Reached escape velocity

[pdhoffman]

I have been an occasional visitor to these forums over the years, and finally joined as I have a topic I have not seen discussed, although I may have missed it.

Both a friend and myself have attained what he refers to as having reached escape velocity. By that we mean that the nest egg is large enough relative to standard of living that, not only is there no danger of running out of money, but, on the contrary, the nest egg will continue to grow.

In my own case I live very nicely on a defined benefit pension and SS. No debts of any sort, own the home, home has recently been completely renovated, new vehicle. I am a widower and have no one else to be responsible for.

So to my topic that I have not seen discussed. It would seem that all the rules of thumb, conventional wisdom, expert advice about investments, allocations of stock/bonds, rebalancing, etc., go out the window. Seems to me that I can tolerate a lot more risk, i.e.. 100% stocks and more.

Thank you. I await a thoughtful discussion, that I know this forum is capable of.

 

[Fermion]

So to my topic that I have not seen discussed. It would seem that all the rules of thumb, conventional wisdom, expert advice about investments, allocations of stock/bonds, rebalancing, etc., go out the window. Seems to me that I can tolerate a lot more risk, i.e.. 100% stocks and more.

Why play the game when you already won?

 

[REWahoo]

It would seem that all the rules of thumb, conventional wisdom, expert advice about investments, allocations of stock/bonds, rebalancing, etc., go out the window. Seems to me that I can tolerate a lot more risk, i.e.. 100% stocks and more.

Based on what you describe, your nest egg is entirely fun money. You can go to Vegas and put it all on red and win or lose, you'll still be fine.

 

[Senator]

I think I have reached it myself, but I am in the 2MY syndrome, just to make 110% sure. All indicators say 100%, but I want the income to be at least double of what I actually think I need, just in case.

 

[Mulligan]

PD, I am in same situation, but have come to a different conclusion. I have reached "escape velocity", but only through my pension. I have won the game so to speak, as long as the rules of the game do not change which is out of my control. The only reasonable way trouble could lurk for me is if the market doesn't deliver over a period of time and then my pension gets cut. If that were to happen, it stands reasonable to believe if my assets were in stocks they would be down significantly when I needed them the most. So therefore it seems prudent to me to have most of my reserve money in safer investments such as CDs, IBonds, and some Bonds. I grow my stash every month because it is not large. Hopefully by age 65 I will have enough of a reserve to survive a 25% haircut if that ever happened, or COLA freeze, etc. That being said, I have about a third of my portfolio in stocks, but I do not rebalance. If it goes higher, it goes higher. I only control what I put in each month which is about one third.


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[eta2020]

We also had reached point that dividend yield is higher than annual expense. We are 100% in equities and still have 6 more years of work in front of us.
I am planning though to build 5 year CD ladder in next 5 years. This is primarily because we can not touch about half of dividend yield since it is in IRAs and 401ks.
I consider equities to be much safer then CDs or bonds (over a very long run)

 

[travelover]

Similar situation, only my pension is not COLAed, so my investments need to supplement my pension and act as a back stop if the pension dies for some reason. Additionally, I want to be able to afford the best end of life care.

I am at 70% stocks and I feel comfortable there.

 

[Fermion]

We also had reached point that dividend yield is higher than annual expense. We are 100% in equities and still have 6 more years of work in front of us.
I am planning though to build 5 year CD ladder in next 5 years. This is primarily because we can not touch about half of dividend yield since it is in IRAs and 401ks.
I consider equities to be much safer then CDs or bonds (over a very long run)

Assuming you are diversified, you are saying you have reached a SWR of under 2%?

Why are you working for 6 more years? Do you enjoy your jobs that much or do you have a crystal ball that says you will not get cancer or heart disease for at least 30 years?

 

[NW-Bound]

I am seeing more and more signs of a market top. More people are saying their portfolio is setting new highs, and they can hack the volatility of equities.

I am getting more worried (still 70% in equities).

 

[Fermion]

I am seeing more and more signs of a market top. More people are saying their portfolio is setting new highs, and they can hack the volatility of equities.

I am getting more worried (still 70% in equities).

I have also noticed more than a few threads by people interesting in trading for the first time (although I have not really done the math to calculate if this is above the norm).

If the kid that comes over to mow our grass starts talking about his latest stock picks, I am so out of the market.

 

[eta2020]

Assuming you are diversified, you are saying you have reached a SWR of under 2%?

Why are you working for 6 more years? Do you enjoy your jobs that much or do you have a crystal ball that says you will not get cancer or heart disease for at least 30 years?

Correct about 2.1-2.2 SWR.

We were all out life 100% in equities and we always planned to work till 55. We are diversified in broad based low fees index funds IE: IVV, VXUS, VWO, VGK, VPL, VIG, SCHD, VTI, VNQ and like....

Ups and downs over last 25 years never changed our allocations and strategy.

 

[REWahoo]

I am seeing more and more signs of a market top. More people are saying their portfolio is setting new highs, and they can hack the volatility of equities.

I am getting more worried (still 70% in equities).

