70% and the market tanks and stays that way for 10 years will the advisor pony up the loss? :?
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Re: 64 YO, advisor recomends 70/30 AA

Post by LookinAround »

retireIn2020 wrote: Fri May 10, 2024 12:49 am What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
It's good to solicit input but as someone said, you have to do what feels right for you. You might find this Bogleheads thread an interesting read to see what others have done.

Age 60+ AND retired? What's your asset allocation? What type of bonds/Fixed Inc instruments do you use?
Last edited by LookinAround on Fri May 10, 2024 6:52 am, edited 2 times in total.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Grasshopper »

My financial calculator ME age 73 retired 18 years ago asset allocation 30/70%. No heirs to leave anything to.
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Wiggums
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Re: 64 YO, advisor recomends 70/30 AA

Post by Wiggums »

We are retired and AA is 65/35. The portfolio is for our heirs less the need for LTC. Same as you. I wanted 70/30 and DW thought 60/40 was better. So we compromised.

During the pandemic, we bought more stock.We are trying out a reverse glide path. Which means we are ok letting the stock bond ratio drift. Most of mandatory expenses are already covered by pensions, with withdrawals mainly for large lumpy expenses such as a new roof, new car.

Not much difference in return between 50/50, 60/40, and 70/30. Some feel better with 50/50 knowing the potential loss is lower. If we were more dependent on our portfolio, I would probably hold less equities. We opened a 70/30 fund for our kids when they were born. They are use to the portfolio size changing all the time. They pretty must use their brokerage account like a checking account. LOL
Last edited by Wiggums on Fri May 10, 2024 7:16 am, edited 1 time in total.
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Re: 64 YO, advisor recomends 70/30 AA

Post by arcticpineapplecorp. »

retireIn2020 wrote: Fri May 10, 2024 12:49 am What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
AA is about need, ability and willingness to take risk.

you have the ability, but do you have the need or willingness?

you may have a need if you're trying to increase assets to leave behind.

do you have the willingness?

36% drawdown vs 25% in The Great Recession:

Image

would you still feel ok if you lost 1/3rd of your money in retirement?

How much risk do you need to take: https://www.cbsnews.com/news/asset-allo ... -you-need/
How much risk do you have the ability to take: https://www.cbsnews.com/news/asset-allo ... -you-take/
How much risk do you have the willingness to take: https://www.cbsnews.com/news/asset-allo ... tolerance/
How to deal with conflicts between the need, ability and willingness to take risk: https://www.cbsnews.com/news/asset-allo ... ing-goals/
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Meg77
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Re: 64 YO, advisor recomends 70/30 AA

Post by Meg77 »

Yes, I agree a 70/30 AA is reasonable for a 64 year old with a withdrawal rate below 4%. I'm a financial advisor and manage my mother's portfolio. She turns 66 this year and I've got her at 75/25.

There are two ways to look at it. You have oversized so can afford not to take the risk. But yes - you'd be likely leaving millions on the table that your heirs would otherwise receive (or that you could, ahem, find ways spend or give away during your lifetime!). On the other hand, you're very likely to meet your goals anyway, so why NOT take more risk and watch that money pile grow?

Either way, you're fine. But I agree with their system's recommendation. Congrats!
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Re: 64 YO, advisor recomends 70/30 AA

Post by z3r0c00l »

Honestly doubt it matters that much. I personally plan to join you at 50/50 when the time comes.
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Re: 64 YO, advisor recomends 70/30 AA

Post by retiredjg »

It seems the "new" system only looks at the financial aspects of portfolio risk. But humans need to consider the emotional aspect of risk as well.

There is nothing wrong about a 70/30 portfolio at your age if your risk tolerance is high. Lots of people invest for their children rather than themselves. But you answered 5 instead of 7 or 8 or even 9. I think you should stay where you are. What's the point of letting your money make you uncomfortable in your older age?
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Re: 64 YO, advisor recomends 70/30 AA

Post by dbr »

retireIn2020 wrote: Fri May 10, 2024 12:49 am
then tells you what the most efficient AA would be.
Do you understand what the efficiency of an AA is? Did they explain what is computed to measure efficiency? Do you understand the consequences to other things about your portfolio of choosing the most "efficient" portfolio.

