What is your AA, given your age? and, Why?

Discuss all general (i.e. non-personal) investing questions and issues, investing news, and theory.
confusedinvestor
Posts: 418
Joined: Thu Mar 15, 2012 11:04 am

What is your AA, given your age? and, Why?

Post by confusedinvestor » Sat Apr 07, 2018 9:41 am

Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?

2. How do you glide your AA as you approach financial independence (not retirement) ?

3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?

Love to get some theoretical inputs.

EnjoyIt
Posts: 1579
Joined: Sun Dec 29, 2013 8:06 pm

Re: What is your AA, given your age? and, Why?

Post by EnjoyIt » Sat Apr 07, 2018 9:51 am

I am in my 40s and our AA is 70/30. I am comfortable at 70/30 since I make a solid and reliable income. I will stay at 70/30 until I semi retire and glide to 60/40. When I fully retire I will go to 50/50. When SS kicks in I will go back to 60/40. None of my decision are based on age except for SS at 70.5 or whatever year that will be in the future.

Since I am looking to semi retire soon, and retire early "age-X in bonds" does not work for me.

User avatar
AtlasShrugged?
Posts: 588
Joined: Wed Jul 15, 2015 6:08 pm

Re: What is your AA, given your age? and, Why?

Post by AtlasShrugged? » Sat Apr 07, 2018 9:58 am

Answers below, I am in my early 50's.

1. 79/21.....with the 79 divided by 54% US and 25% international.
2. I am reducing equity exposure by ~2% each year, and increasing bonds. The plan is to be 60/40 by age 62, and 50/50 by age 67.
3. I don't use 120-age.
“If you don't know, the thing to do is not to get scared, but to learn.”

User avatar
oldcomputerguy
Posts: 3302
Joined: Sun Nov 22, 2015 6:50 am
Location: In the middle of five acres of woods

Re: What is your AA, given your age? and, Why?

Post by oldcomputerguy » Sat Apr 07, 2018 10:00 am

Through sheer ignorance and lack of any guidance in investing, I was 100% stocks in my 401k up until about four years ago (which meant that yes, I was 100% stock during the sub-prime mortgage crisis crash). Fortunately, along with ignorance came a complete lack of "peeking", so I was never tempted to sell during a downturn. Then I discovered passive investing, educated myself a bit, and came to realize that I was only a few years from retirement and needed to be slightly more conservative, at which point I went 60/40. I'm retired now, with my wife being about two years out, and we're at 50/50. Given that we'll both have pensions (hers around $24k per year, mine just about enough to cover my Medicare premiums :? ) and decent Social Security, we'll probably leave it there.
It’s taken me a lot of years, but I’ve come around to this: If you’re dumb, surround yourself with smart people. And if you’re smart, surround yourself with smart people who disagree with you.

galectin
Posts: 229
Joined: Thu Jan 27, 2011 1:57 pm

Re: What is your AA, given your age? and, Why?

Post by galectin » Sat Apr 07, 2018 10:09 am

50:50 equities:bonds

Age 68 for both me and DW.

Considering that Soc. Sec. covers about 3/4 of our spending, this is relatively conservative, but it allows us to not worry about volatility in the future. We have a big cushion in our retirement funds with a conservative Safe Withdrawal Rate. Both adult children are making more than I did, so passing along an inheritance is not a big concern.

User avatar
Sandtrap
Posts: 5321
Joined: Sat Nov 26, 2016 6:32 pm
Location: Hawaii😀 Northern AZ.😳 Retired.

Re: What is your AA, given your age? and, Why?

Post by Sandtrap » Sat Apr 07, 2018 10:09 am

Age in Bonds within a 5% band with a conservative tilt. 30/70.

IMHO: allocation changes depending on whether one has "more to lose than to gain" or "more to gain than to lose".

I am a huge fan, if not a "groupie" of Simplicity, both mental and actionable.

To me, an investment portfolio of funds, no matter the allocation, is all about risk mitigation and protection of a retirement income stream.
Risk can be taken elsewhere. IE: business, R/E, etc.

TAYLOR LARIMORE ON “SIMPLICTY”
https://www.bogleheads.org/forum/viewt ... p?t=156505

aloha
j

Trev H
Posts: 1874
Joined: Fri Mar 02, 2007 10:47 pm

Re: What is your AA, given your age? and, Why?

Post by Trev H » Sat Apr 07, 2018 10:36 am

I am 56 yo now...

I maintained 100% stock allocation until just a few years ago (2016)... and made the change to 70S/30B at that point.

Part of my reasoning for doing so was, my Grandfather and then my Father owned a significant amount of timber land which would eventually become mine... He paid 115.00 per acre for it in 1976... harvested the mostly hardwood (oak) timber off it in 79-80, and kept it for hunting property... growing the timber thru the time that my father owned it and eventually passed it to me... at which point the hardwood timber had matured to the point that it was looking really good. I sold it in 2016 for 1600.00/acre. I had already accumulated some land of my own and really did not have a need for the old family hunting land.

