Anyone else staying very aggressive in retirement

[gunny]

Bonds, phlblblblt

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

[Wanderingwheelz]

How would you feel to be tapering your spending for 10 years, or even longer? What you may be missing is that a 20-30% downturn will take quite a while to recover from when you’re spending from your nestegg, even if it’s at a reduced rate.

A big part of this would be determined by how much you’ve exceeded your retirement goals by the time the bear takes its bite. Cutting spending is a lot less painful when you’re got twice as much as you’ll possibly need.

At ages 49/53 we are 70/25/5 with at least twice as much as we’ll likely need. (One half still working full time with a high income.)

[KlangFool]

If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

gunny,

They know that they have "enough". They do not need to take unnecessary risk.

My AA is 60/40 at 34X not counting social security. It is 68X with social security.

KlangFool

[cosmos]

given the average bear market lasts about a year give or take

bookmarking thread for future...

[Exchme]

Risk is personal. If your retirement is well funded, then you can pretty much choose whatever asset allocation makes you happy. We cut back from nearly all stock to 80/20 just a few years before the 2022 bond-pocalypse, so I feel your pain, but still want enough to act as a bridge to SS. So we stopped rebalancing and are letting bonds shrink as a fraction of the portfolio from here.

[KlangFool]

given the average bear market lasts about a year give or take

gunny,

If the coming recession lasting much more than that, you do not get a do it over. You only live once.

KlangFool

[siamond]

It is a VERY personal decision. Don't let anybody dictate how YOU define risk(s) and what makes YOU sleep well at night during your retirement.

Personally, I was very uncomfortable with the common trope "risk == [portfolio] volatility". This just didn't jive with me. Then I read "Deep Risk" from W. Bernstein. And this really crystallized things for me. Sure, volatility is a form of risk, which can really turn your emotions upside down. But then inflation is another very sneaky risk, which can actually play quite a number on [regular] bonds, as anybody who lived through the late 40s or the 70s knows all too well (and we recently got quite a refresh signal on the matter!). And then there is the risk for low income near the end of one's retirement period, quite a major risk if you ask me, if one doesn't keep a modicum of growth potential in their portfolio. Then issues with longevity, which are largely related. Also, something few people discuss, which is that we have only one life, one retirement, and there is also the risk of not enjoying what's left of your life, by subjecting yourself to other exaggerated fears and dying silly rich (4% Bengen rule, I am looking at you!).

When we mulled over all of this, my wife and I made a decision to stay on 80/20 for life. While maximizing diversification as much as we could on the equity side, and while using a variable withdrawal method to stay adaptive. Ten years have passed, and we have not questioned this decision one second since then. If anything, what happened in the mean time reinforced this decision... But then again, this is JUST us, with our personal circumstances. Everybody is different.

[White Coat Investor]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

Why not just leave it all in Mag 7 stocks? All the same logic people use to justify all US stocks/no international or all S&P 500 can be used to do that.

#recencybias, #performancechasing

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

[gunny]

gunny,

If the coming recession lasting much more than that, you do not get a do it over. You only live once.

KlangFool

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

[gunny]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

So is winning the lottery, but I don't plan on using that as an investment strategy either. This is hardly limited to the last two years. Go as far back as you want.

I prefer evidenced-based decisions. It's hardly a "cult."

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

Of course. And I do. My plan is to ride out the storm. In the long run, I'm likely to come out ahead. But again, people's circumstances vary and I may be able to tolerate more risk than some.

[Kbg]

I was a bit surprised that no one mentioned specifically why your allocation nearing retirement matters.

Bottom line: It comes down to the damage that could be permanently and irrecoverably done to your retirement spending due to an unlucky sequence of returns (SOR). The combination of withdrawals and the fact mortality yields to no one means you may not ever be able to recover.

Spectrum of situations/outcomes:

Extreme Right: Expenses and "fun" fully covered by inflation adjusted pensions/social security. SOR doesn't really matter other than legacy goals and charitable giving.

Extreme Left: Expenses barely covered by current savings. SOR could mean a remaining life of elderly poverty or barely getting by.

There are good historical data, Monte Carlo and bootstrapped data tools where one can get a good sense of what risks one takes with SOR based on their allocation and withdrawal rate. We don't know the future so the analysis is an educated guess, but historically speaking an unlucky SOR with an overly aggressive withdrawal rate does in fact leave one with nothing but their social security to live off of.

Everyone's situation is different, but if you lean left on the scale, some prudence/caution is warranted.