You don't have the foggiest idea what you are getting or why you would want it.

That said a broad simple guess would be that 70/30 is probably fine. 50/50 is probably fine too. A better approach would be to estimate a range of things the portfolio would do and get those ranges of outcomes for different choices of AA so you can see why you might choose one AA in particular.

I personally advocate proceeding by thinking about need, ability, and willingness to take risk mentioned in a post above.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Claudia Whitten »

AlmstRtrd wrote: Fri May 10, 2024 5:28 am Choosing an AA should not be based solely on what is likely to end up giving you the highest balance on the day of your death.
Agree.
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Re: 64 YO, advisor recomends 70/30 AA

Post by goingup »

retiredjg wrote: Fri May 10, 2024 7:27 am It seems the "new" system only looks at the financial aspects of portfolio risk. But humans need to consider the emotional aspect of risk as well.

There is nothing wrong about a 70/30 portfolio at your age if your risk tolerance is high. Lots of people invest for their children rather than themselves. But you answered 5 instead of 7 or 8 or even 9. I think you should stay where you are. What's the point of letting your money make you uncomfortable in your older age?
Insightful and wise post.

OP- you said your risk tolerance is 5, so 50-50 seems right for you. I typically answer these questions with a 7 (also retired and your age), so our AA has more equity. I think AA is largely about your "gut" feeling regarding the prospect of a deep and prolonged market decline. It's also about withdrawal rates and portfolio survivability. At my age I don't really need a computer model or financial advisor to tell explain this to me.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Claudia Whitten »

In my experience, one's "risk tolerance" (leading to appropriate AA) is not something that one can just blurt out after thinking about it for a few minutes. One has to live ups and down, bull markets and (most importantly) bear markets, and learn and re-learn one's behavior. Bear markets do indeed cause many previously confident investors to "sell low," showing them the hard way that their risk tolerance was not what they thought it was. Read some of the threads on this board from 2008-09 or even from 2022 (mild, short bear market).

For people near or in retirement, having a certain number of years in safe assets can make it easier to weather a protracted downturn. The last thing you want to do is water your garden when your well is running dry, which is what taking living expenses from your portfolio during a bear market amounts to. Those "max drawdown" percentages in the image above? They likely do not include distributions to fund living expenses.

I'd consider a 70/30 portfolio in retirement if there was little to no chance I'd need the money in my lifetime.
Last edited by Claudia Whitten on Fri May 10, 2024 8:23 am, edited 1 time in total.
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Re: 64 YO, advisor recomends 70/30 AA

Post by dbr »

Here is a chart that shows the historical experience of different asset allocations while also withdrawing from a portfolio. One can at least get an idea what the outcomes look like and generally what affects what:

https://engaging-data.com/visualizing-4-rule/
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Re: 64 YO, advisor recomends 70/30 AA

Post by rkhusky »

These projections are based on the assumption that the future will look like the past. What if it doesn’t? What if something happens that has never happened before? I am at 40/60 because of that.

However, what you could do is segregate the money for heirs from your retirement money. Don’t count the heirs’ money in your AA, don’t include it in rebalancing calculations, don’t consider it when thinking about spending, and don’t consider it an emergency fund. You could create a separate account for the heirs’ money or just choose a target date fund in an existing account. How much would you put in such a fund/account and how much would you keep for retirement spending? What AA would you now choose for your retirement money?

Incidentally, I consider money in our 529’s this way - completely separate from our retirement money.
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Re: 64 YO, advisor recomends 70/30 AA

Post by RadAudit »

retireIn2020 wrote: Fri May 10, 2024 12:49 am Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA . New System recommends a 70/30 AA .

