when do you plan to change AA

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when do you change AA?

Poll ended at Fri Dec 28, 2012 11:40 am

Age
32
48%
Milestone
17
25%
never
8
12%
Market conditions
7
10%
Other
3
4%
 
Total votes: 67

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Johm221122
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when do you plan to change AA

Post by Johm221122 »

When do you change your AA?I plan on changing my AA as I reach milestones,
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livesoft
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Re: when do you plan to change AA

Post by livesoft »

My IPS says I must change my asset allocation on RBDs, so that must mean "market conditions".

I also have changed my asset allocation based on milestones: semi-retirement, reaching a "number", kids in college, and so on.
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maddyken
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Re: when do you plan to change AA

Post by maddyken »

I hope to have my target AA (still have some cash to invest) until I retire, which I hope will be in 16 years.

The change I anticipate will likely come with an increase in income and an increase in diversification.
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midareff
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Re: when do you plan to change AA

Post by midareff »

I'm recently retired with most (probably 80 - 85%) of my total bond allocation in tax advantaged which will continue to reinvest until RMD is required in 6 years or so. My equities are paying dividends to Ally which I use to pay the IRS for my pension, SS and dividend incomes. I'm guessing at this point but I expect my AA to drift about 1/2 % annually towards a larger FI allocation based on this.
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SimpleGift
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Re: when do you plan to change AA

Post by SimpleGift »

We've been 50% stocks/50% bonds since we retired about 10 years ago. I expect we'll keep this same allocation to the end, as it provides us with 2.5% annual withdrawals out of interest and dividends, plus enough growth (so far) to keep the principal at pace with inflation. Our ultimate plan is for bequests to offspring and non-profits we support. I doubt we'll ever shift our AA.
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Re: when do you plan to change AA

Post by mickeyd »

For me a lot of things happen around my age 70 (2 years from now). At that time I will probably change my AA from 60/40 to 50/50.
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ruralavalon
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Re: when do you plan to change AA

Post by ruralavalon »

Retired 2 years ago, now 67 years old, asset allocation is 50/50, no plans to change in the forseeable future.
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grabiner
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Re: when do you plan to change AA

Post by grabiner »

I plan to change based on age, but indirectly; it won't be when I reach X years of age, but as I approach retirement, and I am not yet old enough to know at what age I will want to retire. My current portfolio (90% stock with the risk of 100% stock, lost over 60% in the 2007-2009 bear market) is not appropriate for when I retire, or even for a few years before I retire. But I am now 44, and retirement is a long way off
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Peter Foley
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Re: when do you plan to change AA

Post by Peter Foley »

My written plan indicated that I would move towards an approximate age in bonds allocation. My plan also included a milestone - that if I reached my target retirement number that I would reduce my equity holdings a bit more quickly. While not stated in my plan, I do not see any reason to go below a 40% equity threshold. So I'm a bit of a combination of the poll options.
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Re: when do you plan to change AA

Post by sschullo »

It's almost always about age.
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Johm221122
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Re: when do you plan to change AA

Post by Johm221122 »

grabiner wrote:I plan to change based on age, but indirectly; it won't be when I reach X years of age, but as I approach retirement, and I am not yet old enough to know at what age I will want to retire. My current portfolio (90% stock with the risk of 100% stock, lost over 60% in the 2007-2009 bear market) is not appropriate for when I retire, or even for a few years before I retire. But I am now 44, and retirement is a long way off
I assume you feel there is more upside in higher equity allocation than rebalancing on market ups and downs over the long term?
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Johm221122
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Re: when do you plan to change AA

Post by Johm221122 »

livesoft wrote:My IPS says I must change my asset allocation on RBDs, so that must mean "market conditions".

I also have changed my asset allocation based on milestones: semi-retirement, reaching a "number", kids in college, and so on.
You don't plan on RBD's or at least you don't hope for them.But you can advantage of them when they happen It would be better if they were all really good days :happy
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sscritic
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Re: when do you plan to change AA

Post by sscritic »

Milestone: at least one. I bought a house; I sold bonds for the (large) downpayment. If you don't consider home equity a bond, then my asset allocation changed. I guess it will change again if I sell my house. I might change my asset allocation based on age, if changing when my children turn 65 counts as an age based rule.* If they won't become more conservative as they age, I will have to do it for them.

* that might be several years after my death.
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Dale_G
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Re: when do you plan to change AA

Post by Dale_G »

I have been happy at 50/50 for a long time. But now that I am almost fully grown up, I will let equities drift up to an allocation better suited to my heirs.

So, excess RMDs coming from bonds will go mostly to equities in a taxable account. I'll continue to rebalance into equities during periods of market distress, but will be slower to rebalance out of equities during times of exhuberance.