I basically considered this land to be my bond allocation for all of those years.... and so I kept my other retirement assets invested 100% in equities until I sold the land. When I sold the land, I paid off my mortgage, so was ABSOLUTELY DEBT FREE at that point, and I also loaded up my retirement accounts including making some significant investments in taxable space (TSM/FTSE X US). At that point, I changed my 100% stock allocation to 70/30.

Sometime in the next 10 years I plan to retire... and between now and then I will eventually get to 60/40... and plan to maintain that thru Retirement.

Trev H

marcopolo
Posts: 1120
Joined: Sat Dec 03, 2016 10:22 am

Re: What is your AA, given your age? and, Why?

Post by marcopolo » Sat Apr 07, 2018 10:42 am

40% US equity
20% Intl equity
30% Intermediate Bond
10% CDs (3%)

Age 51/52. Early retired. Reduced equity from 80/20 --> 70/30 then --> 60/40 over last 5 years approaching early retirement, will likely slowly increase (inverse glide path) over the next 10-15 years.

Additional funds in Ally no-penalty CDs (1.75%) for new home construction not included in above.
Additional funds in 529 plan (age-based portfolio, currently drawing down) not included in above.

Including those would bring total equity exposure to around 45%. But, that will only be for a short period of time as these funds are consumed.
Once in a while you get shown the light, in the strangest of places if you look at it right.

livesoft
Posts: 62699
Joined: Thu Mar 01, 2007 8:00 pm

Re: What is your AA, given your age? and, Why?

Post by livesoft » Sat Apr 07, 2018 10:48 am

I am in my sixties. My AA is about 60/40 because

1. That seems to work. I really like making money when the stock market goes up and don't mind losing too much money when it goes down.

2. It doesn't really matter than much.

3. It's been that way ft or awhile and will be that way for the rest of my life. That is, no gliding.

4. There are many convenient funds with similar asset allocation of 60/40 that can be used as benchmarks for comparing my DIY portfolio to.

Despite all that is written about AA, in the end it just doesn't matter once in the range of 40:60 to 70:30.
Wiki This signature message sponsored by sscritic: Learn to fish.

GAAP
Posts: 586
Joined: Fri Apr 08, 2016 12:41 pm

Re: What is your AA, given your age? and, Why?

Post by GAAP » Sat Apr 07, 2018 11:03 am

Age: Late 50's

AA: 40% VT (Total World Stock), 10% VNQ (US REIT), 25% BND (US Bond Market), 25% BNDX (Ex-US Bond Market, USD Hedged). 50/50 equity/fixed-income since those are fundamentally different investment types. REIT is equity -- but it zigzags differently than stocks and bonds, allowing for better overall growth and more stable portfolio balance. Global investments (stocks and bonds) because it's a global economy, and I want to diversify against failures in any particular economy and gain some benefits from those economies that are doing better than average. I'm also married to someone with triple citizenship -- my final retirement location may not be in the USA, driving more reason into international diversity and also into my preference for ETFs over Mutual Funds. I don't buy investment real estate, and I don't consider the house I live in to be an investment -- or let it influence my AA.

I tried doing the glidepath thing, but found it was mainly hassle, not benefit. I gave up on that within 2 years, settling for something that met my and my wife's overall needs. This is not what I've always done, but I'm getting better with age...

If I was going to do 120-Age, I would do it primarily by investing incoming flows to move toward the next step. I also use re-balancing bands, which combine nicely with a gradually changing AA and dividends that are not automatically reinvested. A spreadsheet easily would calculate the allocation, the re-balancing bands, and the necessary changes on a monthly basis as the cash flows came in and the asset valuations fluctuated. I do basically the same thing today -- just without the AA changes.

Note for all of the above: this is specific to money that I have set aside specifically for retirement or Financial Independence. Monies for other purposes are an entirely different discussion for me -- I find it easier to manage that separately.

User avatar
k66
Posts: 494
Joined: Sat Oct 27, 2012 1:36 pm

Re: What is your AA, given your age? and, Why?

Post by k66 » Sat Apr 07, 2018 11:06 am

I am early 50s and

1. Maintain a 75:25 portfolio,

2. Have no immediate concern that it needs to be adjusted going forward to Retirement, and

3. Glide rules don't really appeal to me.
LOSER of the Boglehead Contest 2015 | lang may yer lum reek

User avatar
rocket354
Posts: 197
Joined: Mon Dec 14, 2015 12:31 pm

Re: What is your AA, given your age? and, Why?

Post by rocket354 » Sat Apr 07, 2018 11:07 am

39yo. 100/0. I was 92/8 heading into the GFC, survived that then watched the rebound and realized I should/could be rebounding more. Went to 100/0 in 2012 and haven't yet looked back.

