How much passive/fixed income would you need to get out of equities?

[LARS]

I get the feeling that some are discounting too heavily the risk of age versus time for portfolio to recover. Small consolation if your portfolio takes five years to recover if you "wasted" five years having to tighten your belt at age 65 to 70 in your prime remaining years.

Just my opinion...

[ShokWaveRider]

Quote:

Originally Posted by EarlyBirdly Q: WHAT ARE YOU TRYING TO ACCOMPLISH (!)

Simply asking a question of others as stated in the OP and title of this thread. Also I enjoy hearing from other folks who feel as I do. Why do some people have to get so adversarial simply because others do not do as they do. No advice is being given, no recommendations, yet folks imply false information is being propagated. Go figure. Can we get back to the original question please.

[ERD50]

Quote:

Originally Posted by EarlyBirdly " We do not spend our days chasing the almighty $$, ...

And neither do I. I have not done anything with my portfolio, outside of tax planning maneuvers, since I did some re-balancing into equities in what turned out to be very near the lows of the last crash. That worked out very well for me.

Quote:

Originally Posted by EarlyBirdly ... You have done this for a considerable amount of time, and continue to produce more than 2x the money you need annually. You also have income sources you are not even tapping as of yet. Q: WHAT ARE YOU TRYING TO ACCOMPLISH ? IMHO-You do NOT fix that which is not even remotely (by any standards, in your case) broke. (!)

As was stated earlier, to provide a buffer (who knows what expenses might come up int he future?), and why not provide a larger stash for hers/charities? If you choose not to do this, no big deal, it's your money. But why act like others are crazy dare-devils for wanting to keep some equity allocation?

Quote:

Originally Posted by LARS I get the feeling that some are discounting too heavily the risk of age versus time for portfolio to recover. Small consolation if your portfolio takes five years to recover if you "wasted" five years having to tighten your belt at age 65 to 70 in your prime remaining years. Just my opinion...

Again, there is no need to cut spending with a conservative WR and some equity exposure.

OK, it's all getting repetitive, once again. I'll try to stay out. Can lead a horse to water....

-ERD50

[EarlyBirdly]

Not intended to be adversarial in the least. The question is a large one, hence the caps for emphasis. Sorry if it is taken otherwise.

Any way, simply restated ( as in my original post ):

> Why try to fix something that needs no fixing ?

[ERD50]

Quote:

Originally Posted by ShokWaveRider Simply asking a question of others as stated in the OP and title of this thread. Also I enjoy hearing from other folks who feel as I do. Why do some people have to get so adversarial simply because others do not do as they do. No advice is being given, no recommendations, yet folks imply false information is being propagated. Go figure. Can we get back to the original question please.

Cross posted, so OK, I'll answer your question:

How much passive/fixed income would you need to get out of equities?

Answer: I would not ever go below 40% equities, unless/until the following conditions occurred:

A) My portfolio had dwindled down to the level that that there was a significant chance I would not be passing anything on to heirs/charities.

and...

B) A tool like FireCalc showed that for my estimated years remaining, a 40% or higher equity exposure reduced my portfolio survival. Off the top of my head, that happens at somewhere under a 10 year span.

Does that answer your question? Interestingly (to me at least!), my answer is sort of backwards to the answer you imply in your question. For me, having a LOT of fixed income allows me to have some equities. So it isn't a matter of how much fixed income would I need to get out of equities, it's how little fixed income would I have before I decided to get out of equities. And that aligns with the information we can glean from historical tools like FIRECalc.

Now my question: Considering all these facts, why wouldn't you include at least 40% equities in your portfolio?

