If retired, what's your allocation to fixed income?

[Tib]

If you’re a retiree with S.S. but without a pension, what’s your allocation to fixed income (including cash) during this time of low interest rates? Anyone still going with “age in bonds”? I'm In my mid-70's with 53% in stock, 47% in fixed income and wondering what others are doing.

[arcticpineapplecorp.]

not retired but I'd say the rule of thumb at a minimum based on Bengen's and Trinity's recommends a minimum of 30% in stock.

This matches vanguard's own target date retirement INCOME fund which has 30% in stocks.

If you have a target date with Vanguard (not target date INCOME fund) in the name Iike Target date 2020 then I believe that fund now has 50% in stocks and by 2027 or 2028 (in this example) would be down to 30% stock.

So at a minimum 30% stock is recommended.

Maximum would be 100% obviously assuming no leveraging.

Some (Malkiel, Siegel, etc) recommend a slightly higher allocation of stocks because of the low interest on bonds as you suggest. I think they said investors who wanted 60/40 could go up to 70/30 or thereabouts.

realize the tradeoff of course. A higher allocation of stocks is inherently riskier. 70/30 carries more risk than 60/40. 50/50 carries more risk than 30/70 and so on.

if you're around 50/50 as Jack Bogle used to say, half the time you'll think you have too much stock and the other half the time you'll think you have too little.

[schachtw]

if you're around 50/50 as Jack Bogle used to say, half the time you'll think you have too much stock and the other half the time you'll think you have too little.

+1
Wife & I both 70, have been retired 5 years.
We’re at 50/48/2.

Works for us.

[protagonist]

My allocation is the amount that I figure I need to maintain my lifestyle through retirement in 2020 dollars plus an emergency buffer, because that is the amount I don't want to put at risk of losing.
I consider percentages irrelevant.
If you have a ton of money and a modest lifestyle that might mean 1% . If you have barely enough money and a lavish lifestyle that might mean 99%.

[stan1]

Asset level matters. A retiree (lets say mid 70s like OP) who has $5M can choose to invest for heirs without worrying about end of life expenses. On the other hand a mid 70s retired couple with $500K still may see a large percentage of their portfolio used for end of life expenses. That couple is not at a point where they can invest for heirs.

Goes back to willingness, ability, and need to take risk. As net worth goes up ability to take risk goes up and need to take risk goes down. A decision to invest with an asset allocation appropriate for heirs falls in the willingness category.

[FrugalInvestor]

When I early retired I was 60/40. After I was retired for a few years, got nearer to normal retirement age and went through the '08-'09 financial crises I went to 50/50. I learned that going through a severe market downturn is the best way to evaluate one's true risk tolerance. I am now slightly past normal retirement age, remain at 50/50 and sleep well at night.

[Raybo]

Been retired 20 years. Was 60/40 for a long time. That changed during 2008-9. At the bottom, I couldn't keep funneling money into stocks. When the smoke cleared, I was at 50/46/4 (s/b/c), which is where I am today.

[Leif]

I'm retired and at 50/50. I'm planning to keep at 50/50 throughout retirement.

[Peter Foley]

I was 45/55 at retirement and let that grow to 50/50 over a few years which is my plan today. I've been as high as 55/45 but have rebalanced to stay within 5% of 50/50. I have only had to actually rebalance a couple times since retiring 8+ years ago.

[smitcat]

Asset level matters. A retiree (lets say mid 70s like OP) who has $5M can choose to invest for heirs without worrying about end of life expenses. On the other hand a mid 70s retired couple with $500K still may see a large percentage of their portfolio used for end of life expenses. That couple is not at a point where they can invest for heirs.

Goes back to willingness, ability, and need to take risk. As net worth goes up ability to take risk goes up and need to take risk goes down. A decision to invest with an asset allocation appropriate for heirs falls in the willingness category.

Exactly - +1

[OffGridder]

Age 63. Spouse age 64.

I retired 5 years ago with some ad hoc consulting gigs. My spouse is retiring from a part time teaching job in a few months.

