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any Ray Lucia Fans here?
Old 06-10-2012, 09:36 AM   #1
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any Ray Lucia Fans here?

Just wondering how many of you ever listen to Ray Lucia or how many have ever read any of his books?

Does anybody here employ his "bucket strategy" in their early retirement? I happen to think that, while he certainly has an agenda in getting people into his son's financial firm, his advice is generally excellent and his show very entertaining. What does everyone here think?
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Old 06-10-2012, 09:40 AM   #2
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A forum search on Ray Lucia and/or buckets will bring up dozens of threads on the subject.
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Old 06-10-2012, 09:41 AM   #3
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thanks. Sorry for the duplication.
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Old 06-10-2012, 10:28 AM   #4
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thanks. Sorry for the duplication.
I think most forum members are aware of him. He's not the worst of the finance gurus, but his "buckets" concept is just common sense AA and drawdown strategy to most of us on here. If it gets more people to think sensibly about AA and risk then that's "a good thing", to quote another guru.
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Old 06-10-2012, 11:34 AM   #5
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... his "buckets" concept is just common sense AA and drawdown strategy to most of us on here.

Not sure I'd agree with that. Buckets kind of twist the idea of AA. Is it 'common sense'? There was a thread recently indicating large cash reserves hurt a retirement portfolio.

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Old 06-10-2012, 12:37 PM   #6
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Not sure I'd agree with that. Buckets kind of twist the idea of AA. Is it 'common sense'? There was a thread recently indicating large cash reserves hurt a retirement portfolio.

-ERD50
You could argue that, but I'd looked at my funds in a buckets way for years before I ever heard of Ray so to me it just seems like common sense. Large cash reserves many hurt a retirement portfolio, but they can be good for one's peace of mind and some cash should be in every portfolio, the amount depends on circumstances.
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Old 06-10-2012, 01:00 PM   #7
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editing your response to focus the key points:
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...to me it just seems like common sense.


Large cash reserves many hurt a retirement portfolio,

but they can be good for one's peace of mind...
I just have a tough time getting my head around the idea that something that may hurt the portfolio could bring peace of mind.

I'm not just talking volatility, I can see that trade off to a degree, but those studies show that success rates were hurt. Different strokes I guess, but that isn't my idea of 'peace of mind'.

-ERD50
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Old 06-10-2012, 01:57 PM   #8
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editing your response to focus the key points:

I just have a tough time getting my head around the idea that something that may hurt the portfolio could bring peace of mind.

I'm not just talking volatility, I can see that trade off to a degree, but those studies show that success rates were hurt. Different strokes I guess, but that isn't my idea of 'peace of mind'.

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It's the same mentality that makes you pay off a 4% mortgage when all the pundits say you can get 7% in the stock market.....remember that.
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Old 06-10-2012, 02:54 PM   #9
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Not sure I'd agree with that. Buckets kind of twist the idea of AA. Is it 'common sense'? There was a thread recently indicating large cash reserves hurt a retirement portfolio.
But to the extent a certain number of years of income might represent X% of your portfolio, it *is* a form of AA, but one that allocates by number of years of income rather than a "percentage" of income.

Nevertheless, if you have a $1M portfolio and you need $30K of income from it each year, if you put 5 years of "safe" stuff (i.e. cash) into 'bucket 1' that's another way of saying roughly a 15% allocation to cash. And if you had another 10 years in bucket #2, that's 30% in stuff like bonds. The rest -- 55% -- would be in equities. So really, it targets a 55/30/15 asset allocation, more or less. It *is* a form of AA.

My problem with it is that it isn't sufficiently mechanical; any "rebalances" in terms of moving money between buckets is likely to be a "gut feeling" or influenced by emotions and where you think the markets are headed in the "short term". I look at using AA as a way to eliminate guesswork and "gut feelings" from rebalancing decisions, and I don't know how you do that in the Lucia "bucketizing" model.

Beyond that, we have more previous threads to search through and read through on this concept than anyone can probably stand!
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Old 06-10-2012, 03:05 PM   #10
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Nevertheless, if you have a $1M portfolio and you need $30K of income from it each year, if you put 5 years of "safe" stuff (i.e. cash) into 'bucket 1' that's another way of saying roughly a 15% allocation to cash. And if you had another 10 years in bucket #2, that's 30% in stuff like bonds. The rest -- 55% -- would be in equities. So really, it targets a 55/30/15 asset allocation, more or less. It *is* a form of AA.

My problem with it is that it isn't sufficiently mechanical; any "rebalances" in terms of moving money between buckets is likely to be a "gut feeling" or influenced by emotions and where you think the markets are headed in the "short term". I look at using AA as a way to eliminate guesswork and "gut feelings" from rebalancing decisions, and I don't know how you do that in the Lucia "bucketizing" model.
That's how I think of things. I do mechanical rebalancing selling when things are up and keeping my cash balance at 5%.
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Old 06-10-2012, 04:10 PM   #11
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It's the same mentality that makes you pay off a 4% mortgage when all the pundits say you can get 7% in the stock market.....remember that.
Well, that mentality didn't make me pay off a low rate mortgage.

I think ziggy's comments are accurate, and as I said it is a 'twist' on AA. I just take issue with you describing it as 'common sense' to most of us. I don't think common sense can tell us if it is good/bad/indifferent, that would take a lot of detailed study, and then you have that whole past/future thing.

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Old 06-10-2012, 04:36 PM   #12
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Well, that mentality didn't make me pay off a low rate mortgage.

