Any retired person have stocks and cash I was thinking about a 70/30

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iamblessed
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Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 6:23 am

What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by Call_Me_Op » Fri Aug 16, 2019 6:29 am

70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by JoeRetire » Fri Aug 16, 2019 6:33 am

iamblessed wrote:
Fri Aug 16, 2019 6:23 am
What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.
You get to decide how much your sleep is worth.

I would never keep 30 percent of my assets in cash. But cash wouldn't help me sleep better.
Don't be a lemming.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 6:34 am

Call_Me_Op wrote:
Fri Aug 16, 2019 6:29 am
70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
I should be able to wait it out with the cash.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by BL » Fri Aug 16, 2019 6:44 am

Is you "cash" a money market fund, or high-interest CDs, savings or money market account at a bank or credit union? Just suggesting you can get over 2% for those at this time, while some banks barely give you anything.

If you are "young retired", bonds may make more sense than for "old retired" folks like me. You might want a couple years worth of "cash" as above to feel more comfortable, and something like Vanguard's Total Bond for the rest of your fixed income. Bond funds have gone down, but nothing like stock funds, so consider carefully what % you want of each in retirement.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by bearwithbear » Fri Aug 16, 2019 6:46 am

OP,

58/19/23
stock/bond/cash
cash is CDs and MM
Retired.
Sleep pretty well

Might help other posters if your withdrawal rate was included.
Still consulting some, so mine is around 1.25%

Bear

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 6:52 am

bearwithbear wrote:
Fri Aug 16, 2019 6:46 am
OP,

58/19/23
stock/bond/cash
cash is CDs and MM
Retired.
Sleep pretty well

Might help other posters if your withdrawal rate was included.
Still consulting some, so mine is around 1.25%

Bear
withdrawal rate 3%

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by dbltrbl » Fri Aug 16, 2019 6:54 am

It depends on you and your situation. I am retired and have 90% stocks, 10% cash and yes I sleep soundly. My RMDs and pension ( NO Social security) provide more than enough for our daily living. And yes I can stomach a 40-50% down turn. You decide on your comfort level.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by Call_Me_Op » Fri Aug 16, 2019 6:56 am

iamblessed wrote:
Fri Aug 16, 2019 6:34 am
Call_Me_Op wrote:
Fri Aug 16, 2019 6:29 am
70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
I should be able to wait it out with the cash.
At 3% withdrawal, you are very likely to be OK. I would also argue that at 3% withdrawal, you do not need to take that much risk.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by JPH » Fri Aug 16, 2019 6:56 am

If you are risk averse, then why have 70% in stocks? I don't see a huge difference between 30% in cash, short-term bonds, or total bond fund. Do you have a huge need to grow your stock portfolio? Or is it more about having a lot of available cash for emergencies? What exactly keeps you awake at night?
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 6:58 am

JPH wrote:
Fri Aug 16, 2019 6:56 am
If you are risk averse, then why have 70% in stocks? I don't see a huge difference between 30% in cash, short-term bonds, or total bond fund. Do you have a huge need to grow your stock portfolio? Or is it more about having a lot of available cash for emergencies? What exactly keeps you awake at night?
I hate to take money from the market on down years. That why I like the cash.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by carolinaman » Fri Aug 16, 2019 6:58 am

iamblessed wrote:
Fri Aug 16, 2019 6:34 am
Call_Me_Op wrote:
Fri Aug 16, 2019 6:29 am
70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
I should be able to wait it out with the cash.
How long do you assume the market will stay down? It could be that way a long time. Unless you have substantial revenue coming from other sources, 70/30 is a risky portfolio for retirees.

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iamblessed
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 7:00 am

carolinaman wrote:
Fri Aug 16, 2019 6:58 am
iamblessed wrote:
Fri Aug 16, 2019 6:34 am
Call_Me_Op wrote:
Fri Aug 16, 2019 6:29 am
70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
I should be able to wait it out with the cash.
How long do you assume the market will stay down? It could be that way a long time. Unless you have substantial revenue coming from other sources, 70/30 is a risky portfolio for retirees.

