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Old 08-13-2012, 12:18 PM   #21
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Quote:
Originally Posted by Cobra9777

Regarding asset allocation, I'm quickly learning that most posters in this forum are much more aggressive than my current plan, which is 30% stock, 70% fixed income. It seems contrary to everything I've been taught about being conservative in retirement. But I'm always open to challenging what I've been taught in the past. So, I'm warming up to the idea, in part because I don't like holding 70% bonds when interest rates are likely to increase in the near future. After looking at some of the historic market performance data in FIRECalc and elsewhere, and thinking more long-term, I'm definitely considering this.

One question though... My models say 4% gets me to my actuarial life expectancy with the nest egg intact. It also gets me to age 91 before I start running short of inflation-adjusted spending. My current conservative portfolio generates 3.5-4.0%; and that's in a time of historically low interest rates. It only gets higher from here. I could actually get MORE conservative in the future and still get where I need to go. Under that scenario, and assuming my models are correct, why would I want to get more aggressive and risk the whole thing? Late 2008 is still fresh in my memory.
There are a lot of informed and risk tolerant investors on this forum and I certainly respect their opinion. But, there are many risk averse investors on this forum also. " Why fight another battle win you already won the war" definitely resonates with me. Each persons ultimate goal and situation are of course unique. My pension is about $75,000 and has a 2% annual COLA. I don't view it as a bond fund, I view at as a stock fund since that is where most of its assets are at. If my pension ever got in trouble its because the stock market tanked. Why would I want my personal money tanking with my pension? I Bonds and CDs, and a couple hundred a month kicked into total stock index is what I do. Conservative? ya throw me in the widows and orphans investment club but I need my safe money!
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Old 08-13-2012, 01:12 PM   #22
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I respect Mulligan's approach. I like the excitment associated with my equity portfolio, though. This would be a monority view, I think. I may need a little excitment to offset the "excitment" I experienced while working, don't know. In any event inflation worries me and my pension is not cola'd although paid by one of Canada's largest and most secure companies. As I said, to each their own on this one.
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Old 08-19-2012, 07:57 PM   #23
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Quote:
Originally Posted by Cobra9777 View Post
Regarding asset allocation, I'm quickly learning that most posters in this forum are much more aggressive than my current plan, which is 30% stock, 70% fixed income. It seems contrary to everything I've been taught about being conservative in retirement. But I'm always open to challenging what I've been taught in the past. So, I'm warming up to the idea, in part because I don't like holding 70% bonds when interest rates are likely to increase in the near future. After looking at some of the historic market performance data in FIRECalc and elsewhere, and thinking more long-term, I'm definitely considering this.

One question though... My models say 4% gets me to my actuarial life expectancy with the nest egg intact. It also gets me to age 91 before I start running short of inflation-adjusted spending. My current conservative portfolio generates 3.5-4.0%; and that's in a time of historically low interest rates. It only gets higher from here. I could actually get MORE conservative in the future and still get where I need to go. Under that scenario, and assuming my models are correct, why would I want to get more aggressive and risk the whole thing? Late 2008 is still fresh in my memory.
Conceptually you could think of your portfolio in terms of four separate pools of money for each of the next four decades.

Pool #1 covers your 50s and will need to be somewhat conservatively invested to withstand any deep market dips in the next decade

Pool #2 covers your 60s (10-20 years out) so you need to think about inflation and what kinds of asset allocation is most appropriate for a 10-20 year time horizon.

Pool #3 covers your 70s (20-30 years out). Equities have generally been the strongest performers for any 20-30 year time horizon in the past.

Pool #4 covers your 80s (30-40 years out). Again, inflation is your big concern (especially things like health care inflation). And there probably aren't any 40-year time periods going back to the 1700s when equities didn't produce the highest returns compared to fixed income investments.

For someone looking to make a portfolio last 40+ years you probably need to think more about generating higher rates of return for the pools of money that you are setting aside for the last decades of your life. If you were to invest pools 3 and 4 into mainly equities knowing that money is set aside for 20-40 years in the future it might be easier to conceptualize and that would bring you closer to 50% equities. For example, Vanguard's Target Retirement 2010 is 47% in equities and their Target Retirement 2015 is 55% in equities.

As for whether you are in a position to ER, I don't really have any advice except to ask how easy would it be for you and or your wife to pick up extra income on the side by returning to work or doing something different. You are still young Would you have the means to get back in the workforce in say 5 years if some catastrophe wiped out part of your portfolio? For example, I teach school here in Texas and my wife is a physician. We aren't planning to ER now but if we did it would be relatively easy to hop back in the workforce 5 years down the road. Science teachers can always find work and so can doctors. But if you are in some corporate field that will move on without you and make it very difficult to get back in then it is something to think about.
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Old 08-21-2012, 10:50 PM   #24
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Hello and welcome. I am one of the mot conservative investors on this forum. To answer your question, IMHO there is no valid reason why you would need to be more aggressive and "risk the whole thing". I would much prefer to spend less while in retirement than becoming less conservative with my investments.
Quote:
Originally Posted by Cobra9777 View Post
My current conservative portfolio generates 3.5-4.0%; and that's in a time of historically low interest rates. It only gets higher from here. I could actually get MORE conservative in the future and still get where I need to go. Under that scenario, and assuming my models are correct, why would I want to get more aggressive and risk the whole thing? Late 2008 is still fresh in my memory.
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Very conservative with investments. Not ER'd yet, 48 years old. Please do not take anything I write or imply as legal, financial or medical advice directed to you. Contact your own financial advisor, healthcare provider, or attorney for financial, medical and legal advice.
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