100% Stocks once on Pension/Social Security?

[jkern]

I'm in the same positions as of right now, except I have rental income vs pension (first SS check next month). I'm moving in the opposite direction (40% stocks, 40% bonds, 20% cash). My portfolio will be used for an emergency fund, self insure for earthquake, self insure for LTC and provide a legacy for children and future grandchildren.

 

[RunningBum]

For those of you who can live off SS, pensions and other income streams and are undecided on what AA to take with your portfolio, a book that helped shape my views was Against the Gods: The Remarkable Story of Risk by Peter Bernstein. I found the section on diminishing marginal utility applicable to in terms weighing potential stock market gains vs. losses and what impact each scenario could have on our happiness levels. That and reading through the past posts here and Bogleheads during big market drops about feelings of gut punches, sleepless nights, and white knuckling it through the stock downturn. I don't want to have those worries in retirement.

I get that. But some people are similarly disturbed to watch a bull market that they've chosen to sit out. It helps to know which type you are, or if you are in the middle and want to be part way in, and part way out.

 

[Oakster]

Lots off threads over on bogleheads about this.

As one poster over there notes there's only about a 1% real annual difference in return between a 100/0 & 70/30 equities/fixed AA portfolio.

Given the above I'd stick with 70/30.

If there is only 1% real annual difference, why choose the lower one? Just a question. If they are that similar, why not make more money?

 

[travelover]

If there is only 1% real annual difference, why choose the lower one? Just a question. If they are that similar, why not make more money?

When stocks plummet, like for instance, 2009, and you need some cash, would you rather sell bonds at face value or stocks at a big loss?

 

[Oakster]

When stocks plummet, like for instance, 2009, and you need some cash, would you rather sell bonds at face value or stocks at a big loss?

I may be wrong (most likely) but when I say and think 100% invested in mutual funds, I would still have a cd ladder for short term spending. That is a different component, like an emergency fund etc. I think that would be very important when investing in mutual funds with your retirement dollars.

 

[Moemg]

I was 95% stocks in 2099 and lost almost 40% . It came back but now I am older and maybe I'll need long term care or assisted living so 65% is all I am willing to risk .

 

[CyclingInvestor]

It's not crazy if your risk tolerance can take it.

This is key. If 100% stocks keeps you up at night, it is too high, regardless of everything else.

I am most relaxed at 100% stocks (SS starts in 7 months). Any other allocation seems like wasting time and money. Only the size and health of the dividend flow is important to me - the current value feels more like a video game - new highs are fun, losses have no effect on real life. Since I am now a net buyer of stocks, declines are actually beneficial to future dividend flows.

 

[Sanbenito1]

So you've got your regular expenses covered, but not your irregular ones. I wouldn't have my emergency fund in equities. Of course this sounds like a greatly overfunded emergency fund, but I'd hold out the larger of the largest emergency expense you're likely to face or a typical year's worth of irregular expenses. Keep that liquid, like in a money market. Maybe add a CD or bond ladder to refresh it if there's a typical amount each year. I wouldn't go 100% equities.

I’m in same situation- expenses covered by military pension and rental income. I hold out some mid-range money for new roof/care in bonds, shorter-term (travel/classes) in CDs and the rest, 90%, is in stocks.

 

[Badger]

We pretty much live on our SS and small pensions. No mortgage, no debts, and health insurance is a non-issue with Medicare and Tricare. Dividends and RMDs are swept into a MM account that we rarely tap into except for a little travel and to gift the maximum to the 2 grown children yet the stash keeps growing. Plenty to leave to each child so I don't want to risk that money. Due to that and a little inheritance from my wife's mother we are very cash heavy at the moment. I'm OK with that and I don't see the need to buy at this time. For now we could go the distance with what we have. We definitely still live below our means by choice and are comfortable with that lifestyle. If our total investments don't keep up with inflation it will make minimal difference. A 50% drop in the market will only result in (maybe) an 18% drop for us at most. Then we have the option of buying more stock to boost the children's inheritance or not and just wait for the market to return. Either way we won't be stressed out. I worried about money enough when I wasn't sure I would ever be able to retire. Not going to go that route again. Life is getting shorter all the time.


