Asset Allocation once you've passed your "number"

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mak1277
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Asset Allocation once you've passed your "number"

Post by mak1277 » Mon Mar 12, 2018 3:12 pm

So, with the vesting of some equity awards, as of now I have hit and slightly passed my "number" for retirement. Because of future equity vesting golden handcuffs, I will continue to work for at least a few more years.

So for future savings, would you:

1) stick to your current/planned AA (ain't broke, don't fix it)
2) Invest future savings more conservatively (protection against down markets)
3) Invest more aggressively (you hit your number, time to "gamble" a little)

I know this is asking the impossible, but I hope we can avoid digging into safe withdrawl rates in this discussion. Just assume you've hit whatever number YOU think you need, regardless of what the withdrawl rate might be.

il0kin
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Re: Asset Allocation once you've passed your "number"

Post by il0kin » Mon Mar 12, 2018 3:18 pm

IMO, go conservative. You worked all those years to get to your number, now is the time to go into “safe mode” and keep the nest egg protected and ready for retirement while the market is doing well. Yes, you may miss out on a few years of gains....but you now have “enough” and protect yourself from year over year losses.

furwut
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Re: Asset Allocation once you've passed your "number"

Post by furwut » Mon Mar 12, 2018 3:21 pm

#3
One approach is to conservatively invest the amount you need to carry you from your retirement date to the time you begin your pension/social security (which I assume you already have) and be more aggressive with the remainder.

Oblivious Investor / An Ideal Retirement Spending Strategy?

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TomatoTomahto
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Re: Asset Allocation once you've passed your "number"

Post by TomatoTomahto » Mon Mar 12, 2018 3:28 pm

We hit well past our number, and I was tired of obsessing over asset allocation (AA). So, I put $x in Fixed Income (FI), and all new dollars (except for dividends on bonds) go to equities.

A little bit country, a little bit rock and roll.

PS. When we recently had to raise a lot of cash for a house purchase, we did decrease our FI assets (and our equities also).

KlangFool
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Re: Asset Allocation once you've passed your "number"

Post by KlangFool » Mon Mar 12, 2018 3:28 pm

mak1277 wrote:
Mon Mar 12, 2018 3:12 pm
So, with the vesting of some equity awards, as of now I have hit and slightly passed my "number" for retirement. Because of future equity vesting golden handcuffs, I will continue to work for at least a few more years.

So for future savings, would you:

1) stick to your current/planned AA (ain't broke, don't fix it)
2) Invest future savings more conservatively (protection against down markets)
3) Invest more aggressively (you hit your number, time to "gamble" a little)

I know this is asking the impossible, but I hope we can avoid digging into safe withdrawl rates in this discussion. Just assume you've hit whatever number YOU think you need, regardless of what the withdrawl rate might be.
mak1277,

In order to answer your question, we need to know what do you mean by your number?

A) 25X current annual expense? 30X current annual expense? 50X current annual expense?

B) 25X retirement expense? 30X retirement expense? 50X retirement expense?

C) With or without a mortgage? Mortgage rate and size in term of annual expense?

D) How old are you?

E) With or without kids? Are kids done with college?

KlangFool

mak1277
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Re: Asset Allocation once you've passed your "number"

Post by mak1277 » Mon Mar 12, 2018 3:33 pm

KlangFool wrote:
Mon Mar 12, 2018 3:28 pm
mak1277 wrote:
Mon Mar 12, 2018 3:12 pm
I know this is asking the impossible, but I hope we can avoid digging into safe withdrawl rates in this discussion. Just assume you've hit whatever number YOU think you need, regardless of what the withdrawl rate might be.
mak1277,

In order to answer your question, we need to know what do you mean by your number?

A) 25X current annual expense? 30X current annual expense? 50X current annual expense? I don't think the multiple matters, because everyone is going to have a different definition. Suffice it to say that I have hit a number based on both current and future projected expenses that I am comfortable retiring on. It's a philosophical question more than anything, so how I calculated my number doesn't matter.