I know the market can be down 5-10 years. If I am frugal I can hold out 10 years. I will need this to cover 75% of the bills.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by Call_Me_Op » Fri Aug 16, 2019 7:19 am

If you notice, your post was about cash versus bonds, but most of us are focusing on your equities. That's because cash versus bonds is a relatively minor question - especially at today's rates. The higher-level and arguably more important question is safe versus risky (risk defined in terms of volatility).
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by Nowizard » Fri Aug 16, 2019 7:31 am

You will have cash in mutual fund accounts, so add that in when figuring. For example, our funds have a total of 3% of our portfolio in cash. Add that to our bond funds and actual cash, and we sleep poorly, like a lot of retired people, but not due to our portfolio.

Tim

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by nisiprius » Fri Aug 16, 2019 7:35 am

It depends what you mean by "cash" and by "a lot in missed earning."

I personally have stocks, bonds, cash all three, and important amounts of each. However, my stock allocation is a heck of a lot lower than 70% and I think 70% is a very aggressive for retirement. Morningstar has some model glide slopes that roughly outline the range of choices made by target-date funds, and as you see, at age 65, they label 60% as "aggressive," 42% as "moderate," and 27% as "conservative." I believe you want to think long and hard about being above their "aggressive" line.

Image

If you are concerned about risk, by far the most powerful lever you have is adjusting your stock/bond ratio. Think of it as a "stock/not-stock" ratio and include both bonds and cash together. Especially in a portfolio that is 70% stocks, the stocks are going to dominate the behavior of the portfolio. Fiddling around with what is in the other 30%, even going from bonds to cash, isn't going to reduce risk much.

So on the one hand, sure, if you just don't want the non-stock portion to be in bonds because you are spooked by bonds, it is perfectly reasonable to move to cash-like assets if you shop carefully for interest rates. But if you are concerned with portfolio risk as a whole, then you should cut back on your stock allocation.

Read the full postings to understand what these charts are and what the methodology is, but, very roughly, these are computer simulations in which the X shows what actually happened historically, and the points show the scatter of a results in a range of Monte Carlo simulations.

Here's the difference between a 60/40 allocation in which the 40% is either intermediate-term bonds (green) or cash (red). As you see, the scatter is much larger than the difference, and as you also see, moving from bonds to cash doesn't change the overall spread of the what-ifs; with bonds, the range of outcomes is $72,000 - $148,000, a difference of $76,000 dollars; with cash, the range from $59,000 - $123,000, a difference of $64,000. So going to cash hasn't done much to eliminate risk.

Full posting

Image

Appendix: Methodology
Brief notes: 1) In these Monte Carlo simulations, the return for a given month is varied by randomly choosing the actual historical return or the actual historic return for an adjacent month. 2) They show the final value from $100 monthly contributions made over the whole time period. 4) Green and red crosses mark actual historical values. 5) Green and red bars show the 10% percentile, median, and 90% percentile of the range of outcomes. 5) The actual data source is PortfolioVisualizer.com, Backtest Portfolio, Monthly Returns; this is used as calculation input; and no PV content or numeric values are directly reproduced.

The crosses and centerpoints are what they are. They are subject to all the issues and problems of comparing two portfolios over one specific period in time. They have exactly the same endpoint issues of all such comparisons. These charts do not help decide which portfolio is better than another, or how much better. Their purpose to compare the size of difference between portfolios to the general variability of the portfolio. They are based on Monte Carlo simulations of random walks around the historical data. The value of this approach has been questioned; see discussion
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by ignition » Fri Aug 16, 2019 7:44 am

Indeed, I don't think cash or bonds will make a big difference.