My reasoning is that I am saving for retirement by, say 65. Has any other portfolio other than 100/0 beat 100/0 over the time-frame from when I'm investing the money? If no, I put it all into equities. Around 45 I'll start having decisions to make, and will probably start putting new investments in at a 90/10 clip or so. My current investments will more or less stay where they're at, but I'll start adjusting my contributions. That's the current plan at any rate.

The other rationale is that I'd really like to retire sooner than 65 and so I want to put my money in the position to most likely get me financially independent sooner. If there's a big downturn it's not a problem because I'm not about to retire, but if there's a big run-up then I want to capitalize, and may be able to move my retirement date forward.

FWIW, I'm at about 82/18 domestic/international. The goal is to be 80/20, but even with the last year or two of great performance international never really seems to keep pace and I've been fine with it drifting downwards some.

balofagus
Posts: 23
Joined: Wed Jan 11, 2017 3:52 pm

Re: What is your AA, given your age? and, Why?

Post by balofagus » Sat Apr 07, 2018 11:16 am

confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?
I am 90:10 at 27. Part of me thinks that should be 100:0, and another maybe somewhere closer to 80:20. Having never been invested through a real rough patch, I’ve split the difference.
2. How do you glide your AA as you approach financial independence (not retirement) ?
I have a plan for gliding down to 80, and will evaluate any next moves as I get closer to that.
3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?
I don’t use 120-age, but probably could. It’s very close to the “schedule” I’ve established.

TXWill
Posts: 32
Joined: Wed Apr 09, 2014 1:08 pm

Re: What is your AA, given your age? and, Why?

Post by TXWill » Sat Apr 07, 2018 11:20 am

1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?

Age: 67, AA 60/40

2. How do you glide your AA as you approach financial independence (not retirement) ?
90/10 till age 55, then 80/20
70/30 at age 63
60/40 at age 67


3. How does Vanguard/Fidelity/(everyone) typically follow "Target Retirement Year Composite Index" AA/glide which is 120 - Age in Stock ?

I don't.

Iliketoridemybike
Posts: 572
Joined: Wed Jun 28, 2017 11:03 am

Re: What is your AA, given your age? and, Why?

Post by Iliketoridemybike » Sat Apr 07, 2018 11:23 am

55 years old. 2.5 years from FIRE.
40% equities of which 13% is international
45% bonds, laddered into high quality, shorter duration individual bonds
15% cash.

Super conservative I know, but... here’s why
We have 30x our desired income already no real need to take risk
We are building our dream retirement home, all self funded


With all that being said, once we flip into retirement mode and the house is done, I can see going more 50/50 or possibly higher to ward off the wicked witch of retirement portfolios, inflation.

LBTRS
Posts: 11
Joined: Sat Feb 14, 2009 9:36 pm

Re: What is your AA, given your age? and, Why?

Post by LBTRS » Sat Apr 07, 2018 11:24 am

85/15 and I'm 50 years old. Equity makup is 65% US and 20% International.

I got started late so I need a higher equity percentage for growth.

Tal-
Posts: 345
Joined: Fri Apr 22, 2016 10:41 pm

Re: What is your AA, given your age? and, Why?

Post by Tal- » Sat Apr 07, 2018 11:28 am

Mid/Late 30's. 75% stock.

Why? Our time horizon is still huge, and I believe that stocks will outpace bonds over the next 30 years. Actually, I'd be happy to go more aggressive, but the wife is more conservative than I am, and I'm not confident enough in my own predictions to differ from the expert guidance by that much.

As an aside, we actually have around 40% of our net worth in rental properties.
Debt is to personal finance as a knife is to cooking.

User avatar
oldzey
Posts: 1028
Joined: Sun Apr 13, 2014 8:38 pm
Location: Land of Lincoln

Re: What is your AA, given your age? and, Why?

Post by oldzey » Sat Apr 07, 2018 11:39 am

I'm 50 years old and my AA is at 65:35.

My plan is to "glide" to 50:50 by age 65 and reevaluate my situation once I settle into full retirement around age 67.
"The broker said the stock was 'poised to move.' Silly me, I thought he meant up." ― Randy Thurman

User avatar
friar1610
Posts: 1268
Joined: Sat Nov 29, 2008 9:52 pm
Location: MA South Shore

Re: What is your AA, given your age? and, Why?

Post by friar1610 » Sat Apr 07, 2018 11:40 am

Ages: 72/71
AA: about 42 (of which 25% Int) equity/55 fixed income (to include bond funds, I-bonds, CDs)/3 cash. Could see going to 45-48% equities but no more.
Why: Feels right in combination with good pension and 2 SS. Not too conservative; not too aggressive.
Friar1610

2pedals
Posts: 582
Joined: Wed Dec 31, 2014 12:31 pm

Re: What is your AA, given your age? and, Why?

Post by 2pedals » Sat Apr 07, 2018 11:41 am

I am 45/55 stocks/bonds at age 58 and will retire at 59.

Stocks are mostly total US stock market and total intentional stock market (70/30 of equity). Bonds are mostly stable value with some CDs, I-bonds, EE-bonds and high yield money market (very low interest rate sensitivity). I am concerned about sequence of returns risks in early retirement.