-ERD50

[LARS]

Quote:

Originally Posted by ERD50 Cross posted, so OK, I'll answer your question: How much passive/fixed income would you need to get out of equities? Answer: I would not ever go below 40% equities, unless/until the following conditions occurred: A) My portfolio had dwindled down to the level that that there was a significant chance I would not be passing anything on to heirs/charities. and... B) A tool like FireCalc showed that for my estimated years remaining, a 40% or higher equity exposure reduced my portfolio survival. Off the top of my head, that happens at somewhere under a 10 year span. Does that answer your question? Now my question: Considering all these facts, why wouldn't you include at least 40% equities in your portfolio? -ERD50

Easy to answer. Because to support the lifestyle I wish to live, given my Net Worth, I don’t need to. And I can say this with conviction having successfully been retired for 24 years and am just in my early sixties now. So plenty of track record.

Called winning the game. Reality, however, as this thread demonstrates, is that there is no one path for all.

Next question...

[Chuckanut]

If the current plan works for the OP and they think they have enough buffer to allow for future uncertainties, then all the best to them. I have to think they know more about what is good for them than I do.

However, to not talk about inflation is risky in that 'newbies' who come across this thread may not realize how badly inflation can thrash one's life savings. Newbies often don't know that they don't know, so I think its important to mention inflation. Here's my personal example. I had never heard of Sequence of Returns Risk before I found it on a retirement site about six months before I retired. It was a real eye opener. After making a few adjustments to my AA holdings I was able to sleep well in my early years of retirement knowing that a Bear Market would not force me to go back to work.

[OldShooter]

Quote:

Originally Posted by ShokWaveRider Here is another way of putting it. At least for me. If my portfolio lost 25-45% in a matter of a week, I would definitely not sleep or a year, maybe more. The 25 - 45% reduction in income would make quite a difference in our lifestyle, even if it was just me going into ultra frugal mode for a while till it came back. If one can afford to lose up to 50% of one's stash and not batt an eyelid, lose any sleep or change one's standard of living, that is great, good on you. But for the rest of us, me especially, that is not the case.

I think there are a couple of unstated premises in your thinking.

First, you write as if the money is gone forever. If history is any guide, it is not. From history, five years of patience usually gets it back. We've been sleepting well with very aggressive AAs since 1987. Waiting patiently through each round of excitement makes waiting through the next round easier and easier.

Second, you seem to be thinking only of the equity portion of your "stash." Presumably you have some kind of conservative AA, which makes a 45% drop in your total stash essentially impossible.

So ... IMO your risks are much less dire than you perceive.

Quote:

Originally Posted by ERD50 But knowing you will almost certainly be losing 25% or more to inflation ...

TIPS is the answer to that. One of life's little mysteries for me is why TIPS are not discussed more here. All this anguish about yield curves and long bonds is essentially moot for someone who holds mostly TIPS on the fixed income side. So, "almost certainly losing?" No.

[ShokWaveRider]

Quote:

Originally Posted by LARS Easy to answer. Because to support the lifestyle I wish to live, given my Net Worth, I don’t need to. Called winning the game. Next question...

Agreed, thank you.

Some folk just want more and more, I would not know what to spend more on anyway.

Being a car guy, Maybe a very expensive Bentley. But, having owned many exotics and luxury cars in my lifetime, knowing I can basically buy any car I want within reason actually gives me greater pleasure than owning one any more. Maybe a nice well restored MGB or Aston Martin Vantage, but they are not bank breakers. But I probably will pass on the Aston, as I know what it needs from a maintenance perspective. But I digress.

[LARS]

Quote:

Originally Posted by ShokWaveRider Agreed, thank you. Some folk just want more and more, I would not know what to spend more on anyway. Being a car guy, Maybe a very expensive Bentley. But, having owned many exotics and luxury cars in my lifetime, knowing I can basically buy any car I want within reason actually gives me greater pleasure than owning one any more. Maybe a nice well restored MGB or Aston Martin Vantage, but they are not bank breakers. But I probably will pass on the Aston, as I know what it needs from a maintenance perspective. But I digress.

