Is anyone here allocated 30/70 a la Rick Ferri's "new center of gravity?"

[AntsOnTheMarch]

Hola Bogleheads!

I believe the center of gravity shifts when a person stops accumulating assets and starts taking income from their assets. The corrected ideal asset allocation for beginning a discussion on asset allocation with a pre-retiree or retiree is 30% stocks and 70% bonds.

https://seekingalpha.com/article/303663 ... r-retirees

Is anyone here allocated 30/70 a la Rick Ferri's "new center of gravity?" If so, Are you using a three fund portfolio? What does it look like?

Why I ask
- This model appeals to me for the low volatility. Even knowing what I know, I can't safely predict my behavior should we have another 2008-09 type event. Better to acknowledge cowardice than to mistake cockiness for confidence.
- I ran some firecalc projections based on 30/70 AA for 30 and 35 years and got 100% success for both based on 3% withdrawal.

Here is some relevant personal info
We are self-employed. My thinking is that we supplement work income with 30k or less per year withdrawals for the next decade, then income will be replaced by SS and we continue to draw at same rate (adjusted for inflation). Depending on how our income and returns on savings work out in next 5-10 years, we may be better off than planned and hopefully not too much worse. Can easily adjust up. As for adjusting down? Well, we will make do. What's the alternative?

More
- Husband/wife, ages 60/60.
- 15% tax bracket.
- Both in excellent health, active, low BMIs and follow a healthy lifestyle. Family genetics imply that we should both plan to live into late-80s but should plan for at least early to mid-90s.
- 1M in savings (600k in non-Roth SEP accounts / 400k in taxable account).
- Live in/own 200k condo and plan to stay in it for foreseeable future (i. e., already living a retirement lifestyle/expenses).
- No pensions.
- No inheritance.
- No other assets.
- No debt.
- No heirs—we'd be happy to die broke with just enough money for cremations.

My deepest, darkest financial fears are what I call the 3 strike scenario
- Strike 1: Between health insurance costs and our high deductible policy, an illness or bad accident requiring longterm care/rehab before reaching Medicare age could dent into savings in a big way.
- Strike 2: Inability to work/earn due to strike 1 (wife and I each have specific role in our biz and either being sick would impact biz, not to mention personal life/stress to the other). So scenario where one of us is laid out would have major impact on savings, income and future income (client retention). Used to have disability insurance but had to drop it due to skyrocketing premiums.
- Strike 3: Major market event on the heels of strike 1 and strike 2.

Ergo, a safer portfolio AA for at least the next 5 years (until we become Medicare eligible) seems prudent. Maybe can adjust after.

I see some pitfalls with my plan but since there's no perfect plan, this seems as good as any to me at the moment.

Would love to hear any and all comments and opinions.

[209south]

You would seem a perfect candidate for such an asset allocation...100% success based on 3% withdrawals, no legacy aspirations, and a clear understanding of your need / willingness to take risk...go for it, and perhaps one of the LIfeStrategy funds would work so your rebalancing needs are handled. I moved to a 35-65 allocation two years ago and sleep far better at night!

[mindboggling]

I am also 30% equities/70% fixed income. It just feels right for me. I'm 64, fully-retired six months. There may be some inflation risk. Might increase equity allocation a bit later on.

Taxable: Index 500, and Federal MM

Trad. IRA: short-term bond index, total bond index, total stock index

Roll-over IRA: total bond index, total stock index, total international stock index

Roth IRA: Vanguard LifeStrategy-Conservative

Vanguard Variable Annuity: Conservative Allocation fund

Misc: I-bonds and high-yield savings account

Fixed Pension: yes

Percent of equities in international: about 22%

Hope this helps.

[AlwaysaQ]

I'm 75 and hold about 33% in stock and stock funds, the rest in cash, CDs, bonds, and bond funds. Individual bonds are TIPS and EE and I bonds.

[zengolf2011]

I'm 71, wife is 68, been retired ten years. We have maintained a 50% stock allocation in retirement, but this post just changed my mind. We could easily live with a 3% withdrawal rate, and have no legacy concerns. Thanks to Rick for posting this, and for the other thoughtful comments.

[harvestbook]

Given your mutual interdependence for income, I would consider bridging to Medicare with disability insurance policies if you don't have them. Nothing wrong with playing it safe leading to the immediate retirement years, getting a little past it, and then re-assessing.