Although, I will have a good pension that will cover most of my expenses, I wish to delay social security to 70 and travel more in my early retirement. After I have been retired for a while 5-10 years I may adjust my asset allocation to something like 60/40.

longinvest
Posts: 2931
Joined: Sat Aug 11, 2012 8:44 am

Re: What is your AA, given your age? and, Why?

Post by longinvest » Sat Apr 07, 2018 11:43 am

I'm still far away from retirement. My AA is 50/50 stocks/bonds fixed for life, no glide. Stocks are evenly divided between domestic and international. Bonds are evenly divided between nominal and inflation-indexed.

When setting my AA, I considered Benjamin Graham's timeless advice:

We have suggested as a fundamental guiding rule that the investor should never have less than 25% or more than 75% of his funds in common stocks, with a consequence inverse range of 75% to 25% in bonds. There is an implication here that the standard division should be an equal one, or 50-50, between the two major investment mediums.
Bogleheads investment philosophy | Lifelong Portfolio: 25% each of (domestic/international)stocks/(nominal/inflation-indexed)bonds | VCN/VXC/VLB/ZRR

BogleMelon
Posts: 1438
Joined: Mon Feb 01, 2016 11:49 am

Re: What is your AA, given your age? and, Why?

Post by BogleMelon » Sat Apr 07, 2018 11:45 am

To answer your question, I am 38 years and my retirement AA is 85-15. However, my AA and glide is not related to age, it is related to how much I have comparing to my retirement number. I currently have only 1X in retirement (where X is my annual spending using today's dollars), when I will switch to more bonds the more I get closer to 25X till I reach something like 40-60 or 30-70 when hitting the 25X.

My reasoning is, today I have more capital human than savings, hence I can take more risk. While capital human (working years left) decrease and savings increase, the ability to take risk decreases..
"One of the funny things about stock market, every time one is buying another is selling, and both think they are astute" - William Feather

Random Walker
Posts: 3064
Joined: Fri Feb 23, 2007 8:21 pm

Re: What is your AA, given your age? and, Why?

Post by Random Walker » Sat Apr 07, 2018 11:47 am

I’m 55 and figure I’m in that pre Retirement red zone. I was 80/20 about 5 years ago, 70/30 2 years ago, and now 42% equity/20% alternatives/20% bonds. I look at glidepaths that decrease 1% or so per year as just a starting point. To me it makes sense to look periodically at portfolio size relative to realistic goals, past returns, current valuations, expected future returns, and sort of customize one’s individual glidepath to the retirement portfolio. This is sort of unidirectional stepwise AA changes on the way to retirement portfolio, so I don’t really view it as market timing. After the dramatic gains of the last several years, taking 1% equity off the table per year just doesn’t cut it for derisking.

Dave

Ben Mathew
Posts: 96
Joined: Tue Mar 13, 2018 11:41 am
Location: Seattle
Contact:

Re: What is your AA, given your age? and, Why?

Post by Ben Mathew » Sat Apr 07, 2018 12:40 pm

I'm 41, wife is 43. Our allocation is 100% stocks : 0% bonds. We've stuck to that allocation since we started saving seriously in 2006. We plan to stick with it till we die. Our reasons for doing so:

- Stocks will almost certainly outperform bonds by a huge margin over horizons longer than 30 years. Small differences in expected returns compound to massive differences in expected value over a lifetime.

- We save enough that even if our portfolio drops by half, we'll have what we need to live on. The excess, if any, goes to the kids and charities after we die. So, the way I look at it, we're not taking the risk on stocks. The kids and charities are, and they can handle it! :happy

- Crash of '08 didn't cause us to panic and pull out, so we have confidence in our ability to stay calm and do nothing in a downturn.

- I very much dislike inflation risk. Unless short term or indexed to inflation, the value of bonds can be wiped out by inflation. I don't like the idea that a rotating cast of government officials will decide whether inflation should be 2% or 5% (or 10%!) over the next 30 years, and that my portfolio can be wiped out by their decisions. May be a black swan thing for me. I am less afraid of the diversified business risks of a diversified stock index.

il0kin
Posts: 138
Joined: Mon Feb 26, 2018 8:19 pm

Re: What is your AA, given your age? and, Why?

Post by il0kin » Sat Apr 07, 2018 12:59 pm

Age 29. 80/20.

I chose 80/20 because we do not yet have more money in retirement accounts than mortgage balance and I will feel more comfortable once we move past that and know we shouldn’t ever lose the house. Probably unnecessary, but I am risk averse and have worked my tail off to get where we are now and don’t want to lose it.

Home prices are also skyrocketing around me and we could probably not afford to buy the same house now, so I don’t ever want to risk losing the house.

We are also on track to far surpass our needs in retirement even with early retirement so I’m okay with being a bit more conservative.

student
Posts: 2530
Joined: Fri Apr 03, 2015 6:58 am

Re: What is your AA, given your age? and, Why?