Either way, it goes to my heirs,
How obligated are you to taking care of your heirs for the duration of their lives?

I came to the conclusions sometime ago that I couldn't leave enough money to the kids to take care of them for the rest of lives. Additionally, although what I might leave behind may sound large to me - I'm anchored in the times of nickel Cokes and when millionaires were wealthy - time, inflation and taxes will take large bites out of the purchasing power of the inheritance.

So I decided to go with what was enough for me. 50/50 or thereabouts.
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Re: 64 YO, advisor recomends 70/30 AA

Post by dbr »

rkhusky wrote: Fri May 10, 2024 8:33 am These projections are based on the assumption that the future will look like the past. What if it doesn’t? What if something happens that has never happened before? I am at 40/60 because of that.

It would probably help to see what is actually being shown to the client. Projections of uncertain futures should be a wide range of what might happen. The expectations for 50/50 and 70/30 overlap considerably. Included in that is what we might think is the uncertainty in the uncertainty.

Also the statement was that the model aims at maximizing efficiency but then the OP talks about maximizing wealth at death. So which is it?
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Re: 64 YO, advisor recomends 70/30 AA

Post by 123 »

To some extent the amount of total assets in the portfolio can effect the potential asset allocation. All other things being equal an investor with $100K in their portfolio can take less risk than an investor with $1M in their portfolio.
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Re: 64 YO, advisor recomends 70/30 AA

Post by avalpert1 »

retireIn2020 wrote: Fri May 10, 2024 12:49 am My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.
Since a 'total view' by definition accounts for everything, it must also account for your risk tolerance and thus it isn't conceivable that a system taking a total view won't provide different outputs based on different answers to that question... So I'm more skeptical of the advisors understanding of the new system than the system itself...

In any case, with a withdrawal rate below 4% (you seem to indicate that is what you have) in your mid 60s it likely doesn't matter one way or the other so choose an allocation you are comfortable with.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Fallible »

retireIn2020 wrote: Fri May 10, 2024 12:49 am ...
New system uses all accounts, Fidelity and Non-Fidelity, takes all income (SS, Pension, yada yada), looks at taxable, 401k, IRA, Roth, Taxes, and HSA, then tells you what the most efficient AA would be. Since all income, expenses, accounts, taxes, age, etc. are already entered, It only asks one question, risk tolerance from 1 to 10.

My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.
...
Something seems wrong here, so some questions for you (and the advisor) regarding risk tolerance:

_is this the only question it asks about RT, to rate 1-10?

_assuming it is, your advisor then seems to say your rating doesn't matter because the "total view" somehow overrides your own personal view of RT?

_how does this total view take into account your own assessment of personal risk tolerance, i.e., what happens to it when somehow combined with all the rest?

_how is this total view more accurate than your own personal assessment of emotional risk tolerance (link below to RT in the wiki)?

https://www.bogleheads.org/wiki/Risk_tolerance
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Re: 64 YO, advisor recomends 70/30 AA

Post by HeavyChevy »

AA a very personal thing.

Ages 64/63 we are comfortable w 75/25, SS to cover 1/3 expenses. No pensions. Possible inheritance.

If I was as conservative as those 30/70 to 50/50, I would purchase a SPIA, cause bond markets are risky too.
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Re: 64 YO, advisor recomends 70/30 AA

Post by delamer »

How many years of your residual expenses would be in a 30% allocation to cash equivalents?
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Re: 64 YO, advisor recomends 70/30 AA

Post by retiredjg »

It is possible the advisor does not understand the "new system".

