Asset allocation for retirees with pension and social security

[Motorad]

Hello everyone.
Doing research on asset allocation proposals for those with both a pension and social security. I've done searches in ER and also "you tube", but there is not much available discussion that cover the rebalancing of asset allocation for retirees that have both pension and SS.

Wondering if anyone can recommend website links that cover asset allocation for retirees with pension and SS. Or perhaps a book or two from Amazon that cover these points?

 

[COcheesehead]

Everyone is going to be different, but I would take your planned spend, subtract SS and pensions and invest to produce an inflation protected amount greater than the remainder. Fidelity’s retirement planner tool would help develop an asset allocation under these circumstances, but I am sure there are others.

 

[Koolau]

The only thing I can offer is that the more money you have coming in (reliably) the more you can invest in equities. Can't suggest numbers.

 

[Midpack]

There are quite a few articles on AA for retirees with Soc Sec, and a pension is just another source of income.

Some argue that Soc Sec and pensions are most like fixed income or cash, so your remaining assets can be tilted toward equities accordingly. However, not all academics agree on this - it’s income, not an “asset.”

Soc Sec and presumably a pension are more stable than most other asset classes, so you can take more risk with you portfolio AA, e.g. higher equity exposure if you’re comfortable with that. In addition, it depends largely on how much of your spending is covered by Soc Sec and the pension. If all your spending needs are met, you could put most if not all your portfolio in equities if so inclined.

But ultimately your risk tolerance will influence what AA YOU are comfortable with. There is no universal right answer, depends on your risk tolerance just as it did during accumulation before retirement.

 

[pb4uski]

Hello everyone.
Doing research on asset allocation proposals for those with both a pension and social security. I've done searches in ER and also "you tube", but there is not much available discussion that cover the rebalancing of asset allocation for retirees that have both pension and SS.

Wondering if anyone can recommend website links that cover asset allocation for retirees with pension and SS. Or perhaps a book or two from Amazon that cover these points?

If your pension and SS exceed your spending then your AA can be whatever you want it to be... from cash stuffed under your mattress to going to Las Vegas and putting it all on red or anything in between.

 

[audreyh1]

The FIRECalc tool covers this in detail. You enter your expected SS and pension, retirement investments, and expected spending (including taxes) and then you can play around with different asset allocations to see outcomes.

https://firecalc.com/

 

[Koolau]

There are quite a few articles on AA for retirees with Soc Sec, and a pension is just another source of income.

Some argue that Soc Sec and pensions are most like fixed income or cash, so your remaining assets can be tilted toward equities accordingly. However, not all academics agree on this - it’s income, not an “asset.”

Soc Sec and presumably a pension are more stable than most other asset classes, so you can take more risk with you portfolio AA, e.g. higher equity exposure if you’re comfortable with that. In addition, it depends largely on how much of your spending is covered by Soc Sec and the pension. If all your spending needs are met, you could put most if not all your portfolio in equities if so inclined.

But ultimately your risk tolerance will influence what AA YOU are comfortable with. There is no universal right answer, depends on your risk tolerance just as it did during accumulation before retirement.

So true. Even though I could manage on my pension and his/hers SS, my AA is relatively light on equities. Just MY personal risk tolerance balanced against my belief that I have "enough." Very much a YMMV situation.

 

[jim584672]

100% stock. If at all goes bust your SS and pension saves you.

 

[Koolau]

100% stock. If at all goes bust your SS and pension saves you.

No problem with that for those who have thought it through for themselves. It's just not for me. I couldn't deal with such big potential losses. I guess we're all different in this area of investing and YMMV.

 

[ShokWaveRider]

We are in the same boat as the OP, and we just use CDs for our allocation with MM as the interim. At 5%+ we do not need anything else. With our SS and very small pension from overseas that covers everything and then some there is no need to worry about the Stock Market. That may change when Interest rates reverse, but I doubt it will make much difference for us.

 

[Alex The Great]

100% stock. If at all goes bust your SS and pension saves you.

I agree, but it is important to figure out the required income. It may not be possible to live on SS and pension alone just in case everything go wrong.
I do have about 55% invested in equities and the plan is to increase this number later before applying for SS.

 

[Chuckanut]

IMO, you must take into account the reliability of your pension and future SS payments. As you know SS could be cut to about 75% of the ‘norm’ if Congress continues its current performance on this issue. In my case, I have a state pension this is about 90% funded. Not perfect but better than some states that come in near 50% on the funding issue.

I’ll tell you what I did before retiring. I ran FireCalc assuming I would get 75% of my SS. And 90% of my pension. I came out OK to retire. I would have to watch my discretionary spending more carefully than under normal conditions.

My 2¢. Take what you wish and leave the rest.

 

[Koolau]

IMO, you must take into account the reliability of your pension and future SS payments. As you know SS could be cut to about 75% of the ‘norm’ if Congress continues its current performance on this issue. In my case, I have a state pension this is about 90% funded. Not perfect but better than some states that come in near 50% on the funding issue.

I’ll tell you what I did before retiring. I ran FireCalc assuming I would get 75% of my SS. And 90% of my pension. I came out OK to retire. I would have to watch my discretionary spending more carefully than under normal conditions.

My 2¢. Take what you wish and leave the rest.