B) 25X retirement expense? 30X retirement expense? 50X retirement expense? see above

C) With or without a mortgage? Mortgage rate and size in term of annual expense? I don't have a mortgage, but I also don't think this matters as long as someone includes mortgage in their future expenses for the purposes of coming up with the number

D) How old are you? early 40s

E) With or without kids? Are kids done with college? One child, under age 2. I have a separate slug of money set aside for educational expenses

KlangFool

JBTX
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Re: Asset Allocation once you've passed your "number"

Post by JBTX » Mon Mar 12, 2018 3:38 pm

mak1277 wrote:
Mon Mar 12, 2018 3:12 pm
So, with the vesting of some equity awards, as of now I have hit and slightly passed my "number" for retirement. Because of future equity vesting golden handcuffs, I will continue to work for at least a few more years.

So for future savings, would you:

1) stick to your current/planned AA (ain't broke, don't fix it)
2) Invest future savings more conservatively (protection against down markets)
3) Invest more aggressively (you hit your number, time to "gamble" a little)

I know this is asking the impossible, but I hope we can avoid digging into safe withdrawl rates in this discussion. Just assume you've hit whatever number YOU think you need, regardless of what the withdrawl rate might be.
Assuming you don't have any other major expected expenditures like kids in college, and you are somewhere near typical retirement age, I think it really comes down to risk tolerance, whether you have any other guaranteed income sources, and especially whether you want to leave something to heirs.

If you want to leave money to children/heirs, I would probably invest more aggressively than if no heirs.

Having said that, I probably wouldn't do #3 regardless. I would probably be somewhere betweeen 60/40 and 40/60 whatever the situation. But that is just me.

soccerrules
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Re: Asset Allocation once you've passed your "number"

Post by soccerrules » Mon Mar 12, 2018 3:38 pm

I'm not there yet.
I plan to retire at 60 and have the 60-70 money set aside in a somewhat conservative bucket; however the 70+ money will be invested at something like 65/35 or 60/40. If I am much further ahead than planned (probable inheritance) then I might slide to 70/30 with the 70+ with an eye on passing the inheritance on to our kids.
When I hit 70 I will re-evaluate plan to determine if alternative plans are better suited for our wishes.
Don't let your outflow exceed your income or your upkeep will be your downfall.

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Re: Asset Allocation once you've passed your "number"

Post by KlangFool » Mon Mar 12, 2018 3:40 pm

OP,

I will give you my answer which may or may not help you.

A) My number is 25X my current annual expense. It is 50X my retirement expense after I withdraw my social security.

B) My kids will be out of college.

C) I am 5 to 10 years from withdrawing my SS.

D) My AA will be 60/40. That translates into 10 years of fixed income for my current annual expense or 20 years of retirement expense.

E) Why this AA? Please see (C). I am 5 to 10 years from withdrawing my SS.

KlangFool

KlangFool
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Re: Asset Allocation once you've passed your "number"

Post by KlangFool » Mon Mar 12, 2018 3:42 pm

mak1277 wrote:
Mon Mar 12, 2018 3:33 pm
KlangFool wrote:
Mon Mar 12, 2018 3:28 pm
mak1277 wrote:
Mon Mar 12, 2018 3:12 pm
I know this is asking the impossible, but I hope we can avoid digging into safe withdrawl rates in this discussion. Just assume you've hit whatever number YOU think you need, regardless of what the withdrawl rate might be.
mak1277,

In order to answer your question, we need to know what do you mean by your number?

A) 25X current annual expense? 30X current annual expense? 50X current annual expense? I don't think the multiple matters, because everyone is going to have a different definition. Suffice it to say that I have hit a number based on both current and future projected expenses that I am comfortable retiring on. It's a philosophical question more than anything, so how I calculated my number doesn't matter.

