asset allocation

[target2019]

Went looking last night and couldn't find. But here is a useful tool:

https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-risk

The options on the charts and graphs aren't obvious. Take some time to explore.

There are other "articles" in the series, too.

 

[medved]

Thanks for all the input. Some of you wondered why, if I have an FA, I would also seek input from random people on the internet. The answer is pretty simple: Throughout my life I have found that the more input and ideas I get, the better my decision making is. (I especially value input from smart people who see things differently than I do, and who therefore are able to challenge my assumptions and my way of thinking). So whatever you tell me gives me some things to think about and some things to discuss with my FA. Don't worry, I am not going to go out and do something just because someone on this forum tells me it is what he or she would do (even if said with a great deal of confidence). But the input is still very useful and I am grateful for it.

Some of you said I have not mentioned what I intend to spend every year in retirement. That is true but it is not because I am hiding anything. I just really do not know. And I don't think my spending these days will be a very good guide, because there are a bunch of things I am spending money on now that are likely to go away when I retire, and a bunch of new expenses. For purposes of some rudimentary modeling, I have been using $350,000 per year in after tax and after paying my FA expenses. I have not used that number because I actually think I will spend that much money. I don't. But if my plan works, with a very high level of confidence, using that sort of very high expenditure, then it seems like a plan I can be totally comfortable with. Then I can look at how little risk I can take and still have a very high level of confidence that such a plan will work.

 

[dixonge]

I do. But I am still interested in the views of other thoughtful people. At a minimum, it can give me ideas to discuss with the financial advisor.

And then there is this interesting piece from Michael Kitces:

https://www.kitces.com/blog/should-...is-a-rising-equity-glidepath-actually-better/

 

[ERD50]

... there are a bunch of things I am spending money on now that are likely to go away when I retire, and a bunch of new expenses. For purposes of some rudimentary modeling, I have been using $350,000 per year in after tax and after paying my FA expenses. I have not used that number because I actually think I will spend that much money. I don't. But if my plan works, with a very high level of confidence, using that sort of very high expenditure, then it seems like a plan I can be totally comfortable with. Then I can look at how little risk I can take and still have a very high level of confidence that such a plan will work.

OK, it would be helpful for you to plug in your retirement sources of income into a tax program to understand what you will be paying in taxes. That can be highly variable, depending on the source of income. Your FA should gladly do this for you, I would think. But if that means $350 + $75 for FA, you are at a 3.4% WR before taxes. The 4% guidepost includes 5% historical failures for just 30 years, so I personally would not consider >3.4% as super conservative. But as you point out, that's probably the high end of your spending.

-ERD50

 

[VFK57]

Medved, (a bear) lives during winter of their fat, gained during rest of the year. In comparison when you are planning retirement (your Golden Years), you do not have to take a risk with riskier investments while you can live of what you had already gained. As it was noted above, 2% would give you $250K annually. Congratulation.

 

[Terryjm51]

Vpgdx-vanguard manage payout investor
Anyone using this to manage their own finances ?
I heard it pays 4% it dropped to 3 one year but over all you draw 4 is what I heard. Going to do some reading on it


Sent from my iPhone using Early Retirement Forum

 

[medved]

Medved, (a bear) lives during winter of their fat, gained during rest of the year. In comparison when you are planning retirement (your Golden Years), you do not have to take a risk with riskier investments while you can live of what you had already gained. As it was noted above, 2% would give you $250K annually. Congratulation.

I agree with that (even though we bears also enjoy salmon, which can be expensive).

With my current 70/30 allocation, I do think I am taking more risk than I need to take. I plan to do the "free" things I can do to dial back the risk -- move equities in the tax deferred account to fixed income, invest dividends/distributions on the fixed income side, and invest new dollars on the fixed income side. The question I am struggling with is whether I should go further and incur capital gain in order to dial back risk. I am reluctant to do that.

 

[Whisper66]

With my current 70/30 allocation, I do think I am taking more risk than I need to take. I plan to do the "free" things I can do to dial back the risk -- move equities in the tax deferred account to fixed income, invest dividends/distributions on the fixed income side, and invest new dollars on the fixed income side. The question I am struggling with is whether I should go further and incur capital gain in order to dial back risk. I am reluctant to do that.

If I understand your numbers correctly, your only real risk is a market fall that would diminish but not eliminate a nice cushion you have. No real risk of losing so much that your needs would not be met. If that is a correct interpretation of your situation, I don't see any value in spending extra money changing your allocation. Just make incremental allocation changes over time by choosing where you pull money for living expenses.

 

[mathjak107]

i swap funds a few times through the year as things change . now i am about 18% high yield with about 40% of the bond budget in high yield .

high yield had its butt kicked and the markets way over did it in many professional opinions so my corporate bond funds are now gone , i kept some total bond and a few other bond funds but split it with high yield .

i reduced some equity's too and went with more high yield as the growth engine .

the thinking is that if we fall again , high yield likely will not fall as much as stock and if stocks go up we are likely to see the same high single digit gains stocks get from high yield . the high yield fund is paying almost 7% interest plus at the moment some nice appreciation on share price since i bought in . .

so i replaced some of my balanced fund with more allocation to a high yield fund .

my current retirement mix according to the fidelity analysis tool which shows differently then morningstars is now at

29% domestic stock
4% foreign stock
53% bonds with 40% in high yield
14% cash and short term bond .--- this is 2 years withdrawals and an emergency fund .

so this is what i mean by my portfolio is always dynamic . i try to keep the swings in a ceratin over all range but vary the funds via the newsletter as the investing climate shifts with major changes . in this case high yield went from being so over valued to being very under valued .