For those near retirement and rebalanced to Bonds...

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TheQuestionGuy
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For those near retirement and rebalanced to Bonds...

Post by TheQuestionGuy » Thu Oct 19, 2017 6:23 pm

With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?

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Sandtrap
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Re: For those near retirement and rebalanced to Bonds...

Post by Sandtrap » Thu Oct 19, 2017 6:28 pm

In retirement.
Bernstein Liability Matching Portfolio.
Allocation 30/70.
IPS detailed and intact and followed.
Sleep factor 100%

What the market does lately, or non-lately (is that a word?) is irrelevant.
Ignore the noise. :D

Johm221122
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Re: For those near retirement and rebalanced to Bonds...

Post by Johm221122 » Thu Oct 19, 2017 6:32 pm

You need to come to terms with risk and how much you want,everyone has different risk tolerance.Stop watching market and turn off market "noise"(news)
Pick an asset allocation that lets you sleep at night,check out historical returns of different asset allocations

https://personal.vanguard.com/us/insigh ... llocations

Random Walker
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Re: For those near retirement and rebalanced to Bonds...

Post by Random Walker » Thu Oct 19, 2017 7:27 pm

I've been talking about this quite a bit lately. I really like William Bernstein's e-book on life cycle investing. He makes the point that high past returns results in high valuations and low future expected returns. Rather than blindly folllowing an age based glide path to retirement, I think it makes sense to look at where one is compared to financial goals, current valuations, future expected returns, and consider cooling off the asset allocation.
I'm 55 and have been transitioning from 70/30 two years ago to 42% equities by year end.

Dave

sport
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Re: For those near retirement and rebalanced to Bonds...

Post by sport » Thu Oct 19, 2017 7:44 pm

For most people, when you are near or in retirement, emphasis shifts from capital appreciation to capital preservation. Once you have "won the game", it does not seem to make sense to risk that situation trying for more that you don't need. I am retired and keep my allocation between 30% and 40%.

rrppve
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Re: For those near retirement and rebalanced to Bonds...

Post by rrppve » Thu Oct 19, 2017 7:48 pm

Why on earth would you rebalance towards equities from bonds if you're approaching retirement (<5 years) just because the equity markets have positive momentum? :oops: That's taking on more risk precisely when risk should be minimized in your portfolio. The 5 years preceding and immediately after retirement are when you should be most risk adverse.

nbseer
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Re: For those near retirement and rebalanced to Bonds...

Post by nbseer » Thu Oct 19, 2017 8:25 pm

Been retired 3 years, taking SS, DW getting spousal benefit. Have gone almost 100% to 1-2 year CDs, but mostly because I was lucky to ride the bull market in the 1990s.. will also be getting a pension in a few years, and have enough in my tIRA that my main concern in a few years will be the 'tax torpedo' when RMDs start. Moved to CDs because with interest rates on the rise bonds will drop in price, and I will buy new CDs hopefully at higher rates when current ones pay off.

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iceport
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Re: For those near retirement and rebalanced to Bonds...

Post by iceport » Thu Oct 19, 2017 8:27 pm

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm
With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
If you are looking for people to share their recommendations for market timing, you've come to the wrong place. :wink: Most of us have accepted the fact that no one knows which way the market is headed over the next year or next five years. A market crash is could happen next month. Or the market could continue to advance for five more years. Or anything in between. Your long term plan should take all those possibilities into account, and you should not drastically alter your long term plan based on short term market conditions.
"Discipline matters more than allocation.” ─William Bernstein

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Peter Foley
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Re: For those near retirement and rebalanced to Bonds...

Post by Peter Foley » Thu Oct 19, 2017 9:00 pm

When you approach retirement one's AA has a lot to do with risk tolerance and the amount of flexibility you think you have. I went from about 70% stocks to 45% in the year or so before I retired. Because we have flexibility (ability to take risk) I've purposefully let things drift a bit over the past 5 years - 5 good years in terms of the market and sequence of returns. I'm currently about 52/48 on a pre tax basis and about 57/43 on an estimated post tax basis.

If I were retiring today I would still aim for less that 50% stocks. I certainly would not be chasing recent returns, aka buying high.

radiowave
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Re: For those near retirement and rebalanced to Bonds...

Post by radiowave » Thu Oct 19, 2017 9:21 pm

We're about 5-6 years out. On the taxable side, we've been increasing our CD allocation to have 2-3 years worth of expenses covered. On the tax-deferred side, nearly all total bond fund and 401k so this has the effect of slowly raising our bond % to a target aa 50/50 by retirement.

