Wiki: Asset Allocation - Update "Age in Bonds"?

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Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 9:04 am

From a request by Starboard in Suggestions for the Wiki, I'd like to get a forum consensus to clarify Jack Bogle's rule for "age in bonds."

Wiki article link: Asset Allocation

Wiki wrote:Bogle recommends "roughly your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. Recently, less conservative rules have emerged such as (age - 10) or even (age - 20) in bonds. Investors choosing to use these guidelines should understand why they feel they have the need, ability, and willingness to take on the greater risk inherent in having a higher proportion of equities. All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's. Individuals with different retirement ages (earlier or later), asset levels (those who have saved enough to fund their retirement fully with TIPS, or needs for the money (e.g. college savings) would be well-advised to consider what circumstances make their situation different and adjust their asset allocation accordingly.

Starboard would like to clarify that this rule needs to be taken in context.
Starboard wrote:This is fine, as far as it goes, however Bogle also recommends that people capitalize their SS and Pension (especially if the Defined Benefit Pension (DBP) is Cost of Living Adjusted (COLA)) and that they include this capitalized amount in their bond allocation. I have read this in several of his books and it was also in the transcript for the Steve Forbes interview (shown below).

In my opinion, if folks do not follow the capitalization rule, then they are quoting Bogle on the "age in bonds" rule out of context.

As an aside, in my particular case, I'm 64, retired, collecting SS and a DBP that will be COLA adjusted after I reach 65. My allocation is all over the map depending on how my SS and DBP are counted: If I do not include cash in my holdings (another problem of across the board comparisons) I am 41/59 Equity to Fixed. If I add in cash these shift to 39/57/4 or 39/61 if cash is folded into Fixed. Now, if I capitalize my SS and Pension and keep cash folded in with Fixed, the number shifts a large amount to 21/79.

Perhaps this should be a forum thread topic, but it has been in the past and still seems like the issue of capitalizing SS and Pension (if available) is consistently overlooked. In some ways it does make sense to exclude capitalizing these things for younger investors, who may have no reliable numbers for either option -- but for folks in the 55+ vintage class, it is a serious problems of apples to oranges comparisons.

It seems like an edit to the Wiki may be in order, so that Bogle's "Age in Bonds" rule is shown in the context he intended.

Starboard's post (repeated here) links to a Forbes.com transcript of an interview with Jack Bogle. I won't restate the quoted text, but here are the links:

- Transcript: John Bogle Page 7 of 13 - Forbes.com - "Age Equals Bonds"
- Transcript: John Bogle Page 8 of 13 - Forbes.com - "Portfolio Allocation"
- Transcript: John Bogle Page 9 of 13 - Forbes.com - continuation, note Bogle's statement about holding equities.

There is no forum consensus on the role of fixed income in a portfolio (Wiki article link: Fixed income). Is this is a similar discussion from a different perspective (the wiki stands as-is), or, should "age in bonds" be clarified to provide guidance as Starboard suggests?

Comments / questions / concerns are welcome.
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Re: Wiki: Asset Allocation - Update "Age in Bonds?"

Post by john94549 » Fri Jul 20, 2012 9:16 am

I am of the school that believes that unless your pension (should you be lucky enough to have one) is 100% guaranteed by the federal government (social security, federal government, military), it is best to capitalize it (if at all) only to the extent of PBGC coverage. Perhaps that is overly-conservative, but it's just my opinion.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Taylor Larimore » Fri Jul 20, 2012 9:42 am

LadyGeek wrote:From a request by Starboard in Suggestions for the Wiki, I'd like to get a forum consensus to clarify Jack Bogle's rule for "age in bonds."


LadyGeek:

Mr. Bogle clarifys his "Age in Bonds Rule" in his latest book, The Clash of the Cultures. This is what he wrote (page 311):

" The next critical decision you face is getting the proper allocation of assets in your investment portfolio. Stocks are designed to provide growth of capital and growth of income, while bonds are for conservation of capital and current income. Once you get your balance right, then just hold tight, no matter how high a greedy stock market flies, nor how low a frightened market plunges. Change the allocation only as your investment profile changes. Begin by considering a 50/50 stock/bond balance, and then raise the stock allocation if:

* You have many years remaining to accumulate wealth.
* The amount of capital you have at stake is modest (for example, when you make your first investment in a thrift plan or an IRA).
* You have little need for current income.
* You have the courage to ride out the booms and busts with reasonable equanimity.

As you age, lower your stock allocation accordingly. You have fewer years remaining to build your retirement; you likely have much more wealth; you'll soon need to spend your investment income rather than reinvest it; and (if you're like me) you're not quite so relaxed about violent market volatility. But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive."


Thank you for helping to keep our wiki the best on the web.

Best wishes.
Taylor
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by archbish99 » Fri Jul 20, 2012 9:48 am

It's mentioned that "Age in Bonds" is a starting point, but that other situations need to be taken into account. Perhaps the most reasonable change is to call a pension out as one of the key situations?

There are different rationales for reducing bond allocation because of a pension -- one is to consider that some or all of your portfolio is actually for a bequest rather than for retirement expenses, and so it should be the age of your heirs. Another is to capitalize the income stream(s) and consider them bonds, as suggested. Yet another is simply to say that with reduced need to draw on the portfolio one can afford more risk (but perhaps has less need for risk). I don't think there will be a consensus as to which of these is the correct reason, but I think we can reach consensus that a reliable income stream means you can be less conservative for some reason. :happy
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Munir » Fri Jul 20, 2012 9:56 am

In addition to social security and a defined benefit pension, shouldn't SPIAs be also included in the fixed income allocation discussion (see recent BH thread on the subject- I don't have the URL)?

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Munir » Fri Jul 20, 2012 10:00 am

archbish99 wrote:It's mentioned that "Age in Bonds" is a starting point, but that other situations need to be taken into account. Perhaps the most reasonable change is to call a pension out as one of the key situations?