Relatively conservative approach to retirement finances.

We estimated our annual expenses in today's dollars net of Social Security to support a comfortable lifestyle. Divided that amount by 3% to determine the total amount of the portfolio required to reasonably support our withdrawal rate. That amount was conservatively allocated to 30% stock and 70% bonds. The balance of our portfolio was allocated 100% to stock for aspirational and legacy puposes. The composite allocation equals 50/50.

Just to clarify, we are not running a "bucket" system. The two separate amounts were calculated solely for the purpose of determining our overall asset allocation. It is total return on one portfolio with +/- 5% rebalance bands.

[Tib]

Age 63. Spouse age 64. We estimated our annual expenses in today's dollars net of Social Security to support a comfortable lifestyle. Divided that amount by 3% to determine the total amount of the portfolio required to reasonably support our withdrawal rate. That amount was conservatively allocated to 30% stock and 70% bonds. The balance of our portfolio was allocated 100% to stock for aspirational and legacy puposes. The composite allocation equals 50/50.

OffGridder, that's an interesting way to look at it. To do a similar calculation I subtracted what I usually spend annually on expensive travel from what I usually draw annually from my portfolio and then (since I'm older than you) divided the result by .045. Then allocating a safe 30% of that amount to stock and allocating 100% of the balance of the portfolio to stock, lo and behold, I too came up with a 50/50 composite allocation.

This calculation, plus the popularity among respondents thus far of a 50/50 allocation, has me reconsidering my plan to rebalance as high as 60/40 if stocks should plummet.

[KlangFool]

OP,


I am 60/40. That translates into 10 years of expense in FI. I have another 2 years of expense in CASH as the emergency fund. It is not part of the AA. The retiree's AA should include 10 to 20 years of expense in FI.


KlangFool

[cashboy]

50/50

[investor.saver1]

I believe it's a matter of risk appetite. For me that equates to 25% in equities. It's irrational to take unnecessary risk. However, I do agree with the above posters that point out the necessity of a larger percentage allocation to equities when the portfolio is not as large. That is taking necessary risk.

[gpburdell]

I manage my parents investments; we decided on a 50/50 overall allocation which includes 20% cash, 20% short bonds, 10% intermediate bonds.

This lets all of us sleep well at night. In a worst case scenario; the 20% cash is at least 10 years of average expenses.

[UpperNwGuy]

This is an interesting thread in that most of those who have commented have high allocations to bonds with no plans to change. There are other recent threads in which those who have commented are completely disenchanted with bonds and have decided to go all-stock or stocks+cash. I'm thinking that those who have already retired like bonds, and those who are still working do not. Thoughts?

[best2u]

My allocation feels most comfortable when it is near the 48/51/1 level. I do stray from this by purchase of stocks when the market swoons like it did in late 2008. My fixed income portion is not at all like my stocks. Most of my stocks are indexed, but I own several individual issues for fixed income. With rates depressed I stay short term on most of my purchases. Just kicking the can down the road until we see some more attractive returns. One thing about the bond market. Many entities are in need of your money. Every so often more people are in need of capital than is awash in the street, then they have to pay the price the demand requires. I try to lock in some of those returns at those times.

[hirlaw]

We are retired, 64 & 65. Allocation is approximately 35/65. Expenses are being paid out of the fixed income portion, with most stock dividends and fund distributions being reinvested, rather than spent. So, the equity side of this allocation may "glide" up as the years go by. My intention is to halt any glide at 50/50.

[Sandtrap]

If you’re a retiree with S.S. but without a pension, what’s your allocation to fixed income (including cash) during this time of low interest rates? Anyone still going with “age in bonds”? I'm In my mid-70's with 53% in stock, 47% in fixed income and wondering what others are doing.

Retiree. No pension.
35/55/10
equities/fixed/cash like

j

[tennisplyr]

Retired 9 years and my fixed income allocation is 45%; I might drift to 40% over time. Most of my life I've been at ~50/50.

