Asset Allocation Questions

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john0608
Posts: 98
Joined: Sat Dec 09, 2017 9:22 am

Asset Allocation Questions

Post by john0608 »

in mid 60s and retired in the last year - wife early 60s still working for another year - holding off on SS till 70 (me) - she will take SS early when she retires (64)
Current Asset Allocations
Overall 58/42, taxable - 67/33, IRA - 54/46
i haven't been doing reallocations in the past year - as i spend from taxable savings for living expenses the ratios change and as the equity markets dive and recover a bit this also changes my AA.

Wondering what others think about AA in similar situations - financial advisors during free consultations always say we have far too much in fixed due to size of portfolio it is about 6 or 7 years living expenses
my feeling is that its safe and all in T-bills or e-banks or i-bonds so getting an avg of 4% but always like to get other opinions from bogleheads.
Would it be better to convert some fixed into mutuals while things are low or better to just stay as is?
homebuyer6426
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Joined: Tue Feb 07, 2017 9:08 am

Re: Asset Allocation Questions

Post by homebuyer6426 »

Not enough information. We need to know things like your social security income and your expenses. If you post in the style outlined on the wiki, you will get a better answer.
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vineviz
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Re: Asset Allocation Questions

Post by vineviz »

john0608 wrote: Thu Nov 24, 2022 7:57 am in mid 60s and retired in the last year - wife early 60s still working for another year - holding off on SS till 70 (me) - she will take SS early when she retires (64)
Current Asset Allocations
Overall 58/42, taxable - 67/33, IRA - 54/46
i haven't been doing reallocations in the past year - as i spend from taxable savings for living expenses the ratios change and as the equity markets dive and recover a bit this also changes my AA.

Wondering what others think about AA in similar situations - financial advisors during free consultations always say we have far too much in fixed due to size of portfolio it is about 6 or 7 years living expenses
my feeling is that its safe and all in T-bills or e-banks or i-bonds so getting an avg of 4% but always like to get other opinions from bogleheads.
Would it be better to convert some fixed into mutuals while things are low or better to just stay as is?
I don't like the broad generalization of "far too much" in fixed income.

If your withdrawal rate is low (and is expected to remain low) it is probably true that you COULD take more equity risk, but also equally true that you DON'T NEED to take more equity risk. Which basically means you should do what you want.

If you called me for a consultation I'd probably want to talk about relying on longer-term bonds more than cash and Treasury bills, given the 30+ years of retirement you and/or your wife could enjoy.

But based on the slim amount of information presented here I think any suggestion that you have "far too much" fixed income seems off-base.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
rkhusky
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Re: Asset Allocation Questions

Post by rkhusky »

Vanguard's target date funds are at 50/50 at the target date and then move to 30/70 over the next 7 years. So, you have more in stocks than that.

The answer depends on how much you have saved and what other sources of income that you have. Big difference between having $3M saved, needing $50K/yr from the portfolio, versus have $1M saved and needing $50K/yr from the portfolio.
pkcrafter
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Re: Asset Allocation Questions

Post by pkcrafter »

While I agree that a little more information would be helpful, I also believe vineviz is right--"far too much" in fixed income," doesn't make sense. Of course, these "advisors" are trying to maximize their retirement. :oops:

Where did the advisors come from? Do you have assets under management? If so, who are you with?


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When times are good, investors tend to forget about risk and focus on opportunity. When times are bad, investors tend to forget about opportunity and focus on risk.
dbr
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Joined: Sun Mar 04, 2007 9:50 am

Re: Asset Allocation Questions

Post by dbr »

You might like to look at this chart of historical results and change around the asset allocation to see what the effect of your choice looks like:

https://engaging-data.com/visualizing-4-rule/

The retirements starting in different years give you a perspective on the range of possible outcomes that might happen to you.
Florida Orange
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Re: Asset Allocation Questions

Post by Florida Orange »

Not enough information to render an opinion, but as a very general observation, it seems a little strange that anyone would say that 40% in fixed income is too much for someone who is retired.
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arcticpineapplecorp.
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Re: Asset Allocation Questions

Post by arcticpineapplecorp. »

homebuyer6426 wrote: Thu Nov 24, 2022 9:28 am Not enough information. We need to know things like your social security income and your expenses. If you post in the style outlined on the wiki, you will get a better answer.
to the OP, homebuyer6426 means this:

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Northern Flicker
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Re: Asset Allocation Questions

Post by Northern Flicker »

john0608 wrote: Thu Nov 24, 2022 7:57 am in mid 60s and retired in the last year - wife early 60s still working for another year - holding off on SS till 70 (me) - she will take SS early when she retires (64)
Current Asset Allocations
Overall 58/42, taxable - 67/33, IRA - 54/46
i haven't been doing reallocations in the past year - as i spend from taxable savings for living expenses the ratios change and as the equity markets dive and recover a bit this also changes my AA.
Your asset allocation should not change when the market moves. It should be a target that may change if life circumstances change or to reduce risk as you age. The asset allocation should reference asset classes, not fund products.

The portfolio investment position will change as the market moves. This can lead to deviations from your target asset allocation. Rebalancing is the process if making a portfolio change to re-align the portfolio position with the target asset allocation. While there can be tax consequences of rebalancing in a taxable account, there is no reason not to rebalance using your IRA to re-establish your overall target asset allocation if you hold both stock and bond funds in your IRA.

My guess is that your asset location mapping may be suboptimal-- it may be advantage to hold a higher bond allocation in the IRA and lower bond allocation in the taxable account, but I don't have enough info to say that definitively.
My postings represent my opinion, and never should be construed as a recommendation to buy, sell, or hold any particular investment.
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tennisplyr
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Re: Asset Allocation Questions

Post by tennisplyr »

This is a good Vanguard tool for getting a general sense of what your AA should be.

https://investor.vanguard.com/tools-cal ... stionnaire
“Those who move forward with a happy spirit will find that things always work out.” -Retired 11 years 😀
Topic Author
john0608
Posts: 98
Joined: Sat Dec 09, 2017 9:22 am

Re: Asset Allocation Questions

Post by john0608 »

- 6 months ago i did meet with a tax specialist that comes with a low cost financial service i use - he said i should try to do Roth conversions up to the 22% or 24% bracket because taxes will go higher in 2027, after reviewing my portfolio and projections he says plans/projections look fine.
- I don't use AUM but over the years have had initial meetings with several companies but i prefer to handle things on my own.

for those of you that do your own projections - 5 or 10 year - what % do you now use for expenses, and what for investment growth? i was using 3% inflation and 4% investment return but i wanted others opinions.
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