I think ziggy's comments are accurate, and as I said it is a 'twist' on AA. I just take issue with you describing it as 'common sense' to most of us. I don't think common sense can tell us if it is good/bad/indifferent, that would take a lot of detailed study, and then you have that whole past/future thing.

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We are discussing philosophical differences. One man's common sense may well seem like foolishness to another because of different priorities.
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Old 06-10-2012, 07:16 PM   #13
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As my retirement date nears I'll look at the Buckets approach more closely. But as of now the concept appeals to me. In a sense I've already adopted it. I have a small wad of cash set aside that virtually guarantees I can hit my needed target date (see my "Miserable..." posting) regardless of what happens to the market.
I intend to post a question on Asset Allocation strategy when I finally RE.
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Old 06-10-2012, 07:51 PM   #14
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We are discussing philosophical differences. One man's common sense may well seem like foolishness to another because of different priorities.
Not really. Facts are facts, they are not changed by one's viewpoints or philosophy.

If one feels better with buckets or no mortgage debt, that's fine. But it does not change whether those are financially advantageous or not. Again, I just don't think it is accurate for you to say it is 'common sense' to many. It may be a personal preference, but 'common sense'?

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Old 06-10-2012, 10:42 PM   #15
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Not really. Facts are facts, they are not changed by one's viewpoints or philosophy.

If one feels better with buckets or no mortgage debt, that's fine. But it does not change whether those are financially advantageous or not. Again, I just don't think it is accurate for you to say it is 'common sense' to many. It may be a personal preference, but 'common sense'?

-ERD50
I think we'll have to agree to disagree. I do not consider the results of models that use historical data as facts, just potential outcomes. Also financially advantageous can be interpreted in different ways, is it how much money you have, liquidity or not having to worry about paying the mortgage or rent ever again?
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Old 06-11-2012, 01:33 AM   #16
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editing your response to focus the key points:

I just have a tough time getting my head around the idea that something that may hurt the portfolio could bring peace of mind.

-ERD50
Isn't that why we have an AA? After all, since stocks do better than cash, historically, you could argue that any cash "hurts the portfolio". Having a "bucket" of cash to protect against shorter-term volatility makes some sense. But that same cash *does* reduce a portfolio return over time.

I do listen to Ray, but have not used his buckets strategy per se. I do feel he's generally knowledgeable and ethical. He does try to sell his services and seems predisposed to using non-tradeable REITs, something that I suspect is a commission maker for his firm. But generally, he seems pretty up and up - extolling staying the course, buying index funds, and not actively trading or trying to predict the market.
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Old 09-05-2012, 06:49 PM   #17
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But to the extent a certain number of years of income might represent X% of your portfolio, it *is* a form of AA, but one that allocates by number of years of income rather than a "percentage" of income.

Nevertheless, if you have a $1M portfolio and you need $30K of income from it each year, if you put 5 years of "safe" stuff (i.e. cash) into 'bucket 1' that's another way of saying roughly a 15% allocation to cash. And if you had another 10 years in bucket #2, that's 30% in stuff like bonds. The rest -- 55% -- would be in equities. So really, it targets a 55/30/15 asset allocation, more or less. It *is* a form of AA.

My problem with it is that it isn't sufficiently mechanical; any "rebalances" in terms of moving money between buckets is likely to be a "gut feeling" or influenced by emotions and where you think the markets are headed in the "short term". I look at using AA as a way to eliminate guesswork and "gut feelings" from rebalancing decisions, and I don't know how you do that in the Lucia "bucketizing" model.

Beyond that, we have more previous threads to search through and read through on this concept than anyone can probably stand!
i never did the math so im really curious as to the results but the buckets are different then just the 55/30/15 allocation would be.

a systematic withdrawal takes from all assets equally typically so stocks are being sold off right from year 1.

although you have large cash and bond positions with ray the stocks can be left untouched for up to 15 years.

The convential mix always would stay at that allocation as you spend down, rays buckets get more aggressive as the cash and bond buckets are spent down.

in fact if you wait until the very end of the 14 years to refill your 90-100% equities .

those equities and re-invested dividends are left untouched to grow for quite a long time.

that may make the end results very different from a fixed allocation model
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Old 09-05-2012, 09:05 PM   #18
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Mathjak, your statement is consistent with my understanding of his buckets strategy.

I believe that historical analysis shows that spending all your cash and bonds before tapping stocks, on average, does result in a much higher total portfolio return (due to the increasing % stock allocation). Still, I'm not sure I'd have the guts in retirement to let that happen, unless I had a large excess over my need. A big market crash just as you exhaust your shorter-term buckets could be a bad situation, even if relatively unlikely.
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Old 09-06-2012, 05:06 AM   #19
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Mathjak, your statement is consistent with my understanding of his buckets strategy.

I believe that historical analysis shows that spending all your cash and bonds before tapping stocks, on average, does result in a much higher total portfolio return (due to the increasing % stock allocation). Still, I'm not sure I'd have the guts in retirement to let that happen, unless I had a large excess over my need. A big market crash just as you exhaust your shorter-term buckets could be a bad situation, even if relatively unlikely.
Yeah, I can immagine how I would have felt in early 2009 if my cash bucket was depleted and now had to liquidate equities to refill. More stress than I would like to deal with
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Old 09-06-2012, 06:48 AM   #20
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Thats the beauty of the plan. see where you stood 15 years before the drop. you would still have been up big time and not selling into a loss even after the drop.
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