[stan1]

Bonds, phlblblblt :)

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

I think you wrote in an earlier post that you have a military pension (reservist) that covers most of your expenses. Are you married or single? If you had a spouse and did not have the military pension would you have a different perspective? My point is that's all a very personal decision on the level of risk someone is willing to take.

[JBTX]

gunny,

If the coming recession lasting much more than that, you do not get a do it over. You only live once.

KlangFool

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

The stock market took about 5 years to recover post 2000 and 4.5 years post 2007. Longer than that in 1929. Japanese market took decades to recover. Current valuations using multiple metrics are comparable to 1929, 2000, 2007. But that’s ok, it will be different this time. I’m sure of it. Trust me.

[WeakOldGuy]

I just started retirement and my AA is 75/25. I am comfortable with this (for now anyway) because our investment accounts total about 50x the expenses they need to cover. I'm fortunate that since SS, income from business sale, and rental income cover most of our expenses, I can afford to be less conservative in my allocation. However, if I didn't have those other sources of income so that my portfolio was 25x our expenses, I would be closer to a 50/50 allocation.

The point, as others have expressed more clearly, is that AA is dependent upon your individual situation and comfort level.

[secondopinion]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

So is winning the lottery, but I don't plan on using that as an investment strategy either. This is hardly limited to the last two years. Go as far back as you want.

I prefer evidenced-based decisions. It's hardly a "cult."

Evidence shows that stocks are not always so rosy, especially when you consider foreign markets as well (even if developed). Maybe the US has done well in comparison, but there has been periods where the US also struggled far more than a couple years.

If you can honestly handle a 50% permanent cut in the portfolio, then I will not bother you about your plans.

[Wannaretireearly]

Bonds, phlblblblt

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

Let’s assume you have $4M liquid. What you’re missing is losing $2M is quite tough mentally. Especially with not much cash/bonds to invest when things go on sale. It’s much different than having 400k and losing 200k in your 20s/30s with plenty of human capital left. Being at the end of the game doesn’t mean you’ve won.

[Claudia Whitten]

given the average bear market lasts about a year give or take and the overall far superior returns of stocks

Lots of assumptions in that parenthetical.

As Google used to say, feeling lucky? Prudence would advise hoping for the best (your assumptions) but planning for the worst.

Maybe you know more than Vanguard and other major investment advisors, but they're predicting better returns from bonds than stocks over the next decade. Vanguard's 10-year annualized return forecast for aggregate U.S. bonds is 4.5% to 5%, compared with a predicted gain of around 3% to 5% for U.S. equities. If we're headed into a stagflationary environment, watch out.

Hopefully your equity allocation is well diversified, i.e., not all in the U.S.

What am I missing?

An age-appropriate portfolio. If it's legacy-only, okay. But even then, I'm not sure your heirs would appreciate inheriting a portfolio that recently declined by 50% because you had too much money in stocks.

[Claudia Whitten]

I was a bit surprised that no one mentioned specifically why your allocation nearing retirement matters.

Bottom line: It comes down to the damage that could be permanently and irrecoverably done to your retirement spending due to an unlucky sequence of returns (SOR). The combination of withdrawals and the fact mortality yields to no one means you may not ever be able to recover.

+1. Plus the fact that in retirement, you're no longer contributing to tax-advantaged account w/ salary.

https://www.kitces.com/blog/should-equi ... ly-better/

[Mr. Rumples]

The cult of equities continues.

Is there not also a cult of bonds? They are subject to risk; "during the three-year period from 1873–1875, the annual default rates total to 35.90% of the total par value of the corporate bond market." https://www.anderson.ucla.edu/documents ... paper1.pdf. Likely, who knows, possible who knows.

I prefer a middle way and as usual I am in a minority: utility and infrastructure funds which concentrate on companies with monopolies.

I am selling my last "legacy" bond fund of about 10% and moving to about 20% in two funds: FSUTX (Fido Utility) and GSFSX (Lazard Infrastructure).

[dogagility]

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that.

I wouldn't call 80/20 very aggressive. There are several posters I've seen on the forum with this, or a higher, stock allocation in retirement.

...why not just taper spending in that down time and resume normal spending rates when things go back up?

You've answered your question. An appeal of less volatile assets during retirement is to reduce the amount of tapering needed.

[Tom_T]

gunny,

If the coming recession lasting much more than that, you do not get a do it over. You only live once.