Question to the group, is anyone doing/recommending CD ladders on their tax-deferred side as an alternative to total bond or TIPS?
Bogleheads Wiki: https://www.bogleheads.org/wiki/Main_Page

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Taylor Larimore
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Re: For those near retirement and rebalanced to Bonds...

Post by Taylor Larimore » Thu Oct 19, 2017 9:26 pm

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
TheQuestionGuy:

Buying high and selling low is not a good strategy. Market-timing is also a losing strategy.

Bogleheads understand that it is much better to decide on a long term asset-allocation plan--then stay-the-course.

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle

flyingaway
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Re: For those near retirement and rebalanced to Bonds...

Post by flyingaway » Thu Oct 19, 2017 9:40 pm

Moving to bonds as retirement gets close, provided that you have enough.

Dottie57
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Re: For those near retirement and rebalanced to Bonds...

Post by Dottie57 » Thu Oct 19, 2017 9:50 pm

I'm 60 at 50/50 allocation. I am happy with how I have allocated. I have done around 10% this year and am happy with it.
Still accumulating but ready tonretire at any time.

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WoodSpinner
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Re: For those near retirement and rebalanced to Bonds...

Post by WoodSpinner » Thu Oct 19, 2017 9:55 pm

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm
With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
How about, relax and sleep well at night knowing I Have enough and should survive upturns and downturns. I fit your profile to a T, my main concern right now is should I throw a FIRE party. Not thinking about a shift?...

WoodSpinner

Random Walker
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Re: For those near retirement and rebalanced to Bonds...

Post by Random Walker » Thu Oct 19, 2017 9:59 pm

In making these peri-retirement decisions I think its good to remember that equities can lose 50% in any given year and that even a 50/50 portfolio has probably 80-85% of its risk on the equity side.

Dave

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David Jay
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Re: For those near retirement and rebalanced to Bonds...

Post by David Jay » Thu Oct 19, 2017 10:02 pm

I am about a year from retirement. I have a very high tolerance for volatility (I don't freak out when stocks go on sale) and I was 100% stocks through 2000 and 2009.

I have moved all of my living expenses for the period from age 62 to age 70 to bonds. In this way the market can't prevent me from retiring. It works out to about a 55/45 portfolio. I will spend down the bonds and end up at a 70/30 for the legacy money that neither of us will need to touch (even after the death of one spouse)
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

desiderium
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Re: For those near retirement and rebalanced to Bonds...

Post by desiderium » Thu Oct 19, 2017 10:09 pm

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm
With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
Having a lower equity allocation in pre-retirement means that you are still enjoying the uphill ride. Many people in this position were younger, had higher equity allocations and lost a lot of money in 2008-9. The sting of memory conditions you to be satisfied when your portfolio is growing comfortably, even if it isn't performing as well as others taking on more risk.

jdb
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Re: For those near retirement and rebalanced to Bonds...

Post by jdb » Fri Oct 20, 2017 7:04 am

Sandtrap wrote:
Thu Oct 19, 2017 6:28 pm
In retirement.
Bernstein Liability Matching Portfolio.
Allocation 30/70.
IPS detailed and intact and followed.
Sleep factor 100%

What the market does lately, or non-lately (is that a word?) is irrelevant.
Ignore the noise. :D
+1. I am not sure whether Sandtrap copied my IPS or I copied his but we both sleep well.

Ron
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Re: For those near retirement and rebalanced to Bonds...

Post by Ron » Fri Oct 20, 2017 7:45 am

I/wife both age 69.

Current mix: 60% equity, 40% bond/cash.
Future mix: 60% equity, 40% bond/cash.

Currently, 65% of our expenses are covered by portfolio withdrawals. Next year, when we both start to draw our age-70 SS benefits, income sources beyond portfolio withdrawals will cover just over 90% of our expenses.

The remaining <10% will be more than covered by RMD's; excess RMD's will be reinvested in taxable accounts at that time. And if the market tanks? Then we'll just have lower RMD's (along with lower taxes) the following years.

In our case, we're not only investing for current income, but also for the benefit of our disabled son. When we do retirement income/expense projections, we add 22 years to our "normal" lifespan. It's a bit more in equities than most have at our age, but then again we're investing for his benefit, not necessarily ours.

FWIW,

- Ron

tibbitts
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Re: For those near retirement and rebalanced to Bonds...

Post by tibbitts » Fri Oct 20, 2017 7:55 am

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm
With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
Everybody except you is wondering whether to get out of equities and you're apparently wondering whether to get back into them with markets at all-time highs. Interesting.

