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Flight to Safety
Old 09-06-2017, 12:18 PM   #1
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Flight to Safety

Hi Everyone,

I am 50 something and hoping to FIRE in the next 5 - 10 years. My biggest variables on the when include; kids becoming independent, financial position and staying on the right side of sanity line with my j*b.

So to my first question.

Over coffee this morning, wifey expressed concern with exposure to volatility in equities. We are at about 82/18 AA today.

I thought about answering her question something along the lines of market timing is crazy talk but decided that perhaps I'd ask those smarter than I for opinions before walking that plank.

Thanks for your help. I've been a lurker here for a while and think you have built an awesome community - take that reddit.

A8
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Old 09-06-2017, 12:27 PM   #2
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What do you want your AA to be when you retire in 5-10 years?

I don't see volatility being much different today than it has been recently.
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Old 09-06-2017, 12:37 PM   #3
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What do you want your AA to be when you retire in 5-10 years?
Great question. I do not have a simple answer to that question. I did recently read Kitces SoRR article and also Bond Tent but have not formulated a strategy of my own yet, beyond a general thought of reducing the 80% equity number.
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Old 09-06-2017, 01:42 PM   #4
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I thought about answering her question something along the lines of market timing is crazy talk.
Truer words were never spoken.
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Old 09-06-2017, 01:52 PM   #5
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I have no paper assets and feel my portfolio is pretty safe, it's 2/3 income real estate and 1/3 gold and silver, no stocks/bonds, no 401k or any kind of digital accounts, I currently have $2000 in my checking account and it's usually much leaner than that
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Old 09-06-2017, 02:01 PM   #6
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Also would like to add that I took flight to safety the day the markets reopened after the 911 attack, I dumped everything went to CD's and was happy with an extra $1000 a month drawing 5% on my money. I didn't want paper assets with my rental income so I put it all into precious metals, it's literally my bank account
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Old 09-06-2017, 02:44 PM   #7
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Originally Posted by ace8 View Post
Hi Everyone,

I am 50 something and hoping to FIRE in the next 5 - 10 years. My biggest variables on the when include; kids becoming independent, financial position and staying on the right side of sanity line with my j*b.

So to my first question.

Over coffee this morning, wifey expressed concern with exposure to volatility in equities. We are at about 82/18 AA today.

I thought about answering her question something along the lines of market timing is crazy talk but decided that perhaps I'd ask those smarter than I for opinions before walking that plank.

Thanks for your help. I've been a lurker here for a while and think you have built an awesome community - take that reddit.

A8
Welcome to the forums.

Specifically, what is your wife's or your question (she only expressed concern)?

Is it how to respond to your wife?

Something else?
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Old 09-06-2017, 02:50 PM   #8
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If 80 % makes her happy, start heading to it now, if its 70 % same thing. I think 82 %-70 % is not earth shattering .
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Old 09-06-2017, 02:58 PM   #9
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Thank you DrRoy. I totally agree with you. I am quite glad the words were thought and not spoken.

99guns, how did you get involved with Real Estate investing? Do you do multi-unit or single family? Are you doing low cost say < 10K properties. So much has never really recovered from '08.
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Old 09-06-2017, 02:58 PM   #10
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Great question. I do not have a simple answer to that question. I did recently read Kitces SoRR article and also Bond Tent but have not formulated a strategy of my own yet, beyond a general thought of reducing the 80% equity number.
Welcome to the forum. I don't think you can provide an answer to your DW until you (both of you) have an AA strategy. Asset allocation is a highly personal topic. As others have mentioned, what will it take for you to sleep well during an inevitable downturn? I suspect most retirees on this forum have allocations from 40/60 to 80/20. The only differences are our tolerance for risk and individual investment/retirement situations. Personally, we have a fairly high tolerance for risk and SS and future pensions that can cover our budget. Accordingly, we keep a 70/30 AA. But, if I didn't have the pension, I would probably drop back to 60/40. Change the personal circumstances and I change my allocation. Keep reading and find out what makes sense for you and your situation.