On the other hand, I'm not that spooked by the 70% equity allocation as others seem to be. 70/30 with a 3% withdrawal rate should be fine if you can stay the course.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by RadAudit » Fri Aug 16, 2019 8:13 am

iamblessed wrote:
Fri Aug 16, 2019 7:00 am
I know the market can be down 5-10 years. If I am frugal I can hold out 10 years. I will need this to cover 75% of the bills.
You've received some pretty good investment advice from the thread. OTOH, I like the idea that you have 10 years in cash to cover a downturn and a recovery. I admire your fortitude. The fact that you're willing to go with this plan when you need this money to cover 75% of your bills is remarkable, to me. In case things go South, when do you plan to die? Do you have anyone depending on you for their well being after your demise?

Like many things when it comes to money - different people have different ideas. I hope you are correct; but, others believe that's not the way to bet. Some (Bernstein [?]) argue for up to 25 years in bonds - the rest in stocks - going in to retirement at 65. May not have / leave as much money when you transition; but you have a better chance of not going broke.

YMMV. Best of luck.
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by SandysDad » Fri Aug 16, 2019 8:29 am

iamblessed wrote:
Fri Aug 16, 2019 7:00 am
carolinaman wrote:
Fri Aug 16, 2019 6:58 am
iamblessed wrote:
Fri Aug 16, 2019 6:34 am

I know the market can be down 5-10 years. If I am frugal I can hold out 10 years. I will need this to cover 75% of the bills.
5-10 years is your "worst case"? IT took over 20 years after great depression. Japan still hasn't recovered after 30 years.

As others stated at current rates having cash vs bonds is fine as long as you chase good CD's and MM. You are most at risk just before and after an early retirement. Consider a safe AA during the 5 years before and 5 years after ER.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by ignition » Fri Aug 16, 2019 8:54 am

SandysDad wrote:
Fri Aug 16, 2019 8:29 am
iamblessed wrote:
Fri Aug 16, 2019 6:34 am

I know the market can be down 5-10 years. If I am frugal I can hold out 10 years. I will need this to cover 75% of the bills.
5-10 years is your "worst case"? IT took over 20 years after great depression. Japan still hasn't recovered after 30 years.

As others stated at current rates having cash vs bonds is fine as long as you chase good CD's and MM. You are most at risk just before and after an early retirement. Consider a safe AA during the 5 years before and 5 years after ER.
A 70/30 allocation would have worked just fine during the great depression withdrawing 3% per year and a globally diversified 70/30 portfolio would have worked for a Japanese investor.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by SandysDad » Fri Aug 16, 2019 9:10 am

ignition wrote:
Fri Aug 16, 2019 8:54 am

A 70/30 allocation would have worked just fine during the great depression withdrawing 3% per year and a globally diversified 70/30 portfolio would have worked for a Japanese investor.
The point was not about survivability, but how well the overall portfolio would do. The OP has already won the game. Why would (s)he keep playing?

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by MikeG62 » Fri Aug 16, 2019 9:16 am

iamblessed wrote:
Fri Aug 16, 2019 6:23 am
What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.
OP, please elaborate what you mean by “cash”. In what accounts or investments is this cash?

It is possible that what you are calling cash some might call the short(er)-term side of their fixed income exposure.
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by RAchip » Fri Aug 16, 2019 9:23 am

My feeling is that bonds are silly. 70/30 stocks/cash sounds good to me. I am holding a bit more cash than that but only because im looking for a business or real estate investment.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 9:28 am

MikeG62 wrote:
Fri Aug 16, 2019 9:16 am
iamblessed wrote:
Fri Aug 16, 2019 6:23 am
What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.
OP, please elaborate what you mean by “cash”. In what accounts or investments is this cash?