[pinot3]

We've been 30/70 for 2 1/2 years since I retired in 2015. Funds are VTSAX (total stock index) and VBILX (intermediate term bond index) a la Jack Bogle's 2 fund for basically the same reasons; I don't feel I need international. I held international in earlier years and was unimpressed with the results. A lot of people invest in international for good reasons, but not having them works for us. We lost more than $400,000 in October 2008, and I don't have the ability to make that back being retired so I really like Rick Ferri's 30/70 center of gravity allocation.

I'm 65, and I'll begin receiving social security in September after I reach FRA in August. My wife still works and hopes to continue to do so for 2 more years. She maxes out her 401k, catch up contribution, and her income allows us both to contribute maximum amounts to traditional IRAs. Her income basically allow us to continue to max out retirement contributions. We have no pensions, future inheritances or other income other than her current employment, our retirement assets and social security. She intends to claim social security in November 2019. We have nearly $3M in investable assets and 2 homes worth more than $1M with no mortgages.

With the 30/70 allocation, our investable assets since early 2015 have increased more than we've been able to draw them down by a large margin. So far, retirement has been better than advertised in many ways. This is what has worked well for us. I hope it helps you with your planning.

[AlwaysBeClimbing]

OP, I’m about your age, roughly similar circumstances and am right at 30/70 and very happy with that. Read Rick’s piece when he posted it and it really struck home and it fits well with my need and ability to take risk. My personal preference is for stable sources of income vs potentially higher but variable ones.

[Dave55]

I used anywhere from 20%-70% stock on Firecalc and got a 100% success rate with a 3.8% withdrawn rate. Are you folks finding the same result?
I also used Vanguards retirement nest egg calculator and I get 94% with a 20stock/80 bond at the 3.8% withdrawal rate, 96% at 30s/70b and 60s/40b is 95%. I know that Vanguard calculator does not take into account Social Security.

I am at 40/60 but seriously thinking of going to 30/70.

Thanks
Dave

[freebeer]

I am nearing (possible / early-ish / partial) retirement with a comfortable but not crazy buffer (3% is OK given SS will eventually supplement) so I am thinking about the sequence of returns risk in early retirement and the idea of reducing equity exposure from 60/40 during accumulation phase is attractive in some respects. But...

1. I have bequest motive, not imperative (both kids seem likely to be self-sufficient) but not absent.

2. My plan is based on current modest expenses but if things went well in early years I could enjoy some more luxurious travel (e.g. participating in more expensive guided expeditions vs. budget independent adventures) and maybe a few other upward tweaks to spending.

3. I have a gut-level aversion to being irrationally inefficient - to "leaving returns on the table". To me going 30/70 feels not so different than paying a fee-based advisor or buying individual stocks or expensive mutual funds or a variable annuity... as in, one of a set of dumb moves that should be avoided. I realize that it is not that cut-and-dried but in all honesty it is probably a bigger factor than 1 & 2 (although indirectly it is part of 1 & 2).

[hirlaw]

We are 61/62. Over the last 5 years we have moved from 55/45 to about 40/60, mainly due to sequence of return risk concerns close to retirement.

I would like to move to about 35/65, but I am running out of room to re-balance to fixed income in our after-tax accounts and don't won't to incur capital gains in our taxable.

[jebmke]

We've been 30/70 for 2 1/2 years since I retired in 2015. Funds are VTSAX (total stock index) and VBILX (intermediate term bond index) a la Jack Bogle's 2 fund for basically the same reasons; I don't feel I need international. I held international in earlier years and was unimpressed with the results. A lot of people invest in international for good reasons, but not having them works for us. We lost more than $400,000 in October 2008, and I don't have the ability to make that back being retired so I really like Rick Ferri's 30/70 center of gravity allocation.

I'm 65, and I'll begin receiving social security in September after I reach FRA in August. My wife still works and hopes to continue to do so for 2 more years. She maxes out her 401k, catch up contribution, and her income allows us both to contribute maximum amounts to traditional IRAs. Her income basically allow us to continue to max out retirement contributions. We have no pensions, future inheritances or other income other than her current employment, our retirement assets and social security. She intends to claim social security in November 2019. We have nearly $3M in investable assets and 2 homes worth more than $1M with no mortgages.