KlangFool

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

In the long run, you'll be dead. What is the purpose of being super aggressive? You've already made statements that sound to me like wishful thinking, like this one.

[BitTooAggressive]

Bonds, phlblblblt

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

I will be about 70/30 going into retirement.

I don’t want to taper spending in my early years of retirement.

[jebmke]

My retirement plan did not allow spending cuts, end of story. In fact, during the 2008-09 down tick we had our highest soending.

[jebmke]

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

In the long run, you'll be dead. What is the purpose of being super aggressive? You've already made statements that sound to me like wishful thinking, like this one.

Indeed. If don't need more when I'm dead.

[dcabler]

First priority was to secure my nondiscretionary spending. Done with TIPS, SS, stock distributions and a small amount of stock sales per year. No need to go through any other gyrations like holding N years in cash or, for us, would be an overly complex portfolio.

Second priority given to discretionary and lumpy spending. Done via stock sales.

Cheers.

[steadyosmosis]

No, I am not staying very aggressive in retirement.

[Fishing50]

Military pension pays our bills…Living within our means.
Staying aggressive with our portfolio, as we decide what to spend.

[Harmanic]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

Why not just leave it all in Mag 7 stocks? All the same logic people use to justify all US stocks/no international or all S&P 500 can be used to do that.

#recencybias, #performancechasing

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

Not completely. My IPS was written a long time ago and uses a reverse glide path methodology that increases stock allocations towards retirement. The bond portion will eventually be annuitized to provide a base income along with social security, leaving equities for discretionary spending. At that point, my portfolio will be nearly 100% equities.

But I get your point. Having an IPS helps one stick to the plan and as long as there is a good justification for being aggressive in retirement, then it could be a good option without considering performance chasing or recency bias.

Ultimately when fixed income (interest, annuities, pensions, etc.) is enough to cover base expenses, then it does not matter what allocation you have.

[student]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

So is winning the lottery, but I don't plan on using that as an investment strategy either. This is hardly limited to the last two years. Go as far back as you want.

I prefer evidenced-based decisions. It's hardly a "cult."

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

Of course. And I do. My plan is to ride out the storm. In the long run, I'm likely to come out ahead. But again, people's circumstances vary and I may be able to tolerate more risk than some.

As long as you are happy about it, I see nothing wrong, although I wouldn't do it myself, and my target is 60/40 to 50/50. While the length of bear markets may be short, it may take a while for S&P 500 to return to previous high. The 2008 crash took a long time to "recover." Of course 80/20 alone does not tell the whole story. Another input should be how many years can the 20% cover. It is a big difference between covering 2 years and 20 years.

Edit: Saw on another thread that military pension cover your expenses. In this case, it seems 80/20 is fine

[Helium]

You gotta ask yourself a very important question...."why?"

If there's something in life that you haven't been able to attain yet and you have a financial goal to obtain it, then sure.

But if you already have all the money you need in life, then what's the point of putting yourself in a unnecessarily risky position? Nobody knows what the future holds. Better safe than sorry.

[exodusing]

A fundamental investment principle is that equities are expected to return more than bonds because they are riskier. OP has essentially written risk out of the equation.

There is no guarantee that equities will have a positive return over any given time frame. They may well plunge for an extended period. We have data from the past, but there's no way to know if that data is useful for predicting the future. If anything, the more people have faith in equities the more they buy and while the higher prices increase returns in the short run, they would seem to decrease returns in the long-run.

You may make enough in early years to ride out any storms in later years. Or not. There's no good reason to believe we can't have a multi-year recession and bear market.

[KlangFool]

OP,

The horrible part of your prediction is if it is true, 60/40 will beat your 95/5 due to rebalancing. Why would you want to be 95/5,?

In 2020, the stock drops 30% and recovered in the same year. I did very well with my 60/40 portfolio with rebalancing.

Please check out this thread

viewtopic.php?t=335902
"PSA: Fixed AA with 5/25 rebalancing works!"

KlangFool

[Harmanic]

If you can honestly handle a 50% permanent cut in the portfolio, then I will not bother you about your plans.

This is the right answer. Someone with a secure income can be all cash or all stocks. The OP suggests that is the case. Each person is different.

[markus75]

I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up?

I would educate myself further about the history of the stock markets. This one is quite good:
https://www.ubs.com/global/en/investmen ... dition.pdf

[BitTooAggressive]

gunny,

If the coming recession lasting much more than that, you do not get a do it over. You only live once.

KlangFool

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

You don’t know that.

