Retirees doing 50/50

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tennisplyr
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Retirees doing 50/50

Post by tennisplyr » Sun Oct 18, 2015 7:53 am

I'm 65/DW 64, retired and have had an AA of 50/50 since retiring 4 years ago and plan to stay for a while. We don't have pensions and live on SS and withdrawals. Like to hear from other retirees @50/50...how long have they been there, plans to change their AA, when/why. Thanks.
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Re: Retirees doing 50/50

Post by retiredjg » Sun Oct 18, 2015 8:47 am

I've been retired about 8 years. Started at 70/30 and when I Bogleized my portfolio in my first year of retirement, smart people here convinced me that 60/40 was a better place to be. As I learned more I wandered on down to 55% stocks and then 50% where I stayed for many of those 8 years.

I'm currently wandering around in a band between 45% stocks and 50% stocks. I had planned to be at 50% with a 5% band up and down. Then I got hinky earlier this year and decided to just eliminate the upside band. I'll stay here until I get uncomfortable again - which I hope is several years down the line. I would like to never go below 40% stocks, but we'll see how that feels as I get older. I picked the 40% because the Trinity Study showed that 40% was on the conservative side of the pretty dependable numbers.

At the present time 25% stocks is my absolute rock bottom although I hope never to go there. But if I manage to live a long time and if 25% is too scary, I guess that plan might go out the window.

I think it is important to have some goals and a plan in mind, but I also think it is important to honor your feelings because you have no choice but to live with them. My agreement with myself is that it is OK to migrate to a more conservative stance after proper time and consideration. But it is not OK to later go back in the other direction.

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Re: Retirees doing 50/50

Post by Riprap » Sun Oct 18, 2015 8:59 am

Two important factors are needed:

1) What is your withdrawal rate?
2) Do you plan to leave a significant financial legacy?

From most of the literature I have read on the subject, you could do a lot worse than 50/50 for a wide range of withdrawal rates.

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Re: Retirees doing 50/50

Post by TheGreyingDuke » Sun Oct 18, 2015 9:04 am

I retired at 58, DW was 55 and at that time I was around 60/40. Nine years later I am at 55/45, wouldn't object to going 50/50 but there are big capital gains to be reckoned with. Right now using the interim before I start SS (at 70) to convert IRAs to Roth, staying at the 15% level for IRS.

Recently been given some thought to going up into the 25% Federal bracket to do a quicker conversion but for now, I am doing nothing. Between the IRA conversions and the capital gains harvesting it seems that the IRA conversion is the better strategy as the capital gains will be at 15% at some time (assuming tax laws do not change).
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Re: Retirees doing 50/50

Post by RadAudit » Sun Oct 18, 2015 9:04 am

I'm at 50 / 50 and targeting +/ - 5% bands and / or annually for rebalancing - whichever comes first. Haven't rebalanced since the first of the year. I'm 68 and have been retired for 5 years. And, I'm debating with myself on whether or not to begining to start to jog down to 40 / 60 stocks / bonds when I reach 70. So far I'm thinking I'll just stay at 50 / 50 primarily just because of inertia if nothing else. But I have a small pension and a little SS so I'm in pretty good shape anyway.

The withdrawal rate is < 2% at present and rising to 3% by the early 80's. The kids will get what's left over after the wife is finished with it and the kids stop fighting over it.
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Re: Retirees doing 50/50

Post by SimpleGift » Sun Oct 18, 2015 10:24 am

We've had a 50% stock/50% bond portfolio every since we early-retired ten years ago, and we plan to keep it that way for the remainder of our lifetimes. Partly it's because we're very fortunate to have "enough" (with a 2.5% withdrawal rate) and are now investing mostly for our heirs and future bequests. But it's also because, in our research, the 50/50 portfolio seemed the best way to preserve our capital and withdrawals over the long haul, facing the deep risks of both inflation and deflation.

