Anyone else staying very aggressive in retirement

[exodusing]

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.

I think you have that backwards...

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.

There's plenty good reason. For one, that hasn't happened in almost 100 years. For another, after that crash, many laws, regulations, policies, etc were put in place to defend against it. I think it's safe to say it worked. That is also unlikely in the extreme. I guess you could say "there's no guarantee," but that is vague and only states the obvious. Nothing in life is guaranteed. All we can do is try to make educated guesses and act accordingly.

Increased demand drives up price and valuation ratios. Higher valuation ratios are usually regarded as a negative for long-run returns and in any event not likely to be a positive.

Read Bill Bernstein's Deep Risk which goes through four main causes of risk including severe, prolonged economic recession/depression.

[gunny]

Been retired 10+ years and I am still about 45/45/10 in my AA. Aggressive? I don't know but I do know that it works for me. And, is that not the best reason?

Absolutely! As others have pointed out, people's situations (and biases and strategies and etc etc) are different. There is no one size fits all. I was just curious to hear from those more conservative than me (i.e. most people) and their rationales etc. IMO that's one of the big values of this site...to hear differing opinions.

[Drsteamfitter]

I have a friend who retired in 2011 and has been in 100% stocks since then, with a tilt toward tech stocks. Because they have ignored conventional wisdom everytime it was offered to them, they are in quite a comfortable situation. Maybe there will be a downturn, or maybe the same strategy will be catastrophic if implemented today.

But none of us know, and I sense that strong arguments one way or the other are a way to deal with the cognitive dissonance of not knowing.

So let's exchange information to help each other make informed choices that suit oneself, rather than present any one approach as "correct".

Coming out of a deep bear market (2011) is conventionally a more optimal time for higher risk than after a long bull run (like right now).

[VanGar+Goyle]

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.

If you are at 100x, then you might live off half your dividends, and easily survive most bear markets.
Or you could invest in US treasuries for a good 30 years, and skip bonds.
Or you might consider your beneficiaries.

[carminered2019]

I retired in 2019 with 52x, AA was 95/5 until last year when my portfolio got up to 112X. Now I put 30X in FI and don't care about the stock side because live off dividends and interests. I got another 30X coming from a real estate sale that I will invest all 100% into the stock side.

[watchnerd]

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?

It's not the average you have to worry about.

[watchnerd]

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.

Lots of frothy and getting near the top signals lately

[watchnerd]

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.

I think you have that backwards...

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.

There's plenty good reason. For one, that hasn't happened in almost 100 years. For another, after that crash, many laws, regulations, policies, etc were put in place to defend against it. I think it's safe to say it worked. That is also unlikely in the extreme. I guess you could say "there's no guarantee," but that is vague and only states the obvious. Nothing in life is guaranteed. All we can do is try to make educated guesses and act accordingly.

You're 61, right?

Were you invested during the Lost Decade?

[Helium]

I have a friend who retired in 2011 and has been in 100% stocks since then, with a tilt toward tech stocks. Because they have ignored conventional wisdom everytime it was offered to them, they are in quite a comfortable situation. Maybe there will be a downturn, or maybe the same strategy will be catastrophic if implemented today.

This anecdote literally doesn't mean anything. Was your friend not comfortable when they retired? If not, then taking some risk is reasonable. If they were already comfortable, then taking rich to get richer when you're already rich is unnecessary and pointless.

[Lawrence of Suburbia]

I make gestures towards maintaining a very loose 50/50-ish a.a. in retirement ... right now, the 50% in stocks seems rather risky indeed, with multiples being where they (near an all-time high, right?). I was definitely inspired by Mr. Bogle in this (his own retirement balance, I think). I call it the "agnostic allocation", because I have no idea whether stocks or bonds will do better going forward.

To be honest, I sometimes feel like piling everything into Wellesley and hunkering down; but that goes against my investment plan.

[epicureme]

I have a friend who retired in 2011 and has been in 100% stocks since then, with a tilt toward tech stocks. Because they have ignored conventional wisdom everytime it was offered to them, they are in quite a comfortable situation. Maybe there will be a downturn, or maybe the same strategy will be catastrophic if implemented today.

