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Old 03-04-2014, 02:51 PM   #21
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I certainly say 70%. It is not random chance that default AA for FIRECalc is 75/25%. As the FIRECalc instructions say.

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percentage of your portfolio that is in equities, versus fixed income? Research seems to suggest about 50% for a 10 year term, almost 70% for a 20 year term, and around 85% for a 60 year term. %
I understand that stock price seems expensive (and they well maybe) but bonds are even more overvalued IMO. More importantly bonds just aren't going to produce enough income to fund a 40+ year retirement, unless you have really low withdrawal rates.

You figure bonds are producing about 1% real returns (total bond market (BND) 2.5% minus 1.5% inflation)
If 40% of your portfolio is earning 1% that is .4% you can withdraw without touching principal.
If you think stocks are overvalued and unlikely to return more than 4% (real) over the next decade than 60%* 4%= 2.4% +.4%= 2.8% withdrawal bumping the AA up to 70% moves the withdrawal rate up to 3.1% (or a 10%+ bump in spending.)

It seems me if you think stocks are going to be returning less than 3% a year, you shouldn't be retiring without a full pensions.
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Old 03-04-2014, 03:07 PM   #22
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It seems me if you think stocks are going to be returning less than 3% a year, you shouldn't be retiring without a full pensions.
I would not want to depend on a pension if stocks were returning less than 3% a year for an extended period. The pensions would go bankrupt. They all use about 6 to 8% for funding calculations.
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Old 03-04-2014, 04:46 PM   #23
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I would not want to depend on a pension if stocks were returning less than 3% a year for an extended period. The pensions would go bankrupt. They all use about 6 to 8% for funding calculations.
Good point although to be clear I was referring to 3% real return, so if inflation is 2-3% than 5-6% nominal returns. The larger point is spot on, we can be as conservative as we want in planning on for future returns. The rest of the world is far less conservative and prolonged period of 1% real bond yields and 3% real stock returns, is a Japanese like economy or Greece.
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Old 03-05-2014, 12:26 AM   #24
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I'm mid forties and 100% equities. Will likely stay that way forever but I'm more comfortable with risk than most here.
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Old 03-05-2014, 05:28 AM   #25
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I would not want to depend on a pension if stocks were returning less than 3% a year for an extended period. The pensions would go bankrupt. They all use about 6 to 8% for funding calculations.
My megacorp was putting billions into the pension fund there for a few years. Didn't do a lot for the stock price, but as one drawing from the fund, I'm not complaining.
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Old 03-05-2014, 09:02 AM   #26
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I'm mid forties and 100% equities. Will likely stay that way forever but I'm more comfortable with risk than most here.
How do you manage withdrawals for living expenses?
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Old 03-05-2014, 10:29 AM   #27
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How do you manage withdrawals for living expenses?
Seems easy to me. Stocks up 30%, sell a couple % and collect dividends = done.
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Old 03-05-2014, 11:09 AM   #28
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I was more wondering if Turboslacker had any special rules for the timing of stock sales or determining which stocks to sell, if he has a temporary bucket that gets refilled, etc.
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Old 03-05-2014, 02:08 PM   #29
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I'm 47 and planning on retirement in 2 years...

Current AA is 70/30, planning on having equities between 60% and 65% when I pull the plug.
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Old 03-06-2014, 11:24 AM   #30
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I'm mid-40s, planning on retiring in the next 1-3 years. I'm currently at an 80/20 (stocks/bonds) asset allocation and have no plans to adjust that significantly before retirement - maybe drop down to 75/25 or even 70/30, but still pretty heavy in equities.

The biggest risk to a long retirement seems to be taking a big hit to your portfolio in the first few years. If that happens to me I can easily pick up some part time work to tide me over, so it's not a great concern to me, hence the relatively high equities exposure.
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Old 03-06-2014, 11:33 AM   #31
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The biggest risk to a long retirement seems to be taking a big hit to your portfolio in the first few years. If that happens to me I can easily pick up some part time work to tide me over, so it's not a great concern to me, hence the relatively high equities exposure.
We are going to keep 3+ years of living expenses in cash (or cash equivalents) to avoid selling equities at a loss in the first 5-10 years of retirement.

If things really go south and we have an extended bear market, going back to work is plan B.
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