FN
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Old 09-06-2017, 03:36 PM   #11
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Over coffee this morning, wifey expressed concern with exposure to volatility in equities. We are at about 82/18 AA today.
Many people employ a cash bucket to help insure against selling equities while their value is depressed.
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Old 09-06-2017, 04:41 PM   #12
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For what it's worth, I just moved money around to get to 75/15/5, equity/bond/cash- in the form of IRA money market account. That gives us 3 years' expenses in MM which I'll move from MM to post-tax account as our tax bracket allows. Plan is to rebalance AA first and third quarters of the year.

I think what's important is to discuss the pros and cons of any AA and withdrawal plan and process with spouse/partner; reach consensus, implement, stay the course for a period, re-evaluate and adjust if necessary. This strategy gives us many months of not having discussions about what to do and when. I wouldn't sleep well at night if DH was awake and fretting.

As flintnational recommends, I read lots (current reading Warren Buffet Invests Like a Girl and Why You Should Too) and am working through free Coursera courses in markets and investing. I keep a notebook with with summary points and thoughts about how these points are relevant to our situation. Probably not necessary, but I do enjoy the academic exercise.
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Old 09-06-2017, 05:10 PM   #13
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OP - you are still working, so even if market tanks by 50% you have no need to sell any stocks. I keep a cash cushion in CD's etc for the same reason since I'm retired.

You do need to decide on your AA , and if you decided you needed more bonds/cds/interest you could do it immediately in tax sheltered accounts since stock has gone up so much the last 6+ years.

Basically re-balancing
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Old 09-06-2017, 05:18 PM   #14
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Only you can determine how risk averse you are.

Personally, the one of the big reasons the markets are up is central banks pumping trillions into the market, either by directly buying the assets or enabling companies to borrow and do stock buybacks. My asset allocation is <10% stocks, the rest is cash, gold, or a stable value fund for the 401k.

If your world view is more pessimistic, you need a more conservative asset allocation.
If you're an optimist, you can justify riskier portfolios.
My allocation isn't going to fit others just as theirs isn't going to fit me.
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Old 09-07-2017, 04:21 PM   #15
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Your allocation doesn't seem out of line to me - I was at 85/15 while working, now running at 70/30.

Could look at Schwab or Vanguard info for another reference point and info to discuss with DW.

Investment Risk | Diversify Investments | Charles Schwab

https://personal.vanguard.com/us/ins...io-allocations
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Old 09-07-2017, 06:00 PM   #16
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I had a detailed glide path to move from my working years to retirement years. One allocation does not have to fit both timeframes.
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Old 09-14-2017, 11:15 AM   #17
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For me, the asset allocation question is very difficult - and clearly there is no "right answer." In part that is because everyone's financial circumstances differ, but even among those who have identical circumstances, risk tolerance and psychological issues differ. (How would you deal with a big fall in the markets? Or how would you deal with a big increase in the markets soon after you fled to safety?)

I am early to mid 50s and still working. I probably don't have to work, but I am going to do so for the next, say, three years. I am at around 65%/35%. No pension. I would like to reduce to 50/50, but there would be a significant amount of capital gains tax involved in accomplishing that. And as much as I love my country (usually), I don't want to make big unnecessary donations to it. My goal, though, is to get down to 50/50 at the time I retire. I am on a glide path in that direction.

Even that is probably taking more risk than I need to take. But I am cognizant of the risk of inflation over what could be a relatively long retirement, depending of course on how long I live.

One way to look at this is "how much risk do you NEED to take in order to achieve your objectives." Of course, you can take more risk than you need to, if you want to. But first figure out how much risk you think you need to take.
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Old 09-14-2017, 11:29 AM   #18
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To the OP, your AA also depends on what you are planning to need in retirement. If your current allocation will still provide you with enough income/spending through a potential 20-50% market drop, and you can sleep at night with that, you are fine.
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Old 09-14-2017, 12:40 PM   #19
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How much do you have now and what do you need? How aggressive do you need to be to reach your goals? If you could be 100% cash and achieve your goal, why be in the market?

Run some Monte Carlo simulations, get ideas on what different allocations would do for you.

While market timing has not been successful for most, not listening to your wife has proven even more disastrous. If your wife says sell, sell.
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Old 09-14-2017, 02:08 PM   #20
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If I knew where or what safety was, I'd be tempted to fly there. Is there a fare sale going on?
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