Perhaps it is designed to suggest a financially reasonable AA which is then supposed to be limited or tempered by the risk tolerance question. That's the only way the "new system" makes good sense to me.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Rocky Mtn Man »

windaar wrote: Fri May 10, 2024 5:55 am Everyone is howling at the moon due to equities doing well lately.
Excellent point. Lots of recency bias out there. Here's another: "Bond funds are the Devil's work"
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Re: 64 YO, advisor recomends 70/30 AA

Post by GP813 »

Stick with 50/50 and don't rebalance. If stocks do outperform you will drift towards higher stock allocation over time, if they don't you'll have more bonds than if you started 70/30.
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Re: 64 YO, advisor recomends 70/30 AA

Post by ruralavalon »

retireIn2020 wrote: Fri May 10, 2024 12:49 am So, I met with my Fidelity advisor today (Premium Services with no fee).

As usual, we went over expenses, taxes, large upcoming purchases etc. which has always been entered into the analyzation software that spits out how much I'll end up with (my heirs) at the end of the game.

Currently I'm self-managing my portfolio (Bogleheads style). My AA currently is 50/50 with a stock asset mix of total stock US/ex-US and Fixed income of MYGA's/MM/401k Stable Value.

Great talk and he commended my portfolio, Said I'm golden, I agreed, no issues and all is well.
He mentioned, they have a new system (2024) for building a comprehensive portfolio investment strategy. I obliged and agreed to listen.

New system uses all accounts, Fidelity and Non-Fidelity, takes all income (SS, Pension, yada yada) [emphasis added], looks at taxable, 401k, IRA, Roth, Taxes, and HSA, then tells you what the most efficient AA would be. Since all income, expenses, accounts, taxes, age, etc. are already entered, [emphasis added] It only asks one question, risk tolerance from 1 to 10.

My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.

Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA . New System recommends a 70/30 AA .

Either way, it goes to my heirs, barring the need for LTC with dignity.

What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
Seems reasonable in my opinion. In my opinion 50/50 is also within the range of what is reasonable.

Asset allocation is a very personal decision which must be based on each investor's own individual ability, willingness and need to take risk.

I am age 78, retired with no pension or annuity, my Social Security benefits plus Required Minimum Distributions (RMDs) are enough to cover my spending needs/wants. I have 4 grown children and 4 grandchildren. My rate Of withdrawal is under 4%. I am in and have paid for a Lifecare Retirement Community so long-term care is covered. My asset allocation is 60/40.
Last edited by ruralavalon on Fri May 10, 2024 11:06 am, edited 4 times in total.
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Re: 64 YO, advisor recomends 70/30 AA

Post by flee »

I've read and posted on Bogleheads for a while now and have been sensitized to the needs and emotional value of a conservative retirement portfolio. However, I'm now convinced it greatly depends on ones monthly portfolio cash flow needs. If you need a steady and higher percentage of retirement monies coming in from the portfolio, well yes, you better have a more cash like investments. Like what Bernstein was quoted 10 years of your living expenses in cash like (treasuries).

If you have your living expenses accounted for with Social Security, pensions, or annuities well you needn't invest in cash, bonds, or any other stable value fund. There is a cost to such security. If you don't need the security then don't waste your money. We must remember there will always be a risk. You cannot invest your way from risk. Think of people who claim late SS that risk leaving much benefit behind if early death occurs. Or those that fear a 50% draw down, but don't fear the loss of portfolio growth upon longer lifespan. Michael Piper "Oblivious Investor blog" wrote a piece some months back on how much cash should retirees hold. What is the optimum amount given the security vs return. It was an impressive research piece on overlapping 30 year retirements throughout stock history with a retiree holding 50:50 portfolio. You know the efficient requirement was $0. Cash did not buy the retirement any value.

I've experimented with Portfolio Visualizer and discovered similar results. My 20 year retirement cycle withdrawals if tested upon some very historical poor stock timing still manages better than a bond stock combination. However, my preference is to hold 25% which is my spouse and my full IRA value in three funds. Spouse has Wellington for a balanced 60:40 active fund with a good history of avoiding pitfalls of the general stock market such as the dot com hype. The fund is Value tilt that does better in a draw down and utilizes corporate bonds that offer higher return albeit with slightly more risk. They are the higher dividend type, again lower volatility. This investment offers more diversity to the portfolio and I believe superior to attempting foreign investments. My IRA is Wellesley and VTI which gives me growth and good stability. I can pull from the fund that makes that has the most yearly growth.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Outer Marker »

retireIn2020 wrote: Fri May 10, 2024 12:49 am What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
Seems reasonable to me. I'm 58, 70/30 and have been there since my mid 30's. Plan to be 70/30 when my heirs inherit.

