Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Had planned on new AA...
Old 12-20-2018, 10:18 AM   #1
Recycles dryer sheets
 
Join Date: Apr 2013
Posts: 142
Had planned on new AA...

Hi all,
I had planned on starting the process of shifting our roughly 80/20 AA before the first of the year (and before the recent drop). I wanted to start being systematic which I have never been when it comes to our AA.

In our portfolio, roughly 20% is in cash.
The 80% is divided between our taxable, individual Fidelity account at around 49%, with the remaining 51% or so in our 401K.

I had planned to start working down to an overall 60/40 AA over time.

The issue of dividends hasn't even entered the picture. I don't know where I stand on that at the moment.

DH and I are both 56 (okay, I'm almost 56). DH is retiring within the next few months (no hard date set yet) and we want to keep our cash to live on until he turns 59 1/2...

One challenge in rebalancing is that so much of our money is tied up in the taxable account. I can sell a couple of stocks within our taxable account before year end b/c they are losses. All of the rest have had sizable gains over the years.

So a couple of questions are:
1. What would you do with the cash from the sale of these two stocks? I am just so accustomed to buying stocks (and in more recent years as index funds) that non-stock side of the equation is still really new territory for me. It's a whole new world...I know I could just stay in more cash, but my brain is telling me to "go shopping! The stocks are on sale!" That mentality obviously doesn't help me in my goal to downregulate my risk exposure...

2. Looking at this from a longer term perspective, can you offer some thoughts/advice? Do I simply hang on until we hit 59 1/2 and then start selling off the stocks in my 401K? Gee, I thought I had a handle on this but I am clearly muddled with this rebalancing thing.

Many thanks!
__________________

steady saver is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-20-2018, 10:24 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 8,593
1. You are trying to go from 80/20 to 60/40, so why wouldn't you buy more of whatever is currently part of the 20? Bonds, bond funds, CD, MMs, etc.

2. Why do you have to wait until 59 1/2 to sell stocks from your 401K? Why can't you move from stocks to bonds/other in that account? The 401K is a good place to hold non qualifying dividend producers.
__________________

RunningBum is offline   Reply With Quote
Old 12-20-2018, 10:26 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 5,231
mine got automatically rebalanced
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 12-20-2018, 10:36 AM   #4
Recycles dryer sheets
 
Join Date: Apr 2013
Posts: 142
Quote:
Originally Posted by RunningBum View Post
1. You are trying to go from 80/20 to 60/40, so why wouldn't you buy more of whatever is currently part of the 20? Bonds, bond funds, CD, MMs, etc.

2. Why do you have to wait until 59 1/2 to sell stocks from your 401K? Why can't you move from stocks to bonds/other in that account? The 401K is a good place to hold non qualifying dividend producers.
Running Bum you are exactly right, of course. It is that "sale" mentality that makes it hard for me to put that money in something more conservative.
As far as rebalancing within the 401K, duh. You are correct again. I think the combination of having too little sleep, too busy of a week, and a sharp drop in the 80 part of my 80/20 portfolio discombobulated me a bit. Thanks for setting me back on the straight and narrow. Okay, well at least back on the general path. Old habits die a slow death.

I will regroup...
steady saver is offline   Reply With Quote
Old 12-20-2018, 11:22 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Lsbcal's Avatar
 
Join Date: May 2006
Location: west coast, hi there!
Posts: 6,667
A few thoughts.

First, concentrating on what your AA should be is a great thought!

I set our AA to be the max risk we will take. That is done after reviewing several runs of the VPW spreadsheet (see Bogleheads for more on VPW). So I don't have any spare money sitting around waiting for an opportunity which must be timed. The AA is 60/40 and if it gets to about 61/39 I sell some equity to get back to 60/40. That way I never take any more risk then originally set. Further, I've decided not to rebalance should stocks fall below 60%, i.e. will not buy into a declining market. Caveat: I do have a Plan B market timing scheme which has not triggered since the buy in 2009, so it's a buy-hold most of the time.

Recently I've bought a lot of TIPS in the retirement accounts. The 5 year TIPS are paying around 1.0% real presently. So that eliminates some rate rise and inflation uncertainty. The rest of the FI side is short term bonds (VFSUX). The short bonds are a long term strategy as a stepping stone to true cash (checking account) and are about 9% of the portfolio.

My whole effort is to find a mechanical way of managing risk. Still I worry a bit. I'm just not the type to set and forget.
Lsbcal is offline   Reply With Quote
Old 12-20-2018, 02:10 PM   #6
Thinks s/he gets paid by the post
HNL Bill's Avatar
 
Join Date: Dec 2017
Posts: 1,599
If the markets haven't rebalanced your portfolio for you, I'd have a really hard time selling equities at 15-20% depreciated values to buy bonds. You'd be locking in your losses. I know many folks here do their rebalancing annually, or semi-annually, regardless of market status, but I think rebalancing in a depressed market will only make those 'paper losses' permanent.
HNL Bill is offline   Reply With Quote
Old 12-20-2018, 02:29 PM   #7
Recycles dryer sheets
 
Join Date: Apr 2013
Posts: 142
Quote:
Originally Posted by HNL Bill View Post
If the markets haven't rebalanced your portfolio for you, I'd have a really hard time selling equities at 15-20% depreciated values to buy bonds. You'd be locking in your losses. I know many folks here do their rebalancing annually, or semi-annually, regardless of market status, but I think rebalancing in a depressed market will only make those 'paper losses' permanent.
You make a good point. I'm going to look inside my 401K and see what tweaks I can make now, without doing a major overhaul all at once in this downtime. One thing I know I can do is sell me two losses in my individual account.

Thanks for your thoughts.
steady saver is offline   Reply With Quote
Old 12-20-2018, 02:47 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 8,593
If you're reinvesting dividends, you could stop that for stocks and stock funds, and use the dividends to buy bonds. That would give a small movement away from equities.
__________________

RunningBum is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Anyone have any stories about ERing earlier than you had planned? glen12 Life after FIRE 39 08-12-2012 02:34 PM
Mom saw warning signs in son who planned shooting spree Wags Other topics 4 04-12-2008 09:58 AM
Hi I am begining a long planned journey to retirement vthorseshoe Hi, I am... 5 04-01-2008 11:50 AM
Describe your first year of ER... Planned or Past chinaco Life after FIRE 34 04-03-2007 07:12 PM
Return more than planned bobbee25 FIRE and Money 65 12-11-2006 03:42 PM

» Quick Links

 
All times are GMT -6. The time now is 12:16 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.
×