Many people here own funds and you can't (try to, at least) sell a fund at a certain price (only at a certain closing price, and even that not necessarily automatically) so that's not an option for many, even if they wanted to do it. In practice you may have more trouble selling a stock at a certain price than you anticipate right after a disaster hits, no matter what order you have placed. Somebody else has to be willing to buy.

zwzhang
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Re: For those near retirement and rebalanced to Bonds...

Post by zwzhang » Fri Oct 20, 2017 8:03 am

I have 3 years before retirement, wife's 5 years from that.

Our current allocation is 40% equity - 60% bond. And we are planning to adhere to it for ever.
The interest from bond and stock dividends supplement our pensions, and will provide us a comfortable, sleep-well retirement.

hulburt1
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Re: For those near retirement and rebalanced to Bonds...

Post by hulburt1 » Fri Oct 20, 2017 8:31 am

In the last 18 years with 2 of the worse dives. If you have stayed put with S&P and the total you would have been a lot higher then if you got out or was at 50/50-Even when it went down you still owned those shares. Remember SS is like bond or cash. Don't take it now use your funds then take SS at 70. It's what you spend not what you make will make your retirement happy.

2 month ago I sold my bond fund. and bought Facebook. I made more in those 2 months then the last 5 years in bonds.
I feel you need a over all plan. stock/stock funds/cash/SS/and a attitude that you can make it even if or when the markets takes a hit.

I'm 64/w62..live on $60000 but can go to $120000 if I want.
2.3m-stocks
120000 cash pls dividends into cash--have a weekly sum sent to me to live on.
no bonds
SS at 70-44000
Always lived at about $60000/never made more then $90000. It's what you spend/no debt.

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Sandtrap
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Re: For those near retirement and rebalanced to Bonds...

Post by Sandtrap » Fri Oct 20, 2017 9:47 am

jdb wrote:
Fri Oct 20, 2017 7:04 am
Sandtrap wrote:
Thu Oct 19, 2017 6:28 pm
In retirement.
Bernstein Liability Matching Portfolio.
Allocation 30/70.
IPS detailed and intact and followed.
Sleep factor 100%

What the market does lately, or non-lately (is that a word?) is irrelevant.
Ignore the noise. :D
+1. I am not sure whether Sandtrap copied my IPS or I copied his but we both sleep well.
I try to emulate all the seniors and experts here imbued with wisdom. :D
j

TheQuestionGuy
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Re: For those near retirement and rebalanced to Bonds...

Post by TheQuestionGuy » Fri Oct 20, 2017 9:31 pm

I had a reply but it seemed to have disappeared.
Is there a charge as to when one may go from 100% stock and start migrating to Bonds?
Also, how often and at what percentage should one increase?

For example, have 100% stock under 40 then migrate 5% every 5 years?
By 50 thats a 90/10 split then do 10% more at 55 and so on.... Anything like that?

Johm221122
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Re: For those near retirement and rebalanced to Bonds...

Post by Johm221122 » Fri Oct 20, 2017 9:34 pm

TheQuestionGuy wrote:
Fri Oct 20, 2017 9:31 pm
I had a reply but it seemed to have disappeared.
Is there a charge as to when one may go from 100% stock and start migrating to Bonds?
Also, how often and at what percentage should one increase?

For example, have 100% stock under 40 then migrate 5% every 5 years?
By 50 thats a 90/10 split then do 10% more at 55 and so on.... Anything like that?
You need to base your asset allocation on your personal situation and risk tolerance
If you want guide, age in bonds, then modify for your personal situation

sport
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Re: For those near retirement and rebalanced to Bonds...

Post by sport » Fri Oct 20, 2017 10:09 pm

I used "age in bonds" until we reached 65% bonds. Then we kept the 65% going forward.

Gnirk
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Re: For those near retirement and rebalanced to Bonds...

Post by Gnirk » Fri Oct 20, 2017 11:15 pm

Retired 10 years. 35/60/5 (more or less), and about 90% of my portfolio is taxable. I "could" take more risk on the equity side at this point because my withdrawal rate is about 1%, but I am risk-averse, and I like to sleep well at night.

David Scubadiver
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Re: For those near retirement and rebalanced to Bonds...

Post by David Scubadiver » Sat Oct 21, 2017 8:41 am

I find advice concerning asset allocation and sleep factor to be worthless because market volatility or not, if I am going to be kept from sleeping it will be because I am worried that my hoard will not be sufficient. Not because the road to getting there is bumpy or smooth.

dbr
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Re: For those near retirement and rebalanced to Bonds...

Post by dbr » Sat Oct 21, 2017 9:36 am

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm


As one approaches retirement the general rule is to migrate from stocks to bonds.
That certainly is not a general rule.