Finally, there's a certain aesthetic appeal to the simplicity of the 50/50 portfolio, which John Bogle nicely captured over twenty years ago in his 1993 book, Bogle on Mutual Funds, (as one of his "Twelve Pillars of Wisdom") :
  • “There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund. Ignore interim fluctuations in their net asset values. Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change. When there are multiple solutions to a problem, choose the simplest one.”
We've diversified beyond the 2-fund portfolio suggested by Mr. Bogle, but kept the 50% stock/50% bond allocation.
Cordially, Todd

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Re: Retirees doing 50/50

Post by Sheepdog » Sun Oct 18, 2015 11:00 am

Interesting comments.
I retired at age 65, now 82. I have been living off of my investments and SS. At 65, 1998, I was at 56% stock. At 66 it was also 56%. From there I started reducing my stock level with the plan of reaching a stock level of 100 minus my age. Age 67-51%, 68-47%, 69 (2002)-31%, 70-30% . When I reached 76 (2009) I was down to 24% stock and I have remained near there since then (now 23%)
I have taken out an average of 4.5% a year and I have more than when I retired.
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Re: Retirees doing 50/50

Post by Broken Man 1999 » Sun Oct 18, 2015 11:27 am

Officially I retired this August, and had been at 50/50 since February of 2013. However, right now we are at 36% stocks/27% bonds/36% cash.

The large holding of cash is from my lump sum retirement, which I hope to work into our portfolio to end up with our desired 50/50 AA over the next several months.

A. I have not yet used any retirement funds, as I have sold some individual stocks held in my fun account. Starting early next year I will have to withdraw 2.3% of our portfolio value (based on Friday's closing prices of investments).

B. I hope to leave a legacy to children/grandchildren. How substantial remains unknown. If we can't leave a legacy, my next desire would be to not be a burden on our children.

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Re: Retirees doing 50/50

Post by Toons » Sun Oct 18, 2015 11:31 am

I would be comfortable with 50/50 asset allocation for Life. :happy
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Re: Retirees doing 50/50

Post by Dave55 » Sun Oct 18, 2015 11:43 am

I'm 50/50 semi-retired at 57. I work part time as a free lance sales/marketing consultant. Been 50/50 for the past 2 years. We plan on staying there for the duration. I have some outside real estate investments too. I do not have a pension.
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Re: Retirees doing 50/50

Post by The Wizard » Sun Oct 18, 2015 11:51 am

I'm 65.8 and retired for 2.6 years.
I annuitized a decent sum with TIAA-CREF at start of retirement, the monthly income from which covers my basics.
I withdraw additional funds monthly from my investments in lieu of SS.

My investments are roughly 50% stocks, 35% TREA (real estate) and 15% FI.
It's working out swell so far...
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Re: Retirees doing 50/50

Post by Leeraar » Sun Oct 18, 2015 11:54 am

We have been at 50/50 for a number of years. No plan to change.

We have done it by 80% VSMGX (LS Moderate) plus 10% each VFSUX and VBILX. We take withdrawals (3%) from VSMGX and rebalance once or twice a year. The withdrawals will drop substantially in a few years when we claim our delayed SS benefits.

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Re: Retirees doing 50/50

Post by SimpleGift » Sun Oct 18, 2015 11:55 am

Just to add a couple of interesting, but lesser known, historical tidbits about the 50/50 portfolio that surfaced in the course of our personal research:

1) When safe withdrawal rates were calculated for 17 countries from 1900-2008, across various portfolio stock allocations, the 50% stock/50% bond portfolio most often provided the maximum withdrawal rate at the least risk:
2) From 1926-2009, the average real returns of a 50% stock/50% bond portfolio have been statistically equivalent whether the U.S. economy was in recession or expansion:
This last result may seem surprising, but Vanguard attributes it to two typical market patterns: 1) the tendency for bonds to outperform stocks during the initial periods of economic weakness (the "flight-to-safety" effect), and 2) the tendency for stock prices to decline before a recession officially occurs and to rise before it officially ends (the "leading indicator" effect).
Cordially, Todd

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Re: Retirees doing 50/50

Post by tennisplyr » Sun Oct 18, 2015 3:43 pm

Thanks for the comments.
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Re: Retirees doing 50/50

Post by Rajsx » Sun Oct 18, 2015 4:27 pm

We retired earlier in the year - I am 59, DW 54, we have been going down in the stocks allocation over last few years from 60/40 to the present 50/50, an all Vanguard portfolio.