There are different rationales for reducing bond allocation because of a pension -- one is to consider that some or all of your portfolio is actually for a bequest rather than for retirement expenses, and so it should be the age of your heirs. Another is to capitalize the income stream(s) and consider them bonds, as suggested. Yet another is simply to say that with reduced need to draw on the portfolio one can afford more risk (but perhaps has less need for risk). I don't think there will be a consensus as to which of these is the correct reason, but I think we can reach consensus that a reliable income stream means you can be less conservative for some reason. :happy


Some advocate for being LESS conservative if you have a reliable steady income stream. Doesn't it depend on one's goals and expectations of the investments?

PS: For a novice like me, can someone explain how you "capitalize an income stream" from a pension?

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by ourbrooks » Fri Jul 20, 2012 10:49 am

Someone like Rick Ferri or Wade Pfau or Larry Swedroe needs to do some deep analysis here.

The accumulation phase and the decumulation phases are radically different in terms of risk. Suppose there's a stock market plunge of 60% while you're accumulating, followed a few years later by a 120% jump. The plunge did no lasting damage. Consider the same situation for someone withdrawing funds. Serious damage. When the market was down, the percentage of your assets needed to maintain your withdrawal rate went up; you spent money which could have provided future earnings.

That being the case, there's clearly a need to move to a less volatile portfolio when you enter decumulation, but you've got to balance two things: volatility and inflation. Even nice, tame 2% inflation means that after a mere 10 years, you'll have lost 22% in real terms. Bonds are less volatile than stocks, tis true, but they don't keep up with inflation as well. The studies on safe withdrawal rates all show that if you get above 80% bonds, you're more likely to run out of money than if you held more stocks.

Alas, all of the safe withdrawal rate studies were done with fixed, lifetime allocations. No one has modeled "age in bonds." From age 65 until age 80, you're still in the safe zone as far as the withdrawal rate studies are concenred. After age 80, though, you're outside of the limits. At that point, you're half way through the 30 years used in the studies. The question is, does it matter? Since it's the early years that make the biggest difference, maybe at that point, it's okay to increase your bond percentage.

At this point, I think what we need to say in the Wiki is that while moving to less volatile investments in retirement is a good idea, not enough is known yet about "age in bonds" and it might turn out to be the case that it actually increases your risk of running out of money compared to a fixed allocation.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by dbr » Fri Jul 20, 2012 10:51 am

Munir wrote:In addition to social security and a defined benefit pension, shouldn't SPIAs be also included in the fixed income allocation discussion (see recent BH thread on the subject- I don't have the URL)?


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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Fri Jul 20, 2012 10:56 am

In my opinion, these are separate issues:

1. Income streams in retirement reduce retirement income needed. They should not be capitalized (are you going to capitalize your expenses too?)

2. Age In Bonds, or some variant thereof, is a good rule of thumb for maintaining a portfolio that will eventually allow withdrawals to meet that (post pension/SS) retirement income number.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by dbr » Fri Jul 20, 2012 10:59 am

ourbrooks wrote:
At this point, I think what we need to say in the Wiki is that while moving to less volatile investments in retirement is a good idea, not enough is known yet about "age in bonds" and it might turn out to be the case that it actually increases your risk of running out of money compared to a fixed allocation.



deleted I am choosing not to participate in this discussion.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Fclevz » Fri Jul 20, 2012 11:04 am

LadyGeek wrote:...should "age in bonds" be clarified to provide guidance as Starboard suggests?

I would have to agree with Starboard that if you ignore the "Your bonds should be your age as a percent, including the Social Security value" part of the 'age-in-bonds' recommendation that your aren't getting the full context.

The explanation in the linked Forbes interview, however, seems a bit confusing to me. There are other interviews, such as this one with Scott Burns that seem to be a bit clearer, at least to me.

ourbrooks wrote:At this point, I think what we need to say in the Wiki is that while moving to less volatile investments in retirement is a good idea, not enough is known yet about "age in bonds" and it might turn out to be the case that it actually increases your risk of running out of money compared to a fixed allocation.

I've always assumed this was a major reason for Bogle's recommendation to include Social Security and pension assets when figuring asset allocation via 'age-in-bonds'. That is, to ensure that your allocation doesn't go too conservative too quickly and possibly increase the chances of your running out of money too early.

Cheers,
Fred

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by ourbrooks » Fri Jul 20, 2012 11:26 am

I tend to agree with yobria that it's probably best to avoid leading people to trying to capitalize income sources. I once took a stab at capitalizing Social Security. The primary benefit plus the survivor benefit could be treated like a dual life, inflation adjusted annuity. The spousal benefit could be treated as a single life, inflation adjusted annuity on the life of the primary beneficiary. I have no idea on how to treat the dependent benefits.

Even just using the first two factors, I came up with a $20,000 a year benefit for a couple aged 66 as having a present value of $874,000. (Interest rates have dropped even further since I did the calculation, so the amount would be higher today.) If my numbers are right, then most people will need to be 120% in stocks at age 66 to achieve "age in bonds" !!

In addition to problems with the safe withdrawal rates, I'm not sure that "age in bonds" is a really great strategy for someone with a pension which doesn't have inflation compensation. Funds will need to be withdrawn from the investment portfolio to compensate for the effects of inflation on the pension amount. This compensation will be small initially but will rise over time and the higher inflation, the more funds will be needed. Stocks do a better job of handling inflation (better, not necessarily good) so it would make sense to hold lots of stocks early on. "Age in bonds" probably moves you far too fast into bonds, given the low initial withdrawal rate.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by CyberBob » Fri Jul 20, 2012 12:08 pm

ourbrooks wrote:Even just using the first two factors, I came up with a $20,000 a year benefit for a couple aged 66 as having a present value of $874,000. (Interest rates have dropped even further since I did the calculation, so the amount would be higher today.) If my numbers are right, then most people will need to be 120% in stocks at age 66 to achieve "age in bonds" !!

