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When To Make Assett Allocation Target Changes
Old 09-24-2008, 01:54 PM   #1
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When To Make Assett Allocation Target Changes

Assett Allocation Target Changes
Assett Allocation Target Changes

There are target funds that will change your target assett allocation over time.
But if you are like me, and doing it yourself, how do you know when its time to change your TARGET?

When i started investing at 18 i was investing in 100% stocks.
In my 20's i adjusted to 80% stocks / 20% bonds.
I am now in my late 30's and planning an early retirement (hopefully between 45 & 50), so I'm now 70% stocks / 30% bonds.

I guess my question is for those who have either already retired or getting ready to retire.
What is/was your planned assett allocation when you retired.
--and is that your final target...or will you change again later?
Sometimes the more books/articles i read the more confused i get.
Thanks for the info...

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Old 09-24-2008, 02:29 PM   #2
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Anyone who has been considering reducing their stock allocation by 5-10% over the last year probably doesn't need to do much rebalancing...

"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
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Old 09-24-2008, 03:15 PM   #3
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Originally Posted by ziggy29 View Post
Anyone who has been considering reducing their stock allocation by 5-10% over the last year probably doesn't need to do much rebalancing...
That's very funny, Ziggy; it worked for me! although I'm trying to increase equities.
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Old 09-24-2008, 03:37 PM   #4
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During the 2003-2006 thriving market, I was 100% in equities. I am a very "nervous nellie" and that was very tough for me to do, but I needed a much larger nestegg and essentially gambled and won. Once my nestegg had grown quite a bit I moved to 80:20 and then 60:40 (equities:fixed) which was MUCH more comfy for me in accumulation phase.

I figured that I wanted a more conservative AA than that in ER, so two years beforehand I started moving towards my target AA of 45:55 (equities:fixed). My timeframes were really speeded up, though, by necessity. I think most people start to make their move much earlier than that. Anyway, at two years out I went from 60:40 to 50:50 and pretty quickly to 45:55. I wanted to try 45:55 during this final year so that I could get a sense of how my nestegg would work for me after ER, to get a better feel for it.

As has been pointed out, the market helped me out in getting to 45:55. I am now 13 months out.

I would say that a good reason to make your move would be if your present AA is uncomfortable for you at present, in accumulation phase, during market ups and downs.

You have quite a bit of time until ER. Still, at about 5-10 years out I think most people would want to be much closer to their retirement AA than earlier. You don't want to risk all you have worked for unless you have enough time to gain it back.
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Old 09-24-2008, 03:48 PM   #5
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The year before I semi-retired, I switched from 90-10 to 70-30. Then I went to 31-31-31-7 (US-Foreign-Bonds-Commericial real estate). I don't think I need to change ever again. So you are almost there with your 70-30. You may even have REITs as part of your 70.
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Old 09-24-2008, 05:14 PM   #6
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I am one of those who was 100% equities in their 20's. I am now 35 and at 97% equities.

My planned ER age is 53. That is a hope more than reality right now (have slightly less than 200k and need about $1.5 M).

My plan is to add 1% to bonds every 6 months. This year the market is doing it for me. I was 97-3 when I went from 2% to 3% in June, I assume I am already 96-4 or more when I check again in December. If market goes up I sell 1% of each holding and move that to bonds every 6 months. If market goes down I do nothing. If market is sideways I just adjust the contributions.

Over a 10 year period this will move me from 100% equity at age 33 to 80-20 at age 43 (about 10 years before retirement). I might just keep doing the same until I get to 60-40 at retirement. Although as I get closer I will have a better idea of withdraw rates I could use and whether mortgage is paid off and what my expenses are.

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