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Old 11-30-2007, 03:57 PM   #21
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I'm curious what you consider an overly defensive portfolio (% stock/bond), and why. Just trying to decide what allocation we want to transition to as we get closer to ER, planning for 50 or so years of retirement. I was leaning toward 60/40 but your comment made me question if this is too conservative when retiring so young. Other replies/opinions welcomed.
I think anything from 50/50 to 70/30 should provide at least a safe 3.5%.
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Old 11-30-2007, 04:12 PM   #22
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Originally Posted by simple girl View Post
I'm curious what you consider an overly defensive portfolio (% stock/bond), and why. Just trying to decide what allocation we want to transition to as we get closer to ER, planning for 50 or so years of retirement. I was leaning toward 60/40 but your comment made me question if this is too conservative when retiring so young. Other replies/opinions welcomed.
There are lots of on line resources to create model portfolios. I worked with 10 or more and there seemed to be a clustering around 70 to 50% equities. Age had a tendency to raise equities but closeness to retirement lowered it. Length in retirement didn't have much impact.

I moved to 40% fixed to be able to handle major market swings. With 7 years of living expenses, I might let the percentage fall if equities continue to do well under the assumption 7 to 10 years of living expenses in cash can let me wait out a market downturn.
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Old 11-30-2007, 04:21 PM   #23
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Wife and I are 55 and will be pulling the trigger by next year this time. We have gone from 75% to 50% equity consisting of 35% US high quality and 15% foreign equity (The switch down was done very close to the highs in Oct.). The rest is fixed zeros (8%) I bought years ago, Bond funds and Money Market (15%). We will be withdrawing 6% per year for the next 7 years but than less than 3% after SS and Pensions kick in. My main goal is not use up too much of my nestegg in ER. If I can maintain a return of 6 or 7% or at least avoid a 20-25% hit I will be very happy. When SS and pensions kick in and/or if market conditions improve I may very well rebalance.
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Old 11-30-2007, 04:32 PM   #24
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risk tolerance should be a combined risk tolerance, not one spouse vetoing other... IMO.
If I were married and my wife wanted a much more agressive or conservative portfolio than what I wanted, I would push for a post-nup, and let each person do what they wanted to do. There is no such thing as a "combined risk tolerance". Risk tolerance is probably baked in the cake by the time you leave childhood. So each spouse is going to have his or her own. This doesn't mean that one might not be able to influence or dominate the other.

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Old 11-30-2007, 06:14 PM   #25
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There are lots of on line resources to create model portfolios. I worked with 10 or more and there seemed to be a clustering around 70 to 50% equities. Age had a tendency to raise equities but closeness to retirement lowered it. Length in retirement didn't have much impact.

I moved to 40% fixed to be able to handle major market swings. With 7 years of living expenses, I might let the percentage fall if equities continue to do well under the assumption 7 to 10 years of living expenses in cash can let me wait out a market downturn.

im pretty close to you , im 55 my wifes 57. we may pull the plug in 2 -3 years. got 7 years in safe money, another 7 in bonds, unlisted reits and bond funds, rest in equities. we can handle almost 15 years of crappy markets without a flinch.
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Old 11-30-2007, 06:25 PM   #26
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I'm for picking an AA that you can live with in an absolutely awful economic environment -- like the early 70's. You know, when the market goes down 1 year and you have to rebalance into equities .... and then it goes down another year and you have to again rebalance into equities. Could you do that? Or would you be selling equities at the bottom (hopefully) when pundits who were bearishly right before are telling you disaster looms ever larger?
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Old 11-30-2007, 07:46 PM   #27
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No change. I'm still 100% VFINX/VTSMX/SWPIX in my retirement accounts.

38.5 years old, single, FIRE date is bouncing around age 52.

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Old 11-30-2007, 07:53 PM   #28
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No change here. 60% equities/40%bonds & cash. Age 56, have non-COLA'd pension (& health care partially underwritten by MegaCorp) supplemented by DH's income. Don't expect to draw down from IRA until 60 - 61 at the earliest and am forecasting 3.0% to 3.5% withdrawal rate.
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Old 11-30-2007, 10:10 PM   #29
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... in the wake of the subprime mortgage mess, in addition to other factors in the economy?

The hubby wants to take a more conservative position at the moment, fearing the worst. I'm still in "ride it out" mode, though I will admit that being about 90% in stocks (a mix of foreign and domestic, as well as small, mid and large cap) is probably not the safest place to be. (I'll be 40 in January; he's 46; our target ER date at the moment is 2011.)

Any thoughts or musings?
I haven't changed anything either. I am really pretty much committed to the long term, and 60/40 lets me sleep at night two years before ER. The only thing is that I had previously been musing and thinking about going to maybe 8% VGSIX (REIT) just for diversification purposes. (That was a year or two ago.) But now I am thinking that with all the real estate problems, maybe I should consider doing something else with that 8%, instead.

