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Yet another SS question
Old 08-07-2012, 06:47 PM   #1
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Yet another SS question

I was wondering what others plan to or did with their asset allocation once SS enters the picture.

Let's say one has a 50/50 asset allocation, would this change with SS?
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Old 08-07-2012, 06:50 PM   #2
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You can make a case for taking on more risk and increasing your exposure to equities, but I didn't.
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Old 08-07-2012, 07:00 PM   #3
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Quote:
Originally Posted by 73ss454 View Post
I was wondering what others plan to or did with their asset allocation once SS enters the picture.

Let's say one has a 50/50 asset allocation, would this change with SS?
My SS already reflects my AA of 60/40. SS and our DB income streams, allows me to invest more aggressively than I normally would if these income streams were not available.

Without a guaranteed income foundation, I would probably be @ a 50/50 or even 40/60 AA.
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Old 08-08-2012, 05:49 PM   #4
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I won't it's extra income but I wouldn't change my AA over it.
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Old 08-08-2012, 06:10 PM   #5
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I won't it's extra income but I wouldn't change my AA over it.
In our case, it's not extra income, but results in less withdrawl of our respective portfolios for current month's income.

Regardless of that, we won't be changing our AA due to SS.

That dosen't mean we won't change it to be a bit more conserative as we age, but that has nothing to do with SS.
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Old 08-08-2012, 06:19 PM   #6
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Some people look at the net present value of guaranteed income streams such as Social security or pensions as bonds or bond ladder equivalents. If it is to be paid in the future it has a (phantom bond) NPV now based on a discount rate, that reflects it's current value. They then use all of their assets including the value of these "phantom bonds" in their asset allocation. An approach like this will tilt you towards a more equity-heavy allocation.

John Bogle of Vanguard advocated using NPV of SS and pensions in deciding your asset allocation.

The concept is somewhat contoversial though. The financial community is divided on the concept. Some academics are split as to when to use these type allocations depending on whether or not you need the income to pay basic living expenses. In the case of those needing SS and pensions to pay living expenses, some advocate (and some do not) a more traditional approach to asset allocation.

Here is an earlier thread discussing the concept:

Phantom Bonds Redux
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Old 08-08-2012, 07:18 PM   #7
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I was wondering what others plan to or did with their asset allocation once SS enters the picture.

Let's say one has a 50/50 asset allocation, would this change with SS?
I plan to make no changes in my AA. Until I claim SS, I am partially substituting for SS with an equally certain monthly income stream from a cash equivalent. I suppose I could invest more in equities when SS begins. However, I am growing older and it is often said that the older you get, the smaller percentage you should have in equities.

To implement that generalization, one could follow the Rule of 120, for example. In my case, I'll follow the "Rule of W2R". This means I won't do anything until I get SS, and then I will continue doing nothing. By not doing anything, there will be a one time shift in dependence from equities when I start receiving SS.

Another such shift will occur in my 80's, should I decide to purchase an immediate lifetime annuity at that time.
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