Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Increasing Equity Exposure in Retirement?
Old 03-28-2016, 11:52 AM   #1
Recycles dryer sheets
YVRRocketSurgery's Avatar
 
Join Date: Dec 2015
Location: Vancouver
Posts: 339
Increasing Equity Exposure in Retirement?

Read an interesting article in a Canadian business newspaper, the Financial Post, that talked about increasing equity exposure in retirement instead of the common rule of thumb of reducing it (ie ~100-Age=Equity exposure). It was written by Jason Heath, a CFP who is a regular contributor to a number of personal finance sites.

I likely don't do the article justice but in a nutshell...
The article is based on a publication by Wade Pfau and Michael Kitces in the Journal of Financial Planning: Reducing Retirement Risk with a Rising Equity Glide Path. He notes the common rule of thumb is that the success of your retirement portfolio is dependent on your sequence of returns; good returns in your early years will hopefully make poor returns in later years insignificant. However, reducing equity exposure in later years may prevent your portfolio from recovering if you experience poor returns in your early years. Increasing equity exposure allows you to capitalize on returns when the markets recover. Pfau and Kitces' research apparently seems to indicate that overall, a rising equity glide paths from conservative starting points can achieve superior results compared to steady or declining equity ratios.
__________________

__________________
YVRRocketSurgery is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-28-2016, 12:01 PM   #2
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Fishers
Posts: 385
My retirement funds are over 99% in equities but I don't plan to touch them until RMD is forced on me and may just roll them over to taxable accounts then. Living expenses are covered until then by savings and an A**uity I bought when I was 40 yrs old and didn't know better - Ha ha. - SS will kick in prior to needing any retirement funds unless armageddon occurs and it won't make any difference then anyway!
__________________

__________________
wmc1000 is offline   Reply With Quote
Old 03-28-2016, 12:03 PM   #3
Thinks s/he gets paid by the post
MasterBlaster's Avatar
 
Join Date: Jun 2005
Posts: 4,359
The concept is to balance the portfolio risk with the sequence-of-returns risk. The sequence-of-returns risk is maximum just before and after one retires.

Based on that the authors turn the traditional portfolio upside down and have lots of bonds when you retire and then fewer bonds as you age.


There were some threads discussing this both here and on the Bogelheads forum around 6 months ago when the paper was published.
__________________
MasterBlaster is offline   Reply With Quote
Old 03-28-2016, 12:05 PM   #4
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,101
A previous discussion of the topic: Increase stocks with age
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 03-28-2016, 12:45 PM   #5
Recycles dryer sheets
YVRRocketSurgery's Avatar
 
Join Date: Dec 2015
Location: Vancouver
Posts: 339
Quote:
Originally Posted by MasterBlaster View Post
The concept is to balance the portfolio risk with the sequence-of-returns risk. The sequence-of-returns risk is maximum just before and after one retires.

Based on that the authors turn the traditional portfolio upside down and have lots of bonds when you retire and then fewer bonds as you age.


There were some threads discussing this both here and on the Bogelheads forum around 6 months ago when the paper was published.
Thanks! I will look for the threads.
__________________
YVRRocketSurgery is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Equity dividend investing vs equity index investing galeno FIRE and Money 16 01-01-2015 04:51 AM
Increasing withdrawal rates aenlighten FIRE and Money 4 05-07-2007 04:03 PM
Increasing (?) costs for communications Martha FIRE and Money 95 02-02-2007 07:22 AM
Increasing the FIRE Payoff sgeeeee Life after FIRE 25 06-13-2004 11:57 AM

 

 
All times are GMT -6. The time now is 11:02 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.