100% Stocks once on Pension/Social Security?

[mountainsoft]

My wife's pension will pay about 60% of our expenses when we retire. The rest will come from our retirement savings for the ten years or so until we can get social security. Once we're getting SS we won't need our retirement savings for daily living expenses anymore.

At that point, would it be crazy to go 100% stocks (VTSAX for example) with our remaining portfolio?

I ran some simulations in Flexible Retirement planner (10% return, 15% deviation) starting at age 69 (after we're both drawing SS) and saw a dramatic increase in portfolio sizes with no portfolio failures (100% success).

It looks good in calculations, but I wonder if I'm overlooking something.

 

[Dtail]

There are 2 schools of thought on this.
Once you won the game, go all out on Equity exposure to maximize your legacy, or have no exposure to equities since you don't need to generate equity exposure type returns.
Personal preference I suppose.

 

[mountainsoft]

There are 2 schools of thought on this.
Once you won the game, go all out on Equity exposure to maximize your legacy, or have no exposure to equities since you don't need to generate equity exposure type returns.
Personal preference I suppose.

I figured our retirement savings would essentially become a big emergency fund once we are on pension/SS. Car repairs, new roof, medical costs, etc. Or increased costs for things I can't do myself any longer, mowing the lawn, cleaning the chimney, etc. Increasing the value for our later years could be beneficial if we need long term care (in home, or assisted living). At the same time, I wouldn't want to lose the savings we have left.

 

[Jerry1]

We’re in the same situation. I don’t think I’ll go full on 100% equities, but I will be letting my equity exposure increase once my pension a SS are covering most of my expenses. At mid 70’s if I’m on plan, my balance will be higher than it is today. If that happens, I’m giving serious consideration to maximizing my returns through a high equity percentage.

 

[GenXguy]

At that point, would it be crazy to go 100% stocks (VTSAX for example) with our remaining portfolio?

Are you wanting to leave a large nest egg for kids, charity, etc? Once I hit my target, I went the other direction and became much more conservative in my investing - around 42% stocks at this point with about 1.5% WR required on my stash to pay "required" expenses. Especially with this long term bull market, it doesn't seem like a good time to increase equities.

 

[RunningBum]

I figured our retirement savings would essentially become a big emergency fund once we are on pension/SS. Car repairs, new roof, medical costs, etc. Or increased costs for things I can't do myself any longer, mowing the lawn, cleaning the chimney, etc. Increasing the value for our later years could be beneficial if we need long term care (in home, or assisted living). At the same time, I wouldn't want to lose the savings we have left.

So you've got your regular expenses covered, but not your irregular ones. I wouldn't have my emergency fund in equities. Of course this sounds like a greatly overfunded emergency fund, but I'd hold out the larger of the largest emergency expense you're likely to face or a typical year's worth of irregular expenses. Keep that liquid, like in a money market. Maybe add a CD or bond ladder to refresh it if there's a typical amount each year. I wouldn't go 100% equities.

 

[Chapter 3]

There are 2 schools of thought on this.
Once you won the game, go all out on Equity exposure to maximize your legacy, or have no exposure to equities since you don't need to generate equity exposure type returns.
Personal preference I suppose.

Similar situation to the OP collecting pension and SS a year away. I chose Dtail's first option and don't feel crazy.

 

[ER2B]

100% equities beats 60/40 in total return. But I may sweat bullets in a severe downturn. Yes, our pensions, rental income and SS more than covers everything. "The pain of losing money is always much worse than the joy of making money"

 

[GravitySucks]

It's not crazy if your risk tolerance can take it.

 

[Souschef]

100% equities beats 60/40 in total return. But I may sweat bullets in a severe downturn. Yes, our pensions, rental income and SS more than covers everything. "The pain of losing money is always much worse than the joy of making money"

I am in the same boat. SS and pensions cover our expenses. The RMD from my IRA accounts covers all taxes, gifts to our sons, charity, and some travel.

 

[Navigator]

A well balanced portfolio of 100% stock is not a crazy idea. In fact, for a 30 year retirement it has outperformed the standard 60/40 portfolio every year since 1932, with one exception. In 1969, both the 60/40 and 100% stock portfolios allowed a 4.7% withdrawal rate. The downside to 100% stock is that there will be larger fluctuations in your portfolio from year to year.

 

[ncbill]

Lots off threads over on bogleheads about this.

As one poster over there notes there's only about a 1% real annual difference in return between a 100/0 & 70/30 equities/fixed AA portfolio.

Given the above I'd stick with 70/30.

 

[mountainsoft]

So you've got your regular expenses covered, but not your irregular ones. I wouldn't have my emergency fund in equities. Of course this sounds like a greatly overfunded emergency fund, but I'd hold out the larger of the largest emergency expense you're likely to face or a typical year's worth of irregular expenses.

Good point. This idea is still 13 years or so out, but I'm just scheming for the future. Play it safe until pension and SS cover our expenses, then our savings isn't as critical. Still, as you say, it would be smart to set aside a good chunk as a cash emergency fund before going crazy investing the rest.

 

[daylatedollarshort]

Pensions and SS are about half our retirement income and provide enough to cover almost all our retirement expenses. I don't think doubling our portfolio money would make us any happier, but losing half of our life savings would sure hurt, so we're in the camp of playing it safe and not investing too much in stocks. At our ages even with a zero real return we can have up to a 3.33% safe withdrawal rate if we wanted into our 90s (100 / 30 years = 3.33%) and that is good enough for us.

 

[W2R]

Last year, my social security and mini-pension paid for all except ~$8,000 of my spending. I am not especially rich, but being single in a paid off home with a paid off car and no debts helps so much.