Lately the savings have been going into cash/CDs for a 2-3 yrs worth of expenses , thus making all investment portfolio look like 45/55. We feel comfortable for now at the present Asset Allocation.

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Re: Retirees doing 50/50

Post by Sbashore » Sun Oct 18, 2015 4:49 pm

I retired in 2005. At the time my allocation was 70/30. I was on a glide path to hit 50/50 by age 65. I'm now there and plan to stay there.
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Re: Retirees doing 50/50

Post by Miriam2 » Sun Oct 18, 2015 5:39 pm

Simplegift wrote:Just to add a couple of interesting, but lesser known, historical tidbits about the 50/50 portfolio that surfaced in the course of our personal research: . . .
2) From 1926-2009, the average real returns of a 50% stock/50% bond portfolio have been statistically equivalent whether the U.S. economy was in recession or expansion: . . .
Simplegift -
Does this change, however, depending on whether one retires into a recession or into a bull market?
I thought one's retirement portfolio to some extent (or a large extent) ultimately reflected whether one retired into a bear or a bull market? Or is this only if one is withdrawing from one's portfolio along the way?

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Re: Retirees doing 50/50

Post by FreeAtLast » Sun Oct 18, 2015 5:59 pm

The biggest change in my portfolio since I retired almost two years ago was moving from 65/35 to 50/50. And as I have stated in a previous post....I intend to stay there for a long time. Since I somehow missed out being born with the gift of prophecy, the 50/50 split seems to me to be the simplest and most logical choice (thank you, Mr.Ockham). So, the only issue left to me now is to ponder what my withdrawal percentage will be this January (the first two withdrawals were at 3.4%).
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Re: Retirees doing 50/50

Post by Peter Foley » Sun Oct 18, 2015 6:04 pm

I'm 65 and have been retired for about 3.5 years. I went to about 45/55 AA 6 months before retirement. I've been between 45% and 50% equities ever sense. I've been rebalancing by gifting appreciated shares of a Total Stock Market fund. I intend to stay in that range for another 10 years. Then If I am investing for my heirs I will probably go to 60/40.

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Re: Retirees doing 50/50

Post by SimpleGift » Sun Oct 18, 2015 6:22 pm

Miriam2 wrote:
Simplegift wrote:Just to add a couple of interesting, but lesser known, historical tidbits about the 50/50 portfolio that surfaced in the course of our personal research: . . .
2) From 1926-2009, the average real returns of a 50% stock/50% bond portfolio have been statistically equivalent whether the U.S. economy was in recession or expansion: . . .
Simplegift -
Does this change, however, depending on whether one retires into a recession or into a bull market?
The Vanguard study linked upthread is just reporting the 80+ year average returns for the 50/50 portfolio — which is of historical interest, but not necessary applicable to specific retirees and their "sequence of returns" risk upon retirement. For a good discussion of the historical sequence of returns risk for the 50/50 portfolio, see this March 2015 article by Wade Pfau:

The Hidden Peril in Sequence of Returns Risk
Cordially, Todd

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Re: Retirees doing 50/50

Post by dumbbunny » Sun Oct 18, 2015 8:41 pm

Simplegift wrote:We've had a 50% stock/50% bond portfolio every since we early-retired ten years ago, and we plan to keep it that way for the remainder of our lifetimes. Partly it's because we're very fortunate to have "enough" (with a 2.5% withdrawal rate) and are now investing mostly for our heirs and future bequests. But it's also because, in our research, the 50/50 portfolio seemed the best way to preserve our capital and withdrawals over the long haul, facing the deep risks of both inflation and deflation.