It is possible that what you are calling cash some might call the short(er)-term side of their fixed income exposure.
Money market fund.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by ignition » Fri Aug 16, 2019 9:30 am

SandysDad wrote:
Fri Aug 16, 2019 9:10 am
ignition wrote:
Fri Aug 16, 2019 8:54 am

A 70/30 allocation would have worked just fine during the great depression withdrawing 3% per year and a globally diversified 70/30 portfolio would have worked for a Japanese investor.
The point was not about survivability, but how well the overall portfolio would do. The OP has already won the game. Why would (s)he keep playing?
Why not? Safe withdrawal rate studies show that portfolio's with high equity allocations have performed better than portfolio's with low equity allocations (higher chance of surviving and higher ending wealth).

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by longinvest » Fri Aug 16, 2019 9:42 am

ignition wrote:
Fri Aug 16, 2019 9:30 am
SandysDad wrote:
Fri Aug 16, 2019 9:10 am
ignition wrote:
Fri Aug 16, 2019 8:54 am

A 70/30 allocation would have worked just fine during the great depression withdrawing 3% per year and a globally diversified 70/30 portfolio would have worked for a Japanese investor.
The point was not about survivability, but how well the overall portfolio would do. The OP has already won the game. Why would (s)he keep playing?
Why not? Safe withdrawal rate studies show that portfolio's with high equity allocations have performed better than portfolio's with low equity allocations (higher chance of surviving and higher ending wealth).
Significantly underspending all retirement long and dying with a humongous unspent portfolio, that's probably the ideal proposition for the retiree's financial advisor living off a percent of assets under management (AUM).

Dying as the richest person in the graveyard isn't attractive to me, and, anyway, I don't have a financial advisor to feed. :wink:

I'm a do-it-yourself (DIY) investor. When I'll retire, I'll use our wiki's sensible variable percentage withdrawal (VPW) method which allows the retiree to spend most of the portfolio using return-adjusted withdrawals. By adapting withdrawals to market returns, VPW will never prematurely deplete the portfolio.
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Re: I live a frugal life. I have 37 years annual expenses. What allocation would you pick? Age 50 Retired

Post by PrettyCoolWorkshop » Fri Aug 16, 2019 9:50 am

[replies from the OP's duplicate topic were merged into this thread - moderator prudent]

Assuming you live in the US, I would recommend 30% US Total Stock Market Index, 30% World Ex US Total Stock Market Index, and 40% US Gov't Bond Index.
Be greedy and fearful. All the time.

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Re: I have 37 years annual expenses. What allocation would you pick? Age 50 Retired

Post by livesoft » Fri Aug 16, 2019 9:51 am

I'd pick the one show in this thread on portfolio rebalancing:
viewtopic.php?t=150267

It's the Prime Asset Allocation:
29% US equities
29% foreign equities
31% fixed income
05% short-term
07% TIAA Real Estate Account (TREA)
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by MikeG62 » Fri Aug 16, 2019 10:58 am

iamblessed wrote:
Fri Aug 16, 2019 9:28 am
MikeG62 wrote:
Fri Aug 16, 2019 9:16 am
iamblessed wrote:
Fri Aug 16, 2019 6:23 am
What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.
OP, please elaborate what you mean by “cash”. In what accounts or investments is this cash?

It is possible that what you are calling cash some might call the short(er)-term side of their fixed income exposure.
Money market fund.
Well we appear clearly headed into a declining interest rate environment.

People talking about 25bp or 50bp move by the Fed at or even before the mid-Sept meeting. Not that I think it’s necessary or would make a difference, but it’s the times we are living in.

$16 trillion in negative yielding government bonds. Who’d ever have envisioned that.

So if you want to sit with 30% of your portfolio in a money market fund I’d be thinking about MMF yields heading back down toward the lower levels we’ve experienced over the last decade and not up and not staying where they are now. So i’d factor that in.

Maybe you are better off locking in some current yield now (traditional CD’s or NP CD’s) or moving some of the cash to intermediate term bond fund.

Perhaps consider 60% equities and 40% fixed income/cash with the fixed income split between intermediate bonds and CD’s (including a bunch of NP CD’s you can break as you need cash over the next year) if you are risk averse.