[joetro29]

37. Pension. No bonds yet. Might shift tax deferred to them later but not now with such low rates.

[friar1610]

I do have a pension. I am 75; my wife is 74.

I’m 50/50-ish. Sometimes varies by a bit. This was arrived at by computing how much my wife would need in fixed income (CDs as well as cash and bonds) to supplement her SS and survivor benefit on my pension if I am no longer around. The rest goes in equities. Came out close enough to 50/50 that it was just easier and simpler to call it that.

[Index Fan]

With a pension, my AA is 50/50. Enough equities for some growth, enough fixed income to keep from worrying about bear markets.

[vectorizer]

Retired 4 years, 62 YO now, not collecting SS yet. Age - 10 in bonds (& CDs & cash), so currently 52% bonds. Though the bonds' average duration is shorter than when I was accumulating due to a ladder of Treasury zeros maturing yearly till I collect SS at age 70.

[bradinsky]

DW & I are both retired. I did so 2 years ago. No pensions, but SS for both. We are currently at 62% cash/CDs/fixed income. Maybe that will decrease in the future, but with the current uncertainty/craziness that exists in the country today, we’re good.

Brad

[Wanderingwheelz]

I’ll add that my dad (mom deceased), also a Boglehead, is 67/33 which I only submit since it appears they have a higher allocation to stocks than what’s typical here. 16 years in, ages 79. He’s self directed, I have no input.

[MikeG62]

DW and I are retired with no pension and 12 years away from claiming SS. Target AA is 40% equities and 60% fixed income (and cash). Current allocation is a bit heavier toward fixed income, which I am ok with in the current environment. Our 2020 budgeted WD rate is just a tad under 3.0% and this year our actual WD rate will be closer to 2.0% given we slammed the brakes on travel and entertainment due to Covid.

[smitcat]

This is an interesting thread in that most of those who have commented have high allocations to bonds with no plans to change. There are other recent threads in which those who have commented are completely disenchanted with bonds and have decided to go all-stock or stocks+cash. I'm thinking that those who have already retired like bonds, and those who are still working do not. Thoughts?

"Thoughts?"
Not in our case but who knows what the concensus really is.

[birdog]

The plan is to retire in 2 years. I'm currently at 15% fixed income and am planning to trend to 20% fixed income by retirement. I was originally planning to get to 25% fixed income but the zero real returns in bonds have caused me to adjust bond holdings down a bit.

[dkturner]

20% in taxable accounts and 65% in retirement accounts. About 50% in combined accounts, which will be decreasing as we draw down our retirement accounts with RMDs.

[Slapshot]

I have a pension which covers all our costs, so I have no need to take much risk. I've opted for around 70% fixed. A good portion is in Target Retirement Income fund.

[BolderBoy]

Retired here. Will start SS in January. Been at 30/70 AA for 5 years and will likely stay there going forward.

[hudson]

If you’re a retiree with S.S. but without a pension, what’s your allocation to fixed income (including cash) during this time of low interest rates? Anyone still going with “age in bonds”? I'm In my mid-70's with 53% in stock, 47% in fixed income and wondering what others are doing.

Tib,
I'm about your age and I'm mostly fixed income.
Consider reading this W. Bernstein book: https://www.amazon.com/Ages-Investor-Cr ... B008CM2T2A

If you like it, maybe read another....Four Pillars: https://www.amazon.com/William-J-Bernst ... p_ebooks_1

Maybe read Four Pillars first?

[MN-Investor]

When my husband joined me in retirement in 2016, at age 62, we re-allocated to a fairly conservative 60% bonds + cash, 40% stocks. Since then my sweetie has passed away. I've sold a few things since then and I'm sitting at 61% bonds, 4% cash, and 35% stocks. Yeah, definitely too conservative for me (age 67) but the economy just has me nervous right now. By the end of next year I'll get back to 40% stocks.

[BogleFan510]

Currently 30%. Mostly in pre-tax, so we are 70/30, pre SS age. But at 2% withdraw rate, so pretty conservative.