Post by student » Sat Apr 07, 2018 1:00 pm

I am about 115-age in stock. For fixed income, I use TIAA Traditional (stable value) rather than bond. I used to be more aggressive when I was younger.

Bacchus01
Posts: 1832
Joined: Mon Dec 24, 2012 9:35 pm

Re: What is your AA, given your age? and, Why?

Post by Bacchus01 » Sat Apr 07, 2018 1:03 pm

95/5 at 44 and 49.

Why? Because we can. Our most likely biggest investment return over the next 20 years is still our human capital. I don’t mind the risk on the rest because we don’t really need it anytime soon.

MotoTrojan
Posts: 2259
Joined: Wed Feb 01, 2017 8:39 pm

Re: What is your AA, given your age? and, Why?

Post by MotoTrojan » Sat Apr 07, 2018 1:07 pm

100/0 with 25% Int and 20% small-value.

26, portfolio is small relative to long term goals, no plans to tap it for many years, and confident in my emotional fortitude.

I evaluate on every 5th birthday (next being 30).

User avatar
llama
Posts: 78
Joined: Wed Dec 23, 2015 1:41 pm

Re: What is your AA, given your age? and, Why?

Post by llama » Sat Apr 07, 2018 1:20 pm

60/40 in my late 30s. I work in an industry with rampant age discrimination so I'm not confident I can keep making my current salary for too many more years. I also received a large inheritance that reduces my need to take risk.

frugalmama
Posts: 111
Joined: Tue Mar 20, 2018 12:53 pm

Re: What is your AA, given your age? and, Why?

Post by frugalmama » Sat Apr 07, 2018 1:26 pm

Ben Mathew wrote:
Sat Apr 07, 2018 12:40 pm
I'm 41, wife is 43. Our allocation is 100% stocks : 0% bonds. We've stuck to that allocation since we started saving seriously in 2006. We plan to stick with it till we die. Our reasons for doing so:

- Stocks will almost certainly outperform bonds by a huge margin over horizons longer than 30 years. Small differences in expected returns compound to massive differences in expected value over a lifetime.
we are 38
- We save enough that even if our portfolio drops by half, we'll have what we need to live on. The excess, if any, goes to the kids and charities after we die. So, the way I look at it, we're not taking the risk on stocks. The kids and charities are, and they can handle it! :happy

- Crash of '08 didn't cause us to panic and pull out, so we have confidence in our ability to stay calm and do nothing in a downturn.

- I very much dislike inflation risk. Unless short term or indexed to inflation, the value of bonds can be wiped out by inflation. I don't like the idea that a rotating cast of government officials will decide whether inflation should be 2% or 5% (or 10%!) over the next 30 years, and that my portfolio can be wiped out by their decisions. May be a black swan thing for me. I am less afraid of the diversified business risks of a diversified stock index.
This is the way we feel. We are 37 and 41 with 100/0 AA.

haban01
Posts: 654
Joined: Thu Mar 01, 2007 9:55 pm
Location: Wisconsin

Re: What is your AA, given your age? and, Why?

Post by haban01 » Sat Apr 07, 2018 1:32 pm

Mid 30's with a 75/25 Stock to Bond Ratio. US vs. Int split also about 70/30. Conservative at my age due to highly economically sensitive career and young family so to have options in case things go bad. Have steadily invested and increased the course through two Bear Markets.
Eric Haban | | "Stay the Course" | "Press on Regardless" | | Wisconsin Bogleheads Chapter Coordinator

drk
Posts: 744
Joined: Mon Jul 24, 2017 10:33 pm
Location: Seattle

Re: What is your AA, given your age? and, Why?

Post by drk » Sat Apr 07, 2018 1:44 pm

Around 30 and currently sitting at 94/6 as I shift from 100/0 to 90/10 with monthly contributions. I made the change to account for the fact that I don't maintain a separate emergency fund and that my compensation is heavily exposed to S&P 100 performance. I plan to stick with this allocation until I hit 40, at which point I'll reassess.

User avatar
Clever_Username
Posts: 1045
Joined: Sun Jul 15, 2012 12:24 am
Location: Southern California

Re: What is your AA, given your age? and, Why?

Post by Clever_Username » Sat Apr 07, 2018 1:49 pm

confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?
Age: mid 30s.

AA: 70% stock, 30% bonds. It's been this for a while. I used to think I'd stick with age and bonds and I just sort of didn't. I think I'm okay with 70/30 for a while.

Why needs to talk about my ability and need to take risks. I was barely invested in anything (still in graduate school, that sort of thing) in 2008 so I don't know how I'd deal with a real correction. The mild volatility this year has had me say "that's interesting" without any temptation to change things. But this is very mild volatility. So I don't know my willingness to take risks and I'm not willing to be aggressive until I have gone through such a drop.