With the 30/70 allocation, our investable assets since early 2015 have increased more than we've been able to draw them down by a large margin. So far, retirement has been better than advertised in many ways. This is what has worked well for us. I hope it helps you with your planning.

Your situation would seem to argue for delaying Social Security to age 70.

[AntsOnTheMarch]

Wow! I'm overwhelmed by all these responses! Thanks to one and all.

@mindboggling: thank you for providing portfolio details!

Given your mutual interdependence for income, I would consider bridging to Medicare with disability insurance policies if you don't have them. Nothing wrong with playing it safe leading to the immediate retirement years, getting a little past it, and then re-assessing.

This very thought occurred to me as I was writing the OP. We dropped disability insurance a few years ago due to rising premiums. Maybe it's worth revisiting to see what's out there.

I used anywhere from 20%-70% stock on Firecalc and got a 100% success rate with a 3.8% withdrawn rate. Are you folks finding the same result?
I also used Vanguards retirement nest egg calculator and I get 94% with a 20stock/80 bond at the 3.8% withdrawal rate, 96% at 30s/70b and 60s/40b is 95%. I know that Vanguard calculator does not take into account Social Security.

Based on numbers in my OP, 3.8% for 30 years gives me around 96% success for 2 scenarios: 30% equities or 70% equities. It seems that it's the additional .8% in the withdrawal rate creating the extra risk. I never include SS in my calculations. I already know what that is going to be so I calculate what extra income I will need after SS. In our case, the wife and I will get ~60k SS if we delay until 70. To supplement, 3% of 1M = another 30K per year for 90K total. Hope that makes sense.

[indexonlyplease]

What about someone who retired early 50s and has a pension they can live on with cola. Can a simple 30/70 portfolio work for someone that has enough and will be happy with less returns but less volatility?? Also, that person will not touch for 7-10 years and will not need any certain percent (ie 3-4% drawdown).

Can that person be happy or does that person need to have a larger percent in stocks with the chance to make more money that he really does not need for retirement(of course more is always better). Also, 40/60 is a though.

So is the 30/70 only for the normal retired person in there 60s??

[pinot3]

jebmke: Agree that I'm a potential candidate to wait till 70 to begin drawing SS. I posted on another thread that I buried my dad at 67 and how I was anguishing over when to file. Basically, he collected less than 2 years of benefits after contributing for over 35 years. Subsequently, my mom collected 50% survivor benefit for another 15 years. Both had ample SS and other income for their needs and desires. I think this experience weighed heavily in my decision to file at FRA. I'll begin collecting at 66 after paying in for 45 years; we'll see how it goes. Thanks for your thoughts.

[jebmke]

jebmke: Agree that I'm a potential candidate to wait till 70 to begin drawing SS. I posted on another thread that I buried my dad at 67 and how I was anguishing over when to file. Basically, he collected less than 2 years of benefits after contributing for over 35 years. Subsequently, my mom collected 50% survivor benefit for another 15 years. Both had ample SS and other income for their needs and desires. I think this experience weighed heavily in my decision to file at FRA. I'll begin collecting at 66 after paying in for 45 years; we'll see how it goes. Thanks for your thoughts.

Makes sense -- and that is why I said "would seem." Every situation is different and the pure financials are only part of the equation.

[BigJohn]

Age 60/59, retired two years with a target allocation of 35/65 and planning on deferring SS until age 70. I got to this target using Bill Bernstein's LMP approach to help manage sequence of return risk. It also helps that I have an SWR below 3% and therefore have no pressing need to take more risk. So I got to a similar place as Rick's recommendation but by a different path.

[burt]

Age 61/60. Retired 1.5 years. SWR a little less than 4%. No heirs.
Plan on taking SS at FRA age 66.
25 year company pension.
30/70 stock/bond allocation.
No need to take risk... with limited ability to take risk.

burt

[MikeG62]

Ages 54 and 52 and retired last year. No pension, so living off our assets (don't plan to take SS until we are 70).

Target asset allocation 48%% equities, 48% bonds (muni's) and 4% cash.

I consider our asset allocation to be conservative (generally speaking). However, I am comfortable with it because we have accumulated significant assets and have an annual withdrawal rate of ~3% of our assets. So no need to "swing for the fences".