That seems quite different than Bogle's method of using a basic annuity to calculate the value. Immediateannuities.com shows a value of only $281,000 for a 66-year old couple and a $20,000 a year benefit (7.12% rate). As opposed to just using a fixed interest rate to figure a present value. That's not really an accurate way since the value of the pension/Social Security decreases every year since one would have fewer years of life left (and once the couple is gone, the value is zero). That is, a $20k Social Security benefit for someone 66 is quite valuable based on may years of expected payments, but for someone 106 it's essentially worthless since the payout period will be so small. So I'd probably recalculate my Social Security/pension annuity value every year to get a more accurate number. And since it's presumably going to be worth less every year and I'll be older every year, the trend towards a more conservative allocation will contnue, just not as quickly as it would if you didn't count Social Security or your pension. I think 'ol Jack is on to something here ;)

Bob

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 12:41 pm

Munir wrote:
archbish99 wrote:It's mentioned that "Age in Bonds" is a starting point, but that other situations need to be taken into account. Perhaps the most reasonable change is to call a pension out as one of the key situations?

There are different rationales for reducing bond allocation because of a pension -- one is to consider that some or all of your portfolio is actually for a bequest rather than for retirement expenses, and so it should be the age of your heirs. Another is to capitalize the income stream(s) and consider them bonds, as suggested. Yet another is simply to say that with reduced need to draw on the portfolio one can afford more risk (but perhaps has less need for risk). I don't think there will be a consensus as to which of these is the correct reason, but I think we can reach consensus that a reliable income stream means you can be less conservative for some reason. :happy

Some advocate for being LESS conservative if you have a reliable steady income stream. Doesn't it depend on one's goals and expectations of the investments?

PS: For a novice like me, can someone explain how you "capitalize an income stream" from a pension?

In finance, capitalization means to treat something as a long-term investment. Bonds are also long-term investments (they mature over a period of years). The intent is that pensions / Social Security, etc. are long-term investments and should therefore be categorized as bonds. Bonds, and perhaps pensions and Social Security, are components of the Fixed income category, which we are discussing.

Taylor Larimore wrote:Mr. Bogle clarifys his "Age in Bonds Rule" in his latest book, The Clash of the Cultures. This is what he wrote (page 311):
"...But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive."
Best wishes. Taylor

Since the wiki is referencing Mr. Bogle directly, and to keep this simple (especially for new investors), would it be better to just add the above sentence and call it done? I propose this:

Bogle recommends "roughly your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. Recently, less conservative rules have emerged such as (age - 10) or even (age - 20) in bonds. Investors choosing to use these guidelines should understand why they feel they have the need, ability, and willingness to take on the greater risk inherent in having a higher proportion of equities.

All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's. Individuals with different retirement ages (earlier or later), asset levels (those who have saved enough to fund their retirement fully with TIPS, or needs for the money (e.g. college savings) would be well-advised to consider what circumstances make their situation different and adjust their asset allocation accordingly.

But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive.

I broke the original into 2 paragraphs for readability, then added Mr. Bogle's statement as a new 3rd paragraph. Does this work?

Remember that the wiki is giving a high-level tutorial overview. The implementation details, e.g. "Do I count Social Security, pension, or annuities in my retirement planning?", are best left for other discussions such as Defined Benefits Pension as fixed income? (Feel free to post there as well. It's a referenced thread from Fixed income). Everyone has a different situation, which will require a different answer. If new investors have questions, they can ask in the forum and we can help them with advice customized for their situation.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by ourbrooks » Fri Jul 20, 2012 1:06 pm

The problem with using immediateannuities.com is that the payouts don't adjust for inflation; Social Security, on the other hand, is inflation adjusted.
Inflation has run at about 3% in the past; at least, that seems to be the difference in payout quotes for fixed as versus inflation adjusted annuities.
If the payout rate is 7.12% for a non-adjusted annuity, then an adjusted one would cost around 4.12%. To get $20,000, you'd need to start with at least $485,000.

Let's assume that you toss in 50% more for the single life annuity so that the total comes to around $700,000. Suppose that you have a $1,000,000 investment portfolio,
so that for asset allocation purposes, you have $1,700,000 total. To get 66% bonds you'll need $1,122,000 in bonds. $1,122,000 - $700,000 = $422,000 in bonds in your portfolio so you'll need to have 58% stocks in your portfolio to do "age in bonds," Jack Bogle style.

As I said in my earlier post, there's evidence that too high a percentage of bonds actually leads to a higher chance of running out of money than if you had more stocks. The danger zone seems to be above 80% bonds; then, you can't even keep up with inflation.

Combining both bits of advice, a good strategy might be to start with "age in bonds" at age 66, calculated Jack Bogle style, so that your invesment portfolio has 58% stocks and then, perhaps over the next 20 years or so, ramp up to 80% bonds. I think that's much closer to what Jack Bogle really meant than applying the "age in bonds" advice to just your investment portfolio.

As to the advice in the Wiki, we need to give people some guidance about how to get the value of Social Security. Just quoting Jack Bogle that they should do it leaves them hanging if they want to follow his advice.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by dkturner » Fri Jul 20, 2012 1:17 pm

LadyGeek wrote:
Munir wrote:
archbish99 wrote:It's mentioned that "Age in Bonds" is a starting point, but that other situations need to be taken into account. Perhaps the most reasonable change is to call a pension out as one of the key situations?

There are different rationales for reducing bond allocation because of a pension -- one is to consider that some or all of your portfolio is actually for a bequest rather than for retirement expenses, and so it should be the age of your heirs. Another is to capitalize the income stream(s) and consider them bonds, as suggested. Yet another is simply to say that with reduced need to draw on the portfolio one can afford more risk (but perhaps has less need for risk). I don't think there will be a consensus as to which of these is the correct reason, but I think we can reach consensus that a reliable income stream means you can be less conservative for some reason. :happy

Some advocate for being LESS conservative if you have a reliable steady income stream. Doesn't it depend on one's goals and expectations of the investments?

