Asset Allocation

[W2R]

I'm adjusting my AA to less pct equities. Curious to see AA of the members of this group. I'm reading that pct equities should be 100 - your age. I don't know anyone with equities pct that low.

So what is your AA and approx age?

I'm at 46,42,12 at 64 years old. I'm thinking of going to 36,60,4

I am 71 years old now, and my equity percentage is 42%. I will move it to 40% the first week in January. I am in the process of slowly moving it towards 110 - my age. My overall AA is (42:49:9).

Here are my equity percentage for younger ages thus far, to the best of my recollection, and my plans for older ages. I only make changes in January, so these are for January of each year:

Up to age 56: 100%
Ages 56-59: moving steadily from 100% to 45%
Ages 59-69: 45%, retired at age 61
Age 70: 42%
Age 71: 40% (planned, will make this change in January)
Age 72: 38% (planned; finally at 110-age)
Age 73: 37% (planned; 110-age)

And so on.

 

[OldShooter]

Thanks for the responses. I'll have to think about this more on my own. I don't have a good answer for why I should have a declining equity tilt, other than less time to recover from a sharp downturn. But since I probably have enough to weather that, it may not be a good enough reason.

@RB, I think you are miles ahead of most on this board, who seem to be focused on the age equations. Hopefully your posts will cause some of them to realize that they need to be more like you if they want to optimize their situations.

I think I can speak for @pb4, too, when I say that we have no answers. Only suggested questions.

 

[pb4uski]

Luckily, there is no "right" answer and a broad range of AAs that will have acceptably high success rates so a broad range of AAs would not result in harm.

 

[W2R]

Luckily, there is no "right" answer and a broad range of AAs that will have acceptably high success rates so a broad range of AAs would not result in harm.

Exactly!

Personally I am beginning to prepare for my declining years and eventual death. Although I am fine now, seems like a lot of people die in their 70's and many get pretty "drifty" during those last few years, or are too preoccupied by health issues to pay much attention to how their equity investments are doing.

So, to me it makes sense to move slowly into less volatile investments as I age, even if it means my ultimate portfolio size will be smaller. It's already way more than I need.

 

[phil1ben]

59 years old (retired since 57) married:

Real Estate held as an Investment (multi-family - excluding personal residences) - 24%

Individual Stocks - 28%

Individual Muni Bonds - 25%

Cash (CDs-Money Markets) - 23%

 

[braumeister]

When I was younger, my equity portion typically ran in the 70-80% range.

Once I retired, I started bringing it down to around 60% and it stayed there for a long time.

A few years ago I started reducing it again and was at 50% for a while, but in the last year I've brought it down a bit more.

Current range is anywhere between 40-50% equities and I think it will stay there for the foreseeable future.

Disclaimer: Pensions and SS cover all our normal everyday expenses. The withdrawals are strictly for "above and beyond" discretionary spending (of which we do quite a bit).

 

[Mark1]

Ages 63/58

48% Equities
44% (5 Yr Laddered CDs)
8% On-line Saving/MM

Plan is to slowly ratchet equity % down to ~13% based on spreadsheet formula at age 105/110 when we run out of money (Variable Percent type planned withdraws). I guess at that point will probably need to sell the house to live.

 

[Ronstar]

Thanks everyone - lots of great replies to help bolster (in my mind anyway) my decision for my next AA.

I thoroughly understand how AA is simply not a 100- or 110- game. Lots of variables come into play. Pensions, SS, heirs/no heirs etc.

ETA - just looked at the portion of my IRA through DW's FA. It's 45.5 47.5 7. I gave him my risk tolerance several years ago and this is what he came up with.

 

[friar1610]

74/spouse 73. 46/50/4. Goal is to gradually move to 50/46/4 either via equity growth or new equity purchases as it makes sense to do so (i.e.,correction/crash). Then hold steady for life with no rebalancing out of equities unless FI drops below a predetermined dollar level.

 

[Sunset]

Thanks everyone for discussing this as it finally motivated me to put in the effort and calculate my ratio.

My ratio is 65% stocks which is pretty close to my age, and lower than I wanted, and quite a bit lower than I thought it was.

Probably my methodology at work here, I counted preferred stocks as bonds, and I counted rental property as bonds, and I included CD's and interest earning cash in the same pile as bonds.

I only had 2 categories , stocks and non-stocks/bonds/cash/cd/rentals/[-]coins in the couch[/-]

 

[RenoJay]

I’m 47. I went from ~50 equities a year ago to ~12% now. That said I have a large allocation to private lending where the yields are massively better than most fixed income products.

 

[Ronstar]

Another question. I forgot to include my annuity. I annuitized it - getting payments for 10 years. It's not equities, not bonds. But the present value of the payments is in my portfolio - it is an investible asset. I need to include the present value somewhere in the AA. Since the payments go directly into checking, it must be cash. Right?

 

[mystang52]

40/50/10 age 67 and I'm comfortable with this allocation.

 

[CardsFan]

Another question. I forgot to include my annuity. I annuitized it - getting payments for 10 years. It's not equities, not bonds. But the present value of the payments is in my portfolio - it is an investible asset. I need to include the present value somewhere in the AA. Since the payments go directly into checking, it must be cash. Right?

I think that falls into the third leg of the stool. Pensions, annuities. I would not count it in AA, but it does count as to WHY you you have that AA. More "guaranteed" income allows more flexibility.

 

[VanWinkle]

Age 64, 50% equities, 45% bonds, 5% high yield savings. Drawing a small pension and survivor benefits plus 1% withdrawal from portfolio. I have to learn how to spend a little more, I've been saving way too long.

