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Old 01-28-2016, 03:08 PM   #21
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Lack of TIPS an annuities and having a 50% stock allocation do not meet Bernstein's recommendations for retirees who don't have enough in "safe assets"......and they are cash/CDs, TIPs, short bonds and annuities. That's why without the size of the OP's portfolio and income needs it's hard to know if the OP's portfolio would be recommended by Bernstein today. I certainly think the lack of bond diversity, TIPS and annuities would be an issue for him. I'm not taking issue with the 50/50 Wellesley/Wellington portfolio, just in associating it with Bernstein's current thoughts around retirement income portfolios.
I should qualify my AA as following the advice in 4 Pillars. I know he's changed his tune somewhat since then.
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Old 01-28-2016, 04:44 PM   #22
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You could probably do a lot worse.

I've got what are essentially three buckets:

Wellesley for the first 3-4 years
Wellington for the next 5-25 years
Vanguard Health for 25+

So far the dividends and capital gains distributions from those have been more then enough to cover my expenses. If things tank and they don't then I plan on drawing from Wellesley first.
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Old 01-28-2016, 04:47 PM   #23
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As Yoda would say, "leave the politics out of this, let us".
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Old 01-28-2016, 05:32 PM   #24
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I should qualify my AA as following the advice in 4 Pillars. I know he's changed his tune somewhat since then.
Yeah, he's singing a bit of Zvi Bodie's tune; and that's the whole point of my contributions to this thread. Bernstein's current recommendations for retirement income portfolios are very different from his "4 Pillars" thinking. He's become far more risk averse and has recommended a Liability Matching approach in retirement. Have you read "The Ages of the Investor" or the Boglehead threads where Bernstein's move to Liability Matching is discussed?They are interesting.

I have no criticism of your current portfolio, it is very "Bernstein, 4 Pillars" and that was my accumulation approach, just the observation that it's not necessarily something that Bernstein would currently support in retirement, particularly the fixed income part.
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Old 01-28-2016, 06:46 PM   #25
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Yeah, he's singing a bit of Zvi Bodie's tune; and that's the whole point of my contributions to this thread. Bernstein's current recommendations for retirement income portfolios are very different from his "4 Pillars" thinking. He's become far more risk averse and has recommended a Liability Matching approach in retirement. Have you read "The Ages of the Investor" or the Boglehead threads where Bernstein's move to Liability Matching is discussed?They are interesting.

I have no criticism of your current portfolio, it is very "Bernstein, 4 Pillars" and that was my accumulation approach, just the observation that it's not necessarily something that Bernstein would currently support in retirement, particularly the fixed income part.
I've seen a lot of conflict in these advisors recommendations. And then there is advisor ego. Lots of that on display. So which advisor is right for me? Bodie, Bernstein, Swedroe, Ferri, Bogle and etc.

Personally I've taken a bit from most of them but not anywhere near the whole of any of their advise. They would all disapprove of my current path I think. But then like I said, some of them (like Swedroe and Ferri) have a lot of conflicts. The markets are full of conflicting advise and strategies ... and that's what makes a market. Buy or sell? The price is set by these conflicts.
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Old 01-28-2016, 08:01 PM   #26
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... some of them (like Swedroe and Ferri) have a lot of conflicts. The markets are full of conflicting advise and strategies ... and that's what makes a market. Buy or sell? The price is set by these conflicts.
+1

Imagine the market without conflicts. Imagine there are only buyers, and no sellers, or only sellers and no buyers.

The world would just stop functioning, the earth would stop spinning, the sun stop shining, and an asteroid might as well hit us and put us out of misery.
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Old 01-28-2016, 08:59 PM   #27
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....... and an asteroid might as well hit us and put us out of misery.
We'd never say that "the pedestrian hit the car" so its a bit strange to say that the asteroid hits the Earth, rather it's the Earth that hits the asteroid and destroys it. The dinosaur killer asteroid was probably 10km wide and we've discovered all the asteroids and Near Earth Objects down to 1km so we'll know if one of those is going to hit long before it happens.
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Old 01-28-2016, 09:23 PM   #28
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Clearly Nun you have never heard of those sneaker asteroids just lurking about.
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Old 01-29-2016, 07:45 AM   #29
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Clearly Nun you have never heard of those sneaker asteroids just lurking about.
There is a tiny chance that some 1km and larger asteroids remain undiscovered, but the probability of that and it's orbit and the Earth's intersecting is so tiny it's not worth worrying about. But there are plenty of city destroyers lurking out there. The recent one over Russia was around 20m wide.
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Old 02-06-2016, 08:05 AM   #30
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Back in 2007 Bernstein would have have very similar retirement investing advice, but in 2016 I don't think he would recommend such a portfolio for many retirees. A 50/50 Wellesley/Wellington might be a good way to fund retirement, but I'm not sure it could be described as a Bernstein approach in 2016.

To Invest for Retirement Safely, Know When to Get Out of Stocks - TIME
I don't understand this piece of advice from Bernstein:

Quote:
One other income source to consider: Social Security. Unless both you and your spouse have a low life expectancy, the best version of an inflation-adjusted annuity out there is bought by spending down your nest egg before age 70 so you can defer Social Security until then. That way, you, or your spouse, will receive the maximum benefit.
How much extra income per month could that possibly provide? And how could that amount possibly be more than what your nest egg would provide?
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Old 02-06-2016, 08:09 AM   #31
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My feeling is that if we work hard enough to guarantee the minimum level of return as our safety net, that is exactly what we will get- our minimum level of return.
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Old 02-06-2016, 08:11 AM   #32
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How much extra income per month could that possibly provide? And how could that amount possibly be more than what your nest egg would provide?
Up to 32% higher SS benefit if waiting from FRA to 70. If from 62 to 70, I think the increase is around 50+%.

