Equity/Fixed Income Allocation Change with Age

[d]

Venezuelan beaver-cheese futures

... thought b33v3r-ch33s3 was verboten 

You'll have to get back to us the day after your 100th birthday

...i'll make a note of that!

 

[mathjak107]

Are you adjusting those 50/50 to 60/40 allocations as you get older? Do you foresee doing so or is the allocation and bucket system going to remain constant tell you depart this earth?

it kind of self adjusts as you refill your shorter term buckets during the good times by selling some of the longer term buckets

 

[Nords]

I assume that excludes TIPS and similar new fangled instruments, right? Or are you concerned that they may tank in a high-inflation high-taxes environment?

That's a darn good question.  (I'm sure an answer will be forthcoming shortly!)  I think we decided a while back that a TIPS portfolio has too low a yield to support a 4% SWR, or that the phantom taxes would be a nightmare.  But there's probably not enough data for the quantitative economists to come up with a study to answer that question.

... thought b33v3r-ch33s3 was verboten  ...i'll make a note of that!

Well, the hyphenated phrase slipped through a loophole, but I closed it.

Thanks for bringing that up, D!  Anyone else have any other words they'd like to add to the list?

 

[Ed_The_Gypsy]

Does anyone know what ever happened to this Galeno guy? Searching history it appears he made that one post and then was never heard from again. By the way looking at his FI mix, he list 2 year CDs maturing in 1 year. Never saw one of those before..he he.

I think he got a life. He once posted a lot on other forums.

As I read his method, every year he takes 4% of his equity pot and buys a 2-year CD. This means he has a 'staggered ladder', and every year another 2-year CD matures.

Not sure what those without the benefit of a pension are doing. None have reported in.

I will get $400/mo when I turn 65. I will let you know then.

Our partron saint, John Greaney, published a study here:
http://www.retireearlyhomepage.com/restud1.html
that included a small graph of % stock allocation vs. pay-out period for 100% safe withdrawals. The data points were:
10 year pay-out = 49% stocks
20 year pay-out = 66% stocks
30 year pay-out = 74% stocks
40 year pay-out = 78% stocks
etc.
(See article for further details, like what 'stocks'?.)

Some folks have suggested that Social Security could be considered a 'bond'-type of investment. Using this reasoning, our other investment could be heavily weighted towards equities.

Ed

 

[Hydroman]

I think everyone should stop polling the audience and work out the math for their own situations. ER is hard enough, but if people can't do math then ER is impossible.

I'm not sure if "those on a COLAed pension that covers basic living expenses" is a jibe or if I should play it as a straight comment, so I'll play it straight.

No problem doing the math myself. I thought the purpose of this forum was to exchange different viewpoint which we each can then use or reject as an input to our own decision process. If we cant solicit other participants viewpoint or "poll" them as you put it then what the hell is the purpose of this forum? It sure is sucking a lot bandwidth.

Yep that was a straight comment, no "Jibe" intended.

 

[Nords]

No problem doing the math myself. I thought the purpose of this forum was to exchange different viewpoint which we each can then use or reject as an input to our own decision process. If we cant solicit other participants viewpoint or "poll" them as you put it then what the hell is the purpose of this forum? It sure is sucking a lot bandwidth.

I think the best uses of this forum are (1) finding tools, (2) learning how to use them, and (3) having people nitpick review our decisions for errors & omissions.

My meaning is that too many posters attempt to decide by concensus instead of by learning the tools (helpfully provided here) and then using them to make their own decisions. Math doesn't care what the public-opinion polls are saying about your particular situation. There are many paths to ER and many ways to continue the journey without a tour guide. There's no such thing as the ideal asset allocation-- only the one that works for your particular situation, and changes as your life also changes appropriately.

We've all seen the "Yeah, but" posters who've already made up their minds and are only seeking confirmation bias mutual support for their "decision".

We've also seen the "I forgot to mention" posters who provide just enough details for us to recommend a decision and then bring up one minor piece of new info that completely derails the previous plan.

I think human decision-making heuristics (investor psychology) suffer from too much conventional wisdom and too many rules of thumb. (Witness the many incarnations of the "80% of pre-retirement income" pablum.) Look at how many questions people still come up with after using FIRECalc, admittedly one of ER's most straightforward and unambiguous tools! If ER was easy then everyone would be doing it and financial advisors would be cleaning toilets for food.

Take as many polls and get as many opinions as you want. At some point, though, we all have to close the books on the conventional wisdom, analyze our own situations, create our own portfolios, and keep track of our own issues without trying to match everyone else's models...

 

[Gearhead Jim]

So what I have gathered so far is that volatility does not matter much to those on a COLAed pension that covers basic living expenses and so that group does not make any adjustments in their equity/FI ratio based on age. Not sure what those without the benefit of a pension are doing. None have reported in.

No one likes to talk about it, but a situation that produces a severe and prolonged downturn in the stock market could cause some of those pensions to fail or lose the COLA. The only sure thing is that there's no sure thing.
Don't go crazy over this, but do be aware that any pension still has some risk. How much risk will vary a lot from one to another.

 

[Spanky]

No one likes to talk about it, but a situation that produces a severe and prolonged downturn in the stock market could cause some of those pensions to fail or lose the COLA. The only sure thing is that there's no sure thing.
Don't go crazy over this, but do be aware that any pension still has some risk. How much risk will vary a lot from one to another.

That may be true for private sector pensions -- not likely for public (or military) pensions. The risk is minimal.