B) 25X retirement expense? 30X retirement expense? 50X retirement expense? see above

C) With or without a mortgage? Mortgage rate and size in term of annual expense? I don't have a mortgage, but I also don't think this matters as long as someone includes mortgage in their future expenses for the purposes of coming up with the number

D) How old are you? early 40s

E) With or without kids? Are kids done with college? One child, under age 2. I have a separate slug of money set aside for educational expenses

KlangFool
mak1277,

<<It's a philosophical question more than anything, so how I calculated my number doesn't matter.>>

It matters to me in my model. Please see my answer on how I setup my AA.

KlangFool
Last edited by KlangFool on Mon Mar 12, 2018 3:44 pm, edited 1 time in total.

rkhusky
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Re: Asset Allocation once you've passed your "number"

Post by rkhusky » Mon Mar 12, 2018 3:42 pm

If you lost 50% of your equities, would you still feel comfortable retiring?

Dottie57
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Re: Asset Allocation once you've passed your "number"

Post by Dottie57 » Mon Mar 12, 2018 3:43 pm

il0kin wrote:
Mon Mar 12, 2018 3:18 pm
IMO, go conservative. You worked all those years to get to your number, now is the time to go into “safe mode” and keep the nest egg protected and ready for retirement while the market is doing well. Yes, you may miss out on a few years of gains....but you now have “enough” and protect yourself from year over year losses.

I agree here for most part. I will get severance until I am 62. I am protecting what I have until SS at 70. Then I will probably move from 50/50 to 60/40 as my SS wiil provide a good income floor.

MichDad
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Re: Asset Allocation once you've passed your "number"

Post by MichDad » Mon Mar 12, 2018 3:47 pm

When I passed my number two or three years ago, I made no changes. However, a year ago, after 30 years of investing only in US and international equities (no bonds), I finally moved ~35 percent of our combined retirement portfolio into the TSP G Fund and kept the rest in US and international equities. Our portfolio has continued to increase since then, but at a slower rate. If US and international equities were to drop by 80 or 90 percent tomorrow, we'd have enough between my G Fund holdings and FERS pension to tide us over between now and when we'll begin to collect maximum Social Security benefits at age 70, eight years from now.

MichDad

mak1277
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Re: Asset Allocation once you've passed your "number"

Post by mak1277 » Mon Mar 12, 2018 3:53 pm

KlangFool wrote:
Mon Mar 12, 2018 3:40 pm
OP,

I will give you my answer which may or may not help you.

A) My number is 25X my current annual expense. It is 50X my retirement expense after I withdraw my social security.

B) My kids will be out of college.

C) I am 5 to 10 years from withdrawing my SS.

D) My AA will be 60/40. That translates into 10 years of fixed income for my current annual expense or 20 years of retirement expense.

E) Why this AA? Please see (C). I am 5 to 10 years from withdrawing my SS.

KlangFool
OK, so let's say you have your 50x, set up at 60/40. What would you do with any *additional* savings you brought in? That's the question I'm asking.

mak1277
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Re: Asset Allocation once you've passed your "number"

Post by mak1277 » Mon Mar 12, 2018 3:55 pm

rkhusky wrote:
Mon Mar 12, 2018 3:42 pm
If you lost 50% of your equities, would you still feel comfortable retiring?
yes

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Re: Asset Allocation once you've passed your "number"

Post by Darth Xanadu » Mon Mar 12, 2018 3:58 pm

Congrats, OP!

Since you asked, what I would do (with incremental savings), is invest aggressively, likely trading individual securities, because at least for some period of time, I would probably enjoy it, and since I'm not relying on this money for anything, I wouldn't feel too guilty about it.
"A courageous teacher, failure is."