I think you may be unhappy a year or two from now not having locked-in what’s left of the decent yields today for at least some period of time.
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by iamblessed » Fri Aug 16, 2019 11:17 am

Good idea on the CD's

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by miamivice » Fri Aug 16, 2019 11:31 am

iamblessed wrote:
Fri Aug 16, 2019 6:23 am
What do you think? Cash makes me sleep better but will it cost me a lot of money in missed earning. I have run the some numbers a stock cash 70/30 has close returns to a 60/40 stock bond return. I am retired.
I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by miamivice » Fri Aug 16, 2019 11:33 am

MikeG62 wrote:
Fri Aug 16, 2019 10:58 am
Well we appear clearly headed into a declining interest rate environment.
A long time ago a mortgage broker once told me I can't predict what interest rates might do in the future. I think that is sage advice. Just when the trend seems to rates going down, they go up. Then when I expect rates to go up, they go down. Or stay flat.
I've never been able to predict future interest rates very well.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by MikeG62 » Fri Aug 16, 2019 11:42 am

miamivice wrote:
Fri Aug 16, 2019 11:33 am
MikeG62 wrote:
Fri Aug 16, 2019 10:58 am
Well we appear clearly headed into a declining interest rate environment.
A long time ago a mortgage broker once told me I can't predict what interest rates might do in the future. I think that is sage advice. Just when the trend seems to rates going down, they go up. Then when I expect rates to go up, they go down. Or stay flat.
I've never been able to predict future interest rates very well.
That is fair. Last year I thought rates were headed up.

However, with $16 trillion in negative yielding government debt around the world, most countries doing more QE and our Fed reversing course and now embarking on rate reductions, it does make this feel different (more predictable). [OT comment removed by admin LadyGeek]

FWIW, I've been doing precisely what I suggested the OP consider - locking in current rates with CD's (mix of traditional and NP CD's). Also, investing some excess cash in Vanguard's high-yield national muni bond fund (VWALX). This latter investment is in lieu of money that would be going into my very high grade individual muni bond position, but for the fact that yields on that paper are woefully unattractive.
Real Knowledge Comes Only From Experience

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by delamer » Fri Aug 16, 2019 11:53 am

Call_Me_Op wrote:
Fri Aug 16, 2019 6:29 am
70% i9n equities is considered high when in retirement. Do you need to take that much risk and can you stomach a sharp downturn (-50%)?
That’s the point of the cash — to counterbalance the relatively high stock allocation.

Our retirement portfolio is similar to the OP’s. We’ll be fully retired next year. I’d rather take my risk with stocks than bonds.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by SandysDad » Fri Aug 16, 2019 12:52 pm

[/quote]

I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
[/quote]

I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by catalina355 » Fri Aug 16, 2019 1:00 pm

I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
SandysDad wrote:
Fri Aug 16, 2019 12:52 pm
I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.
What allocation did you decide to use during retirement?

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by SandysDad » Fri Aug 16, 2019 1:09 pm

Of my stocks bonds and cash 55 percent is stocks. Split about 60 domestic and 40 intl.

I should caveat that about 1/3 of my NW IS alternatives mostly real estate.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by delamer » Fri Aug 16, 2019 1:19 pm

SandysDad wrote:
Fri Aug 16, 2019 12:52 pm
I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
[/quote]

I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.
[/quote]

Not necessarily. What miamivice is talking about doesn’t require rebalancing the way ii is normally discussed here.

S/he could decide not to replenish the stable value fund until down to 2 years of expenses, for example. That would get through most stock market downturns.