 

[Al in Ohio]

I am 58 with 50% equities 40% bond funds 10% cash retired 3 years ago.

 

[JackJester]

As I have gotten closer to FIRE (1-2 yrs out), I have settled on the following AA to ride into and through retirement: Stocks 65%, Bonds 24%, Cash/Commodities 11%. I have most investments at Schwab, and I researched my optimal AA (risk vs return) using the tool https://portfoliocharts.com/
I have a more complex mix than most (10 ETFs/MFs) with the following spread:

Morningstar Category; AA (%); Investment
Large Growth; 9; SCHG
Large Blend (S&P 500); 20; SWPPX
Large Value; 9; SCHD
Mid Cap Blend; 9; SCHM
Small Blend; 8; SCHA
Foreign Large Blend; 10; SCHF
Intermediate-Term Bond; 22; SCHZ
Realestate; 10; SCHH
Gold (Commodities Precious Metals); 1; SGOL
Inflation Protected Bond; 2; SCHP

In the long run, it probably doesn't make much difference between my AA and those with the simple 3 Vanguard fund spread, but I enjoy managing my portfolio and don't mind the extra work to re-balance.

 

[pb4uski]

Another question. I forgot to include my annuity. I annuitized it - getting payments for 10 years. It's not equities, not bonds. But the present value of the payments is in my portfolio - it is an investible asset. I need to include the present value somewhere in the AA. Since the payments go directly into checking, it must be cash. Right?

No, IMO and more common practice it is not part of your assets... just an element of income... similar to a defined benefit pension.

 

[targatom2019]

Age 50....60/40 + 2 yrs for emergency.

 

[FlaGator]

Rather than set percentages, I've tried to maintain 6-8 years of expenses in bonds/cash and let the equity component float. That has left me in 60-70% equities over the last 5 years (was 85/15 before ER).

Settled on that in the belief the future will be similar to the past, in that it can take 6-8 years for stocks to recover after a steep decline.

It has worked well to date and appears to be a useful planning guide for the next few years. Expect I'll review it along the way as the market changes, the kids move through college and HS, and the future wife's assets and needs get folded into the planning.

 

[RunningBum]

Another question. I forgot to include my annuity. I annuitized it - getting payments for 10 years. It's not equities, not bonds. But the present value of the payments is in my portfolio - it is an investible asset. I need to include the present value somewhere in the AA. Since the payments go directly into checking, it must be cash. Right?

I know that many don't, and you've had a couple replies to confirm that, but I do what you suggest with my pension and even social security. My rational is that if those provided 99% of what I need I would probably invest my other assets differently than if they provided 1%, so why not factor it in at whatever % it is? I know you can just "be more aggressive" if you have a large pension, but I find it easier to quantify it by putting it in the same terms as my other assets, as best I can. It's your money, you won't get audited on these personal accounting practices, so I say if that makes sense to you, do it. If it doesn't, don't.

 

[swakyaby]

Started retirement with 60% equities, 35% bonds, 5% cash at age 56. Then received a mostly equities inheritance which skewed my asset allocation to 69% equities at age 58. I plan to bring the equities back to a more comfortable 60%. At age 70, I plan to bring equities to 40-50% and leave it there.

 

[Ronstar]

Another question. I forgot to include my annuity. I annuitized it - getting payments for 10 years. It's not equities, not bonds. But the present value of the payments is in my portfolio - it is an investible asset. I need to include the present value somewhere in the AA. Since the payments go directly into checking, it must be cash. Right?

I think that falls into the third leg of the stool. Pensions, annuities. I would not count it in AA, but it does count as to WHY you you have that AA. More "guaranteed" income allows more flexibility.

No, IMO and more common practice it is not part of your assets... just an element of income... similar to a defined benefit pension.

I know that many don't, and you've had a couple replies to confirm that, but I do what you suggest with my pension and even social security. My rational is that if those provided 99% of what I need I would probably invest my other assets differently than if they provided 1%, so why not factor it in at whatever % it is? I know you can just "be more aggressive" if you have a large pension, but I find it easier to quantify it by putting it in the same terms as my other assets, as best I can. It's your money, you won't get audited on these personal accounting practices, so I say if that makes sense to you, do it. If it doesn't, don't.

I understand those that say that an annuity (or ss, pensions) are not part of assets, and that payments to the owner are income. Certainly in the case of ss, pensions, and annuities where payments are for life. And I understand that standard accounting practices probably don't include annuities, etc as assets.

But I'm including the present value of my annuity as an asset for a couple of reasons.

1. Like RunningBum said, I think it makes sense to include it as an asset where the $ amount is significant enough to affect financial decision making as it pertains to AA.

2. I paid into the annuity with after tax payroll dollars. During the accumulation phase, it was just like a mutual fund. It had an account value that I could sell at any time for the account value. I included the account as an asset during the accumulation phase, since it was no different than other funds.

Then I annuitized the account value to where I receive fixed monthly payments for 10 years. I can still call and get a single payout (present value of the remaining monthly payouts) if I desire. So I still include the present value of the remaining payouts as an asset. Makes sense to me - it was an asset during the accumulation phase - the money simply doesn't vanish when I start taking monthly distributions. In my mind, it is no different than a Vanguard fund that someone takes monthly distributions from.

 

[REWahoo]

I can still call and get a single payout (present value of the remaining monthly payouts) if I desire. So I still include the present value of the remaining payouts as an asset. Makes sense to me -

Makes sense to me as well.

 

[gamboolman]

Age 60
45/45/10