Cheers!

 

[indiajust]

Wait and see. Not a decision you need to make today. You can adjust your AA to suit your attitude and changed circumstances then.

 

[ABQ2015]

I am in a similar situation with pension/SS but 100% equities makes me nervous so compromised with a 70/30 portfolio.

 

[kgtest]

My wife's pension will pay about 60% of our expenses when we retire. The rest will come from our retirement savings for the ten years or so until we can get social security. Once we're getting SS we won't need our retirement savings for daily living expenses anymore.

At that point, would it be crazy to go 100% stocks (VTSAX for example) with our remaining portfolio?

I ran some simulations in Flexible Retirement planner (10% return, 15% deviation) starting at age 69 (after we're both drawing SS) and saw a dramatic increase in portfolio sizes with no portfolio failures (100% success).

It looks good in calculations, but I wonder if I'm overlooking something.

My dad has 3 pensions (and mom had a one time pension payout so technically 4)...plus both their SS and DF also has a few rental properties. He is 69 and has been 100% equities the past decade with no intentions of reducing that level EVER.

Perhaps if he were sued to the hilt, lost all 4 of his properties, one of his pensions went debunk and for some unforeseen reason SS was reduced...I'm sure then he would reduce...but what is the likelihood of all of that to come crashing?

I am also 100% equities and plan to be that way my entire life partly because of the financial position my dad and FIL are in. My DF and DFIL have built their nest eggs to the point of almost disproportionate wealth and it would take more than an act of god to change my decision.

Both my sisters are also in 100% equities...but one has RE as well so maybe you wouldn't consider that 100%?

Someone once asked me why I am in all 100% growth funds...well that is why...the future is bright. If you read the YTD thread, you will see my returns are consistent with 100% equities.

 

[brett]

When we were doing our split between equities and fixed we included the net present value of my pension in the total and designated it as fixed. Although the payout period has been reducing ever since I started the pension low interest rates have somewhat offset the drop in net present value.

We will be at the nine year point next year so it will be time to re calculate the npv of my pension. The investment pot has grown very nicely over that period notwithstanding some withdrawals.

 

[GaryM]

Just retired about a week ago and my money is staying in the market. Long term numbers are so much better and since last fall I figure we should have a bit of time before the next big drop.

 

[Spanky]

100% equities beats 60/40 in total return. But I may sweat bullets in a severe downturn. Yes, our pensions, rental income and SS more than covers everything. "The pain of losing money is always much worse than the joy of making money"

Yup - the pain! A lot of people seem to forget the pain since the last steep decline was so long ago.

 

[GravitySucks]

Finally some info I can use.
Imma going cash in 2098.

I was 95% stocks in 2099 and lost almost 40% . It came back but now I am older and maybe I'll need long term care or assisted living so 65% is all I am willing to risk .

 

[dtbach]

Finally some info I can use.
Imma going cash in 2098.

I'll have to pass that nugget off to my grandkids though as neither I (nor my kids) will be around to benefit.

 

[dtbach]

Yeah, 100% stocks would probably bring the highest return, but having gone through several steep drops, I'll take the cushier ride with a 65/35 AA. And remember, if you have the guts, you can always sell the bonds and have capital to buy the stocks at a bargain.

 

[dixonge]

Given the complete lack of COLA on our pensions, and the minimal 'COLA' on SS, we are 100% equities with our small investment portfolio. We need it to grow as much as possible to be able to offset inflation in future years. Plus it doesn't hurt to have a bit extra for emergency or other cash purchase purposes...

 

[Nords]

Once we're getting SS we won't need our retirement savings for daily living expenses anymore.

At that point, would it be crazy to go 100% stocks (VTSAX for example) with our remaining portfolio?

We've been >90% equities since 1986, and we plan to stay with that asset allocation for the rest of our lives. Personal Capital claims that today we're 98.65% equities.

My military pension, a little rental income, and dividends cover the vast majority of our spending. Every 4-6 months we'll harvest some capital gains for large lump sums or for the credit-card bills from upcoming slow travel.