Random Poster
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Re: Asset Allocation once you've passed your "number"

Post by Random Poster » Mon Mar 12, 2018 4:03 pm

When I hit what I think is my baseline number* I changed my asset allocation to 50/50, composed of 10% international, 40% total stock, and 50% of a mix of total bond and intermediate term tax exempt. With the recent run-up in stocks, I've pretty much just been buying bonds for the past 4 months and I'm still a little bit heavy on the stock side of the allocation by around 3%.

To me, any enjoyment that I would likely experience by doubling what I've got now is far less than the amount of pain that I would experience as a result of losing money. But my portfolio needs to last, say, 50 or so years**, so I can't give up on equities altogether, so that's why I ended up with the 50/50 split.


* For whatever it is worth, that baseline number equals 60x current expenses, or 50X current expenses plus 20%, or 40X current expenses plus 50%.

** In case it matters, I'm in the range of your age, but without any kids (but with a wife, last I checked).

KlangFool
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Re: Asset Allocation once you've passed your "number"

Post by KlangFool » Mon Mar 12, 2018 4:07 pm

mak1277 wrote:
Mon Mar 12, 2018 3:53 pm
KlangFool wrote:
Mon Mar 12, 2018 3:40 pm
OP,

I will give you my answer which may or may not help you.

A) My number is 25X my current annual expense. It is 50X my retirement expense after I withdraw my social security.

B) My kids will be out of college.

C) I am 5 to 10 years from withdrawing my SS.

D) My AA will be 60/40. That translates into 10 years of fixed income for my current annual expense or 20 years of retirement expense.

E) Why this AA? Please see (C). I am 5 to 10 years from withdrawing my SS.

KlangFool
OK, so let's say you have your 50x, set up at 60/40. What would you do with any *additional* savings you brought in? That's the question I'm asking.
mak1277,

I probably stay at 60/40 until my portfolio reaches 75X. At that point, I may adjust my AA to 70/30. I do not believe in setting my AA more aggressive than 70/30 due to risk-adjusted return. So, that is the max that I will go.

KlangFool

ThrustVectoring
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Re: Asset Allocation once you've passed your "number"

Post by ThrustVectoring » Mon Mar 12, 2018 4:24 pm

100% equities + enough cash to cover day-to-day needs.

That said, my plan involves retiring with far too much money :)

KlangFool
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Re: Asset Allocation once you've passed your "number"

Post by KlangFool » Mon Mar 12, 2018 5:07 pm

ThrustVectoring wrote:
Mon Mar 12, 2018 4:24 pm
100% equities + enough cash to cover day-to-day needs.

That said, my plan involves retiring with far too much money :)
ThrustVectoring,

<< enough cash to cover day-to-day needs.>>

For how long? 1 day? 1 month? 1 year? 10 years?

KlangFool

ThrustVectoring
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Re: Asset Allocation once you've passed your "number"

Post by ThrustVectoring » Mon Mar 12, 2018 5:43 pm

KlangFool wrote:
Mon Mar 12, 2018 5:07 pm
ThrustVectoring wrote:
Mon Mar 12, 2018 4:24 pm
100% equities + enough cash to cover day-to-day needs.

That said, my plan involves retiring with far too much money :)
ThrustVectoring,

<< enough cash to cover day-to-day needs.>>

For how long? 1 day? 1 month? 1 year? 10 years?

KlangFool
It's floated around based on what I've needed, but usually roughly around one or two months. I get antsy if I have more than $10k or so in cash - I think there's something way better I could be doing with my money.

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Sandtrap
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Re: Asset Allocation once you've passed your "number"

Post by Sandtrap » Mon Mar 12, 2018 5:49 pm

#1 with a sprinkle of #2.

Consider:

1 Kitces "Retirement Red Zone"
https://www.kitces.com/blog/managing-po ... -red-zone/

2 Sequence of Returns Risk
This is an excellent thread that addresses the "Retirement Red Zone".
Sequence of Returns Risk by "DonCamillo".
viewtopic.php?t=159107

3 Inevitable "Financial and Personal" "Black Swans"

FWIW: I am North of my "number", at present 35/65 with a 5% variation. I'll consider 30/70 when I turn 70.
j :D
Last edited by Sandtrap on Mon Mar 12, 2018 5:52 pm, edited 1 time in total.