This anecdote literally doesn't mean anything. Was your friend not comfortable when they retired? If not, then taking some risk is reasonable. If they were already comfortable, then taking rich to get richer when you're already rich is unnecessary and pointless.

Indeed, it makes less sense when you quote half of the post... keep reading

[gunny]

You're 61, right?

Were you invested during the Lost Decade?

Hurray for more cherry picking!

[markus75]

I have just two questions.

What am I missing?

Why risk money you need for more money you don't need?

given the average bear market lasts about a year give

Assuming you can't swim, would you cross a river that averages 4 feet deep?

[watchnerd]

You're 61, right?

Were you invested during the Lost Decade?

Hurray for more cherry picking!

It was 9 bad years of negative real US stock returns in our recent past.

Not exactly cherry picking.

What did you learn from it?

[BitTooAggressive]

Hurray for more cherry picking!

It was 9 bad years of negative real US stock returns in our recent past.

Not exactly cherry picking.

What did you learn from it?

Apparently nothing.

[Morse Code]

Yes, we will be staying very aggressive in retirement. We will keep 3-5 years of expenses in cash/treasuries, the remainder in equities. Maybe we will regret it, but I don't think we'll starve regardless of market performance because we have the ability to live very modestly if necessary. If markets perform as they have historically, we will have more than we need and will be able to help a lot of other people along the way.

[secondopinion]

Yes, I would want to leave a small fortune to my cousin and friends, my money my prerogative.

So the money is for their benefit. I’d assume cousin and friends are somewhat comparable age? So you think they would rather you shoot for the moon to get $10 million, but risk ending up back at 3 million in 10 years (the average of what has happened historically at these market valuations ) or would they rather have a “safe” 5-6 million in 10 years?

I rather gift some of the money while I am alive, especially if there is a risk of some estate taxes. And I would invest in a matter appropriate to my heirs and appropriate to their wishes; I would personally not want all of it in stocks.

[KEotSK66]

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?

Your expectations for bear markets and stock returns look like they're driving your AA.

You might be missing to provide long-term retirement income doesn't require 95% in stock, such a high stock allocation could in some scenarios put you in a hole later in life due to cannibalization of your share base during an extended period of low stock returns.

I'm 70, retired 3 years ago, and have held about 35% in stocks for a while now. The rest has been in bonds. My portfolio provides more than sufficient income so I'm always growing my portfolio one way or another...dollars or shares or both.

However I do know people who've been successful with high stock allocations, particularly dividend stocks.

[tibbitts]

I'm 70, retired 3 years ago, and have held about 35% in stocks for a while now. The rest has been in bonds. My portfolio provides more than sufficient income so I'm always growing my portfolio one way or another...dollars or shares or both.

However I do know people who've been successful with high stock allocations, particularly dividend stocks.

At some point "sufficient income" is more a function of having a huge amount invested than of any strategic decisions.

Unless dividend stocks have outperformed other stocks success wouldn't depend on dividends.

[Hot Sauce]

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

bookmarking thread for future...

Yea I laughed out loud at that part. And the fact that planning shouldn’t be based on an average.

[j0e0r7]

I have always thought that many people who think they have a "high appetite for risk" and want to be "aggressive" in their asset allocation, don't fully understand all the risks to which they are exposing themselves.

Rather, they either don't know about the risky possibility or simply think the risk won't end up realizing itself.

[White Coat Investor]

Not sure you would think that even 50% is enough. I lost 78% in REITs in 2008 and the overall market dropped 90% in the Great Depression. There's not even some rule that a future scenario couldn't be worse than that.

White Coat Investor,

10% of my portfolio was in REIT. Before 2008, REIT went up more than 30% and 5/25 band based rebalancing was triggered. Hence, I made money from REIT with rebalancing before it gone crashing in 2008/2009.

Did you use 5/25 band based rebalancing in your IPS?

KlangFool

I just rebalance with new contributions more or less. Since it doesn't matter much, I don't try to be too exact or nutty about it. But I started investing in REITs in January 2007. That initial investment did not have a good first two years. Over time my return in the asset class is fine of course. But it was 78% peak to trough.