Finally, there's a certain aesthetic appeal to the simplicity of the 50/50 portfolio, which John Bogle nicely captured over twenty years ago in his 1993 book, Bogle on Mutual Funds, (as one of his "Twelve Pillars of Wisdom") :
  • “There are an infinite number of strategies worse than this one: Commit, over a period of a few years, half of your assets to a stock index fund and half to a bond index fund. Ignore interim fluctuations in their net asset values. Hold your positions for as long as you live, subject only to infrequent and marginal adjustments as your circumstances change. When there are multiple solutions to a problem, choose the simplest one.”
We've diversified beyond the 2-fund portfolio suggested by Mr. Bogle, but kept the 50% stock/50% bond allocation.
This is pretty much my story except for the 2.5% withdrawal rate and investing for heirs. I was very aggressive in my earning/accumulation phase and now I am not willing to take on as much risk. I don't ever see myself with less than 25% stock.
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Re: Retirees doing 50/50

Post by joe8d » Sun Oct 18, 2015 8:52 pm

Retired,73 and 50/50.
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Re: Retirees doing 50/50

Post by kolea » Sun Oct 18, 2015 9:23 pm

64,67 yo, retired, AA = 65/35 but a better description of it is maximum of 65% equities. We asymmetrically balance equities to bonds but not vice versa. So the AA can float downward to 50/50 or below in a bear market. But our days of buying equities are over. Current withdrawal rate = 3.2% but that will drop to about 2.5% once I start SS.
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Re: Retirees doing 50/50

Post by itstoomuch » Sun Oct 18, 2015 10:59 pm

Our pre-retirement investment portfolio was balanced (60/40) in W funds. Now at 65/68, we are,
50/0/0/35&15 (50 equity/0 bond/0 cash/35dVA & 15dFIa). In 2008 (58/61yo) came to to the realization that it wasn't the mix of equity/bond that determined risk tolerance But WHO bore the risks. Independently came to Wade Pfau' s research on a near equivalence of annuities to bonds. [The dVAs are entirely equity with tilt to mid and small caps. The Indexes are tilted to mid and small caps. The trading accounts are utility and emerging small caps. ]
YMMV :annoyed
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Re: Retirees doing 50/50

Post by Erwin » Mon Oct 19, 2015 12:23 am

Simplegift wrote:Just to add a couple of interesting, but lesser known, historical tidbits about the 50/50 portfolio that surfaced in the course of our personal research:

1) When safe withdrawal rates were calculated for 17 countries from 1900-2008, across various portfolio stock allocations, the 50% stock/50% bond portfolio most often provided the maximum withdrawal rate at the least risk:
2) From 1926-2009, the average real returns of a 50% stock/50% bond portfolio have been statistically equivalent whether the U.S. economy was in recession or expansion:
This last result may seem surprising, but Vanguard attributes it to two typical market patterns: 1) the tendency for bonds to outperform stocks during the initial periods of economic weakness (the "flight-to-safety" effect), and 2) the tendency for stock prices to decline before a recession officially occurs and to rise before it officially ends (the "leading indicator" effect).
The problem with all historical data is that it is highly convincing in the very long term, but no one has a 108 years investment horizon. In retirement a mistake can very well be irreversible, so all these data may be of little value. My view is that you do what you feel is right for you and hope for the best. I like Ferri's 30% in equity recommendation for retirees, see http://www.rickferri.com/blog/investmen ... -retirees/ , specially Figure 3.
Erwin

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Re: Retirees doing 50/50

Post by David Jay » Mon Oct 19, 2015 12:41 am

mpt follower wrote:I like Ferri's 30% in equity recommendation for retirees, see http://www.rickferri.com/blog/investmen ... -retirees/ , specially Figure 3.
I agree if you also treat Social Security as an annuity of equivalent value when you calculate the equity percentage.
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Re: Retirees doing 50/50

Post by Erwin » Mon Oct 19, 2015 12:49 am

David Jay wrote:
mpt follower wrote:I like Ferri's 30% in equity recommendation for retirees, see http://www.rickferri.com/blog/investmen ... -retirees/ , specially Figure 3.
I agree if you also treat Social Security as an annuity of equivalent value when you calculate the equity percentage.
The approach that I consider optimum, assuming that you have the means, is Liability Matching. I am 67 and have a TIPS ladder that covers our annual expenses until age 80 (I plan to buy an annuity from age 80+. Then anything left that can be allocated to equities, irrespective of the %.
Erwin