TravelforFun
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Re: Asset Allocation once you've passed your "number"

Post by TravelforFun » Mon Mar 12, 2018 5:52 pm

I've hit my FI number but am still working part time. I keep 10 years of annual expenses in cash and bonds, and the rest of my investment is in equities. I'm not worried too much about AA.

TravelforFun

bhsince87
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Re: Asset Allocation once you've passed your "number"

Post by bhsince87 » Mon Mar 12, 2018 6:01 pm

I personally struggled with this decision for several years. I was essentially 90/10 equity/bond for years, and stuck with that until we hit a number where we could live a decent lifestyle on a 3% withdrawal rate.

Then I tapered down to 60/40, where I plan to stay for the foreseeable future. Will be retiring soon at age 53-55, and don't want to be too heavy in bonds because of inflation risk until Social Security at 70.

We have no children or legacy issues, so that should be considered too.
BH87

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cfs
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Re: Asset Allocation once you've passed your "number"

Post by cfs » Mon Mar 12, 2018 6:01 pm

IF you can afford to lose 50% then go for broke!

Caveat emptor, see my signature.

Good luck with your investments, y gracias por leer ~cfs~
~ Member of the Active Retired Force since 2014 ~

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munemaker
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Re: Asset Allocation once you've passed your "number"

Post by munemaker » Mon Mar 12, 2018 6:09 pm

Once all your financial needs are met, lighten up on your risky assets.

What's the point in continuing to play once you won the game?

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Re: Asset Allocation once you've passed your "number"

Post by Phineas J. Whoopee » Mon Mar 12, 2018 6:17 pm

This is what I did, and a couple of years later I answered some questions about it.

For the record, I think an age-based asset allocation will be far more practical for most investors.

PJW

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Re: Asset Allocation once you've passed your "number"

Post by youngpleb » Mon Mar 12, 2018 6:32 pm

I'm only 26 so I definitely haven't hit my number, but in my opinion I think you said it yourself--you've hit the magic number of all that you need, so why not go a bit riskier? To go more conservatively seems to imply to me that that money wouldn't be "extra" at all. If it were me personally and I was at say a 50:50 or 40:60 ratio for my "number" then I'd go riskier for anything extra. Risky enough that the rewards would be noticeable, and not risky enough that it would all be wrecked if the market hits the fan. So I'd do something like 70:30 for that stuff.
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Re: Asset Allocation once you've passed your "number"

Post by mhadden1 » Mon Mar 12, 2018 7:00 pm

Congrats to OP on reaching your number!

My plan for AA and such: Spoiler alert - stay the course

1) I retired (became voluntarily unemployed house husband?) without hitting a particular number. A helpful but not-so-rich MegaCorp buyout hastened me out. 70/30 stocks/FI, had no plan to change AA even if working longer.

2) DW plans to retire in May 2019 at age 62, and start SS and middling teacher pension (some SAHM years.)

3) A portion of very safe FI will help cover expenses until I too become an artist and draw SS at 70. After that, pension + SS should support our usual modest/comfortable lifestyle.

4) May eventually downsize in house in lower COL area, which would provide extra buffer. No hurry since DS and family live in current city. (DGD, age 4!)

5) No plan to rebalance into stocks in a market crash. Over time expect to use some of the stocks for tomfoolery, rest for legacy.

6) Resist temptation to fiddle and tweak.
Oh I can't, can I? That's what they said to Thomas Edison, mighty inventor, Thomas Lindberg, mighty flyer,and Thomas Shefsky, mighty like a rose.

TravelforFun
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Re: Asset Allocation once you've passed your "number"

Post by TravelforFun » Mon Mar 12, 2018 7:40 pm

munemaker wrote:
Mon Mar 12, 2018 6:09 pm
Once all your financial needs are met, lighten up on your risky assets.