[KlangFool]

White Coat Investor,

10% of my portfolio was in REIT. Before 2008, REIT went up more than 30% and 5/25 band based rebalancing was triggered. Hence, I made money from REIT with rebalancing before it gone crashing in 2008/2009.

Did you use 5/25 band based rebalancing in your IPS?

KlangFool

I just rebalance with new contributions more or less. Since it doesn't matter much, I don't try to be too exact or nutty about it. But I started investing in REITs in January 2007. That initial investment did not have a good first two years. Over time my return in the asset class is fine of course. But it was 78% peak to trough.

Okay. I think I started on 2004 or earlier.

KlangFool

[KEotSK66]

At some point "sufficient income" is more a function of having a huge amount invested than of any strategic decisions.

Not in my case. I made several strategic decisions decades ago, including the decision to more or less equalize my growth and income.

[JBTX]

White Coat Investor,

10% of my portfolio was in REIT. Before 2008, REIT went up more than 30% and 5/25 band based rebalancing was triggered. Hence, I made money from REIT with rebalancing before it gone crashing in 2008/2009.

Did you use 5/25 band based rebalancing in your IPS?

KlangFool

I just rebalance with new contributions more or less. Since it doesn't matter much, I don't try to be too exact or nutty about it. But I started investing in REITs in January 2007. That initial investment did not have a good first two years. Over time my return in the asset class is fine of course. But it was 78% peak to trough.

That was the tough thing about 2007/2008. Other than treasuries just about everything took a beating. In 2000 and coming out of that I had various tilts, small cap, value, REITS, international that did comparatively better than the index, and I thought I was really smart. In 2008, they all did worse - and i was underweighted in bonds, so peak to trough we were probably down 50%. Luckily I didn’t panic and it recovered in time, but on the way up I kept rebalancing to a more reasonable allocation (which in theory would have been better off not doing).

[r.walker]

Retired after several decades of all-equity investing, I continue to dance with the one that brought me - 100% VTSAX with a modest cash reserve for lumpy expenses. Never owned bonds. SS at 70 largely covers basic expenses. Cash reserves can be quickly replenished if needed via taxable VTSAX {mostly qualified) dividends. Though well past the need to accumulate, I enjoy watching my shares of productive businesses grow.

Understood that portfolio size is a key factor in making this work. Mine is in excess of 100x.

[Morse Code]

I have always thought that many people who think they have a "high appetite for risk" and want to be "aggressive" in their asset allocation, don't fully understand all the risks to which they are exposing themselves.

Rather, they either don't know about the risky possibility or simply think the risk won't end up realizing itself.

I have always thought that many people who think they have a "low appetite for risk" and want to be "conservative" in their asset allocation, don't fully understand all the risks to which they are exposing themselves.

Rather, they either don't know about the risky possibility or simply think the risk won't end up realizing itself.

[chlomag]

Here is the 10 year data based on forward PE


https://www.oaktreecapital.com/images/o ... 6a105466_2



Here the 20 year data based on CAPE10

https://www.crestmontresearch.com/docs/ ... eturns.pdf


OP Is expecting an outcome that has never happened before - not even close. 10%+ returns over the next decade when started from very high PE ratios.

Using history, odds are that TIPS at 2.0-2.5% real will outpace stocks over the next 10 years.

Of course we could experience a unicorn and see stocks triple on top of record high PEs. Anything is possible.

The conclusion (“OP Is expecting an outcome that has never happened before - not even close. 10%+ returns over the next decade when started from very high PE ratios”) is not supported by the graph presented; the data actually covers only a period starting in 1988 and ending in late 2014 (the number of independent 10 year periods is less than 4 and conveniently continuing the data to the end of 2014 would result in returns exceeding 10%). The plot shown/cited exhibiting 10 year S&P 500 forward P/E ratio is misleading; a close examination of the data basically reveals that if you bought equities with elevated PE ratios in the dot com bubble, which was followed by the GFC, the market did not recover until 2014 (not news). To conclude that something has never happened before based on a very selective time frame is a reach (even for a unicorn).

