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Changing the stock/bond mix with time
Old 04-22-2004, 05:13 PM   #1
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Changing the stock/bond mix with time

I have assumed that most of the portfolios presented on this board do not change much with time, as far as the stock/bond mix is concerned. A recommended portfolio that is 50/50 is not typically adjusted to be more conservative with time, even if the person is in retirement. On the other hand, a few posts have suggested things like the Vanguard Target Funds. These automatically get more conservative. For example, the Target 2025 starts at 60/40, after 10 years is at 50/50 and after 20 years is at 35/65. This seems very conservative for someone who may have 20, 30 or 40 years in retirement. The In Retirement Fund is 20/80. Any advice/comments about this?

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Re: Changing the stock/bond mix with time
Old 04-22-2004, 05:47 PM   #2
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Re: Changing the stock/bond mix with time

I presume 'they' are making certain assumptions about potential customers as to age/life expectancy and use of funds as income sources.

Since ER's don't often fit the target catagory, we're left to do more study as how to fit our situation. At age 60 after ten years in ER. I still feel in a non-fit zone for the canned product. At 66 - may take another look - depending on how 'old' I feel.

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Re: Changing the stock/bond mix with time
Old 04-22-2004, 06:01 PM   #3
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Re: Changing the stock/bond mix with time


I am 70 and own Target Retirement 2025, a 60/40
stock to bond mix. This fund is in my wife's IRA and
in our after tax fund. I am using value tilting index
funds in my IRA at a 60/40 mix to balance the
Total Stock Market Index funds in the 2025 funds.

My wife is 8 years away from "required minimum
distributions" and gets glassy eyed at this kind
of discussion so, for her sake, I am keeping her
IRA and our after tax fund dirt simple. Since I
am in the RMD stage, I recently decided to switch
out of 2025 to all index funds in my IRA to better
manage withdrawals. We are withdrawing from
my IRA at a 6% rate or 4.2% from the total portfolio.

In case I need a drool cup prematurely or step in
front of an 18 wheeler, I have instructed my wife to
switch back to the 2025 fund.

We are taking a tax hit in the after tax 2025 but it
should be a relatively safe investment for the next
30 years and provide a nice nest egg for our brood.
We hope to avoid any withdrawals from this for at
least 20 years.

At this stage in life, I like the way the 2025 becomes
more conservative with time, especially if I am not here
to mother hen things. You can always spice things up
with stuff like REITS, small cap value, large value etc.
but the target retirement funds are a good core holding,
IMHO. If you like a non changing allocation, then
Balanced Index or one of the life strategy funds might
suit you better. Managed funds like STAR, Wellington
and Wellesley are also excellent.


Charlie (aka Chuck-Lyn)
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Re: Changing the stock/bond mix with time
Old 04-25-2004, 12:14 PM   #4
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Re: Changing the stock/bond mix with time

I'll turn 68 this Wednesday, and have been retired 12 years. I also manage finances for my 91 year old mother. We use a 60/40 split in all accounts: 40% total domestic stocks, 20% total international stocks, 25% short-term bonds, 10% REITs, and 5% cash, and it seems to work well for us. A 60/40 split already represents a reduction in volatility risk for us, so I don't envision changing that allocation further with age. Except for cash, our investments are in Vanguard index funds. We draw under 4%; my mother draws under 3%.

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Re: Changing the stock/bond mix with time
Old 04-25-2004, 05:01 PM   #5
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Re: Changing the stock/bond mix with time

Hello Don Bell and Happy Birthday! My idea of
successful ER is living to 68. Last night I had a real nightmare. I dreamed I was back working and
my co-workers were giving me crap. I was
miserable and frantic to get out. The capper was
that my ex-wife showed up near the end of the dream. I woke in
a highly agitated state

John Galt
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Re: Changing the stock/bond mix with time
Old 04-26-2004, 12:06 PM   #6
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Re: Changing the stock/bond mix with time


My mother is 91. She has a brother 97, sister 98, and another brother 104, all in reasonably good health. So, at 68, I think it's wise to plan for at least 40 years of continued retirement, which would mean I was retired a lot longer than I worked. I was late 20's when I got my first real job after completing a post-doc, so my career was about 27 years.

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Re: Changing the stock/bond mix with time
Old 04-26-2004, 03:58 PM   #7
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Re: Changing the stock/bond mix with time

I assume nothing about my life span based on my
relatives. The odds might favor me but I refuse to count on anything over about a month. My parents are both alive
and in pretty good shape (86 and 85). My paternal
grandfather and great grandfather made it to 100+.
But, my Dad also had 2 sisters, both dead at 42. IMHO,
you make these optimistic assumptions at your peril. It will serve you to no good end.

John Galt
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