What's the point in continuing to play once you won the game?
So we could leave something for our kids, grandkids, and others.

TravelforFun

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Re: Asset Allocation once you've passed your "number"

Post by goodenyou » Mon Mar 12, 2018 7:41 pm

I don't think I will change my AA. I think that the probability of failure just goes down as the total number gets bigger (and larger than my "number"). I am 60/30/10 (S/B/C). That percentage breakdown of an even larger number just further reduces risk of failure, but having that AA allows for a significant probability of growth and legacy. Calculators have told me that I have far exceeded my number. I have not changed.
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Re: Asset Allocation once you've passed your "number"

Post by schachtw » Mon Mar 12, 2018 7:47 pm

Wife and I retired three years ago, each 67. Wife is drawing SS and pension, I’m taking spousal SS and will file for my own benefit at age 68 (compromise between 66 and 70). Currently drawing 1% from taxable to make up difference.

Have 25X yearly expenses saved. Will stay at 55/45 AA, indefinitely.

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Re: Asset Allocation once you've passed your "number"

Post by Nestegg_User » Mon Mar 12, 2018 9:39 pm

since you updated to say that you will retire in mid-forties, that implies a fifty (plus) year horizon, so not so different than a perpetual (1.89 ==> 1.9 % WR) so your “number” would be 50 x or greater.

with that retirement, there’s lots of zeros in your SS, so it won’t be much; makes it easy for claiming, just start taking at either 62 (or whatever is earliest by then) or 65 to help pay for part of the Part B and supplement policy.

I’m also assuming that your personal capital is zero after- - i.e., you won’t be able to return to work. also, i assumed that, with the numbers you’ve put out there, all compensation is RSU’s and W-2, with NO pension.

So...
at retirement, put the 50 x into a50/50 allocation; any additional can be more equities (60+ - 75 %, as 75% is top of risk-adjusted level). if there’s a downturn, replenish the 50 x pot, any remaining can still be aggressive.

at age 55, re-evaluation:
now need ~40 year horizon, so could be at 33-35 x.
In your case, because SS and other COLA’d income will be negligible, i’d be conservative and go 35 x. So, 35 x in 50/50 and residual in higher equities.

Last re-evaluation at 65: you’ve already started SS, can be down at 4 % WR for entire portfolio (all now have same allocation). {You’ve still got sequence of returns issues- - so allocation goes to 40 - 50% equities, max ...unless you’ve had a very favorable return sequence to be well above 25 x}

all the heavy lifting will be needed by your portfolio, so need 50/50; also with 20-25 years before medicare, no one can say what will happen with health insurance, especially with that long of a period. we also can still assume that health insurance premiums will have higher inflation rates than the general COL, so your portfolio will have to keep up with a higher than nominal cost of living

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Re: Asset Allocation once you've passed your "number"

Post by Clever_Username » Mon Mar 12, 2018 9:59 pm

I already have a decently conservative asset allocation. Part of that is that I haven't really been invested through a real correction. I think part of it is that with even conservative estimates, I'm going to hit my number (25X expected annual expenses in retirement) around age 40. I plan to keep the same allocation or possibly make it a little less aggressive, as I'm far more interested in a high likelihood of outliving my money than leaving behind a large amount.
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Re: Asset Allocation once you've passed your "number"

Post by Nestegg_User » Mon Mar 12, 2018 10:06 pm

Clever

at 40, your expected value isn’t 25 X - -
you’ve got a time horizon of 50 + years, so your maximum WR is 2.0 -2.5 (2.5 is aggressive) and so implies a multiplier of 50 X down to a lower 40 X ! !

you’ve got quite a ways to go...if you are trying to retire then

EDIT: Clever... I see that you are a teacher, so likely can’t get your pension until some nominal retirement age. As a teacher, I also suspect that your wages won’t necessarily keep up with inflation, so you’ll need to take that into consideration