It also doesn't really matter; I have an estimate for how much income I'll need in retirement, in 2018 dollars. I'm already at the point where, at 3.5% real growth without new contribution, a 4% SWR starting the year I turn 59.5 would achieve a very large portion of that. And I'm not about to stop contributions. So it isn't like I need to take any real risk to have a very good chance at a good retirement.
confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
2. How do you glide your AA as you approach financial independence (not retirement) ?
I haven't decided yet. I will probably stick with whatever AA I have for a while. Once I hit the point where the existing balance and estimated growth likely get me where I want to go, I'll have to make a decision. I'll probably have a decreasing risk aversion, having new contributions allocated in such a way to increase the bond allocation.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

Dottie57
Posts: 4462
Joined: Thu May 19, 2016 5:43 pm

Re: What is your AA, given your age? and, Why?

Post by Dottie57 » Sat Apr 07, 2018 2:01 pm

Clever_Username wrote:
Sat Apr 07, 2018 1:49 pm
confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
Folks,
1. Without quantifying your need/ability/willing to take risk and/or goals, what is your AA (Stock:Bond), given your age? and why?
Age: mid 30s.

AA: 70% stock, 30% bonds. It's been this for a while. I used to think I'd stick with age and bonds and I just sort of didn't. I think I'm okay with 70/30 for a while.

Why needs to talk about my ability and need to take risks. I was barely invested in anything (still in graduate school, that sort of thing) in 2008 so I don't know how I'd deal with a real correction. The mild volatility this year has had me say "that's interesting" without any temptation to change things. But this is very mild volatility. So I don't know my willingness to take risks and I'm not willing to be aggressive until I have gone through such a drop.

It also doesn't really matter; I have an estimate for how much income I'll need in retirement, in 2018 dollars. I'm already at the point where, at 3.5% real growth without new contribution, a 4% SWR starting the year I turn 59.5 would achieve a very large portion of that. And I'm not about to stop contributions. So it isn't like I need to take any real risk to have a very good chance at a good retirement.
confusedinvestor wrote:
Sat Apr 07, 2018 9:41 am
2. How do you glide your AA as you approach financial independence (not retirement) ?
I haven't decided yet. I will probably stick with whatever AA I have for a while. Once I hit the point where the existing balance and estimated growth likely get me where I want to go, I'll have to make a decision. I'll probably have a decreasing risk aversion, having new contributions allocated in such a way to increase the bond allocation.
I am at 50/50. 61years old. Retired March 2018.

Retirement accounts at 58/42.
Taxable At 30/70 Stock/bonds/cds

Not included 70k of severance post tax

User avatar
randomizer
Posts: 1506
Joined: Sun Jul 06, 2014 3:46 pm

Re: What is your AA, given your age? and, Why?

Post by randomizer » Sat Apr 07, 2018 2:03 pm

Age: 40s
AA: 75:25
Glide: No adjustment anticipated for the foreseeable future.
87.5:12.5, EM tilt — HODL the course!

Frank Grimes
Posts: 109
Joined: Tue Mar 07, 2017 10:54 am

Re: What is your AA, given your age? and, Why?

Post by Frank Grimes » Sat Apr 07, 2018 2:10 pm

Early 30s. Currently 80/20. Why? It's a fairly aggressive blend, but not as much as we could be given our ages. I feel like we're ahead of the game with regard to our current balance and savings levels and don't need to take a ton of risk in order to get to our number.

Planning to glide it down to around 75/25 at 35 to 40, 70/30 at 40-45, 65/35 at 45-50 and 60/40 at 50+. No specific reason for the increments other than I think it'll be good discipline to draw down the stock % over time instead of waking up at age 55 and having to unload a ton of stocks to get a conservative mix.

Edit: Also I think doing it gradually will let me rebalance solely through new purchases, instead of having to sell stuff. So that'll minimize cap gains.

2015
Posts: 1972
Joined: Mon Feb 10, 2014 2:32 pm

Re: What is your AA, given your age? and, Why?

Post by 2015 » Sat Apr 07, 2018 2:16 pm

60's, Retired.
40/60 this year. 50/50 next year and thereafter.
So I can divert as much of my precious attention from financial matters to the reason I ever paid attention to financial matters in the first place: living well.

lostdog
Posts: 1166
Joined: Thu Feb 04, 2016 2:15 pm

Re: What is your AA, given your age? and, Why?

Post by lostdog » Sat Apr 07, 2018 2:28 pm

Ben Mathew wrote:
Sat Apr 07, 2018 12:40 pm
I'm 41, wife is 43. Our allocation is 100% stocks : 0% bonds. We've stuck to that allocation since we started saving seriously in 2006. We plan to stick with it till we die. Our reasons for doing so:

- Stocks will almost certainly outperform bonds by a huge margin over horizons longer than 30 years. Small differences in expected returns compound to massive differences in expected value over a lifetime.