I'd be very curious where Vanguard's questionaire places you . . . ? https://investor.vanguard.com/tools-cal ... stionnaire

Spot on in my case vis-a-vis my own rationale.
bikechuck
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Re: 64 YO, advisor recomends 70/30 AA

Post by bikechuck »

As a 71 year old de accumulator I care more about portfolio preservation than growth. So at this point I am 50/50 and expect to remain that way for the duration.
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Charles Joseph
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Re: 64 YO, advisor recomends 70/30 AA

Post by Charles Joseph »

Claudia Whitten wrote: Fri May 10, 2024 7:38 am
AlmstRtrd wrote: Fri May 10, 2024 5:28 am Choosing an AA should not be based solely on what is likely to end up giving you the highest balance on the day of your death.
Agree.
Ah-men.
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retireIn2020
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Re: 64 YO, advisor recomends 70/30 AA

Post by retireIn2020 »

Thank you everyone for the excellent comments.

I'm going to keep my AA at 50/50 for now and allow my stock allocation to drift upward a bit over time as I spend down fixed income, unless it doesn't. :D

My willingness to take risk definitely won't allow me to make any drastic AA changes. I've always been a Bird in the hand is worth two in the bush kind of person.
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livesoft
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Re: 64 YO, advisor recomends 70/30 AA

Post by livesoft »

windaar wrote: Fri May 10, 2024 5:55 am Everyone is howling at the moon due to equities doing well lately....
Except for those folks howling at the moon due to bonds not doing well lately. :)

I think that as one gets older, then sequence-of-return risk and longevity risk become risks that are not meaningful to you, so going to a lower bond allocation is probably fine.
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bsteiner
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Re: 64 YO, advisor recomends 70/30 AA

Post by bsteiner »

If you're not sure as between 70/30 and 50/50, there's always ....
stan1
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Re: 64 YO, advisor recomends 70/30 AA

Post by stan1 »

retireIn2020 wrote: Fri May 10, 2024 1:27 pm Thank you everyone for the excellent comments.

I'm going to keep my AA at 50/50 for now and allow my stock allocation to drift upward a bit over time as I spend down fixed income, unless it doesn't. :D

My willingness to take risk definitely won't allow me to make any drastic AA changes. I've always been a Bird in the hand is worth two in the bush kind of person.
Does social security, pension, and other income cover your living expenses? Its back to ability, need, and willingness to take risk. It sounds like you might be able, don't need to, and may not be overly willing.

If your goal was to potentially leave a large family legacy for generations you might choose an asset allocation suitable for your heirs not for yourself. Likewise if your goal was to leave money to charity you might take more risk. 70/30 sounds about right for either. If you have over $10M nothing wrong with putting it all into an equity gamble.

If you want to make sure you have a very comfortable retirement and no stress for the rest of your lives including long term care then 50/50 is reasonable.
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Re: 64 YO, advisor recomends 70/30 AA

Post by Thesaints »

retireIn2020 wrote: Fri May 10, 2024 12:49 am My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.
What does this even mean ?
Sooo, turns out the new system say's I'm leaving millions on the table over the next 20 years at my current 50/50 AA
Well, no. You are leaving the chance of making more millions on the table.
New System recommends a 70/30 AA .

Either way, it goes to my heirs, barring the need for LTC with dignity.

What do Bogleheads think about this new system? At 64 years of age, retired and decumulating, is a 70/30 AA reasonable when SWR is below 4%?
Two points to ponder about:
1) Warren Buffet is 93yo. Should he be mostly in bonds to avoid large drawdowns ?