PS: For a novice like me, can someone explain how you "capitalize an income stream" from a pension?

In finance, capitalization means to treat something as a long-term investment. Bonds are also long-term investments (they mature over a period of years). The intent is that pensions / Social Security, etc. are long-term investments and should therefore be categorized as bonds. Bonds, and perhaps pensions and Social Security, are components of the Fixed income category, which we are discussing.

Taylor Larimore wrote:Mr. Bogle clarifys his "Age in Bonds Rule" in his latest book, The Clash of the Cultures. This is what he wrote (page 311):
"...But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive."
Best wishes. Taylor

Since the wiki is referencing Mr. Bogle directly, and to keep this simple (especially for new investors), would it be better to just add the above sentence and call it done? I propose this:

Bogle recommends "roughly your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. Recently, less conservative rules have emerged such as (age - 10) or even (age - 20) in bonds. Investors choosing to use these guidelines should understand why they feel they have the need, ability, and willingness to take on the greater risk inherent in having a higher proportion of equities.

All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's. Individuals with different retirement ages (earlier or later), asset levels (those who have saved enough to fund their retirement fully with TIPS, or needs for the money (e.g. college savings) would be well-advised to consider what circumstances make their situation different and adjust their asset allocation accordingly.

But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive.

I broke the original into 2 paragraphs for readability, then added Mr. Bogle's statement as a new 3rd paragraph. Does this work?

Remember that the wiki is giving a high-level tutorial overview. The implementation details, e.g. "Do I count Social Security, pension, or annuities in my retirement planning?", are best left for other discussions such as Defined Benefits Pension as fixed income? (Feel free to post there as well. It's a referenced thread from Fixed income). Everyone has a different situation, which will require a different answer. If new investors have questions, they can ask in the forum and we can help them with advice customized for their situation.


I think your suggested solution is perfect. Since the Wiki entry is Bogle specific, Mr. Bogle's oft quoted words certainly should be added. Without this modification the entry really doesn't represent Mr. Bogle's actual view on the matter.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 1:20 pm

ourbrooks wrote:As to the advice in the Wiki, we need to give people some guidance about how to get the value of Social Security. Just quoting Jack Bogle that they should do it leaves them hanging if they want to follow his advice.

How about referencing an appropriate article? Perhaps: Introduction to retirement spending models

That would let the interested readers go off exploring, while keeping the content at a high level. Social Security is a separate topic from asset allocation.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 1:47 pm

dkturner wrote:I think your suggested solution is perfect. Since the Wiki entry is Bogle specific, Mr. Bogle's oft quoted words certainly should be added. Without this modification the entry really doesn't represent Mr. Bogle's actual view on the matter.

I updated the wiki. See: Asset Allocation ("Age in bonds")
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by gwrvmd » Fri Jul 20, 2012 1:59 pm

I have been involved in several long discussions on " capitalizing pensions and social security" with AAII ( American Association of Individual Investors) groups). At 65 it is generally considered to be 11 times the annual income of a non indexed pension and 14 times the annual income of an indexed pension such as Social Security. I think what Jack Bogle means to take those totals and add them to your bond total them use the total ( bonds and guarenteed income) as the figure for "Age in Bonds".
Those factors should be lower as you get older and your life expectancy decreases meaning you will get less payments, use it only as a guideline, the discussions were based on a new retiree at at age 65.
Should the factors be higher in these days of low bond yields ?
Should the factors be higher for those pensions with survivor benefits?
Should the factors be lower for annunities only guarenteed by insurance companies?
I'm sure other posters can suggest many reasons they should be higher or lower Gordon
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by CyberBob » Fri Jul 20, 2012 2:32 pm

gwrvmd wrote:I have been involved in several long discussions on " capitalizing pensions and social security" with AAII ( American Association of Individual Investors) groups). At 65 it is generally considered to be 11 times the annual income of a non indexed pension and 14 times the annual income of an indexed pension...

Interestingly, the 14x figure is what Bogle has mentioned before. I wonder what the figure would be for other ages.
This very question is in Mel's QUESTIONS FOR Q&A WITH JACK BOGLE AT BOGLEHEADS 11 thread. Hopefully Jack will find the subject interesting enough to clear up the confusion for us.

Bob

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by 2retire » Fri Jul 20, 2012 2:42 pm

In putting the new quote in there, there should also be instructions on how to capitalize it. It will be nontrivial for most people and having a formula would be great.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 3:45 pm

I assume you're referring to:
Wiki wrote:But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive.

Do you (or anyone else) have a suggestion? This probably doesn't belong under asset allocation (?), but we can put it somewhere else and link to it. For example, To estimate your "bond-like" component, please see....

Also, I think the term "capitalization" is not something a new investor would be familiar with. Can you provide a definition, which will be included with your suggestion?
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Fri Jul 20, 2012 4:12 pm

I think you're mixing a specific idea (age in bonds) with much broader concepts - need and ability to take risk, and how future cash flows might affect that. This should probably be rolled into a larger section.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Fri Jul 20, 2012 4:27 pm

LadyGeek wrote:...or, should "age in bonds" be clarified to provide guidance as Starboard suggests?

I'm opposed.

It is true that Jack has said that at least once. But I'm not convinced that every time Jack has suggested "age in bonds" that he was intending to say "age in bonds adjusted for all the different income streams that might be like income from a bond".

We all know that Jack tends to say different things at different times. He is not consistent, but I don't interpret that as being wishy washy. I think that he believes there are a lot of good ways to do this investing stuff and he does not want to try to nail things down to only one way.

So if a person says "do you think....?", Jack might say "yes, that would be fine". But that is not the same thing as saying "yes, that is the way it should always be done." He always leaves things open - many other options might be acceptable as well, including the exact opposite in some cases.