I agree with those who say that 90% equities when ER is only 3-4 years away is probably too aggressive. I would think that 60-75% would be better. I don't know if now is the right time to make that move, though. It's usually best to sell high when that is feasible. My crystal ball isn't working very well.
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Old 12-01-2007, 12:08 AM   #30
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Allocations have remained about the same at about 80% equity, and 20% bonds/cash. It's all in there for the long haul, since I receive a decent cola'd DB pension. Also, part of the pension gets rat-holed away each month.....saving for a rainy day....and some really nice trips!
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Old 12-01-2007, 12:16 AM   #31
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Haven't changed much. Did use some cash during the recent market sell-off to pick up a position in beaten down stock--Labor Ready---LRW---selling at ten year low PE range, no debt, good ROE's, good earnings growth. Strong "keeps chugging away" company for the long haul at a bargain price. Was thinking about Lowes just under $22, then the market bounced back up and LOW now up $24.72 so I missed on that one.
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Old 12-01-2007, 01:58 PM   #32
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I think anything from 50/50 to 70/30 should provide at least a safe 3.5%.
I'd think a 50-50 portfolio would have long term returns approach 6%- a guess, but that is my guess.

I'd think a 70-30 portfolio would have long term returns approach 7%-another guess.

If 3.5% is what you want, then look to CDs or money markets. Much close to a guaranteed return using those vehicles.
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Old 12-01-2007, 02:04 PM   #33
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I agree with 2B, 90% stocks is pretty strong. With retirement just a few years away for you, I would have a more balanced portfolio.
I do think 90% bonds with 4 years to retire is way too high. My formula for bonds is 20-years to retire=% bonds

In your case this is 20-4=16. So 16% bonds would be the minimum I would consider for bonds. If you are more risk averse, this amount would be higher (26% suggested based on age).

I think 70-30 for you makes sense based on age when you retire.

To get to 16% bonds from here, consider selling 1% of all holdings every month. Pick a day and make the trade the same day each month. in a year and a half you will have around 18% bonds.

By selling 1% on occasion you are also locking in profits and you could use the selling as a way to rebalance.
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Old 12-04-2007, 01:26 AM   #34
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I revised my AA in July: twas 70/30; now 63/37. Also severely revised my domestic/international mix to 54/46; was formerly 75/25. I have long thought that a declining dollar plus other US increasing debt issues plus emerging market boom should be reflected in a greater ex-US exposure. I retired in 2005.
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No Adjustments because of Subprime
Old 12-04-2007, 04:16 AM   #35
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No Adjustments because of Subprime

I have not made any adjustments due to the subprime mortgage debacle.

60/40 that's my story. I am sticking with my general allocation plan. I am well diversified. My only adjustment to my allocation (which will happen over a few years) will be to allocate a bit more of the portfolio to international markets... for the obvious reason, the US is not the only growth engine in town. But the USD is so weak right now, I am reluctant to buy anymore at this time when the USD is probably at a low... especially with Europe. Since I cannot predict the future, I am more likely to make slow adjustments over time. The downside (to my approach), is that a lump-sum decision is more efficient in terms of earnings... but of course those extra earnings are contingent on me being able to make the best time-based decision. Instead, I will average the moves in over time (a few years).

I have target allocations and a timeline for getting there.

The only financial decision where the subprime situation (plus the general economy) might cause me to make an adjustment would be in the sale of real estate (our home). And even with that I would probably continue to look, plot, and plan.
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Old 12-04-2007, 07:04 AM   #36
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We rebalanced a little early, and 4 years away from retirement we are 55/45. We sleep better this way.
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Old 12-04-2007, 07:43 AM   #37
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I haven't made any adjustments. Am I doing something wrong?
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Old 12-04-2007, 07:48 AM   #38
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If I were married and my wife wanted a much more agressive or conservative portfolio than what I wanted, I would push for a post-nup, and let each person do what they wanted to do. There is no such thing as a "combined risk tolerance".
Marriage is all about compromise.
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Old 12-04-2007, 09:19 AM   #39
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Totally changed. I'm on the sidelines till at least next spring.
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Old 12-04-2007, 10:03 AM   #40
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I'd think a 50-50 portfolio would have long term returns approach 6%- a guess, but that is my guess.

I'd think a 70-30 portfolio would have long term returns approach 7%-another guess.

If 3.5% is what you want, then look to CDs or money markets. Much close to a guaranteed return using those vehicles.
Am I missing something, because I thought the 3.5% was the withdrawal rate, not the expected return (which should, of course, be higher than the withdrawal rate)?

And as a follow-up, we switched over to 60-40 yesterday afternoon. (Well, technically, we set things in motion to do so; the actual sales in our taxable accounts will occur on 12/28 and 1/2, to split the capital gains taxes between two years.)
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