Dottie57
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Re: For those near retirement and rebalanced to Bonds...

Post by Dottie57 » Sat Oct 21, 2017 9:51 am

radiowave wrote:
Thu Oct 19, 2017 9:21 pm
We're about 5-6 years out. On the taxable side, we've been increasing our CD allocation to have 2-3 years worth of expenses covered. On the tax-deferred side, nearly all total bond fund and 401k so this has the effect of slowly raising our bond % to a target aa 50/50 by retirement.

Question to the group, is anyone doing/recommending CD ladders on their tax-deferred side as an alternative to total bond or TIPS?

I've started matching yearly expenses to cd's. I need secure money while waiting to take SS.

dbr
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Re: For those near retirement and rebalanced to Bonds...

Post by dbr » Sat Oct 21, 2017 9:58 am

Dottie57 wrote:
Sat Oct 21, 2017 9:51 am
radiowave wrote:
Thu Oct 19, 2017 9:21 pm
We're about 5-6 years out. On the taxable side, we've been increasing our CD allocation to have 2-3 years worth of expenses covered. On the tax-deferred side, nearly all total bond fund and 401k so this has the effect of slowly raising our bond % to a target aa 50/50 by retirement.

Question to the group, is anyone doing/recommending CD ladders on their tax-deferred side as an alternative to total bond or TIPS?

I've started matching yearly expenses to cd's. I need secure money while waiting to take SS.
It seems plausible that if those expenses are a large fraction of the overall portfolio that one would want to avoid having to make the withdrawals against a market decline. I am not sure that I have seen an actual demonstration of that against the alternative of simply maintaining the asset allocation from before and after this period of time.

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nedsaid
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Re: For those near retirement and rebalanced to Bonds...

Post by nedsaid » Sat Oct 21, 2017 10:50 am

TheQuestionGuy wrote:
Thu Oct 19, 2017 6:23 pm
With the way the market has been performing I wondered about people in this scenario.

As one approaches retirement the general rule is to migrate from stocks to bonds.
In this scenario, with the way the market has been doing this past year or so, and lets say you have 50%- 75% or more of your portfolio is in Bonds, what would you do?
Sit on the sidelines and watch the market take off and think of what you are missing?
Or slowly migrate money back into Stocks? If so, what percentage?

Couldn't you get back 100% into Stocks and put in something like an Order to sell if it hits a certain price?
I would do nothing. Just enjoy seeing your 25% to 50% allocation to stocks go up. Don't try market timing and don't try sell orders. You are too close to retirement to be gambling on short term market moves. If you have a good plan, just stick with it.
A fool and his money are good for business.

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Jazztonight
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Re: For those near retirement and rebalanced to Bonds...

Post by Jazztonight » Sat Oct 21, 2017 1:39 pm

The business about “sleep well at night” doesn’t mean much to me—I rarely sleep well at night. But it has nothing to do with allocation.

Rather I view asset allocation as a measure of general comfort level. Who knows what the future will bring, market-wise or otherwise?

I went ahead and tried the good old “age in bonds” concept in my early 60s, and 40/60 felt good, so I stuck with it.

When it no longer keeps me in that comfort zone I’ll modify it.

Staying the course is what’s important, for me anyway.

YMMV.
"What does not destroy me, makes me stronger." Nietzsche

tibbitts
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Re: For those near retirement and rebalanced to Bonds...

Post by tibbitts » Sun Oct 22, 2017 11:27 am

People would be dramatically more comfortable with a higher bond percentages with real bond rates in the 2-3% range vs. the 0% range they're in now. A lot of the talk we have here about 100% stock etc. is really based on that, not now well the market has done lately. It's hard to sleep well at night when you know for certain your money is losing value, even if it's "safe" from catastrophic drops.

dbr
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Re: For those near retirement and rebalanced to Bonds...

Post by dbr » Sun Oct 22, 2017 11:33 am

tibbitts wrote:
Sun Oct 22, 2017 11:27 am
People would be dramatically more comfortable with a higher bond percentages with real bond rates in the 2-3% range vs. the 0% range they're in now. A lot of the talk we have here about 100% stock etc. is really based on that, not now well the market has done lately. It's hard to sleep well at night when you know for certain your money is losing value, even if it's "safe" from catastrophic drops.
I believe that is true. It is really a question of hardening up enough to realize that history does not always dish out the most desired outcome.

However, I think it is also conceivable that a rational analysis of objectives and risk could arrive at a conclusion that one would best invest more in stocks than one would if bond returns were higher. However, that decision should be taken rationally and with one's eyes wide open rather than out of frustration, fear, and greed.

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