So the fact that Jack has mentioned this SS/pension adjustment at least once does not mean, at least to me, that he believes that is the only way to do it or the exact right way to do it.

What I'm not opposed to is a suggestion that "age in bonds" might be adjusted by the income streams if a person feels the desire. I'm also not opposed to mentioning that Jack has even said that.

What I'm opposed to is stating in our Wiki what his opinion is when we don't really know what his opinion is. We only know that he mentioned that adjustment once in the hundreds of times he has mentioned "age in bonds."

So I'd say "yes" it could be mentioned in the Wiki, but "no" do not say anything that would indicate to a newbie that this has to be done. Or should be done. Or needs to be done. It is hard enough helping some people get started without throwing in this other thing that people cannot even agree needs to be done. Or, among the people who support it, how it should be done.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 4:32 pm

retiredjg - thanks for the clear explanation of your perspective. I'm thinking that we've gone far enough to update the wiki with regards to what Jack means. We'll be sure to ask him at the BH 11 convention, though (it's one of our proposed questions as CyberBob points out). We can wait a few months.

yobria wrote:I think you're mixing a specific idea (age in bonds) with much broader concepts - need and ability to take risk, and how future cash flows might affect that. This should probably be rolled into a larger section.

That's addressed in Risk and return: an introduction, which assumes that new investors would read first. Perhaps a reference back to that section would help? Or, a footnote to explain in more detail?
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Fri Jul 20, 2012 4:37 pm

But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive.[8]

I am opposed to this. This statement sounds like a "should". People do not agree, so I don't think the Wiki should imply that is the right way to do it.

I would not be opposed to a statement that many people do consider their future pension and SS in determining an appropriate asset allocation. Or even that some people consider their future pension and SS as a bond. Those last two things are not the same, so probably both themes would have to be included.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by 2retire » Fri Jul 20, 2012 4:49 pm

I find this discussion interesting because I have always had trouble with comprehending why the "age in bonds issue" doesn't seem to apply to the Vanguard targeted retirement funds. I understand it could be a competitive business decision, but perhaps they take into account SS and pensions like Jack mentioned in the article linked.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Fri Jul 20, 2012 5:29 pm

LadyGeek wrote:retiredjg - thanks for the clear explanation of your perspective. I'm thinking that we've gone far enough to update the wiki with regards to what Jack means. We'll be sure to ask him at the BH 11 convention, though (it's one of our proposed questions as CyberBob points out). We can wait a few months.

yobria wrote:I think you're mixing a specific idea (age in bonds) with much broader concepts - need and ability to take risk, and how future cash flows might affect that. This should probably be rolled into a larger section.

That's addressed in Risk and return: an introduction, which assumes that new investors would read first. Perhaps a reference back to that section would help? Or, a footnote to explain in more detail?


I just don't think positive cash flows in retirement (SS/pension) has anything directly to do with the "age in bonds" rule. It should be in a section called "calculating your retirement income needs". It is good to emphasize the rule should only be applied to retirement income needs, as opposed to shorter term needs.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Fri Jul 20, 2012 8:02 pm

I tried to reconcile between retiredjg and yobria and got stuck. So, I put everything back to the way it was (but kept the paragraph formatting).

"But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive." was removed. It can be put back...

For retirement planning, the use of Social Security and pensions as cash flows is the focus. At issue is whether or not to include it as the "bond" part of asset allocation, which I think refers to lumping everything together under the guise as Fixed income. This is where the age in bonds comes in. Do we include it as fixed income or not? We're not going to get a single definitive answer.

There's an entire series of wiki articles on "calculating your retirement income needs": Introduction to retirement spending models. (Start here: Retirement spending) Connecting these articles to asset allocation would not be appropriate.

If someone can provide one or 2 paragraphs that can enhance "age in bonds" without contention, I'm open to suggestions. BTW, this is a collaborative effort. Wiki editors are encouraged to edit the article directly (but post here if you changed anything). If I didn't explain anything correctly, by all means let me know.

2retire wrote:I find this discussion interesting because I have always had trouble with comprehending why the "age in bonds issue" doesn't seem to apply to the Vanguard targeted retirement funds. I understand it could be a competitive business decision, but perhaps they take into account SS and pensions like Jack mentioned in the article linked.

No, I don't think they take SS and pensions into consideration. They make assumptions about average investors, but don't take individual risk (range of acceptable loss) into consideration. You should always ignore the date and pick the fund that's closest to the asset allocation you are most comfortable with.

Wiki article link: Vanguard Target Retirement Funds (How to choose a target retirement fund is explained here.)
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by jasonv » Fri Jul 20, 2012 10:21 pm

ourbrooks wrote:Someone like Rick Ferri or Wade Pfau or Larry Swedroe needs to do some deep analysis here.

The accumulation phase and the decumulation phases are radically different in terms of risk. Suppose there's a stock market plunge of 60% while you're accumulating, followed a few years later by a 120% jump. The plunge did no lasting damage. Consider the same situation for someone withdrawing funds. Serious damage. When the market was down, the percentage of your assets needed to maintain your withdrawal rate went up; you spent money which could have provided future earnings.

That being the case, there's clearly a need to move to a less volatile portfolio when you enter decumulation, but you've got to balance two things: volatility and inflation. Even nice, tame 2% inflation means that after a mere 10 years, you'll have lost 22% in real terms. Bonds are less volatile than stocks, tis true, but they don't keep up with inflation as well. The studies on safe withdrawal rates all show that if you get above 80% bonds, you're more likely to run out of money than if you held more stocks.

Alas, all of the safe withdrawal rate studies were done with fixed, lifetime allocations. No one has modeled "age in bonds." From age 65 until age 80, you're still in the safe zone as far as the withdrawal rate studies are concenred. After age 80, though, you're outside of the limits. At that point, you're half way through the 30 years used in the studies. The question is, does it matter? Since it's the early years that make the biggest difference, maybe at that point, it's okay to increase your bond percentage.