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Re: Retirees doing 50/50

Post by trasmuss » Mon Oct 19, 2015 4:05 am

I'm 65 and have been retired 3 1/2 years. We went 50-50 before retirement and plan to stay that way indefinitely. I found that 66% stocks was more than I liked going into the 2000 bear market. I can handle 50-50 without losing sleep. Reading the book by Ben Stein "Yes Boomers Can Retire" helped as did Ben Graham and the notion of simplicity.

Two important points, however. People are different in their needs from their portfolio (we could live fine on pensions and social security) and their comfortable sleeping points. 2000 and 2008 should have been good learning points as far as comfort levels go. I still keep my spreadsheet updated that shows how much we would have with a 50% correction in stocks. If I'm okay with that number I'm fine with our allocation.

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Re: Retirees doing 50/50

Post by smashhand » Mon Oct 19, 2015 5:41 am

I've been retired since 2009 and moved my IRA portfolio to 50-50 a couple of years before retiring. I've had a few anxious moments and quite a few urges to "just do something" along the way, but have managed to outlive all those impulses without acting on any of them. I am a classic Boglehead: my tax sheltered investments are all in three Vanguard index funds and I have always adhered to five-percent rebalancing bands--although I've only rebalanced from equities to bonds once in the past nine years. We live comfortably on pensions and Social Security and intend to stay 50-50 forever. One thing I have to admit is that I have never been thrilled about the 15 percent of my portfolio invested in Vanguard Total International Stock Index. Seems like it has just laid there while my domestic stuff has done well. Bottom line: I've enjoyed being 50-50 and intend to stay.

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Re: Retirees doing 50/50

Post by rixer » Mon Oct 19, 2015 7:55 am

I retired 2 years ago. I have always been somewhat fearful and have invested conservatively at 40/60 on the way up. Looking back I wish I would have been a little more aggressive but to be honest, 40/60 is my comfort zone. I'll likely remain here forever so I put it all in Lifestrategy CG.

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Re: Retirees doing 50/50

Post by stemikger » Mon Oct 19, 2015 8:58 am

Toons wrote:I would be comfortable with 50/50 asset allocation for Life. :happy
Scott Burns original Couch Potato Portfolio was 50/50 Vanguard 500 Index and Vanguard Total Bond from Cradle to Grave. I know he has since come up with a different set of asset allocation portfolios but I believe that is because he started a company called asset builder. There really isn't much of a need to use his company, if you just pick 50/50 for life is there. He also had the sophisticated couch potato for younger investors which was 75% Vanguard 500 and 25% Total Bond. He also changed to the Total Stock Market Index instead of the 500 Index, but I believe that is a non-issue because their returns are pretty much identical when looking at the long term.

I really see this has a great portfolio for life. It enables you to enjoy life without worrying about your portfolio.
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Re: Retirees doing 50/50

Post by Johno » Mon Oct 19, 2015 9:07 am

Riprap wrote:Two important factors are needed:

1) What is your withdrawal rate?
2) Do you plan to leave a significant financial legacy?

From most of the literature I have read on the subject, you could do a lot worse than 50/50 for a wide range of withdrawal rates.
I would add
3) how you calculate the allocation? ie do you include the value of primary residence and present value of Social Security and/or pensions?

Variations in that make it hard IMO to compare people's real portfolio allocations from one line posts saying 'I'm X% stocks'.

If a hypothetical retiree were a renter or still had a relatively large mortgage, no pension, low Social Security relative to expenses and no particular aim to leave money to heirs ('whatever happens to be left over' or no heirs at all) 50% stocks might be high. IOW I think it's more likely to be high than low as a *real* stock allocation which includes all assets including gteed income pv's, unless legacy is a central goal. But if the answers to 1-3 aren't known, 50% is probably as reasonable a first guess as anything else: most people ignore important asset/income stream PV's in quoting their stock % it seems, so those %'s are less risky than they sound.