[chuckb84]

Retired 5 years with both SS and .gov pension. We have about 50% of assets in a 3 Fund portfolio, and 25% split 50/50 between Wellesley and Wellington and about 25% in a pile of dividend stocks. These are 3 different, but rather conservative approaches. The net effect is 53% stocks, 45% bonds, 2% cash.

[EnjoyIt]

Parents retired a few years now....60/40 is where they are at. This is our goal as well when we choose to retire.

[John Z]

Retired 8 years. 30/70 allocation.

[Eat33]

Personally I have struggled with asset allocation as I have a pension that covers 80 percent of expenses. Right now I am 60-40 and have a target of 80-20.

I have regrets in not allocating more monies into the market earlier this year.

Have not yet taken SS.

Any good reasons not to commit more funds to stocks.

[Broken Man 1999]

In 2015 at age 62 (both DW and I) we set up our retirement, I received my pension as lump-sum, and DW started SS. I was receiving SSDI and Medicare already.

Prior to 2015 we were invested mostly in equity funds, with a few bond funds. With my lump-sum funds, I changed our AA to 50% equities/50% bonds.

This year I changed our AA to 55% equities/45% bonds. I plan to change in 2025 to a 60% equities/40% bonds.

All bond funds, no cash holdings for fixed income.

Broken Man 1999

[crnatg]

Both of us are 69 and retired. We consulted with Allen Roth (a Boglehead member), and decided with his guidance to go 35/65. As has been stated on this site numerous times, "we won the game, and we quit playing the game (capital appreciation)". Our goal now is to maintain the lifestyle we have become accustomed. We have about $4.5 in retirement accounts. Feeling good!!!

[sschullo]

33%/67% since I retired in 2008.

[Tib]

The thread has turned more conservative since my last post. At Hudson’s suggestion I’ve pulled The Four Pillars from my bookshelf, for a booster shot of caution. Morgan Housel’s new book reinforces the message. Unlike many here I prefer as lavish a lifestyle as is prudently available to me. (This is what comes of having girlfriends rather than a wife.) So my withdrawal rate is not the minimal 2%-3% that affords one the luxury of a very low allocation to stocks—as well as the luxury of a very high allocation (with heirs in mind). 50% fixed income (bonds/cash) is the high-end of what I’d been considering, but that’s what I’m now inclined to go with. If it proves too aggressive, well, I’ll still have enough to live comfortably (barring high inflation). And I have a couple of accounts that could be annuitized for extra income. Financing retirement is intellectually challenging.

[hudson]

The thread has turned more conservative since my last post. At Hudson’s suggestion I’ve pulled The Four Pillars from my bookshelf, for a booster shot of caution.

Ahhh, a closet, long time Boglehead!

[2pedals]

61 and 59 year old married with significant pension covering about 80% expenses we are at about 55/45 AA. We plan on letting the asset allocation float for the next several years. No buying equities at all. Selling equities with significant market gains.

[Rudedog]

Have a great day

[LivingTheDream]

OP,


I am 60/40. That translates into 10 years of expense in FI. I have another 2 years of expense in CASH as the emergency fund. It is not part of the AA. The retiree's AA should include 10 to 20 years of expense in FI.


KlangFool

+1
I'm closer to 65/35, but use the same rationale (10 years of expense in FI + 1.5 yr in CASH)

[jginseattle]

70% fixed income.

[Greg in Idaho]

This is an interesting thread in that most of those who have commented have high allocations to bonds with no plans to change. There are other recent threads in which those who have commented are completely disenchanted with bonds and have decided to go all-stock or stocks+cash. I'm thinking that those who have already retired like bonds, and those who are still working do not. Thoughts?

I'm liking this thread also for the dose of what I take to be investing reality from a long term BH perspective.

The spate of bond skepticism lately, based on current interest rates and yields is just that - reactions to the current conditions rather than what I take to be a more BH perspective of staying the course with a workable plan over the long haul. That doesn't require putting one's head in the sand but as a number of studies have suggested, doing that is often the most successful.