- We save enough that even if our portfolio drops by half, we'll have what we need to live on. The excess, if any, goes to the kids and charities after we die. So, the way I look at it, we're not taking the risk on stocks. The kids and charities are, and they can handle it! :happy

- Crash of '08 didn't cause us to panic and pull out, so we have confidence in our ability to stay calm and do nothing in a downturn.

- I very much dislike inflation risk. Unless short term or indexed to inflation, the value of bonds can be wiped out by inflation. I don't like the idea that a rotating cast of government officials will decide whether inflation should be 2% or 5% (or 10%!) over the next 30 years, and that my portfolio can be wiped out by their decisions. May be a black swan thing for me. I am less afraid of the diversified business risks of a diversified stock index.
+1

I am 42 and my wife is 40. We are 100/0. Pretty much what Ben said but we have no kids. My wife works full time and I am semi-retired. Ben pretty much covered what was on my mind. If my wife loses her job, we have an emergency fund to cover us during the unemployment phase. My wife maxes her 401k and Roth IRA. We're also able to max my roth IRA. We still have some extra cash after retirement accounts and bills are covered. We're debt free including home.

Vanguard Total World Index. I mimic the total world allocation with 3 index funds in my wife's 401(k).
Last edited by lostdog on Sat Apr 07, 2018 2:44 pm, edited 1 time in total.

sschoe2
Posts: 282
Joined: Fri Feb 24, 2017 4:42 pm

Re: What is your AA, given your age? and, Why?

Post by sschoe2 » Sat Apr 07, 2018 2:33 pm

Age 37:
80% stock (20% international)
14% bonds
6% miscellaneous

DetroitRick
Posts: 586
Joined: Wed Mar 23, 2016 9:28 am

Re: What is your AA, given your age? and, Why?

Post by DetroitRick » Sat Apr 07, 2018 2:48 pm

62 retired, spouse 57 working part time.

Current target (and actual) allocation is:
74% equity
22% fixed income (includes bonds and cd's)
4% alternatives

Function of risk tolerance and capacity, current state of the bond market, non-investment income sources and our spending patterns. No plans to alter much in the next few years.

The Casualty
Posts: 67
Joined: Sun Oct 24, 2010 9:09 pm

Re: What is your AA, given your age? and, Why?

Post by The Casualty » Sat Apr 07, 2018 2:58 pm

62 retired, Spouse 67 retired.

A/A > 50/35/15 (cash/CD's)

Pension and dual SS cover 100% of expenses. We've pretty much "won the game" as they say, was 90/10 most of our working life. We took more risk because our income was pretty secure and we have no children. We will dial back to 30/70 over the next 10 years or so depending on what happens going forward. I'm more concerned about inflation than market fluctuations so we intend to keep at least $1M in the market.

bgf
Posts: 607
Joined: Fri Nov 10, 2017 9:35 am

Re: What is your AA, given your age? and, Why?

Post by bgf » Sat Apr 07, 2018 2:59 pm

32. 100% equities. I see the lower expected payoff of a bond allocation as the price/cost for decreased short term volatility. I have no desire to decrease short term volatility at the expense of higher return, so I am 100% equities.
Last edited by bgf on Sat Apr 07, 2018 3:00 pm, edited 1 time in total.
“TE OCCIDERE POSSUNT SED TE EDERE NON POSSUNT NEFAS EST"

User avatar
mickeyd
Posts: 4612
Joined: Fri Feb 23, 2007 3:19 pm
Location: Deep in the Heart of South Texas

Re: What is your AA, given your age? and, Why?

Post by mickeyd » Sat Apr 07, 2018 3:00 pm

When I initially began investing with VG I had a 90/10 AA. After numerous adjustments and life changing events (retirement, RMD, SS, pensions) we are now perched with a 45/45/10 AA.

@ age 73, simplicity rules!
Part-Owner of Texas | | “The CMH-the Cost Matters Hypothesis -is all that is needed to explain why indexing must and will work… Yes, it is that simple.” John C. Bogle

schachtw
Posts: 89
Joined: Mon Jul 06, 2015 6:15 pm

Re: What is your AA, given your age? and, Why?

Post by schachtw » Sat Apr 07, 2018 3:08 pm

Wife and I retired, both 67.
AA is 50/47.5/2.5

Tax deferred accounts: 100% bonds
Taxable accounts: 85% equities, 15% tax free bonds

MiddleOfTheRoad
Posts: 150
Joined: Fri Jul 21, 2017 11:19 am

Re: What is your AA, given your age? and, Why?

Post by MiddleOfTheRoad » Sat Apr 07, 2018 3:13 pm

Tal- wrote:
Sat Apr 07, 2018 11:28 am
Mid/Late 30's. 75% stock.

Why? Our time horizon is still huge, and I believe that stocks will outpace bonds over the next 30 years. Actually, I'd be happy to go more aggressive, but the wife is more conservative than I am, and I'm not confident enough in my own predictions to differ from the expert guidance by that much.

As an aside, we actually have around 40% of our net worth in rental properties.
Other than the fact that we are in our early 40s, this is us almost exactly! Crazy :shock:

vested1
Posts: 1569
Joined: Wed Jan 04, 2012 4:20 pm

Re: What is your AA, given your age? and, Why?