At this point, I think what we need to say in the Wiki is that while moving to less volatile investments in retirement is a good idea, not enough is known yet about "age in bonds" and it might turn out to be the case that it actually increases your risk of running out of money compared to a fixed allocation.


There was a paper published by Bengen in 1996 that showed no benefit to a "phase down" (Figure 3 on the third page):

http://web.archive.org/web/201007022030 ... 5388_1.pdf

Although the chart reflects sustainable withdrawal rate rather than risk of failure, it seems to imply that a fixed allocation during retirement is superior. Unless this research has since been refuted, I would only consider gradually shifting my asset allocation during the accumulation phase in preparation for retirement.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Fri Jul 20, 2012 10:51 pm

ourbrooks wrote:Someone like Rick Ferri or Wade Pfau or Larry Swedroe needs to do some deep analysis here.

Posted this week by Ferri.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Erwin » Sat Jul 21, 2012 12:38 am

It really puzzles me why people go about this subject in such a scientific manner. Each investor should make his own decision based on risk needed and ability to take risk. If you have sufficient money to retire, you can take the portion needed to comfortably retire and invest it in treasuries, with the rest in whatever it feels right to you. Now, if you have no choice and need to grow your savings more rapidly, risk is required without age being a consideration. I think that the basic premise for setting the allocation is how many years before retirement (I retired at 55, some will at 69, so age is irrelevant) and what are the needs relative to what has been accumulated.
My personal position, specific to me and unrelated to an age formula, is that being retired and having enough, my only goal is capital preservation. I am 63, yet my stock allocation, based on savings, is only 22.5%, and that is just fine. Why risk more?
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by BTDT » Sat Jul 21, 2012 7:11 am

Hmmm? In a recent string I reported my asset allocation as 50/50 at age 65. Given this discussions, and my government pension and SS, I guess it could now be 10/90?

My next rebalance should prove interesting? :oops:
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Sat Jul 21, 2012 8:36 am

retiredjg wrote:
ourbrooks wrote:Someone like Rick Ferri or Wade Pfau or Larry Swedroe needs to do some deep analysis here.

Posted this week by Ferri.

http://www.financial-planning.com/fp_is ... gination=1

I found the post: Is An SPIA Considered Part Of Fixed Allocation In Asset. The article link in human readable form: Is An SPIA Considered Part Of Fixed Allocation In Asset

So I think the answer to Starboard's suggestion is to leave the wiki content as-is; to remain unclear on what constitutes a "bond."

wiki wrote:Bogle recommends "roughly your age in bonds"; for instance, if you are 45, 45% of your portfolio should be in high-quality bonds. Recently, less conservative rules have emerged such as (age - 10) or even (age - 20) in bonds. Investors choosing to use these guidelines should understand why they feel they have the need, ability, and willingness to take on the greater risk inherent in having a higher proportion of equities.

All age-based guidelines are predicated on the assumption that an individual's circumstances mirror the general population's. Individuals with different retirement ages (earlier or later), asset levels (those who have saved enough to fund their retirement fully with TIPS, or needs for the money (e.g. college savings) would be well-advised to consider what circumstances make their situation different and adjust their asset allocation accordingly.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Sat Jul 21, 2012 9:35 am

retiredjg wrote:
ourbrooks wrote:Someone like Rick Ferri or Wade Pfau or Larry Swedroe needs to do some deep analysis here.

Posted this week by Ferri.

http://www.financial-planning.com/fp_is ... gination=1


Yes, that rather wandering article is the right way to look at it.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Sat Jul 21, 2012 9:56 am

LadyGeek wrote:For retirement planning, the use of Social Security and pensions as cash flows is the focus. At issue is whether or not to include it as the "bond" part of asset allocation, which I think refers to lumping everything together under the guise as Fixed income. This is where the age in bonds comes in. Do we include it as fixed income or not? We're not going to get a single definitive answer.


Maybe an analogy will change your thinking: In retirement, your rent is $10,000/year. We can capitalize that amount at a 5% cap rate, and call it a $200K liability. We could do the same thing for your future cost of, say, laundry detergent. There are two problems with this: 1) It's technically wrong - you do not have a $200K liability - it's not something your estate will owe if you die. 2) More importantly, there's no point in doing so. It just doesn't help you. -- And so it is with positive cash flows, like SS/Pension.

LadyGeek wrote:There's an entire series of wiki articles on "calculating your retirement income needs": Introduction to retirement spending models. (Start here: Retirement spending) Connecting these articles to asset allocation would not be appropriate.


Looking at those technical articles, I think what's needed is a simple page called "How to calculate your retirement income needs" with an example chart comparing a person's working and retirement income and expenses. That would be a good place to talk about SS/pension.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Sat Jul 21, 2012 10:10 am

Yes, that analogy helped considerably. For the first point (1), it's a matter of ownership. The second (2), I think you are saying that there's no advantage to classify an income stream as a bond because it's a constant dollar stream and that's not how bonds work?

Can you provide some good references to start this "simple" page? If a chart is needed, I can build a spreadsheet. If you have an idea on content, either post it or send me a PM and I'll get it in the wiki. I think this is an important idea that needs to be followed up.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by yobria » Sat Jul 21, 2012 11:02 am

LadyGeek wrote:Yes, that analogy helped considerably. For the first point (1), it's a matter of ownership. The second (2), I think you are saying that there's no advantage to classify an income stream as a bond because it's a constant dollar stream and that's not how bonds work?


I'm saying the point of (retirement) asset allocation is to invest your savings at a level of risk that you're comfortable with, and that can achieve your retirement income needs. The presence of a positive or negative cash flow in retirement is related only in that it changes the annual income needed (which in turn could alter your risk profile, or retirement savings rate, or retirement age). Investment concepts, like "age in bonds", or "captialize your Social Security", need to be analyzed and accepted or rejected. Age+/- in bonds is a solid rule of thumb. SS as a bond just doesn't hold up IMO.