I think I could say that my SS and pension covered all the necessities. During the year I bought a Nintendo Switch and games, a GameCube and games, a printer, had high quality frozen steaks regularly delivered, ate lunch out every day, and bought some nice clothes for a change. I could cut out any or all of those things.

Anyway, to make a long story shorter, I am not going to go 100% equities in my portfolio. Why should I? I don't need the money. At the risk of sounding terribly stuck up, I can tell you honestly that I have more than I can spend. Even more importantly, I don't need the stress, should there be another downturn. I'd rather post "Wheee!!! " threads than "Whoa!!! " threads.

We each have our own investment philosophies and approach. For me, the high equity AA's were just right when I was young and desperate to grow my nestegg sufficiently to retire. Right now I am not in that position.

 

[braumeister]

Pensions and SS cover all our regular costs and some of our discretionary expenses. But being the overly cautious type, our AA fluctuates between 50/50 and 40/60 and I don't let it out of that band. Currently around 45/55. Of course we could let the equity portion get much higher, but that tends to make me nervous and it's all about sleeping well at night.

 

[yakers]

Somewhat similar situation, pensions cover basic costs. My AA is 40 stock/45 bond 15 cash (MMF), I have enough equities, only sell them for RMD/QCD just use cash funds for travel/discretionary activities and if the market tanks I wil buy in to 60% stock but otherwise no plans to change.

 

[Hillbilly]

In about 10 years, I will face the same problem. My plan as of today would be to not go all 100% stocks since I'm self insuring LTC with this money. It really needs to be there when one of us needs it. So for now, I'm at 50% stocks while I study this deeper myself. Look forward to others thoughts on this too.

 

[workmyfingerstothebone]

We expect pensions, ss, rental income to cover all our expenses in retirement.
Our allocation is typically around 70/30.
This year we rebalanced to something like 55/25/30.

But, our long term goal is 5.50% real returns over the next 30 years.
So more risk early and moving more conservative later.

We are of the mind that we will spend down as much as like.
If anything is left over then it will past down.

 

[donheff]

Lots off threads over on bogleheads about this.

As one poster over there notes there's only about a 1% real annual difference in return between a 100/0 & 70/30 equities/fixed AA portfolio.

Given the above I'd stick with 70/30.

This is where I came out. My risk tolerance is high (easy with a good pension) but I prefer to damp out the volatility and I want (as opposed to need) to pull from the portfolio even after a massive downturn. Doing that with 100% depressed equities would bother me even if the end result is likely fine.

 

[jollystomper]

2019 is my first full year of retirement. My pension has covered 58% of our expenses. Interest/dividend income directed to cash (I still have some other dividends being reinvested) and DW's part time income (which I did not factor into the retirement plan) has covered 22%, and 20% has come from our cash (much lower than we expected). I maxed out SS contributions for 35 years and will be receiving the maximum benefit. When we choose to take it, it plus my pension will likely cover our regular expenses.

The comment above about the 2 schools of thought is true. If one wants to go 100% in stocks and can accept the volatility that comes with it, more power to them. I am not one of those folks right now . My current choice is to leave the stock component of my AA as is (currently 33%) when we take SS. I am fine with getting less of a return to have less volatility. Our kids and the charities we will be leaving our inheritance to will not suffer if we do not try to maximize returns.

In theory, since we have enough cash to help cover expenses until we choose to take SS, we could have the rest of our portfolio in 100% stocks, particularly if we delay SS to age 70, 9 years from now. But there is the "sleep well at night" factor, and our current AA provides that, without any impact on our desired lifestyle. Of course things can change, so I will re-evaluate this over time.

 

[Navigator]

Lots off threads over on bogleheads about this.

As one poster over there notes there's only about a 1% real annual difference in return between a 100/0 & 70/30 equities/fixed AA portfolio.

Given the above I'd stick with 70/30.

A 70/30 portfolio is reasonable, but I would like to point out that a 1% difference in annual return is huge. It translates into a 35% difference over 30 years.

 

[FI_RElater]

I'd rather post "Wheee!!! "

we're doomed! She said "that which should not be said"


Back to the post: some of us don't realistically have 30 years, so the extra 1% isn't that material.... especially when some of us don't have a wr above 2% currently.
our plan is 45% equities until SS, then go 50/50 to possibly even 60/40 (absolute max we'd go)... but likely just stay at 45-50 and let it drift up to 50 over time. other part of IPS is to start SS early (before 70 or even FRA) if there's a significant downturn

we're like GenXguy, but older and have pension; no need to take risk for funds we really don't need since we already have nearly three large in investable with paid off house {note: no kids or legacy needs}

[already eligible, just waiting to at least FRA under normal conditions. Younger spouse, with marginally higher PIA would wait until 70]

 

[daylatedollarshort]

For those of you who can live off SS, pensions and other income streams and are undecided on what AA to take with your portfolio, a book that helped shape my views was Against the Gods: The Remarkable Story of Risk by Peter Bernstein. I found the section on diminishing marginal utility applicable to in terms weighing potential stock market gains vs. losses and what impact each scenario could have on our happiness levels. That and reading through the past posts here and Bogleheads during big market drops about feelings of gut punches, sleepless nights, and white knuckling it through the stock downturn. I don't want to have those worries in retirement.

 

[Gumby]

For those of you who can live off SS, pensions and other income streams and are undecided on what AA to take with your portfolio, a book that helped shape my views was Against the Gods: The Remarkable Story of Risk by Peter Bernstein. I found the section on diminishing marginal utility applicable to in terms weighing potential stock market gains vs. losses and what impact each scenario could have on our happiness levels. That and reading through the past posts here and Bogleheads during big market drops about feelings of gut punches, sleepless nights, and white knuckling it through the stock downturn. I don't want to have those worries in retirement.

That book is great, and I think almost everyone would benefit from reading it.