[Richard1580]

Retired after several decades of all-equity investing, I continue to dance with the one that brought me - 100% VTSAX with a modest cash reserve for lumpy expenses. Never owned bonds. SS at 70 largely covers basic expenses. Cash reserves can be quickly replenished if needed via taxable VTSAX {mostly qualified) dividends. Though well past the need to accumulate, I enjoy watching my shares of productive businesses grow.

Understood that portfolio size is a key factor in making this work. Mine is in excess of 100x.

Similar to our experience. We never held bonds until after retirement. Began shifting out of equities a couple of years ago. I don't think we *needed* to do this, but there is a point where it made sense to start taking money "off the table." Dumped a lot of equities so we are now 69/24/6/1 (equities/TIPS/gold/cash). I think most people would still consider that an aggressive AA.

Going forward, we will be looking at a net positive cash flow and excess funds will just go into TIPS.

I fully expect that over the long term equities will outperform bonds, but we don't need the additional growth, and my predictions about the future have been wrong often enough that I choose to hedge my bets. It lets me sleep well at night.

Again, it is all about your personal risk tolerance. From our perspective, once you have planned for likely events, it is time to start preparing for unlikely (but possible) events.

[itnetpro]

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 set a floor and I keep a 3 year cash reserve to buffer any downturn. If the downturn extends past 3 years, I can cut expenses in half and live fine pulling 2.5% per qtr to live.

Thats back testing my portfolio with a 50/50 mix (I combine two active traded funds) back to 71. I determined, the max underwater duration for my mix was 2.8 years.

When I calculated a much more aggressive portfolio similar to what you have, that underwater duration rises to 5 years. So in theory, if I wanted to protect that more aggressive portfolio, I would need 5 years cash reserve or invest all of it and go along for the ride.

Right up until retirement, I was 100% aggressive in equities. Waited out the .com bubble, lost 50% in the 2008 downturn never selling, always buying. That was easy back when we had jobs and income.

We retired 2 years ago at 52/55 years old.

I thought I will still have the same courage I did back then but my portfolio is aligned much more conservative tolerating as much as 30% loss and 3 years underwater at most.

We have no pension and won’t take SS until 70 so my perspective so much different now on risk.

Staying aggressive is fine if you have other income such as pensions or if you have a really solid withdraw strategy to weather the storm. Really think long and hard on how much risk tolerance you will have after you are no longer pulling a paycheck. That 80/20 might sound great now watching these record returns but think back to how you would have felt in 2008 or .com in the early twilight years of your life?

Now is the time you want to enjoy your life early in retirement while you can! Not cutting back eating Chef-Boy-RD because the market tumbled 50% and you need to cut your food budget, sitting at home watching soap operas because you can’t afford the gas to drive to the golf course!

Just my 2 cents…

John

[JBTX]

Here is the 10 year data based on forward PE


https://www.oaktreecapital.com/images/o ... 6a105466_2



Here the 20 year data based on CAPE10

https://www.crestmontresearch.com/docs/ ... eturns.pdf


OP Is expecting an outcome that has never happened before - not even close. 10%+ returns over the next decade when started from very high PE ratios.

Using history, odds are that TIPS at 2.0-2.5% real will outpace stocks over the next 10 years.

Of course we could experience a unicorn and see stocks triple on top of record high PEs. Anything is possible.

The conclusion (“OP Is expecting an outcome that has never happened before - not even close. 10%+ returns over the next decade when started from very high PE ratios”) is not supported by the graph presented; the data actually covers only a period starting in 1988 and ending in late 2014 (the number of independent 10 year periods is less than 4 and conveniently continuing the data to the end of 2014 would result in returns exceeding 10%). The plot shown/cited exhibiting 10 year S&P 500 forward P/E ratio is misleading; a close examination of the data basically reveals that if you bought equities with elevated PE ratios in the dot com bubble, which was followed by the GFC, the market did not recover until 2014 (not news). To conclude that something has never happened before based on a very selective time frame is a reach (even for a unicorn).