Remember the philosophy is to invest all money not intended to cover short-term expenses in stocks; it is not to maintain a specific allocation.

chem6022
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by chem6022 » Fri Aug 16, 2019 1:39 pm

Honest question, wouldn't TIPS be even more conservative than cash for this purpose?

catalina355
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by catalina355 » Fri Aug 16, 2019 1:47 pm

delamer wrote:
Fri Aug 16, 2019 1:19 pm
SandysDad wrote:
Fri Aug 16, 2019 12:52 pm
I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.
[/quote]

Not necessarily. What miamivice is talking about doesn’t require rebalancing the way ii is normally discussed here.

S/he could decide not to replenish the stable value fund until down to 2 years of expenses, for example. That would get through most stock market downturns.

Remember the philosophy is to invest all money not intended to cover short-term expenses in stocks; it is not to maintain a specific allocation.
[/quote]

It's an interesting idea. It seems the general advice is to have a 50/50 or 60/40 (or perhaps a more conservative) allocation in retirement. Is the above approach not riskier?

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by MotoTrojan » Fri Aug 16, 2019 2:06 pm

Nowizard wrote:
Fri Aug 16, 2019 7:31 am
You will have cash in mutual fund accounts, so add that in when figuring. For example, our funds have a total of 3% of our portfolio in cash. Add that to our bond funds and actual cash, and we sleep poorly, like a lot of retired people, but not due to our portfolio.

Tim
Huh? Settlement fund you mean? An equity mutual fund may have an allocation to cash but that isn’t reducing risk, it’s held for redemptions and the fund will use derivatives to hit full equity exposure.

GibsonES335
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by GibsonES335 » Fri Aug 16, 2019 2:13 pm

In addition to risk tolerance, which only you know, there are a few other things which are important to know. What % of your NW is your yearly expenses? If you need to have a 4% withdrawal rate, say, you will want to make sure that you have enough of a stock allocation to minimize Risk of Ruin given that withdrawal rate. If your withdrawal rate is only 2.5%, you can afford to have a lower stock allocation and maintain the same Risk of Ruin. To put it differently, there are two types of "risks" for you. The first is market volatility and the second is the risk of your portfolio being depleted while you are still alive.

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KlingKlang
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by KlingKlang » Fri Aug 16, 2019 2:18 pm

At your asset level you could just stuff the money in your mattress (don't actually do that) and be good. Realistically speaking any well diversified asset allocation between 80/20 and 20/80 will turn out fine.

I would spend some time looking at your projected tax situation. What percentage of your holdings are tax-deferred, tax-except, and after tax? Do you live in a high tax state? If you are in a low tax situation now but will encounter large RMDs later there are a number of actions that you can take.

delamer
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by delamer » Fri Aug 16, 2019 2:31 pm

catalina355 wrote:
Fri Aug 16, 2019 1:47 pm
delamer wrote:
Fri Aug 16, 2019 1:19 pm
SandysDad wrote:
Fri Aug 16, 2019 12:52 pm
I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.
Not necessarily. What miamivice is talking about doesn’t require rebalancing the way ii is normally discussed here.

S/he could decide not to replenish the stable value fund until down to 2 years of expenses, for example. That would get through most stock market downturns.

Remember the philosophy is to invest all money not intended to cover short-term expenses in stocks; it is not to maintain a specific allocation.
[/quote]

It's an interesting idea. It seems the general advice is to have a 50/50 or 60/40 (or perhaps a more conservative) allocation in retirement. Is the above approach not riskier?
[/quote]

That would depend in part on what is included in your bond allocation in the 50/50 or 60/40 scenarios.

Junk bonds are a lot different than Treasury bonds.

And what type of risk you are concerned about.

Inflation risk is different than principal risk.

colodane
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by colodane » Fri Aug 16, 2019 3:34 pm

Forgive me if I missed it somewhere in the above posts, but how old are you?

A 55 year old retired person most likely has a different outlook than a 95 year old retired person.

Assuming that most of us are between these extremes, our thinking will still vary.