2) You are saying additional money would go to the heirs. How about adjusting your sights ? Flying business is nicer and some people (most ?) are very happy with that, but First is another thing entirely and, depending particular circumstances, private is even better.
Lifestyle creep is not necessarily a bad thing.
gavinsiu
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Re: 64 YO, advisor recomends 70/30 AA

Post by gavinsiu »

Yes, a 70/30 will potentially grant you more money than a 50/50, but what will you do if things don't go well. The following is a graph from portfolio visualizer link

So graph goes through a bad period in recent time which is stock market bubble of 2000 followed by 2008. Portfolio 1 = 50/50. Portfolio 2 = 70/30 (70 stock), and portfolio 3 = 100% stock. There is a 3.5% + inflation withdraw on the portfolio [Correction].

Image

Does the graph, particularly after 2008 scare you? If not then 70/30 is probably ok.

Are you married? If you are, have you factored in what happens if one of you passes away. The remaining person will have to live with half the SS and half the pension (if any).
Last edited by gavinsiu on Fri May 10, 2024 4:23 pm, edited 1 time in total.
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retireIn2020
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Re: 64 YO, advisor recomends 70/30 AA

Post by retireIn2020 »

stan1 wrote: Fri May 10, 2024 1:38 pm Does social security, pension, and other income cover your living expenses? Its back to ability, need, and willingness to take risk.
Once I turn 70, yes SS and SPIA will cover my expenses (not large, unexpected expenses).
It sounds like you might be able, don't need to, and may not be overly willing.

I think you nailed here.
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GaryA505
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Re: 64 YO, advisor recomends 70/30 AA

Post by GaryA505 »

gavinsiu wrote: Fri May 10, 2024 2:20 pm Yes, a 70/30 will potentially grant you more money than a 50/50, but what will you do if things don't go well. The following is a graph from portfolio visualizer link

So graph goes through a bad period in recent time which is stock market bubble of 2000 followed by 2008. Portfolio 1 = 50/50. Portfolio 2 = 70/30 (70 stock), and portfolio 3 = 100% stock.

Image

Does the graph, particularly after 2008 scare you? If not then 70/30 is probably ok.

Are you married? If you are, have you factored in what happens if one of you passes away. The remaining person will have to live with half the SS and half the pension (if any).
That's 24 years and 100% stock still hasn't caught up to 70/30 or 50/50. It would look even worse if you were making withdrawals during that time. Really bad things happened in 2000. Really bad things could happen again. Maybe not the same really bad things, but really bad things just the same. A 64-year-old probably will not have 30 years to wait for a stock market recovery.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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retireIn2020
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Re: 64 YO, advisor recomends 70/30 AA

Post by retireIn2020 »

Thesaints wrote: Fri May 10, 2024 1:39 pm
retireIn2020 wrote: Fri May 10, 2024 12:49 am My answer for risk tolerance was a 5, he said it wouldn't really matter since this new system looks at a total view, basically you could say 3 or 7 and it will make it's recommendation on the total view.
What does this even mean ?
It means their system looks at the overall financial picture. Depending on various factors it could put out an AA anywhere between 30/70 and 70/30 based on the total picture and not just risk tolerance.
https://www.merriam-webster.com/dictionary/abide
Thesaints
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Re: 64 YO, advisor recomends 70/30 AA

Post by Thesaints »

retireIn2020 wrote: Fri May 10, 2024 2:32 pm It means their system looks at the overall financial picture. Depending on various factors it could put out an AA anywhere between 30/70 and 70/30 based on the total picture and not just risk tolerance.
Sure, but it better give a different answer if one says their risk tolerance is "3", or "7".
john0608
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Re: 64 YO, advisor recomends 70/30 AA

Post by john0608 »

heres a tip..financial advisors know everything, until they don't

big deal you are leaving millions on the table (he/she says)....they don't know what the h they are talking about.....thats only if there is a constant bull market, you have to assume anything can happen, extreme terrorism, another pandemic, more wars, crazies in congress, etc.

in which case the prudent methodology would be whatever allocation lets you sleep at night should the stock market drop 75% overnight....if that is 70/30 equities to fixed then go for it.