Back to the question posed by the OP. I think the answer to this question ultimately depends on the level of ones spending in retirement as compared to their guaranteed sources of income (pension and SS). Many "Bogleheads", those who live quite frugally - where the vast majority of their spending is covered by a pension and/or SS - can invest more conservatively as they don't necessarily need the potential for higher growth provided by equities. However, as a blanket statement, I think it is dangerous (as some people will need the higher growth prospect equities provide) - especially in an environment where interest rates remain near historic lows.

Interestingly, Jack Bogle did a podcast with the WSJ's Veronica Dagher (watching your wealth) this past week at the CFA Institute Annual Conference in Philly this past week. See first link here...

https://itunes.apple.com/us/podcast/wsj ... 00303?mt=2

In this podcast, Bogle provided his insights on the asset allocation one ought to have entering retirement. His advice was broadly 50/50 equities and bonds. In fact, he said 50/50, maybe "a little more" in bonds "when including SS (in the bond portion)".

He then went on to talk about returns for two portfolio's - one heavy in equities using actively managed funds and one heavy on bonds using index funds. For the heavy equity portfolio, he used 75% equities and 25% bonds and he called it a "very aggressive position". For the bond heavy portfolio, he used 25% equities and 75% bonds and he called that a "very, very conservative - too conservative portfolio". His words, not mine.

Just some food for additional thought - a counterpoint if you will on Ferri's article.

[Blues]

Interesting that some of the replies are very similar to our own situation.
Will have been retired for 14 years at the end of this year...eligible for Medicare in a few months. (Wife is a few years younger.)

I cut our allocation down to roughly 30 /70 a few years ago based upon my own calculations bolstered by the influences of Swedroe, Bernstein et al, regarding risk and the need, ability and willingness to take additional risk. (Actually, we're just a little under the 30% on the equity side presently.)

We have no debt, own our home and vehicles, no bequest requirements and are able to live on and actually bank a good portion of my monthly pension. We buy what we want or need when we want or need it, are not stingy with ourselves and therefore see no real reason to spin the roulette wheel in the hopes of making more money than we need for the lifestyle we're comfortable with.

In the event of a protracted market downturn we can ride it out without watching our net worth dwindle in terror. (I've been through enough of these since the 80's when I started investing that I don't pay them all that much mind in any case.)

Anyway, it works for us and I see no reason to change even though we can afford to take more risk.

[AntsOnTheMarch]

@MikeG62,

Thank you for your comment. I can't find fault in it.

I have heard Bogle make similar comments in videos I've watched and I am re-watching some of these again (among other things) as my wife and I go through the process of this decision. I'm still undecided about 30/70. In fact, the reason I posted this was to have my idea shot down.

For my wife and me, it comes down to this:

- My concerns with too much equities exposure is overestimating our emotional/mental resilience when (not if) the next downturn takes place.

- My concern with too little equity exposure is given our modest but workable nest egg, a long retirement window, and unexpected, non-negotiable expenses (think medical, etc), our growth will not keep pace to maintain our already modest lifestyle (firecalc projections notwithstanding).

So a Goldilocks scenario of "just right" exposure vs growth is what I seek. I don't have the number yet. It feels like it's going to be near 35/65 or maybe 40/60. Can I envision 50/50. Maybe. But that's a big maybe. I can't see 60/40 right now and that's where a suitable target fund (2025) would have us.

Side note
As part of my exercise, I've pulled 35 years of records and am looking through them right now. The two things that could have made major positive impact to our retirement scenario:

- invested more into bolstering late life income potential
- held a more growth oriented portfolio throughout

As they say, wish I knew then what I know now.

Of course, hindsight is 20/20. No sour grapes. Maybe someone younger can make use of my mistakes.

[FCM]

I'm 70 and my wife is 68. I retired at 66 from "megacorp" with a modest pension that with my wife's and my social security is enough to cover our monthly expenses; mortgage is paid off. We do have a fairly substantial investment portfolio that is about 40/60 equities-to-bonds, which we consider to be our "sleep well at night" level of exposure to equities. I have also established a minimum level of cash/fixed income assets that would cover our anticipated expenses until we both reach 100 years of age. I won't violate that minimum level regardless of what equity markets do, meaning that I won't use those assets to re-balance into equities if equities tank. I have other cash assets ear-marked for that possibility. So far, we have only been using about 1 - 2% per year from our investment portfolio, which is easily covered by interest and dividend income (presently automatically re-invested) and RMDs from IRAs and 401k. We have "won the game" and don't need to take more risk than necessary. What is left of our estate will be an inheritance for our only child, who is 27 and finishing his education.