{ now if you mean that you’ll have your stash, and will keep it invested at whatever allocation you decided on, and are still working to a more “normal” retirement age ... then carry on. Any excess can be used for a better state room on the cruise ships or for flying first class...}

[we still don’t fly first class, and yet we’ve only had a sub 2% WR so far. before retirement, we did have a balcony room (not a suite) on a cruise ship ( long Mediterranean cruise) so we’ve used some funds along the way]
Last edited by Nestegg_User on Mon Mar 12, 2018 11:03 pm, edited 2 times in total.

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Re: Asset Allocation once you've passed your "number"

Post by aj76er » Mon Mar 12, 2018 10:14 pm

While still working, I think that having an age based rule is a good idea. If at your number, then perhaps just go with age in bonds, which is considered conservative these days.

Once retired, following a glide path must be done with care, since you don't want to harvest too much from equities. In fact a reverse glide path has been the better solution (although perhaps tough to implement emotionally).
"Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth" - John C. Bogle

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Re: Asset Allocation once you've passed your "number"

Post by Nestegg_User » Mon Mar 12, 2018 10:48 pm

aj76er

that’s why we cut back to 45% equities in retirement (60) until we start the first SS; then we can start up to higher equity allocations

The one problem with age-in-bonds is with the QE bond yields, you didn’t get the classic results (hence why Pfau was saying that the SWR got reduced to 2.8% !)

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Re: Asset Allocation once you've passed your "number"

Post by rkhusky » Tue Mar 13, 2018 7:03 am

mak1277 wrote:
Mon Mar 12, 2018 3:55 pm
rkhusky wrote:
Mon Mar 12, 2018 3:42 pm
If you lost 50% of your equities, would you still feel comfortable retiring?
yes
Then you're good to go.

jvini
Posts: 67
Joined: Tue Apr 06, 2010 11:55 am

Re: Asset Allocation once you've passed your "number"

Post by jvini » Tue Mar 13, 2018 7:30 am

Back to the original question, which I've been wrestling with. Stepping back and considering kids, lifestyle, time, I would choose 3. It may be way less risky than you think. If you could retire off of your baseline number, additional money will be used for heirs or, if you do well, for some really fun stuff in retirement. First class vs. coach. A longer vacation away. A nicer hotel or room. Whatever. All the time knowing you can live comfortably off of your base retirement portfolio.

Also, that money will have a long time to compound. If the market tanks, leave it alone. It will come back, just as it did in 2009.

Keeping it in bonds will likely mean less volatility, but less returns.

It's not gambling, it's not playing with house money. It's a very rational long term strategy.

If you find you've miscalculated and NEED that money, then I'd reallocate into something that will be more safe and reliable.

Dandy
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Re: Asset Allocation once you've passed your "number"

Post by Dandy » Tue Mar 13, 2018 7:50 am

reaching your number is a major win. Retirement usually means rapid loss of human capital, withdrawing vs investing, so the ability to replace major losses is bleak. The years just before and just after retirement seem to be most critical since major losses can put a large dent assets in a retirement that could last for decades.

Whether you use your good fortune to increase your risk/reward or not is more of a personal decision. I faced a similar decision a few years ago after retiring and decided to use Dr. Bernstein's idea of having enough assets in "safe" products to fund my retirement to age 90. That left me with the rest of my assets aka my "risk" assets to be invested at 67/23 -- combined allocation of 43/57. I sleep well and am also blessed with a decent income floor when I collect my age 70 SS later this month. I chose asset preservation vs growth and have no regrets.

I should note that since my large TIRA is mostly fixed income and my taxable is mostly equities my RMDs and the higher return of equities over the long run will likely increase my overall equity allocation - that might be ok or I will have to gift or sell equities and incur taxes to maintain my target allocation.

