A " Bond Tent" During the "Retirement Red Zone?"

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David Jay
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Location: Michigan

Re: A " Bond Tent" During the "Retirement Red Zone?"

Post by David Jay » Wed Dec 06, 2017 12:18 pm

ruralavalon wrote:
Wed Dec 06, 2017 12:10 pm
I want a hyper-simple portfolio my wife could manage, using just a single balanced fund like either Vanguard Balanced Index Fund Admiral Shares (VBIAX) or Vanguard LifeStrategy Moderate Growth (VSMGX).
My "after I am gone" letter to my wife suggests that she put everything in LifeStrategy Moderate (98% of the portfolio is in tax-deferred or tax-exempt).
Prediction is very difficult, especially about the future - Niels Bohr | To get the "risk premium", you really do have to take the risk - nisiprius

radiowave
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Joined: Thu Apr 30, 2015 5:01 pm

Re: A " Bond Tent" During the "Retirement Red Zone?"

Post by radiowave » Wed Dec 06, 2017 12:56 pm

David Jay wrote:
Tue Dec 05, 2017 7:04 pm
radiowave wrote:
Mon Dec 04, 2017 10:28 pm
dbr wrote:
Mon Dec 04, 2017 7:59 pm
. . .
If there are no contributions or withdrawals there is no sequence of returns phenomenon at all. Also, like most risk, the phenomenon can result in a benefit to the investor as much as a hazard.
So if there is no anticipated withdrawal from retirement assets in early retirement, what asset allocation is recommended?
If you are not withdrawing, the highest stock allocation that you can "stand" - sleep well at night and not sell in a downturn.
Which is 50% bonds crossing the threshold into retirement (65-67). That's in my IPS and I've been gradually on my glidescope abt 43% bonds now. My concern is I have all equity (total US/international stock) in my taxable account which is about 1/3 of total portfolio so the dilemma is if we go into a bear market at retirement, I was planning on using the taxable funds to push back SS to 70. So there is an iteration to the discuss not only how much bond % for the "tent" but where the bonds are re tax deferred vs taxable. This could affect cash flow in early retirement and has tax implications, e.g. was counting on 15% marginal tax rate and 0 LTCG in early retirement.
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jalbert
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Joined: Fri Apr 10, 2015 12:29 am

Re: A " Bond Tent" During the "Retirement Red Zone?"

Post by jalbert » Wed Dec 06, 2017 5:34 pm

My concern is I have all equity (total US/international stock) in my taxable account which is about 1/3 of total portfolio so the dilemma is if we go into a bear market at retirement, I was planning on using the taxable funds to push back SS to 70.
If you hold different asset classes in different locations, you can take withdrawals from the location that makes sense from a tax perspective, and then adjust the allocation of tax-qualified account(s) to maintain asset allocation. Thus, if you liquidate equities in taxable space when equities are below allocation target, you would shift other classes into equities in a tax-qualified account to maintain asset allocation.

Also, withdrawing from a tax-deferred account may incur more taxes due today than withdrawing from a taxable account, but drawing down the tax-deferred account will reduce future RMDs, which may reduce overall taxes in the long run.
Risk is not a guarantor of return.

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