[House Blend]

In this podcast, Bogle provided his insights on the asset allocation one ought to have entering retirement. His advice was broadly 50/50 equities and bonds. In fact, he said 50/50, maybe "a little more" in bonds "when including SS (in the bond portion)".

+1. FWIW, it appears that Vanguard agrees with Jack--the Vanguard Target Retirement Series converges to a 30/70 portfolio, but not until ~7 years after the nominal retirement date. For example, the 2015 TR fund is currently at ~45% equity.

The 2010 TR fund is (recently?) closed to new investors. Presumably it will get folded into Target Retirement Income soon.

I have my mother (age 84) invested in a 30/70 portfolio, and was definitely influenced in that decision by the VG Target Retirement series. (However, the components of her portfolio are rather different.) Seems like a sweet spot when you don't need to take much risk.

[magneto]

Taking note of how markets are valued today; 30/70 may (or may not) turn out to be prudent,
bearing in mind the Sequence of Returns Risk for the retiree as mentioned.
We, also in retirement, are currently 27/73.

However with different market conditions we might lift to 50/50 or maybe even an extreme of 60/40.

No predictions implied

[willthrill81]

I used anywhere from 20%-70% stock on Firecalc and got a 100% success rate with a 3.8% withdrawn rate. Are you folks finding the same result?

According to FIRECalc, a 3.8% plus CPI WR and a 20/80 AA had an 88.9% success rate. By comparison, a 40/60 AA had a 99.1% success rate.

Personally, I wouldn't recommend anything less than 30% in stocks (preferably at least 40%) to a retiree gearing up for a 30 year horizon. With shorter time frames (i.e. 20 or fewer years) and no desire for a legacy, one could potentially be 100% bonds and be just fine.

[steve roy]

30/70 has been my asset allocation for awhile.

In my previous life, I was active as a director in a mid-sized 401(k) plan. People in their late fifties/early sixties often asked me what I thought was a good investment strategy. (These were folks who wanted to keep things simple and had minimal interest in managing multiple accounts). I told them, "Put 60% in Vanguard Target Income and 40% into Wellesley. It's simple, and you cover all the bases."

I continue to think that's a good allocation mix for people who want to set up an investment plan and pay minimal attention.

[MikeG62]

@MikeG62,

Thank you for your comment. I can't find fault in it.

...My concern with too little equity exposure is given our modest but workable nest egg, a long retirement window, and unexpected, non-negotiable expenses (think medical, etc), our growth will not keep pace to maintain our already modest lifestyle (firecalc projections notwithstanding).

So a Goldilocks scenario of "just right" exposure vs growth is what I seek. I don't have the number yet. It feels like it's going to be near 35/65 or maybe 40/60. Can I envision 50/50. Maybe. But that's a big maybe. I can't see 60/40 right now and that's where a suitable target fund (2025) would have us.

AntsOnTheMarch,

This thread contains a survey and responses from around 1,300 people to among other things asset allocation...

viewtopic.php?t=154364

Several months ago I downloaded the responses to the survey and stratified the results between those who are already retired and those who are still working.

What I found was that the asset allocation for those who are retired is much higher than the impression you might get reading the responses to your thread, which leads me to believe you may not have a representative sample here.

More specifically, here is what I saw...

There were 266 responses from folks who claimed to be retired. Of those 266 responses, here is how they fell in terms of asset allocation:

0% Equity Allocation = 9 people (Average Portfolio Value $460K; Average Age 65)
10% Equity Allocation = 7 people (Average Portfolio value $740K; Average Age 63)
20% Equity Allocation = 12 people (Average Portfolio value $2.2 million; Average Age 63)
30% Equity Allocation = 16 people (Average Portfolio value $3.2 million; Average Age 67)
40% Equity Allocation = 43 people (Average Portfolio value $2.5 million; Average Age 64)
50% Equity Allocation = 66 people (Average Portfolio value $3.4 million; Average Age 64)
60% Equity Allocation = 60 people (Average Portfolio value $2.8 million; Average Age 61)
70% Equity Allocation = 24 people (Average Portfolio value $2.3 million; Average Age 64)
80% Equity Allocation = 19 people (Average Portfolio value $2.2 million; Average Age 60)
90% Equity Allocation = 6 people (Average Portfolio value $5.3 million; Average Age 67)
100% Equity Allocation = 4 people (Average Portfolio value $1.4 million; Average Age 57)

So 169 people or 64% of those responding had asset allocation between 40% and 60% (only 6% had asset allocation of 30%). Not sure I'd conclude based upon the responses to your thread (or lack of responses like mine) that 30% equity allocation is used broadly for those in retirement.