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Clever_Username
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Re: Asset Allocation once you've passed your "number"

Post by Clever_Username » Tue Mar 13, 2018 10:50 am

Nestegg_User wrote:
Mon Mar 12, 2018 10:06 pm
Clever

at 40, your expected value isn’t 25 X - -
you’ve got a time horizon of 50 + years, so your maximum WR is 2.0 -2.5 (2.5 is aggressive) and so implies a multiplier of 50 X down to a lower 40 X ! !

you’ve got quite a ways to go...if you are trying to retire then

EDIT: Clever... I see that you are a teacher, so likely can’t get your pension until some nominal retirement age. As a teacher, I also suspect that your wages won’t necessarily keep up with inflation, so you’ll need to take that into consideration

{ now if you mean that you’ll have your stash, and will keep it invested at whatever allocation you decided on, and are still working to a more “normal” retirement age ... then carry on. Any excess can be used for a better state room on the cruise ships or for flying first class...}

[we still don’t fly first class, and yet we’ve only had a sub 2% WR so far. before retirement, we did have a balcony room (not a suite) on a cruise ship ( long Mediterranean cruise) so we’ve used some funds along the way]
I don't mean "I'll hit 25X at 40 and retire." I do mean that I'll hit 25X by 40 and be significantly less worried about how I'll be when I get to retirement. The 25X is referring to money in a 403(b) (plus rollover IRAs from previous jobs, plus a Roth IRA from various years when I could), plus some Series I bonds, etc. My retirement plan at work is 403(b) -- I don't believe there's a traditional pension in the sense that money is taken out of my paycheck (which I'd notice, as I look at the paystubs and look where the various money taken out goes) is contributed with a defined payout at some age.

My employer plans are listed in my Vanguard account (it's through Vanguard, although other options exist) as:

(school name) RETIREMENT SAVINGS PROGRAM DC RETIREMENT 401(A) PLAN

and

(school name) RETIREMENT SAVINGS PROGRAM TAX DEFERRED ANNUITY 403(B) PLAN

But despite the name "deferred annuity," it's a 3-fund portfolio (funds of my choice, in accordance with my total allocation).

The relief I imagine I'll feel is mostly that it's a clear "okay, I should be fine in retirement." I'll obviously continue to contribute to tax-advantaged retirement accounts, again with that goal of a higher likelihood of success when I do retire. As I won't be able to access much of that money until 59 or so, it isn't a "well, I've got money, time to quit."

As for wages not keeping up with inflation... sadly a possibility. For better or worse, I have a fixed-rate mortgage, so a large portion of my monthly spending is fixed. I really do like my job and, at this point, a higher salary really only causes a higher savings rate, and I know that I'm leaving money on the table with this job instead of industry. At some point, if I believe the job enjoyment versus money trade-off isn't in my favor, I can go the other direction.
"What was true then is true now. Have a plan. Stick to it." -- XXXX, _Layer Cake_

mak1277
Posts: 772
Joined: Fri Jan 09, 2015 4:26 pm

Re: Asset Allocation once you've passed your "number"

Post by mak1277 » Tue Mar 13, 2018 1:45 pm

jvini wrote:
Tue Mar 13, 2018 7:30 am
Back to the original question, which I've been wrestling with. Stepping back and considering kids, lifestyle, time, I would choose 3. It may be way less risky than you think. If you could retire off of your baseline number, additional money will be used for heirs or, if you do well, for some really fun stuff in retirement. First class vs. coach. A longer vacation away. A nicer hotel or room. Whatever. All the time knowing you can live comfortably off of your base retirement portfolio.

Also, that money will have a long time to compound. If the market tanks, leave it alone. It will come back, just as it did in 2009.

Keeping it in bonds will likely mean less volatility, but less returns.

It's not gambling, it's not playing with house money. It's a very rational long term strategy.

If you find you've miscalculated and NEED that money, then I'd reallocate into something that will be more safe and reliable.
This makes a lot of sense...I like it. Thanks.

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