[mike_in_ny]

I will echo the comment that this is very personalized. I know on this board we tend to
talk about a percentage of assets in stocks vs bonds as in 50/50 or 80/20. However,
for a discussion like this its much more relevant to discuss it in terms of years worth of
spending in bonds. This will presumably bridge you to any downturn.

If you are at 25x, 50/50 would say you have 12 years of spend in bonds. That seems good.

If you are at 50x, 80/20 would say you have 10 years of spend in bonds. That seems about
the same.

If you are at 100x, 90/10 would say you have 10 years of spend in bonds. Sounds good,
too.


I think having somewhere between 5-15 years of living expenses in bonds feels good to
me. If you have 50 years in bonds 50/50 @ 100x.....that may be conservative, but it
really would depend on your age and what you want to do with your money.

[BitTooAggressive]

Any given upcoming recession is highly unlikely to last much more than that, and could just as easily last less. To each their own, but I can easily ride such a short-term situation and ultimately come out ahead in the long run.

The stock market took about 5 years to recover post 2000 and 4.5 years post 2007. Longer than that in 1929. Japanese market took decades to recover. Current valuations using multiple metrics are comparable to 1929, 2000, 2007. But that’s ok, it will be different this time. I’m sure of it. Trust me.

Lots of recency bias, or just willingness to have a financially difficult or altered retirement.

[montanagirl]

I was 60/40 until I put the rest of my trad IRA in an SPIA.

So now I'm 85/15. Any movement in brokerage triggers capital gain income that taxes more SS, and in Roth I'd be throwing away that sweet tax treatment if I sell for bonds.

So I'm not sure what to do.

[bikechuck]

... My IPS was written a long time ago and uses a reverse glide path methodology that increases stock allocations towards retirement. The bond portion will eventually be annuitized to provide a base income along with social security, leaving equities for discretionary spending. At that point, my portfolio will be nearly 100% equities.

If you are comfortable sharing ...

At what age or ages do you plan to annuitize your bond holdings?

Are you counting on SS and equities be a sufficient hedge against inflation?

[tibbitts]

The cult of equities continues.

Is there not also a cult of bonds? They are subject to risk; "during the three-year period from 1873–1875, the annual default rates total to 35.90% of the total par value of the corporate bond market." https://www.anderson.ucla.edu/documents ... paper1.pdf. Likely, who knows, possible who knows.

I prefer a middle way and as usual I am in a minority: utility and infrastructure funds which concentrate on companies with monopolies.

I am selling my last "legacy" bond fund of about 10% and moving to about 20% in two funds: FSUTX (Fido Utility) and GSFSX (Lazard Infrastructure).

Although I own a small amount of the fund, FSUTX is a pretty aggressive utilities fund, and I wouldn't think of it the way people at least used to think of conservative utilities. It's definitely nowhere near a bond substitute - or even a utilities index substitute.

[LFKB]

Bonds, phlblblblt

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

People often sacrifice millions throughout their life by being far too conservative. People pay off 3% mortgages early all the time at the cost of having that money in the market because they don’t want to have a house payment. It makes no sense financially, but it brings peace of mind for people which is why they do it.

[J295]

You gotta ask yourself a very important question...."why?"

Curious on OP objectives, and guessing he/she is motivated by maximizing long term return.

I have no angst with those who are aggressive equity wise, and those who are not. It’s personal — not one size fits all.

We’ve gone both routes. We were 100% equities for about 30 years until early retirement, then did a glide path down to where we are now at 50% equities (actually drifted up to about 55% as of today).

For us the notion of 100% equities was to maximize return, and the notion of 50% equities was to (a) capture some return and (b)preserve a good size chunk of change to be able to freely give during our lifetimes and have $$ for family upon death, (c) not spend any emotion or brain cells on finances when the inevitable economic (or personal) rough patches hit.

The GR left some scar tissue for us. That was a 56% drop over 16 months peak to trough with recovery time estimated at 5 years. (And remember, when you’re in this situation you don’t get a timeline telling you just to ride out the storm because there’s a guaranteed recovery at X date).

[greg24]

Going by recent posts, the OP has a pension that will pay all of their expenses, and see SS as "extra".

Of course they can be very aggressive in retirement. Most people aren't in the same boat.

[Retiredron]

I always find the Vanguard chart showing the range of calendar year returns (1926-2022) as quite helpful in deciding on asset allocations. I will show only 3 examples below but you can find the full chart on the Vanguard site.

