Yep, could be misleading, but less confusing.
That's almost as controversial as the active-passive management debate. I agree that asset allocation could consider the contribution of a pension, but unless it's a govt pension the debate seems to heat up from there. It's hard (and perhaps even more misleading) to declare a pension to be the equivalent of corporates or junk. Or preferreds if it has a COLA? Or should we stick to ERISA-guaranteed annuitized values?!
But you're right, adding in the pension (as a non-stock asset) knocks the retirement portfolio's stock contribution down to less than 50%. Adding in the projected #2 pension & SS (17-19 years away!) knocks it down to your 8% neighborhood. I tell my kid that a military pension seems like fair compensation for all those decades of risking having your assets shot off-- as long as you're one of the unharmed survivors.
I'd be even more hesitant to count home equity as a "value" until it's been realized through a HELOC or a sale or a reverse mortgage. And I'd only value rental property for its cash flow, not its equity.
But if I did throw annuitized pensions & home equity into the mix, and came out with less than an 80/20 stock/bond allocation, what then? Leveraged mutual funds? Options or futures contracts? Perhaps keeping the retirement portfolio ("liquid" or not, the brokerage account part of it, anyway) in 92% stocks doesn't seem so extreme after all. And I'm glad I don't invest in bonds or REITs.
It seems easier to reduce the allocation discussion to unfunded expenses. We all have varying degrees of income (pensions, rentals, employment, gifts) and expenses. We're all able to quantify those numbers to varying degrees. We're all able to say "This is my cash flow" and then assign a number to the unfunded part of the concept. How much of a portfolio (and its allocation) is necessary to cough up that number is a fairly well-documented process.
I'm typing without Bernstein next to me, but I think most asset-allocation recommendations are based on meeting the unfunded expenses and not with regard to the quality of pensions & real estate.
With today's impending rate increases, Bernstein's advice seems to be of the "bonds don't suck too badly" ilk, and I'm earning at least that much with laddered five-year CDs. I can find plenty of low-suck investments, but I want to choose profitable ones.
Like you, the main drag on our retirement budget is our kid. (Presumably there are other benefits to parenthood and I'm sure I'll think of one soon.) Maybe we should just keep cash on hand until we're empty nesters!
Ours is also looking for a nice new car to celebrate that day-- I smile gently, pat the dashboard of our '94 Taurus wagon (only 87K miles!) and say "Someday, kid, this will be all yours..."