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sscritic
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Re: when do you plan to change AA

Post by sscritic »

Dale_G wrote:I have been happy at 50/50 for a long time. But now that I am almost fully grown up, I will let equities drift up to an allocation better suited to my heirs.
I started at 50-50 forty years ago and am roughly in the same spot today. What equity allocation is better suited to my (and your) heirs? I think 50-50 is just fine. It will help make up for the fact that my heirs are probably 100% equity. I am their bond fund.
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Re: when do you plan to change AA

Post by peppers »

We are nearing retirement with her 50% stocks and her 50% bonds. My function is to provide moral support and do the laundry.
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Dandy
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Re: when do you plan to change AA

Post by Dandy »

Am trending down from a high of 55% equities to about 40% over a 10 year period from 60 to 70. I expect to have a withdrawal rate of well under 4% so don't feel the need to take additional equity risk. Fixed income also has adecent allocation to CDs and short term bonds for moderation of risk reason.
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grabiner
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Re: when do you plan to change AA

Post by grabiner »

Johm221122 wrote:
grabiner wrote:I plan to change based on age, but indirectly; it won't be when I reach X years of age, but as I approach retirement, and I am not yet old enough to know at what age I will want to retire. My current portfolio (90% stock with the risk of 100% stock, lost over 60% in the 2007-2009 bear market) is not appropriate for when I retire, or even for a few years before I retire. But I am now 44, and retirement is a long way off
I assume you feel there is more upside in higher equity allocation than rebalancing on market ups and downs over the long term?
Yes. I do rebalance (and sold bonds to buy stock near the 2008 market bottom), but there isn't much of a rebalancing bonus in a 90% stock portfolio. But relative to my risk tolerance, I expect better returns from rebalancing to 90% than to 80%.
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Re: when do you plan to change AA

Post by Paul@ »

I used to follow Age in Bonds but have decided, as a recent retiree, to permanently stick with an allocation of 35% equities (including REITS), 60% bonds, 5% cash. So I guess that puts me in the Milestone camp. A fixed ratio keeps life simple. Also, I expect to make annual withdrawals of less than 3.5%, so don't really see the need to take more equity risk.
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ofcmetz
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Re: when do you plan to change AA

Post by ofcmetz »

Our IPS keeps us at our current allocation until we reach the age of 40. Like to think of it as a wealth accumulation allocation.
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nolabogle
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Re: when do you plan to change AA

Post by nolabogle »

Currently 94% equity/stocks. Plan to stay >90% equity until around 50 years old. At that point will likely start increasing bond holdings.
ClaireTN
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Re: when do you plan to change AA

Post by ClaireTN »

We use what I think of as the "Otar plan." on page 206 of his "Unveiling the Retirement Myth," Otar lays out an AA plan based on a ratio of assets to withdrawals.

With 1-2 years of withdrawals in savings, you use a 50/50 AA (he calls this "seed money" and assumes you'd get scared off by a big market drop at this stage).
With 2-10 years in savings you go 70/30
With 11-16 years in savings you go 60/40
With 17-20 years in savings you go 50/50
With 20-30 years in savings you go 40/60
During retirement he recommends a 30/70 mix

I voted milestone.
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spanky123
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Re: when do you plan to change AA

Post by spanky123 »

We are in the "milestone: camp as we are slowly shifting more to the fixed income side. The target will be 40/55/5 (equity, fixed-income, cash). As for fixed-income, we are contemplating on short-term bond funds as interest rate will mostly go up as QE3 expires in mid year 2013.
gkaplan
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Re: when do you plan to change AA

Post by gkaplan »

I couldn't answer the poll, because more than one option applied.
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Steelersfan
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Re: when do you plan to change AA

Post by Steelersfan »

Retired. AA allocation about 50%/50%. Investing for my heirs so no change expected.

Ask me again in 10 years and I may have a different answer.
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Re: when do you plan to change AA

Post by abuss368 »

For the time being "age less 10" in bonds.
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Johm221122
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Re: when do you plan to change AA

Post by Johm221122 »

ofcmetz wrote:Our IPS keeps us at our current allocation until we reach the age of 40. Like to think of it as a wealth accumulation allocation.
Does it worry you that age 40 we could have big bear market? I use milestone because as I reach needs,I need less risk.My goals should be easily obtainable ,so if markets have run up I can cut risk and if markets are extremely bad I stay equity heavy a little longer until recovery
Say your plan is 1,000,000 at 40,then change AA at 1,000,000 not 40.
John
af895
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Re: when do you plan to change AA

Post by af895 »

I selected "milestones" but that's a bit broad. I use an Investment Policy Statement (IPS) as a guide.

I recently updated my IPS from 60/40 equity/bond index funds to 75/25 after a market downturn during which I realized that I actually look forward to markets underperforming as a buying opportunity.

Other milestones include growing the portfolio to a size that justifies adding asset classes, and significant market events that might make it acceptable to dial down my risk level and glide toward my goal instead of keeping the power/risk on.
nolabogle
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Re: when do you plan to change AA

Post by nolabogle »

Does it worry you that age 40 we could have big bear market? I use milestone because as I reach needs,I need less risk.My goals should be easily obtainable ,so if markets have run up I can cut risk and if markets are extremely bad I stay equity heavy a little longer until recovery
I am going with age as my AA determinant. Even with a bear market I am under the presumuption the stock market will recover in 15 years in most scenerios. I recognize many point to Japan as a critisism to this approach. I would like to believe that Japan is a unique situation and am willing to accept the risk associated with such an approach. Otherwise, I'll just work a little longer - I enjoy working so not really an issue.
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Re: when do you plan to change AA

Post by gtwhitegold »

I rebalance annually. I modify my allocations in my TSP after I have purchased the ETFs that I am interested in buying in my Roth IRA accounts.
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