As one data point, I am 76 and currently have 26% in equities and 74% in bonds and money markets. About a 2% withdrawal rate. But that's just me.

catalina355
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by catalina355 » Fri Aug 16, 2019 3:38 pm

delamer wrote:
Fri Aug 16, 2019 2:31 pm
catalina355 wrote:
Fri Aug 16, 2019 1:47 pm
delamer wrote:
Fri Aug 16, 2019 1:19 pm
SandysDad wrote:
Fri Aug 16, 2019 12:52 pm
I'm not retired but when I am I think I'll keep 5 years living expense in a stable value fund and the remainder 100% stocks.
I used to think this way, then I realized that is 80/20 based on 4% wr. How would i rebalance in a long term down market to stay at 80/20. If the market went down by 1/2 I would have to use much of that cash to buy stocks to keep it at 80/20. In other words if one plans to rebalance 80/20 will require you to use much of your five year reserve to buy stocks and doing that might cause much discomfort if what is left is only 1-3 years in cash.
Not necessarily. What miamivice is talking about doesn’t require rebalancing the way ii is normally discussed here.

S/he could decide not to replenish the stable value fund until down to 2 years of expenses, for example. That would get through most stock market downturns.

Remember the philosophy is to invest all money not intended to cover short-term expenses in stocks; it is not to maintain a specific allocation.
It's an interesting idea. It seems the general advice is to have a 50/50 or 60/40 (or perhaps a more conservative) allocation in retirement. Is the above approach not riskier?
[/quote]

That would depend in part on what is included in your bond allocation in the 50/50 or 60/40 scenarios.

Junk bonds are a lot different than Treasury bonds.

And what type of risk you are concerned about.

Inflation risk is different than principal risk.
[/quote]

I'm using Treasuries.

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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by Call_Me_Op » Fri Aug 16, 2019 4:19 pm

chem6022 wrote:
Fri Aug 16, 2019 1:39 pm
Honest question, wouldn't TIPS be even more conservative than cash for this purpose?
Not necessarily - especially at real rates close to zero. The TIPS may well be under water when you want cash.
Best regards, -Op | | "In the middle of difficulty lies opportunity." Einstein

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willthrill81
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by willthrill81 » Fri Aug 16, 2019 4:24 pm

SandysDad wrote:
Fri Aug 16, 2019 9:10 am
ignition wrote:
Fri Aug 16, 2019 8:54 am

A 70/30 allocation would have worked just fine during the great depression withdrawing 3% per year and a globally diversified 70/30 portfolio would have worked for a Japanese investor.
The point was not about survivability, but how well the overall portfolio would do. The OP has already won the game. Why would (s)he keep playing?
You don't know that you've 'won' until you're dead or, if you have a spouse, they're dead too. Truly.

Besides, many of us are also 'playing' for others who will likely outlive us.

If you want to be mathematically guaranteed to never run out of money, then use one of the many 'percentage of portfolio' approaches out there. VPW is one of them, but it is only one specific application of the time-value of money formula, which can be used in many different ways with as much simplicity or complexity as needed or desired.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

chem6022
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by chem6022 » Fri Aug 16, 2019 5:11 pm

Call_Me_Op wrote:
Fri Aug 16, 2019 4:19 pm
chem6022 wrote:
Fri Aug 16, 2019 1:39 pm
Honest question, wouldn't TIPS be even more conservative than cash for this purpose?
Not necessarily - especially at real rates close to zero. The TIPS may well be under water when you want cash.
Rates near zero are irrelevant, since rates can still go negative. Unexpected inflation is a bigger risk. Of course you will want the duration of the TIPS fund or ladder to match your time horizon, but if that's true I think TIPS should be strictly better than cash.

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midareff
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Re: Any retired person have stocks and cash I was thinking about a 70/30

Post by midareff » Fri Aug 16, 2019 5:36 pm

I'm at roughly 48% equities, 48% bonds and 4% cash. Roughly 7.5 years retired, 71 y/o, 5% WR. As soon as enough is accumulated another trip is booked.

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