For younger folk with FRA at 67, it's 24% from FRA to 70.
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Old 02-06-2016, 10:57 AM   #33
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Dixonge, this wade Pfau article lays out the delay of Social Security tradeoffs pretty well:
The New Math of Delaying Social Security Benefits - The Experts - WSJ
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Old 02-06-2016, 11:28 AM   #34
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...How much extra income per month could that possibly provide? ....
While it varies depending on age generally the age 62 benefit is ~75% of the FRA (age 65-66) benefit and the age 70 benefit is ~132% of the FRA benefit.

So the age 70 benefit is ~176% of the age 62 benefit.

Plus for couples the age 70 benefit is paid to the survivor if the person with the higher benefit dies early.

So if someones FRA was $2,000/month at age 66 their benefit at age 70 would be $2,640 ($2,000 * 132%). So waiting is equivalent to paying $96,000 (the $2,000/month for ages 66-70 that was foregone) for a COLAed annuity paying $640/month or $7,680/year or a payout rate of 8%. Very attractive for a joint life COLAed annuity.
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Old 02-06-2016, 11:49 AM   #35
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While it varies depending on age generally the age 62 benefit is ~75% of the FRA (age 65-66) benefit and the age 70 benefit is ~132% of the FRA benefit.

So the age 70 benefit is ~176% of the age 62 benefit.

Plus for couples the age 70 benefit is paid to the survivor if the person with the higher benefit dies early.

So if someones FRA was $2,000/month at age 66 their benefit at age 70 would be $2,640 ($2,000 * 132%). So waiting is equivalent to paying $96,000 (the $2,000/month for ages 66-70 that was foregone) for a COLAed annuity paying $640/month or $7,680/year or a payout rate of 8%. Very attractive for a joint life COLAed annuity.
of course, this assumes SS doesn't become enough of a political football that they change the rules of the game at halftime. (same metaphor 3 times in one sentence: pretty good if you ask me. On Super Bowl Weekend besides...)
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Old 02-06-2016, 12:26 PM   #36
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ok, so here is my current scenario - at 62, the SSA is estimating I'll receive $920/mo. At 70 that goes up to $1636. The wife's is higher, but we haven't verified it yet.

The Pfau article covers one scenario, one that I guess most people here are looking at. But for us the delay won't be affecting our withdrawal rate from our portfolio, it will affect our *contributions* to our portfolio. We'll be living on a fraction of our pension and SS for the first several years while building our external portfolio up to decent levels. So not having that money for eight years would *cripple* our plans. 100% of our early SS money will be going into (most likely) Vanguard funds seeking that nice 7%+ relatively safe gain. We'll also be contributing a portion of our pension money.

I'd throw all of this into a spreadsheet to find the break-even approach, but I don't think it would matter. So maybe we'd have more money from 80-100 years of age? Buy a nicer retirement home package?

I think that the basic difference would involve an income that climbs to $73.5K locked in by 2023 vs climbing to only $48K from retirement through 2027, then finally maxing out at $75K in 2031. This second scenario would also result in much lower portfolio contributions.
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Old 02-06-2016, 02:43 PM   #37
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dixone - Each situation is different and there is not one, true, 100% correct way to view when to take SS benefits. If it would cripple your plans to wait until 70 then the answer for you seems clear, IMHO.

You should do what is financially and psychologically right for you two. The psychological aspects of the decision should not be denied. For example, if taking SS at 62 helps one to remain calm in the face of a downturn and not sell low into a bear market, that is a huge benefit.

I believe in the three legged stool, and by delaying SS until my FRA or later, that strengthens the SS leg and gives me a fallback in the event that one of the other legs gets a chunk chopped out of it. And, of course, the others legs would do the same for the SS leg in case it gets cut.

Since I can't predict the future, that's about the best this lowly mortal can do.
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Old 02-06-2016, 03:51 PM   #38
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I am planning on having DH's IRA in Wellesley Income and mine in Vanguard Target Retirement 2020. I have higher risk tolerance than he does, and I like the Target Retirement funds' exposure to international stocks and bonds.
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Old 02-06-2016, 04:10 PM   #39
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I believe in the three legged stool, and by delaying SS until my FRA or later, that strengthens the SS leg and gives me a fallback in the event that one of the other legs gets a chunk chopped out of it. And, of course, the others legs would do the same for the SS leg in case it gets cut.

Since I can't predict the future, that's about the best this lowly mortal can do.
That sounds very reasonable. I'll continue to test projections with that in mind. If we can find a way to delay we'll definitely do that.
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Old 02-06-2016, 04:19 PM   #40
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Dixonge, this wade Pfau article lays out the delay of Social Security tradeoffs pretty well:
The New Math of Delaying Social Security Benefits - The Experts - WSJ
I think I just figured out my confusion. When Bernstein mentions 'spending down your nest egg' I was thinking of intentionally lowering the balance to a certain level - but obviously he just meant doing withdrawals from the nest egg until 70, then replacing that with the new, improved SS money amounts -- after which, the withdrawals from the nest egg go back to better, smaller levels...
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