100% bonds: Best 32.6% Worst -13.1%
50/50: Best 32.3% Worst -22.5%
100% stocks: Best 54.2% Worst -43.1%

Risk tolerance is a personal decision that should be based on data. There can be multiple up and down years in a row as we all know.

[goblue100]

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

Of course. And I do. My plan is to ride out the storm. In the long run, I'm likely to come out ahead. But again, people's circumstances vary and I may be able to tolerate more risk than some.

I can't argue with OP, a higher equity allocation is more likely to do better. But let me turn the question around, why isn't OP using leverage? If 95% equities is good, 150% should be even better.

For me, I am in the 60/40 club. Hopefully I eliminate some of the worst of the possible downside cases by giving up a few of the best upside cases. I don't know which thread of the multiverse I will get, and I only get one.

[J295]

Going by recent posts, the OP has a pension that will pay all of their expenses, and see SS as "extra".

Of course they can be very aggressive in retirement. Most people aren't in the same boat.

Indeed. Pretty material facts.

[Lawyered_]

The cult of equities continues. It feels like, after two years of 25%+ market returns, there are many Bogleheads who don't believe it's possible for bonds to outperform stocks over a very long period of time. It might not be likely, but it is possible.

Why not just leave it all in Mag 7 stocks? All the same logic people use to justify all US stocks/no international or all S&P 500 can be used to do that.

#recencybias, #performancechasing

Investing is mostly about risk control. There are lots of risks out there. Have a plan that will still work if they show up.

Agreed. There is no reason that all investors should not be at least 10% long term treasuries. 90/10 has outperformed 100/0 with better risk adjusted returns as well. An investor who diversifies with treasuries is taking the first step toward diversification. While diversifying with treasuries is a good start, it is not the end all be all of diversification. Equities and treasuries can go down in tandem when inflation rears its ugly head. Investors have been spoiled with low inflation since the 1990s, but no guarantee that continues. Investors should consider holding other assets as well, like TIPS, gold, and (gasp) trend following.

Some backtests: https://testfol.io/?s=8kRCqeOOeRv

[JohnDoh]

Bonds, phlblblblt

I have about a 95/5 ratio currently and will taper down a bit soon (I'm 61 an eyeing retirement soon), but not much...80/20 at most, if that. I just don't get the appeal, given the average bear market lasts about a year give or take and the overall far superior returns of stocks, why not just taper spending in that down time and resume normal spending rates when things go back up? There's a net gain there if your stock funds or whatever even just simply keep pace with the S&P 500. If some cannot afford the downturn (SS isn't enough), I get that, but I've spoken to people who can easily do so but still much heavier on bonds. What am I missing?

People often sacrifice millions throughout their life by being far too conservative. People pay off 3% mortgages early all the time at the cost of having that money in the market because they don’t want to have a house payment. It makes no sense financially, but it brings peace of mind for people which is why they do it.

Sorry, but I think this is wrong. Almost dangerously so. At most one can say "turn out to have been (far too) conservative IN HINDSIGHT ... because various risks turned out not to have shown up. But if the risks HAD shown up, then such persons would not have "turned out to be (far too) conservative".

This is why Larry Swedroe used to say that it is important to separate analysis of strategy and analysis of outcome. A good strategy can in fact lead to a bad outcome. And a good outcome can arise from a bad strategy.

The key concept, I think, is "insurance". Are folks with homeowner's insurance (on which most will never collect), "too conservative" "sacrificing millions" (or thousands, as the case may be)? Would you advise a 25-year old that medical insurance is "too conservative"? Etc. Etc. Etc.

Risk control costs money. It's not free. It's also far from worthless.

The devil of course if figuring out there "golden mean" of risk is, both in general for your "average" person and also in particular for you.

[smitcat]

OP,

The horrible part of your prediction is if it is true, 60/40 will beat your 95/5 due to rebalancing. Why would you want to be 95/5,?

In 2020, the stock drops 30% and recovered in the same year. I did very well with my 60/40 portfolio with rebalancing.

Please check out this thread

viewtopic.php?t=335902
"PSA: Fixed AA with 5/25 rebalancing works!"

KlangFool

Please reference any article(s) where they 'prove' that any type/kind/method of rebalancing will outperform a higher equity AA over the longer term.

[retire57]

Going by recent posts, the OP has a pension that will pay all of their expenses, and see SS as "extra".

Of course they can be very aggressive in retirement. Most people aren't in the same boat.

Same here. That's why I'm okay with 80/20.