Poll:Are you in the "Won The Game" Club with reference to Fixed Income Investing?

[REWahoo]

Quote:

Originally Posted by Alan With 8 pensions between the 2 of us money out the wazoo we have no need for equities but maintain a 50/50 AA.

FIFY...again.

[Alan]

Quote:

Originally Posted by REWahoo FIFY...again.

[imoldernu]

Quote:

Originally Posted by REWahoo FIFY...again.

[Which Roger]

The common definition of "won the game" seems to be a 100% success rate in FireCalc. But FireCalc assumes that the future will not be worse than the worst of the past. Once one has won the game by this definition, it would seem that the next step would be to position oneself for scenarios where the future is worse than the past.

[MichaelB]

Another relevant factor not often discussed is improvements in standard of living (SoL) over time. By definition (BLS) SoL improvements are things such as cell phones, automobile safety features, streaming video service, new medical discoveries and techniques.

They are not considered part of the CPI. They are additional, and if we want to enjoy this increasing standard of living during all of our retirement, our budgets need to grow more than (inflation + taxes).

Just thinking about the changes we’ve enjoyed over the past 30 years, I definitely would not want to miss out on the next 30. That means my portfolio needs to provide for inflation + taxes+ withdrawals + SoL improvements. Over a 30-40 year period, this is at least 7% annualized. In order to get there with only fixed income options, my guess is the amount saved (total portfolio) would need to be >50% more. That equates to many years of additional work.

[MichaelB]

Quote:

Originally Posted by Alan With 8 pensions between the 2 of us we have no need for equities but maintain a 50/50 AA.

Dad? Is that you? Hey ...

[Spanky]

FIRECalc indicates that 100% success for 30 years on a 4% growth & 3% inflation or 100% 1-month treasury. However, we still have more than 50% in equity. The reason, I think, is the tenacity to have more and insecurity.

[marko]

This chart shows that a 28/72 stocks/bonds has the lowest risk vs 100% bonds. Not sure how that fits into true 'fixed income' but FWIW

Even more interesting is that a 50/50 carries less risk than 100% bonds.

risk-vs-return.jpg

[imoldernu]

Except for a few stray tiny stocks, never invested in equities.

Bonds and Annuity have paid well over 4% for the past 30 years... that and Social Security has left our net worth in better shape than when we retired, and with a small LTC policy, we feel safe. Dunno if that means "winning the game", but we're pretty happy, though it might be nice to be back in our 50's...

I plan to come back as a hummingbird. We're waiting our friends return from Panama. Feeder is out. Pair of yellow finch this morning.

Life is good!

[Cobra9777]

I didn't answer the poll because I don't understand the premise of the question.

Quote:

Originally Posted by travelover It won't be clear if I truly won the game until both DW and I are dead...

+1

Our WR is below the portfolio's dividend rate with SS still to come. I suppose most people would define that as having "won the game." Or perhaps spending too conservatively. But I retired at 52; and chances are reasonably good that one of us will live into our 90s. That's a really long time with more risks and uncertainties than any planning tool can possibly comprehend.

Our portfolio is 70% stock and real estate. This is intended to cover inflation, longevity, and LTC risks... without becoming a financial burden on our kids or the state. If none of that happens, then our kids and grandkids will likely inherit a tidy sum. Only then, will the game's outcome be clear.

[Freedom56]

We have been 100% fixed income (individual bonds, CDs, preferred stocks, and treasuries for 30 years and some years with rental income and capital gains from real estate transaction). We continued to grow and compound through all the major corrections over the past 30 years. I see no need for any equity exposure given our portfolio size in expense coverage through pension and interest income. At some point in the not too distant future, our portfolio will be CDs and treasuries only, which requires minimum management. I know many early retirees that have never owned stocks or bonds but have an incredible real estate portfolio (residential and commercial) and a steady income stream from rental income.

[daylatedollarshort]

Our retirement plan is to live mainly off <= SS, pensions and our TIPS interest or equivalent in retirement. Not too much in stocks. Our net worth should be about the same whenever we die as it is today in inflation adjusted dollars, less extraordinary expenses like extended long term care. Plan B, the rent from our current house would cover all our expenses in a lower cost of living area or we could start dipping into principal for an additional 3.33% withdrawal (100 (zero real interest rate) / 30 more retirement years = 3.33%).