LadyGeek wrote:Can you provide some good references to start this "simple" page? If a chart is needed, I can build a spreadsheet. If you have an idea on content, either post it or send me a PM and I'll get it in the wiki. I think this is an important idea that needs to be followed up.


Something like this: viewtopic.php?f=1&t=99873&newpost=1444769 . I might be able to help with the text later, but my biking buddies are waiting :) .

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by steadyeddy » Sat Jul 21, 2012 11:33 am

mpt follower wrote:It really puzzles me why people go about this subject in such a scientific manner. Each investor should make his own decision based on risk needed and ability to take risk.


I agree with this. I believe each investor should use any percentage of bonds that allows them to stay the course through rough waters. Any attempt to quantify this number as a one-size-fits-all will be inadequate.

LadyGeek, thank you so much for all the time you spend building and maintaining the Wiki. There is no other resource like it for personal financial education, and it's your freely given time and effort that keep it free for all to use.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Sat Jul 21, 2012 11:51 am

mpt follower wrote:It really puzzles me why people go about this subject in such a scientific manner. Each investor should make his own decision based on risk needed and ability to take risk.

I agree.

For people who have no idea what it all means, some rules of thumb are handy. It at least gives them a starting place for what might be reasonable for the average person. They can make their own adjustments depending on their circumstances and how they feel.

I think the easier the better. "Age in bonds", "age minus 10 in bonds", and "age minus 20 in bonds" are simple guidelines and won't put most people on a bad path. They only have to consider if they are conservative, in the middle, or aggressive and then pick the formula that fits. Temper that general range with some consideration of need, ability, and willingness and most people will start getting it narrowed down. Add in the reality of Adrian's rule, and they should have it narrowed down to a range where either answer is fine.

Also to LadyGeek, your efforts are certainly appreciated. It can't be easy trying to find a middle ground when these questions come up.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Sat Jul 21, 2012 1:48 pm

retiredjg wrote:...I think the easier the better. "Age in bonds", "age minus 10 in bonds", and "age minus 20 in bonds" are simple guidelines and won't put most people on a bad path. They only have to consider if they are conservative, in the middle, or aggressive and then pick the formula that fits. Temper that general range with some consideration of need, ability, and willingness and most people will start getting it narrowed down. Add in the reality of Adrian's rule, and they should have it narrowed down to a range where either answer is fine.

Also to LadyGeek, your efforts are certainly appreciated. It can't be easy trying to find a middle ground when these questions come up.

Thanks, but there are a number of editors working to improve the wiki (Barry Barnitz is the founder). I just happen to be the most visible in the forum.

I found some interesting background on Adrian's rule. Take a look in: “Adrian’s” 50% rule. In this thread, Adrian Nenu (who the rule is named after) describes his rule in great detail. Apparently, there's a disagreement on who came up with the idea first - Larry Swedroe or Adrian Nenu. The thread shows the basis for the "Max Equity - Exposure Max loss " table that's in our Investment Planning sticky.

Use of "rules" is in (this post), which I think applies to anyone's rule, including "age in bonds."
Adrian Nenu wrote:The rule of thumb should be considered but should not be the only consideration when determining a suitable asset allocation. There are many other individual specific issues to ponder.

To be clear, Adrian's rule is not in the wiki by choice. It has not proven itself over time as Bogle's rule does. At least that's what I remember when this was considered.

Thinking further, consideration of need, ability, and willingness is described in the Investment Planning sticky as well. The topic of investment planning comes before even asset allocation. It's why the sticky is above Asking Portfolio Questions in the forum - new investors are supposed to read this first.

Tracking this path in the wiki from Getting Started finds a gap. We list the Investment Planning sticky in Getting Started, but then skip right to the Investment Policy Statement in Bogleheads® investing start-up kit. (The sticky is mentioned, but new investors will skip over it).

We have a similar wiki article that could possibly fill the gap, but it needs some work: Investment Planning - Bogleheads - this article briefly touches on income sources (pension / Social Security). Clicking on the View history tab (top right) shows CyberBob was the last editor to work on this page. He posted in this thread. :)
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Sat Jul 21, 2012 3:41 pm

LadyGeek wrote:Thanks, but there are a number of editors working to improve the wiki (Barry Barnitz is the founder). I just happen to be the most visible in the forum.

No doubt that is true. And people know you are not the only one. However, you are the one who is catching this week's load of worries, so you get the adoration this time. :wink:

I found some interesting background on Adrian's rule.....

So Larry ran some numbers and Adrian ran some numbers. They came up with similar results.

Larry put his numbers in a book and it ended up in Laura's sticky. Larry's chart for "Max Equity - Exposure Max loss" was considered information, but it never evolved into "rule'.

Adrian, on the other hand, put his information into a formula :shock: and then kept pounding people here on the forum with his idea until it became locally known as "Adrian's rule". Not that it is a real investing rule, just a concept that is represented by those words.

"Adrian's Rule" is a lot easier to refer to than "Larry's Max Equity - Exposure Max loss chart" :D , so I suspect the use of the term "Adrian's Rule" became more popular even though both ideas cover roughly the same ground.

I didn't mean to suggest that we put something called "Adrian's Rule" in the Wiki. What I meant is that some thinking along the line of potential loss is helpful in a post when somebody is just not "getting it" on a gut level. Many still won't really "get it" on a gut level, but some can at least picture what could happen in a good old-fashioned crash.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Sat Jul 21, 2012 4:31 pm

No, I didn't think you would suggest putting Adrian's Rule into the wiki. I was heading off others from suggesting it. :wink:

I'm thinking we need to update the Investment Planning article and give it appropriate visibility for new investors. Or, use it as a basis for some new articles. In any case, there are a number of possibilities to work on. Wiki editors are encouraged to contribute.