I am 67yo spouse is 64yo - we are both retired, AA is 60/40 equities to fixed but the fixed has 10 years living expenses.
If your 30% fixed has 10 years living expenses then go for it....its the amount of the assets also not just the AA.
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retireIn2020
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Re: 64 YO, advisor recomends 70/30 AA

Post by retireIn2020 »

GaryA505 wrote: Fri May 10, 2024 2:27 pm
gavinsiu wrote: Fri May 10, 2024 2:20 pm Yes, a 70/30 will potentially grant you more money than a 50/50, but what will you do if things don't go well. The following is a graph from portfolio visualizer link

So graph goes through a bad period in recent time which is stock market bubble of 2000 followed by 2008. Portfolio 1 = 50/50. Portfolio 2 = 70/30 (70 stock), and portfolio 3 = 100% stock.

Image

Does the graph, particularly after 2008 scare you? If not then 70/30 is probably ok.

Are you married? If you are, have you factored in what happens if one of you passes away. The remaining person will have to live with half the SS and half the pension (if any).
That's 24 years and 100% stock still hasn't caught up to 70/30 or 50/50. It would look even worse if you were making withdrawals during that time. Really bad things happened in 2000. Really bad things could happen again. Maybe not the same really bad things, but really bad things just the same. A 64-year-old probably will not have 30 years to wait for a stock market recovery.
I think I used that very graph and thought process when I set my retirement AA to 50/50 years ago.
https://www.merriam-webster.com/dictionary/abide
GaryA505
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Re: 64 YO, advisor recomends 70/30 AA

Post by GaryA505 »

retireIn2020 wrote: Fri May 10, 2024 2:41 pm
GaryA505 wrote: Fri May 10, 2024 2:27 pm
gavinsiu wrote: Fri May 10, 2024 2:20 pm Yes, a 70/30 will potentially grant you more money than a 50/50, but what will you do if things don't go well. The following is a graph from portfolio visualizer link

So graph goes through a bad period in recent time which is stock market bubble of 2000 followed by 2008. Portfolio 1 = 50/50. Portfolio 2 = 70/30 (70 stock), and portfolio 3 = 100% stock.

Image

Does the graph, particularly after 2008 scare you? If not then 70/30 is probably ok.

Are you married? If you are, have you factored in what happens if one of you passes away. The remaining person will have to live with half the SS and half the pension (if any).
That's 24 years and 100% stock still hasn't caught up to 70/30 or 50/50. It would look even worse if you were making withdrawals during that time. Really bad things happened in 2000. Really bad things could happen again. Maybe not the same really bad things, but really bad things just the same. A 64-year-old probably will not have 30 years to wait for a stock market recovery.
I think I used that very graph and thought process when I set my retirement AA to 50/50 years ago.
I'm 72 and easing into retirement this year (I hope). I'm going for about 60/40 which may seem high for my age, but my wife is much younger than me :wink: so I'm mostly investing for her long retirement.
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
gavinsiu
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Re: 64 YO, advisor recomends 70/30 AA

Post by gavinsiu »

GaryA505 wrote: Fri May 10, 2024 2:27 pm That's 24 years and 100% stock still hasn't caught up to 70/30 or 50/50. It would look even worse if you were making withdrawals during that time. Really bad things happened in 2000. Really bad things could happen again. Maybe not the same really bad things, but really bad things just the same. A 64-year-old probably will not have 30 years to wait for a stock market recovery.
Actually, it's doing a 3.5% withdraw + inflation. I will update the post, I forget to mention it in the article. 2000 is a unusual time period, it's worse than the 10th percentile in simulations.
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