[pb4uski]

Quote:

Originally Posted by Which Roger ... Once one has won the game by this definition, it would seem that the next step would be to position oneself for scenarios where the future is worse than the past.

Why? Asteroids?

[scrabbler1]

I answered "No" but feel I have still won the game.

[sengsational]

I think "won the game", was an unfortunate wording to get to what I think the spirit of the question is. It's more about do you feel the need to forcefully reduce market risk because you have enough to cover anticipated expenses.


I do not. I'm convinced that market risk is going to be rewarded for patient investors as it has been in the past. Some here are depending on market growth to "make it", and they are not candidates for elimination of market risk. But I suspect many of us would make it without market risk, we just choose not to go that route.

[Svensk Anga]

I am not much tempted to load up on FI when real yields at 0.5-1.0%. Now if we could get 3.5%+ real like when TIPS and I Bonds were introduced, it would be worth thinking about. I think there is still a reasonably good chance of earning an equity risk premium over our lifetime. In consideration for our heirs interests, we are keeping a good chunk in equity.

[mrfeh]

Quote:

Originally Posted by MichaelB Just thinking about the changes we’ve enjoyed over the past 30 years, I definitely would not want to miss out on the next 30. That means my portfolio needs to provide for inflation + taxes+ withdrawals + SoL improvements. Over a 30-40 year period, this is at least 7% annualized.

It's not clear to me why you've come to this conclusion. It's not like there haven't been technological advances in the past, and yet 4% WR has worked.

[RunningBum]

Quote:

Originally Posted by pb4uski Why? Asteroids?

Is that the only thing you can think of that could be worse than the past?

How about the national debt getting truly out of control?

War weapons can cause a lot more destruction these days, and we really haven't had a war significantly on our soil since the Civil War. How about a limited nuclear war, or all-out terrorism? How well could we take a 9/11 type of attack every few months?

Rising oceans causing coastal cities to have to be rebuilt inland?

A catastrophic earthquake destroying a lot of California?

[W2R]

Quote:

Originally Posted by marko Quote: Originally Posted by MichaelB Evaluating the merits of only fixed income without mentioning inflation is like asking about living in SE Florida - but not mentioning hurricanes. Not talking about the risk does not mean it isn’t still present. +1 And within that context, IMO, the game isn't won until the buzzer sounds.

Both of you phrased your posts so nicely. What you are saying is exactly what I meant in the post that everyone hated so much and I am sorry that I phrased it so poorly. When I wrote it I felt I couldn't mention the "I" word (and explain more tactfully and nicely) according to the parameters of the thread, - - but you all are braver than I am.

But if we are now talking about "I"... then I can say that I feel that any retiree, no matter how well funded, needs some "I" protection in case massive "I" descends; I fear the OP's situation is a disaster waiting to happen, even though it hasn't happened to him yet.

Like many here, I have reduced my equity exposure but not to zero because I need to hedge my bets (as Audreyh1 phrased it).

I wouldn't put my entire net worth on "red" at the roulette table day after day, even if I had done so and won every time up to now, unless I was desperate. That's an extreme example, I know, but I am using it as an illustration because risk is involved. As MichaelB said, not talking about risk doesn't mean it does not exist.

[mrfeh]

Quote:

Originally Posted by W2R Both of you phrased your posts so nicely. What you are saying is exactly what I meant in the post that everyone hated so much and I am sorry that I phrased it so poorly. When I wrote it I felt I couldn't mention the "I" word (and explain more tactfully and nicely) according to the parameters of the thread, - - but you all are braver than I am. But if we are now talking about "I"... then I can say that I feel that any retiree, no matter how well funded, needs some "I" protection in case massive "I" descends; I fear the OP's situation is a disaster waiting to happen, even though it hasn't happened to him yet. Like many here, I have reduced my equity exposure but not to zero because I need to hedge my bets (as Audreyh1 phrased it).

If one is primarily concerned about inflation, I'd recommend TIPS before increasing equity exposure.