[delamer]

What about someone who retired early 50s and has a pension they can live on with cola. Can a simple 30/70 portfolio work for someone that has enough and will be happy with less returns but less volatility?? Also, that person will not touch for 7-10 years and will not need any certain percent (ie 3-4% drawdown).

Can that person be happy or does that person need to have a larger percent in stocks with the chance to make more money that he really does not need for retirement(of course more is always better). Also, 40/60 is a though.

So is the 30/70 only for the normal retired person in there 60s??

I was thinking when I read the original post that the OP and his wife are the about same age as me and my husband, but otherwise a world apart. None of his "3 strike" scenarios are relevant for us. And we will be more than comfortable living on our pensions and Social Security. Our investments are earmarked for three things -- 1) possible second home for the winter months; 2) high costs of potential assisted living/nursing home care; and/or 3) inheritance for children.

So while I understand why the 30/70 portfolio makes sense in their circumstances, ours is about 75/25 overall. Our "bond" portion is pretty heavily cash/cash equivalents because of the aforementioned house and because we don't have a separate emergency fund.

One of the biggest advantages of this forum is that it allows people to get advice based on their personal circumstances, rather than just generic recommendations. So I don't think 30/70 is for a "normal" person -- or I'd be labelling myself "abnormal" -- but it does seem to make sense for the OP.

[David Jay]

So a Goldilocks scenario of "just right" exposure vs growth is what I seek. I don't have the number yet. It feels like it's going to be near 35/65 or maybe 40/60. Can I envision 50/50. Maybe. But that's a big maybe.

Be careful not to go down the rabbit hole of getting too finite in your AA. 5% won't move the needle on your finances, so don't sweat the "should I be 35/65 or 40/60?", just pick one and go.

By comparison, the Vanguard LifeStrategy all-in-one funds only come in: 80/20, 60/40, 40/60 and 20/80. Even comparative charts like this one only show 10% steps: https://www.vanguard.com/us/insights/sa ... llocations

[badger42]

The biggest problem with all of these models is that "past results do not guarantee future outcomes".

Bond interest rates have been bouncing around historic lows for several years now. When putting 70% of your assets into bonds, you're either taking the choice of barely any real yield (if you're lucky), or a ton of interest rate risk.

For a 20-30 year time window, that may be fine. For a FIRE type 40-50 year window, that's a huge "lack of returns" risk.

Personally (headed towards FIRE in our mid-40s, with plenty of "extra cash if needed" type earning potential, and a pretty flexible approach to spending - you can vacation on a tropical island in a good year, and drive to a national park in a bad year), we're likely to stick with something in the 70/30 or 75/25 range. We won't go below the "Ben Graham Minimum" of 25% bonds / cash / FI, but probably won't go much above it either.

[AntsOnTheMarch]

@MikeG62

Thank you! Very interesting numbers! It doesn't surprise me that 40-60% equities is the sweet spot. That's actually the range I feel we "need" to be in based on logic but I am having a hard time with it emotionally and trying to worm my way into a lower % of equities. If I'm honest, I also have to admit that the current long-running bull is affecting my decision. Yes, I know this is (perhaps) a no-no but I'm trying to look at myself honestly.

The portfolio values in those numbers are very interesting to me as well—and perhaps instructive. Right at the low equities % group I see retired/older people with smaller portfolios. They are probably scared of losing any principal and not being able to make it up. All the while that gets them stuck in low growth. I can relate to that. Once a portfolio reaches a certain point where it can easily provide for your expenses with a conservative drawdown, the rest of it is gravy, imho. I know I'd use a different strategy with a 3m or 5m portofio. And no matter what I ended up with—my wife and being frugal, financially conservative people—I would expect to be fine for 40 years without any concern. Then I'd start worrying about the black swan event to end all black swan events.

Be careful not to go down the rabbit hole of getting too finite in your AA. 5% won't move the needle on your finances, so don't sweat the "should I be 35/65 or 40/60?", just pick one and go.

Agreed!

