If you have plenty of money, why not 100% stocks in retirement?

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smitcat
Posts: 3068
Joined: Mon Nov 07, 2016 10:51 am

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by smitcat » Mon Apr 15, 2019 10:24 am

afan wrote:
Mon Apr 15, 2019 10:21 am
.No, I am not factoring in a rumored cut to social security. To my understanding, there are no cuts to social security codified in the law and any decision on cutting social security is speculation. I don't make decisions based on speculation.
Not a rumor.
Not speculation.

Read the trustee's report.
There have been a number of times when SS has faced funding issues in the past - the history of how these occurred and were solved is not speculation and one of the best means IMO to use to predict futures.

Broken Man 1999
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Joined: Wed Apr 08, 2015 11:31 am

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Broken Man 1999 » Mon Apr 15, 2019 10:57 am

I'm not sure about how much plenty of money might be, as we are early in retirement at 65 years of age. Hopefully we will be around a couple of decades longer, so I don't think 100% equities would be a good choice at this time.

However, I am considering just letting the percentage of equities rise over time, and removing most expense dollars from our bond holdings. Apparently I am using a bond tent as described at https://www.kitces.com. I'm OK with a bond tent as I was once a Boy Scout and I enjoyed camping immensely. :D

I do believe using such a strategy might increase our estate, but I don't see any downside to that issue.

Since I don't know yet if we do have plenty of money, a strategy of gradually increasing equity percentage of portfolio seems better than a quick, substantial move to a higher percentage of equities.

Broken Man 1999
“If I cannot drink Bourbon and smoke cigars in Heaven than I shall not go. " -Mark Twain

afan
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by afan » Mon Apr 15, 2019 12:32 pm

As one's horizon becomes shorter with age it may be reasonable to change asset allocation. Pleny of money at 65 leaves decades of uncertainty. Plenty of money at 90 leaves far less time for the unpredictable to unfold. If one truly has plenty at that point the a high stock allocation could be great.

As for ignoring the bad cases in formulating plans-
the housing market had never declined, so it was perfectly safe to leverage up on real estate. Then the housing market crashed.

There had never been a depression as bad as the Great one, so need to plan for it. Then the Depression occurred.

I suppose one could say that they worst economic outcomes that are possible have already occurred. Not sure I get the logic, but it seems to be popular.

Even more baffling is to ignore the worst outcomes so far, assuming they cannot happen again. Once we know they are possible, why pretend that repeats cannot occur?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

goblue100
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Re: If you have plenty of money, why not 100% stocks in retirement?

Post by goblue100 » Mon Apr 15, 2019 9:17 pm

dknightd wrote:
Sun Apr 14, 2019 10:48 am
miamivice wrote:
Sun Apr 14, 2019 10:42 am
dknightd wrote:
Sun Apr 14, 2019 10:41 am
If I had plenty, or too much, money. I'd probably buy an SPIA that would more than cover my expected expenses. Then leave the rest in an 80/20 portfolio. Sounds like you can do whatever makes you happy. So, be happy!
I'm 15-25 years from retirement. This isn't a question about what I do today, but rather, I am thinking about the situation for when it comes later.
Then I suggest revisiting the question when you get closer to retirement.
Me too. 10 years ago I would have been right in there agreeing with you, just stay 100% and run up the score, so to speak. I don't feel that way anymore, I am a lot more worried about protecting what I have. I suppose I'm subconsciously listening to all the chatter, "longest bull market ever" "bound to fall", etc. Anyway, 60/40 feels a lot smarter now than 100/0, two or three years from hanging it up. You might feel different when you get here too.
Edit to say, miami, you are really discounting the risk of the stock market. Obviously we all think there is a positive expectation, but perhaps it is a less certain positive then you are giving it. Or I'm turning into a fraidy cat, and its not as risky as it looks to me now, what with Black Swans around every corner. Probably the truth is somewhere between those two things.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

CnC
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Joined: Thu May 11, 2017 12:41 pm

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by CnC » Mon Apr 15, 2019 10:54 pm

I agree whole heartedly.

If you have plenty of money no reason to be 100 percent stocks. But plenty of money differs greatly person to person. If you have 50x your desired (not required) expenses then sure go 100% stocks live off of dividends of the tsm not of some dividend aristocrat bundle prepare to cut excess expenses in the event of a crash.

You will likely leave your heirs 3-5x the amount you retired with.


But I personally would keep a 10 year bond tent and retire early at 30x expenses rather than wait till 62 and retire with 50x expenses.

CnC
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Joined: Thu May 11, 2017 12:41 pm

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by CnC » Mon Apr 15, 2019 11:03 pm

afan wrote:
Mon Apr 15, 2019 12:32 pm

Even more baffling is to ignore the worst outcomes so far, assuming they cannot happen again. Once we know they are possible, why pretend that repeats cannot occur?
Because coming up with a solution that is worse 99 out of 100 possible outcomes is a bad idea. Imagine if you lived your life that way. So constantly afraid of the 1 in 100 event that you choose to do illogical and expensive things rather than succeed the 99 times without it.

I could list dozens of examples, but I trust you understand my point.

goblue100
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Joined: Sun Dec 01, 2013 10:31 am

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by goblue100 » Tue Apr 16, 2019 6:00 am

CnC wrote:
Mon Apr 15, 2019 10:54 pm
I agree whole heartedly.

If you have plenty of money no reason to be 100 percent stocks. But plenty of money differs greatly person to person. If you have 50x your desired (not required) expenses then sure go 100% stocks live off of dividends of the tsm not of some dividend aristocrat bundle prepare to cut excess expenses in the event of a crash.

You will likely leave your heirs 3-5x the amount you retired with.


But I personally would keep a 10 year bond tent and retire early at 30x expenses rather than wait till 62 and retire with 50x expenses.
:idea:

This is what happened to me. I'm still 10 years from FRA, but since I am in that 25x range sticking it out for 10 more years and getting to 50x @ 100 /0 is a lot less appealing than cutting off the "fat tails" and going 60 / 40, and headed for 50/50 and pulling the plug in a year or two.
Financial planners are savers. They want us to be 95 percent confident we can finance a 30-year retirement even though there is an 82 percent probability of being dead by then. - Scott Burns

Miriam2
Posts: 2464
Joined: Fri Nov 14, 2014 11:51 am

Re: If you have plenty of money, why not 100% stocks in retirement?

Post by Miriam2 » Tue Apr 16, 2019 8:38 pm

Broken Man 1999 wrote: I'm not sure about how much plenty of money might be, as we are early in retirement at 65 years of age. Hopefully we will be around a couple of decades longer, so I don't think 100% equities would be a good choice at this time.

However, I am considering just letting the percentage of equities rise over time, and removing most expense dollars from our bond holdings. Apparently I am using a bond tent as described at https://www.kitces.com. I'm OK with a bond tent as I was once a Boy Scout and I enjoyed camping immensely. :D
I also enjoy camping immensely - especially putting up my LL Bean tent in the middle of the night in the rain :mrgreen:

Here are other links to Michael Kitces and his Bond Tent :happy

www.kitces.com/blog/managing-portfolio- ... -red-zone/

www.bogleheads.org/forum/viewtopic.php?f=10&t=209728 - Kitces' Bond Tent

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