Prior to 1988 the only time the market was valued close to that high was 1929, and that took more than 10 years to recover (including the deflation and dividend reinvestment makes this less clear ) So I think the assertion that 10% returns for a decade on top of very high PEs is correct. Sure, the data set is limited, and it “could” happen, but to hold it as a reasonable or probable expectation defies logic.

[Dottie57]

In the long run, you'll be dead.

I didn't mean THAT long. (Hopefully it's long)

What is the purpose of being super aggressive? You've already made statements that sound to me like wishful thinking, like this one.

Stocks out-perform bonds "in the long run." That's hardly wishful thinking. But as always, the devil's in the details.

What is it you wish to accomplish by being agressive -super or not?

[JBTX]

I didn't mean THAT long. (Hopefully it's long)

Stocks out-perform bonds "in the long run." That's hardly wishful thinking. But as always, the devil's in the details.

What is it you wish to accomplish by being agressive -super or not?

Pass on a big estate to his friends and cousin when he dies. Presumably only a really big amount will impress them.

[Candor]

What is it you wish to accomplish by being agressive -super or not?

Pass on a big estate to his friends and cousin when he dies. Presumably only a really big amount will impress them.

You're confusing the OP with another poster.

[JBTX]

Pass on a big estate to his friends and cousin when he dies. Presumably only a really big amount will impress them.

You're confusing the OP with another poster.

Probably. Wouldn’t be the first time. I tend to get the 95%+ stocks until death posters confused.

[Lawrence of Suburbia]

Question for the Peanut Gallery*:

I'm currently at ~63x my annual withdrawals, 6 years into retirement (I'm 71). Do I even need to be concerned about my A.A.? ... I'm at 50/50 right now, and have ~55% of my money in Target 2025 at Vanguard, which becomes 30/70 in about 7-8 years.


*If you know what this refers to, you're "vintage" like me!

[MichDad]

We entered retirement in 2018 with a substantial FERS pension. My wife began collecting her reduced Social Security benefits a couple of years later at age 62. I'll begin to collect my maximum Social Security benefits this year at age 70. We have a paid off home and car, federal employee health and dental benefits, and long term care insurance.

When we retired, our portfolio was about 70:30 equities to bonds. All our bonds were in the TSP's G Fund. We've been spending down the G Fund over the past several years. We're now about 81:19 equities to bonds and we'll continue to spend slowly from our G Fund over the next several years. This will increase our equities allocation to 90:10 or more at some point.

Over 90 percent of our equities are in Roth IRAs. The rest is taxable accounts.

I feel like we're taking a calculated risk that our retirement portfolio will be worth many millions of dollars in ten to fifteen years -- perhaps into eight figures.

We've been ramping up our spending and will likely continue to do so. If the US and international equities markets crash 80 percent, I think we'll be fine. We'll take a psychological hit but I don't think it will require us to change our spending.

My short answer to the question posed by OP is that it's possible to be very aggressive in retirement under certain circumstances.

MichDad

I just did some math that can help explain why we can remain aggressive in retirement. This year, we've budgeted spending only 1.75% of our assets. Even if our assets decline slightly in 2025, I expect that we'll spend down only 1.4% of our assets in 2026. That's because I'll begin to collect my maximum Social Security benefits this year. Because of this small drawdown percentage, I expect that our drawdown percentage will continue to decline over time unless we ramp up spending or give significant assets to charity.

If US and international equities tank in 2025 or 2026, I suspect we'll still end up spending down less than four percent of our portfolio.

MichDad

[watchnerd]

Question for the Peanut Gallery*:

I'm currently at ~63x my annual withdrawals, 6 years into retirement (I'm 71). Do I even need to be concerned about my A.A.? ... I'm at 50/50 right now, and have ~55% of my money in Target 2025 at Vanguard, which becomes 30/70 in about 7-8 years.


*If you know what this refers to, you're "vintage" like me!

Do you think you'll live over 130 years?

If not, no.

Do whatever.