[MikeG62]

@MikeG62

Thank you! Very interesting numbers! It doesn't surprise me that 40-60% equities is the sweet spot. That's actually the range I feel we "need" to be in based on logic but I am having a hard time with it emotionally and trying to worm my way into a lower % of equities. If I'm honest, I also have to admit that the current long-running bull is affecting my decision. Yes, I know this is (perhaps) a no-no but I'm trying to look at myself honestly.

This is a fair point. However, you think the bond market is not currently as, if not more, overvalued than equities?

Most people I hear speak on this seem convinced (I count myself among them) that the bond market is significantly overvalued and rates have only one direction to go over time and that is higher. I do not believe rates are going really high (I do think things are different than 20-30 years ago), but increasing rates will leave those with significant assets in bonds not feeling great. In addition, with the stock market trading at ~17.5 times forward earnings and interest rates being this low there really is no other place for money to go (making equity valuations seem less stretched).

Also, you presumably have an asset allocation now. In other words, this is not all new money entering the market (be it equities or bonds). That feels a bit different than if you came into a large amount of money and were deciding how to invest it. So in all likelihood you have ridden up the equity market the last 8 years and if you gave back a little on a pullback that is only to be expected. Pullbacks (at least in modern times in the US) have not lasted very long anyway and it has not taken all that long before the market recovers to new highs.

[AntsOnTheMarch]

@MikeG62

Thank you! Very interesting numbers! It doesn't surprise me that 40-60% equities is the sweet spot. That's actually the range I feel we "need" to be in based on logic but I am having a hard time with it emotionally and trying to worm my way into a lower % of equities. If I'm honest, I also have to admit that the current long-running bull is affecting my decision. Yes, I know this is (perhaps) a no-no but I'm trying to look at myself honestly.

This is a fair point. However, you think the bond market is not currently as, if not more, overvalued than equities?

Most people I hear speak on this seem convinced (I count myself among them) that the bond market is significantly overvalued and rates have only one direction to go over time and that is higher. I do not believe rates are going really high (I do think things are different than 20-30 years ago), but increasing rates will leave those with significant assets in bonds not feeling great. In addition, with the stock market trading at ~17.5 times forward earnings and interest rates being this low there really is no other place for money to go (making equity valuations seem less stretched). Your point may or may not be valid. I am very low on the spectrum of experience and knowledge to even take a guess so I'll leave it to others to comment. For me, it feels as though a total bond fund may weather a downturn a little better and perhaps preserve some capital which ends up being reallocated to equities at a lower price. But this is by no means the main factor driving my decision.

Also, you presumably have an asset allocation now. In other words, this is not all new money entering the market (be it equities or bonds). That feels a bit different than if you came into a large amount of money and were deciding how to invest it. So in all likelihood you have ridden up the equity market In actuality I'm sitting on about 40% equities right now so this won't be a big change up or down. But I've already started to move funds to a 3 fund portfolio in order to maximize tax/ACA advantages, get into admiral shares, and more easily set my own allocation going forward. So it's a natural time to re-assess. Who knows? When all is said and done I may decide on a higher equity percentage.

It's all a personal decision! Comfort level and sleeping well at night!

[white_water]

16 years into retirement, very modest pension, took SS at 62, asset allocation 35/65 using Vanguard and Fidelity total stock and total bond index funds.

Fairly LCOL living area, house paid for, no consumer debts, low consumption lifestyle and live in income tax state by choice.

[indexonlyplease]

16 years into retirement, very modest pension, took SS at 62, asset allocation 35/65 using Vanguard and Fidelity total stock and total bond index funds.

Fairly LCOL living area, house paid for, no consumer debts, low consumption lifestyle and live in income tax state by choice.

What age did you retire. You are doing it the right way.

[Gnirk]

73 yo, retired about 10 years, no debt, very small pension (COLA'd) and SS (taken at 63). I have a 35/60/5 allocation which lets me sleep well at night. I will probably change to 30/65/5 within a few years. 90% of my investments are in taxable accounts, so bonds are muni funds and individual muni bonds.

DH is 78 yo has SS, no pension, and a 55/40/5 allocation because he is investing for his children's inheritance, and has no plans to change his allocation. 90% of his investments are also in taxable accounts, so bonds are muni funds and muni bonds.

Right or wrong, we use the muni bond/ bond fund interest to supplement our SS and my small retirement to meet our living expenses.