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What would you recommend
Old 05-03-2018, 08:36 PM   #1
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What would you recommend

I read with interest another thread asking about laddering CDs. I was surprised to learn people were out of the market once they accumulated enough for their retirement. We do not have pensions which concerns me in today’s market. After all, we don’t have a guaranteed paycheck coming in and a severe turn in the market can be very detrimental. We have a Vanguard Index fund and most of our tIRA in Fidelity’s target date fund. We are 40/60. We want to transfer some of our money out and be less in the market, but stay with Fidelity and Vanguard. We have CD ladders with an online bank. Should we put 10%in Fidelity CDs? Get our exposure down to 30/70? Not sure how to go about this? In other words, what is your suggestion for pulling back and getting more conservative?
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Old 05-03-2018, 08:56 PM   #2
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Annuities.

Are you absolutely sure you are actually seeking this sort of advice here?
Seems odd to me.
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Old 05-03-2018, 09:28 PM   #3
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Have you run the calculators to see if a 30/70 allocation will be enough to support your expense needs? I believe that 30% Equities is at the very low end of theoretically being able to generate enough inflation beating ROI.
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What would you recommend
Old 05-03-2018, 09:43 PM   #4
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What would you recommend

What I did was replace most of my bonds with a CD ladder. I count CDs longer than 2 yrs as bonds and count the shorter ones as cash for expenses. My AA is 60%stocks
32% CD>2yrs
8% CDs <2yrs +high yield FDIC savings.

I am working to consolidate at Fidelity using brokered CDs but right now I'm scattered all over.
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Old 05-03-2018, 11:04 PM   #5
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Not using any calculations or ratios with my perspective but If your retired then you feel that your assets are enough to sustain you and capital appreciation should not be a concern, capital preservation should be your #1 goal.
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Old 05-03-2018, 11:41 PM   #6
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If you have enough money to start with, and your WR is low enough, then it works great. But good luck finding many around here that will "speak up" and support such "investments". (There are a few)
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Old 05-04-2018, 09:38 AM   #7
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H.L. Mencken observed: For every complex problem, there is a solution that is simple, neat and wrong.

IMO that applies to all these general rules on AA. Subtracting age from some number, etc. The "right" AA depends strongly on the value of your assets compared to the rate at which you need to draw from them. (As @Car-guy points out.) It also depends on your attitude towards risk. "Do you want to eat well or do you want to sleep well?" Finally, it depends on your age and your objectives for heirs and other beneficiaries of your estate.

In our case, we have handily won the game, so we could certainly go to 100% conservative assets. We are 70YO, so the "rules of thumb" might tell us to go 50% or less in equities. But we are just redoing our allocation to go 75%. Why? Well, TBH, the game is kind of fun. But also our estate plan has two testamentary trusts for our sons, so we are really investing that money for them. It also has charitable components, so we are investing for those beneficiaries as well.

To beat the horse a little more, consider two 70YO widows whose parents led long lives into their 90s. The conventional wisdom and the far-too-simple age formulas would advise both of them to have the same AA. Now I tell you that one has $200K of assets and one has $10M. Does the same AA suit both? Of course not.

So ... there really is no answer to your question except the one you come up with for yourself. No one else's experience applies. As @Dtail suggests, play with the various calculators to see possible scenarios, understanding that they are simply projecting history into the future and cannot actually predict the future. Then make your choice.
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Old 05-04-2018, 07:12 PM   #8
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Agree with not so old Shooter. You need to determine what works for you and allows you to sleep at night. In my case I have a non-cola but decent pension from mega corp. That along with a good chuck of change in a CD ladder and TIPS allows me to say that I have enough (from these) to let the other money run wild (i.e. be in equities).

You could attempt to do something similar by constructing a CD ladder where you would have enough income and return of principal from FDIC/Safe investments that allow you more flexibility in terms of your more leveraged assets.

Remember, loss of principal is not the only risk factor. A 100% safe (whatever that is) income stream might assume your money is returned, but that doesn't say that the money will provide adequate spending power. The purpose of equity investments is to provide a superior return (above inflation), albeit at the cost of additional risk and turbulence.
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Old 05-04-2018, 08:02 PM   #9
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I ladder both taxable and muni bonds at Fidelity. They have self service ladder tools for CD’s and bonds. They will also help you over the phone. If you want very predictable income flows over a specific timeframe, it is hard to beat a ladder.
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Old 05-04-2018, 08:40 PM   #10
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Originally Posted by joylesshusband View Post
Annuities.
Annuities always sound like a great pitch "guaranteed income for life". Buyer beware! They are an extremely complex product that the salesperson makes a fortune off of.

Anyone considering them or who owns them I encourage you to call the annuity company and ask verbatim "what are the Annual fees including sub account fees, M&E expenses, any riders." Also ask of there are surrender penalties.
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Old 05-04-2018, 09:29 PM   #11
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Normally, I’d advise selling a bit of stocks to buy real estate, but that market also seems so expensive right now.

Heck, I’ll still advise buying more REITs, if only for the sake of being ornery.
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Old 05-05-2018, 07:48 AM   #12
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+1 on what OldShooter and others have said, especially about no single right answer/silver bullet. For us, CD's (2 year ladder) and a couple of modest pensions, provides a reasonably safe means of getting to SS. Our emergency cash is just that - cash. We don't envision CD's "earning interest." It's more like; they devalue, through inflation, slightly slower than cash.

YMMV!
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