[Lawrence of Suburbia]

Question for the Peanut Gallery*:

I'm currently at ~63x my annual withdrawals, 6 years into retirement (I'm 71). Do I even need to be concerned about my A.A.? ... I'm at 50/50 right now, and have ~55% of my money in Target 2025 at Vanguard, which becomes 30/70 in about 7-8 years.


*If you know what this refers to, you're "vintage" like me!

Do you think you'll live over 130 years?

If not, no.

Do whatever.

Thanks.

I think I'm good for maybe 15 more, actually. Had some concerning lab test results recently.

I've been sort of fiddling with things to keep it 50/50 -- maybe I'll just let Target 2025 become Target Income.

[tibbitts]

At some point "sufficient income" is more a function of having a huge amount invested than of any strategic decisions.

Not in my case. I made several strategic decisions decades ago, including the decision to more or less equalize my growth and income.

It doesn't matter what you did decades ago; you still must have a large amount invested (or extraordinary circumstances such as a generous pension or very low expenses) if 35/65 is allowing you to always grow your dollar and/or share balance in retirement.

[calmaniac]

To answer the OP's original question, we've gone from 100/0 to 80/20 as we've neared retirement and will keep it around there in retirement. Of that 20% in bonds, about half is in the TSP G Fund. I originally was aiming for 75/25, but that made me jittery...just too conservative to make sense to me.

Like the OP, I have a military pension, and DW has a state pension. Having 2 substantial COLA adjusted pensions insulates us from market downturns. We are also overfunded to ≈100x, further mitigating risk.

I wholeheartedly agree that in retirement one needs to thoughtfully avoid risk, as I do not want to constrain our lifestyle waiting for the market to recover. That said, I don't see a scenario for us in which dialing it back to 60/40 would meaningfully add security.

gunny, if you have not read Bill Bernstein's The Four Pillars of Investing, Second Edition, I recommend it. He is brilliant.
https://www.amazon.com/Four-Pillars-Inv ... 1264715919

[KEotSK66]

Question for the Peanut Gallery*:

I'm currently at ~63x my annual withdrawals, 6 years into retirement (I'm 71). Do I even need to be concerned about my A.A.? ... I'm at 50/50 right now, and have ~55% of my money in Target 2025 at Vanguard, which becomes 30/70 in about 7-8 years.


*If you know what this refers to, you're "vintage" like me!

I admit to knowing what it refers to, 70 and retired for 3 years.

I've been 35/65 for a while, I think it will matter whenever the market tanks.

My portfolio has a healthy income component and I'd hate lose a portion of that when I'm forced to redeploy my Rollover IRA to my Non-Retirement Account due to RMDs, I'll come up with something. I don't think I'll be drawing from my Roth so I can let it stew, I hope it will eventually become the core of a legacy.

[gunny]

I'd just like to thank those of you who offered your opinions and insights, even if you disagreed with me, without digressing into childish, snotty insults, which sadly speak for themselves. I guess every village (site) has them...

[LFKB]

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.

My point is that over a long enough period of time, the risk has never shown up. You have never been off worse with equities than bonds over long periods of time.

It's fine if you want to prepare for something that has never happened, but it's not necessarily logical. And like I said, many people have sacrificed many millions for peace of mind, not wanting to have a mortgage payment, etc.

Your insurance example makes absolutely no sense to me. If your house burns down, it burns down and the insurance company repays for it. If the stock market goes to zero, your bonds are probably worthless also and the world is ending.

[LFKB]

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.

You make it sound like they made a mistake by paying off their house and getting rid of debt/interest instead of hoping for higher returns in the stock market.

I do, and they absolutely did if they paid off a low rate mortgage. Paying off a 3% 30 year mortgage early is basically just taking your money and lighting it on fire.

[Drsteamfitter]

You make it sound like they made a mistake by paying off their house and getting rid of debt/interest instead of hoping for higher returns in the stock market.

I do, and they absolutely did if they paid off a low rate mortgage. Paying off a 3% 30 year mortgage early is basically just taking your money and lighting it on fire.

True, but those aren't the rates available to people taking out mortgages today.
https://www.bankofamerica.com/mortgage/mortgage-rates/