Post by vested1 » Sat Apr 07, 2018 3:45 pm

Over 2 years retired at 60/40, about 15% of stocks in international, 10% 0f bonds in MM. Me 66, wife 65 in July. I used to be 50/50 during the time between retirement from megacorp at 56 and several years into continuing employment, but found that missing out on gains by being too conservative was not in my makeup and made for more uncertainty. The portfolio should last even with a 50% decline, so after RMD's begin we may slowly increase equities as a nod to inheritance.

The initial filing of SS this year, including my wife's pension will be sufficient to cover most expenses, both discretionary and non-discretionary. Once full SS kicks in, in 3.5 years, those two sources will comfortably surpass all expenses. Expect the mortgage to be gone at 1 year past the onset of full SS when another look will determine if a slow uptick in equities is appropriate. Would like to increase intermittent gifting to our children and grandchildren at that point, but market performance will determine that.

getthatmarshmallow
Posts: 223
Joined: Mon Dec 04, 2017 9:43 am

Re: What is your AA, given your age? and, Why?

Post by getthatmarshmallow » Sat Apr 07, 2018 4:01 pm

Late 30s, 80/20 exclusive of emergency fund/cash. Honestly, I plugged the numbers into Vanguard's calculator and that's what it spat out, and that was 90% of the decision. The other 10% that with a later career start and minimal debt I figured it was best to be somewhat aggressive.

Not worried about a downturn as my great talent is graduating into recessions, and I already have my terminal degree. ;)

GCD
Posts: 537
Joined: Tue Sep 26, 2017 7:11 pm

Re: What is your AA, given your age? and, Why?

Post by GCD » Sat Apr 07, 2018 4:07 pm

My wife and I are in our early 50's and retired. We LBYM completely on our pensions and do not tap our investments. Clearly this raises our risk tolerance.

529 plans for the kids are 50% bond/50% short term reserves at Vanguard. Those are about 17% of our investible assets. Our kids are in high school and we hit our goal for this so we're just letting it ride.

TSPs (US govt. 401K) are 100% stock. 50% C fund, 25% S fund, 25% I fund. That's S&P 500/ small cap/ international respectively. That's about 60% of our investible assets.

IRAs and other savings is largely in stock. Some of it is in more esoteric international funds where I'm trying to get more exposure to the third world than the I fund gives. I'd have to look up the fund name, but it's at Vanguard. That's about 15% of investible assets.

Another 5% is in Vanguard Health Care Fund (VGHCX).

Another 3% is in art and other collectibles. We never meant to get this high here, it was kind of accidental. It was more just buying stuff we liked and ended up with a chunk of $ in it, not really meant as an investment. But it has value and some degree of liquidity so I mention it here.

I'm not including our house as an investment.

We had the 529s all in stock up until 6 months ago.
Last edited by GCD on Sat Apr 07, 2018 4:18 pm, edited 2 times in total.

Random Walker
Posts: 3064
Joined: Fri Feb 23, 2007 8:21 pm

Re: What is your AA, given your age? and, Why?

Post by Random Walker » Sat Apr 07, 2018 4:12 pm

Frank Grimes wrote:
Sat Apr 07, 2018 2:10 pm
Early 30s. Currently 80/20. Why? It's a fairly aggressive blend, but not as much as we could be given our ages. I feel like we're ahead of the game with regard to our current balance and savings levels and don't need to take a ton of risk in order to get to our number.

Planning to glide it down to around 75/25 at 35 to 40, 70/30 at 40-45, 65/35 at 45-50 and 60/40 at 50+. No specific reason for the increments other than I think it'll be good discipline to draw down the stock % over time instead of waking up at age 55 and having to unload a ton of stocks to get a conservative mix.

Edit: Also I think doing it gradually will let me rebalance solely through new purchases, instead of having to sell stuff. So that'll minimize cap gains.
I’m 55 and just took the tax hit you’re talking about :-) and it could potentially be a good idea at some point for you. If, as you get older, you find there has been a period of extra substantial market generosity, take the profits with the associated tax hit, and be happy that you taken risk off the table when there were big profits to take. Payimg the tax on gains is way better than no longer having the gains. I like the idea of starting with a glidepath in mind, then sort of opportunistically modifying in stepwise fashion over time as the market gyrates and the investor gets more clear on needs versus wants. William Bernstein mentions taking action near retirement right near the end of his short ebook on lifecycle investing.

Dave

halfnine
Posts: 856
Joined: Tue Dec 21, 2010 1:48 pm

Re: What is your AA, given your age? and, Why?

Post by halfnine » Sat Apr 07, 2018 4:14 pm

In our 40s

Stock: 40% (global)
Fixed Income: 30% (+/- 10%)(global)
Real Estate: 20% (+/- 10%)
Alternative: 10% (+/- 5%)

Post Reply