Anyone can post an idea in the Suggestions for the Wiki thread, which is how this thread got started in the first place.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by ruralavalon » Sat Jul 21, 2012 5:18 pm

archbish99 wrote:It's mentioned that "Age in Bonds" is a starting point, but that other situations need to be taken into account. Perhaps the most reasonable change is to call a pension out as one of the key situations?

. . . . ., but I think we can reach consensus that a reliable income stream means you can be less conservative for some reason. :happy

I think this is the better approach, i.e. that "age in bonds" is a very general rule of thumb (" a principle with broad application that is not intended to be strictly accurate or reliable for every situation") to be adjusted for the investors circumstances, a key circumstance being the presence or absence of a pension, which would change ones willingness or need to take risk.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by starboard » Sat Jul 21, 2012 5:37 pm

Since my request to alter the Wiki with regard to Bogle's Age in Bonds rule of thumb started this, I guess I should try to clarify my thoughts regarding an increasingly diverse discussion.

My initial point is quite simple: If we start out the Wiki section with this phrase:
Bogle recommends "roughly your age in bonds"
then we are duty bound to follow out Bogle's rule and include capitalization of SS and Pension (especially if the Defined Benefit Pension (DBP) is Cost of Living Adjusted (COLA)) and that they include this capitalized amount in their bond allocation.

In my initial comment, I noted that Bogle has included capitalization of SS and Pension with Bonds in several of his books. I included a somewhat wide ranging reference in his interview with Steve Forbes. Since then Taylor has cited an extremely clear section of text regarding Bogle's "Age in Bonds Rule" from his latest book, The Clash of the Cultures (page 311). Fclev then cited an interview with Scott Burns that echos the same complete definition of Bogle's Age in Bonds. Both of these are cited earlier in this thread.


Now, if we want to discuss the Bogleheads' Age in Bonds rule of thumb then we need a consensus of what that might be. Most of the discussion in this thread seems to focus on this, a different topic.

I think that LadyGeek was on the right track with her original edit to the Wiki section. She then backed out the addition of a third paragraph reading:

"But, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive."

My recommendation would be to put that thought back in as the second paragraph or as an extension of the first paragraph, and edit following paragraph to note that some Bogleheads do not add capitalized SS and Pension to their bond holdings, and perhaps also address some of the thoughts behind "Adrian's Rule", where an assessment of potential loss is factored into an asset allocation.

My hope is that the Wiki citation clearly reflects Bogle's Age in Bonds rule, while also reflecting a much more diverse set of interpretations, which may be of equal merit.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Cb » Sat Jul 21, 2012 5:50 pm

I agree with Starboard...to intentionally omit a (rather significant) portion of Mr. Bogle's comments is a misrepresentation of his stated views.

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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by LadyGeek » Sat Jul 21, 2012 7:04 pm

Thanks for the guidance. I backed the change out simply because I got stuck and couldn't see a clear resolution. It's not appropriate to continually change content "live" while readers are trying to learn from it. Let's do this a little differently.

Here's the current article, in full context: Asset Allocation

I extracted the "Rules of thumb" section into a temporary draft page: Scratch Pad

The message at the top tells the wiki editors not to change anything except for this thread. We now have something to work with, and can take our time to focus on getting a consensus.

The "proposed" version is what I think Starboard means. I also inserted ruralavalon's excellent comment. I didn't insert anything about Adrian's Rule (Larry Swedroe's table...) yet, as I wasn't sure how to do this.

Now, take a look at the "But, in your asset allocation, don't forget to include as a bond-like component..." paragraph and footnote 2. To a new investor, that's conflicting advice.
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by Barry Barnitz » Sat Jul 21, 2012 7:22 pm

Hi Lady Geek:

I made the following minor emendation:
Bogle also suggests that, in your asset allocation, don't forget to include as a bond-like component of your wealth the value of any future pension and Social Security payment you expect to receive.[5][footnotes 1]


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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Sat Jul 21, 2012 7:38 pm

Cb wrote:I agree with Starboard...to intentionally omit a (rather significant) portion of Mr. Bogle's comments is a misrepresentation of his stated views.

Since I'm one of the major objectors, I'll take another (and closer) look. I'm certainly not opposed to including it if that is what Jack actually means all the time - rather than a comment that might have applied to a situation or a comment about a way to do things as opposed to the way to do things. I'm just not convinced yet, but I'll keep an open mind.

I'm not at all opposed to including those comments as "this is Jack's opinion" if we can be pretty sure that is accurate. I would still be opposed to anything that says that is the way to do it, even if our dear beloved St. Jack thinks that's the best way. It is just too controversial to present as "the right way". It is too difficult. It is above the ability of most of the new people. And since nobody can agree on how it should be done, it would be a complete cluster to say "this is what you should do" and then not agree on how to do it.

New people need to find this investing stuff to be do-able. They need it to be simple and straightforward. Throwing in any idea like this as "the right way" to do things would cause major difficulty for those of us who are working daily with the newbies.

retiredjg
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Re: Wiki: Asset Allocation - Update "Age in Bonds"?

Post by retiredjg » Sat Jul 21, 2012 8:10 pm

P.S. I should not have to say this, but sometimes communication (especially written) goes awry. I think Jack Bogle pretty much walks on investment water. He is the real deal. My comments are not sarcastic, they are sincere and I really respect his opinions.

But they are opinions, not messages from the investment oracle. So they should be treated and reported as opinions, not facts.

The other thing is that "age in bonds" is not the only rule of thumb that people might want to adjust for income streams like pension, SS, SPIA, etc. A person might decide that "age minus 20 in bonds" is the right place to be and then adjust that for the different income streams. So we need to be very careful about what ends up in the Wiki and not just tie it to Jack or age in bonds.

Like some others, I'm not a support of this "adjustment" activity. But if it needs to be introduced, let's be sure to do it right.

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