I am SADLY afflicted with the car bug. I’ve generally dealt with this by having my sports car quotient be buy and hold. Thus, helping on the depreciation hit. That said, I owned my Ferrari for eleven years, which I replaced with my Porsche 993 that I’ve owned for twenty two years.

Porsche, having made my 993 "last of the air cooled", has actually made the 911 an appreciating asset!

[audreyh1]

Quote:

Originally Posted by Badger So if you are already in the position as described on fixed income then what is the point of risking volatility of some market exposure just because you have enough when it isn't necessary? Cheers!

These are simply personal choices. You can go either way.

[daylatedollarshort]

In this article, from Investopedia: https://www.investopedia.com/article...-inflation.asp

TIPS did the best in back testing against inflation out of 9 asset classes. A 60/40 stock bond portfolio came in 7th, and Barclay's Aggregate Bond Index came in 3rd. I would be interested in seeing others post studies like this with perhaps different results on the best assets for inflation protection.

[audreyh1]

Quote:

Originally Posted by daylatedollarshort In this article, from Investopedia: https://www.investopedia.com/article...-inflation.asp TIPS did the best in back testing against inflation out of 9 asset classes. A 60/40 stock bond portfolio came in 7th, and Barclay's Aggregate Bond Index came in 3rd. I would be interested in seeing others post studies like this with perhaps different results on the best assets for inflation protection.

We, fascinating that AGG does so wellsgainst inflation.

Most intermediate bond index funds track it.

[I was misinformed]

Quote:

Originally Posted by daylatedollarshort In this article, from Investopedia: https://www.investopedia.com/article...-inflation.asp TIPS did the best in back testing against inflation out of 9 asset classes. A 60/40 stock bond portfolio came in 7th, and Barclay's Aggregate Bond Index came in 3rd. I would be interested in seeing others post studies like this with perhaps different results on the best assets for inflation protection.

Thanks for pointing to this interesting study.

The percentage of 12 month periods in which an asset class beat inflation is interesting, but perhaps more relevant is the chance over a longer period - 5, 10, 20 yrs.

Also even on the short-term it would be interesting to learn how each class does when the inflation rate is rising or falling.

And, of course, in reality it is harder to beat inflation when taxes are factored in

[OldShooter]

With absolutely no facts to back me up, I think that if we really get a dose of inflation, like two digits, TIPS will do far better than the simple arithmetic of bonds would predict.

First, Treasury will stop issuing TIPS. The rationale will be that they do not want to throw gasoline on the fire. Second, at the same time supply is constricted demand will rise. There will be panicky people who want the guaranteed inflation protection at almost any price. Hence, the price of TIPS will rise driven not only by inflation but by behavioral factors. How much? I don't know but I do expect to be selling part of our TIPS position if/when things get exciting. But my hope is that the excitement never comes.

[Sojourner]

How much passive/fixed income would you need to get out of equities?

In recent years I've told myself that if I could generate approximately $20K/month from fixed, passive sources, I'd be quite comfortable reducing my equity exposure to zero. Assuming something like a 3.5% return on FI investments, I would need around $7MM in a 0/100 portfolio to accomplish this. So I suppose if my investable net worth climbs gets up into the $6.5-7MM range one day, I'll have to decide whether I truly feel like it's time to stop chasing "more". If I had to say right now, I'd guess I'd still keep at least 30% in equities due to that little voice in the back of my mind greedily urging me on to the 8 digit mark.

[GravitySucks]

For me it wouldn't be how much, but how long. If I got 10 years or less left I might go all FI.

[Retch The Grate]

Since my goal is to get to a 3% withdrawal rate and then ratchet up with portfolio growth, there's no amount where I would switch to fixed income.

[ShokWaveRider]

How about this one then. IF your pensions, SS and other somewhat guaranteed income was $50k..... What would it be then?

[eytonxav]

I also subscribe to the theory if you've already one the race, why keep playing, but I suppose that could mean something between 0 - 20% equities.