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Re: Retirees doing 50/50

Post by best2u » Mon Oct 19, 2015 12:43 pm

I have one more move to get to 50/50, as I am currently 54-46. Down from my previous 65-35. Hope to retire in 2 years. My probable target is 35% US 15% foreign and 50% FI. As previously mentioned in another post my foreign stock has been a drag on my portfolio. Keep hearing about this so-called reversion to the mean. Hope that means foreign stocks will perform better similar to US, not US stocks will match foreign country poor performance.

I've been contemplating whether 50/50 or one of the 40/60 or 60/40 is the way to go. Great thread.

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Re: Retirees doing 50/50

Post by kolea » Mon Oct 19, 2015 1:56 pm

Johno wrote:
Riprap wrote:Two important factors are needed:

1) What is your withdrawal rate?
2) Do you plan to leave a significant financial legacy?

From most of the literature I have read on the subject, you could do a lot worse than 50/50 for a wide range of withdrawal rates.
I would add
3) how you calculate the allocation? ie do you include the value of primary residence and present value of Social Security and/or pensions?
My goal is to be able to survive a 10-year bear market without selling equities. That means bonds have to cover all withdrawals. Since our withdrawal rate = 3.2%, and accounting for inflation, that gives about 35% in bonds, relative to starting asset value. As I mentioned above, I will let the bond allocation float upward to greater than 35%, but I will never let equities go above 65%. Asymmetric rebalancing.

Since our AA is determined mostly by cash flow consideration and our house does not generate cash flow, it is not part of the AA calculation. Conversely, SS is all about cash flow, and it went into the determination of our withdrawal rate.
Kolea (pron. ko-lay-uh). Golden plover.

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Re: Retirees doing 50/50

Post by Johno » Mon Oct 19, 2015 4:39 pm

TwoByFour wrote:
Johno wrote:
Riprap wrote:Two important factors are needed:

1) What is your withdrawal rate?
2) Do you plan to leave a significant financial legacy?

From most of the literature I have read on the subject, you could do a lot worse than 50/50 for a wide range of withdrawal rates.
I would add
3) how you calculate the allocation? ie do you include the value of primary residence and present value of Social Security and/or pensions?
My goal is to be able to survive a 10-year bear market without selling equities. That means bonds have to cover all withdrawals. Since our withdrawal rate = 3.2%, and accounting for inflation, that gives about 35% in bonds, relative to starting asset value. As I mentioned above, I will let the bond allocation float upward to greater than 35%, but I will never let equities go above 65%. Asymmetric rebalancing.

Since our AA is determined mostly by cash flow consideration and our house does not generate cash flow, it is not part of the AA calculation. Conversely, SS is all about cash flow, and it went into the determination of our withdrawal rate.
That's fine but I think really just makes my point. Your '65%' is not really 65% as others might calculate it, although you've thought it out such that '65' under your meaning works for you.

But if (and not saying it would be your fault, obviously their problem) somebody takes that as inspiration to *really* have 65% in equities, ie including SS PV and perhaps without a house (you can sell or borrow against a home you own if push comes to shove, you can't for one you don't own :D ) they'd be taking a lot more risk.

IMHO if there were a standard to give the most comparable figures if would calculate allocation including all significant assets and the PV's of all significant income streams. OTOH people don't have to make their way of figuring things comparable with other people's. Again I'm just saying they tend not to be, and thus the answers on these threads about personal allocation tend not to be very meaningful.

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Re: Retirees doing 50/50

Post by SeeMoe » Mon Oct 19, 2015 7:29 pm

As you age, better to have 45/55, at 80 about 40/60 split . Keep diversified with foreign stock and bonds @ 30%_40% of the folio . Take RMD,s 1x year swept in a money market account in the taxable folio . Be cool on taking big tax withdrawals . :moneybag
"By gnawing through a dike, even a Rat can destroy a nation ." {Edmund Burke}

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