If your equity exposure causes you worry, perhaps you have the wrong AA?

 

[NW-Bound]

It's right, until it becomes wrong. Is it time yet?

"Please God, one more bubble" -- Bumper Sticker

Is the time to get out when your neighbor brags about how much he makes in the stock market?

In the past, one should wait until his cousin also has the same talk.

The game of brinkmanship. Heh heh heh... I actually like the excitement.

 

[REWahoo]

Is the time to get out when your neighbor brags about how much he makes in the stock market?

Who knows.

What I do know is whenever I've tried the old 'in and out' maneuver someone got screwed.

 

[NW-Bound]

If I get "screwed" less than my neighbor, does that count?

 

[LOL!]

So you donate all your portfolio dividends to charity nowadays, right?

 

[eta2020]

I am seeing more and more signs of a market top. More people are saying their portfolio is setting new highs, and they can hack the volatility of equities.

I am getting more worried (still 70% in equities).

Nobody knows where the market is and where it is heading. But over a long stretch of time it does not matter at all......

 

[NW-Bound]

What is long becomes too long when one gets older (or feels his time is running out). I am not actually worried. More like irked if the market beats me again.

PS. In between posts, I was able to run out to the backyard, spread a bag of manure over the planting bed for the squash plants to keep the wife happy, then got inside for a shower before getting back to the keyboard. Man, I am good at single tasking, but doing each task very fast.

 

[Mulligan]

Nobody knows where the market is and where it is heading. But over a long stretch of time it does not matter at all......

Because we will be dead anyways? If we hit a mid 1960s stretch to 1982, I may be in big trouble. 15 years is a long time to someone pushing 70. Maybe I am a nervous Nelly, but hey, since Obygn hasn't posted much lately someone has to take the voice of concern.


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[eta2020]

Because we will be dead anyways? If we hit a mid 1960s stretch to 1982, I may be in big trouble. 15 years is a long time to someone pushing 70. Maybe I am a nervous Nelly, but hey, since Obygn hasn't posted much lately someone has to take the voice of concern.


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S&P 500 Dividend by Year

1960-1985 you would still get better dividend then in 1950's but I agree it would be going up slower then inflation. So agreed this would not be good.

This is where SS checks come to play a role of bond portion of our portfolio. You can view SS as one large bond holding....

 

[NW-Bound]

The fact that SS and pension act as a counterweight to stocks has been talked about often. The OP meant the same thing probably, when he talked about being 100% in stocks.

However, during a market downturn, one can "buy low" if he has bonds to sell, but how does he rebalance SS or pension into equities?

Again, some people will say that equities will win in the long run, so it does not matter. The problem is how long? We have seen the S&P being flat from 2000 until recently, if we look at market top to market top. And if we count inflation, the S&P dividend is not enough to make up for that.

Other than accumulators, there are people who got ahead, myself included, by rebalancing. In an overall-sideways but volatile market like the recent past, rebalancing is the only way to get ahead.

 

[Greg V]

For the OP, I would not say that the advice, rules of thumb, etc go out the window. Your plan should be the result of deliberate analysis. It may be that when you apply them, you conclude that you can financially bear a high level of volatility/risk in your investment portfolio.

You should also contemplate how you emotionally handle large swings in portfolio value. Would they be highly stressful and make it difficult to carry our your investment plan? Your personal tolerance for potential portfolio losses may affect your asset allocation.

In addition, you may consider whether other priorities such as charitable support, etc now have a more prominent place in your life since you are no longer concerned about financially providing for a spouse/family. In addition, your desire for travel, hobbies, education, supporting causes, etc, may expand since you have the financial wherewithal to dream bigger dreams. All those things could have a bearing on the desired withdrawal rate from your portfolio and the asset allocation.

Just some thoughts as you assess your situation and make your plans. Best of luck.

 

[Fermion]

Other than accumulators, there are people who got ahead, myself included, by rebalancing. In a sideways market like the recent past, rebalancing is the only way to get ahead.

If your crystal ball is telling you we are in for years of sideways markets, covered call selling is another way to get ahead.

 

[eta2020]

The fact that SS and pension act as a counterweight to stocks has been talked about often. The OP meant the same thing probably, when he talked about being 100% in stocks.

However, during a market downturn, one can "buy low" if he has bonds to sell, but how does he rebalance SS or pension into equities?

Again, some people will say that equities will win in the long run, so it does not matter. The problem is how long? We have seen the S&P being flat from 2000 until recently, if we look at market top to market top. And if we count inflation, the S&P dividend is not enough to make up for that.

Other than accumulators, there are people who got ahead, myself included, by rebalancing. In a sideways but volatile market like the recent past, rebalancing is the only way to get ahead.

You get ahead if you have a plan and stick to this plan.

I think your approach is as good as mine and is as good as someone's who stayed in PD or Air Force for 20 years to get nice retirement.

You just need a plan and stay with it

 

[NW-Bound]

My plan is to [-]buy low, sell high[/-] rebalance, and I try to [-]time the market[/-] do it in a most lucrative manner.