I suppose just these possibilities of pension or even SS being in "distress" is a reason that I don't commit more to equites. I'd rather protect what I have than reach for more. My "stash" is my main back-up to a hit to pension or SS. Call me timid, but I prefer "enough" to a "lot - with more risk." YMMV

 

[jim584672]

You should do 2X levered ETFs, generational wealth or bust.

 

[rk911]

Hello everyone.
Doing research on asset allocation proposals for those with both a pension and social security. I've done searches in ER and also "you tube", but there is not much available discussion that cover the rebalancing of asset allocation for retirees that have both pension and SS.

Wondering if anyone can recommend website links that cover asset allocation for retirees with pension and SS. Or perhaps a book or two from Amazon that cover these points?

This is us...SS and three defined benefit pensions. Our AA varies depending on the account but averages out to roughly 60/40 (equities/fixed). Overall that's less aggressive than before retirement when the AA was ~75/25. Today, our Roth IRA's are a bit more aggressive but an account we designated for our long-term care is a bit less aggressive.

 

[pacergal]

I think it depends on your "sleep at night" factor.
If your SS and pensions cover your budget/spending, then you can have your AA be whatever is most comfortable to you and gives you the outcome you plan for.
Firecalc can help with scenarios.

We are also blessed with two pensions and SS, all govt. based, so pretty stable and reliable, SS may or may not be cut in the future. Our base budget is below the total, so the "extra" each month goes into a local savings for travel, minor home upkeep.
We are about 70/30 right now, but have been 50/50 and in between.

 

[Gumby]

Our pensions and my SS cover our regular living expenses plus domestic travel. Our portfolio is 65/35 to 70/30. No children.

 

[G-Man]

Our pensions and my SS cover our regular living expenses plus domestic travel. Our portfolio is 65/35 to 70/30. No children.

I believe I asked you this question before. Are you still invested in these funds?

VWENX - Vanguard Wellington™ Fund Admiral™ Shares
OAYBX - Oakmark Equity and Income Fund Class Advisor
VIIIX - Vanguard Institutional Index Fund Institutional Plus Shares
SJT - San Juan Basin Royalty Trust
VGSLX - Vanguard Real Estate Index Fund Admiral Shares
MO - Altria Stock

 

[Gumby]

I believe I asked you this question before. Are you still invested in these funds?

VWENX - Vanguard Wellington™ Fund Admiral™ Shares
OAYBX - Oakmark Equity and Income Fund Class Advisor
VIIIX - Vanguard Institutional Index Fund Institutional Plus Shares
SJT - San Juan Basin Royalty Trust
VGSLX - Vanguard Real Estate Index Fund Admiral Shares
MO - Altria Stock

Yes.

 

[cyber888]

If your Social Security + Pension/Annuities supports your Monthly Expenses/Budget, then the rest can be in high growth stocks.

 

[Koolau]

If your Social Security + Pension/Annuities supports your Monthly Expenses/Budget, then the rest can be in high growth stocks.

Or, under your mattress (Okay, let's say in CDs). One has a significant chance of growing a lot or also a chance of being decimated by a bear. The other will grow. Period. It may not even meet (let alone beat) inflation. Also, the later WILL be there since it's guaranteed by the gummint.

If you really don't need it, there's no huge incentive to grow it. Being sure it's still there - just in case - might be an argument for the mattress.

It's not what I'd do, but I wouldn't go completely aggressive either. Just a difference in people, I guess.

 

[MarieIG]

I might want to keep a bit of dry powder.

 

[cyber888]

Or, under your mattress (Okay, let's say in CDs). One has a significant chance of growing a lot or also a chance of being decimated by a bear. The other will grow. Period. It may not even meet (let alone beat) inflation. Also, the later WILL be there since it's guaranteed by the gummint.

If you really don't need it, there's no huge incentive to grow it. Being sure it's still there - just in case - might be an argument for the mattress.

It's not what I'd do, but I wouldn't go completely aggressive either. Just a difference in people, I guess.

What do you need it for That's the question. If you don't need it at all 100%, then you don't need.
If you really really really really need it you keep it under the mattress.

 

[Chuckanut]

Or, under your mattress (Okay, let's say in CDs). One has a significant chance of growing a lot or also a chance of being decimated by a bear. The other will grow. Period. It may not even meet (let alone beat) inflation. Also, the later WILL be there since it's guaranteed by the gummint.



If you really don't need it, there's no huge incentive to grow it. Being sure it's still there - just in case - might be an argument for the mattress.



It's not what I'd do, but I wouldn't go completely aggressive either. Just a difference in people, I guess.

Very true. We have not had a rip roaring, take no prisoners, almost inexhaustible Bear market for over four decades. But, I remember the Bear of the 1970’s. It tore huge chunks out of the stock market, went away for a short while, and then came back to sink its teeth and claws into investors and rip off a few more pounds of flesh. It devoured equities, driving the market down about 50%. Then, IIRC, it took 18 years for the market to get back to it’s previous highs in REAL terms.

The Bear doesn’t give a hoot or a growl about your plans or feelings. So, yes, have something stashed away in government guaranteed CDs, Treasuries, etc.

 

[Alex The Great]

Or, under your mattress (Okay, let's say in CDs). One has a significant chance of growing a lot or also a chance of being decimated by a bear. The other will grow. Period. It may not even meet (let alone beat) inflation. Also, the later WILL be there since it's guaranteed by the gummint.

I look at it a bit differently. CDs/cash likely won't grow as fast as growth stock (depend on market conditions) but it will most likely meet inflation taking into account today's CD rates. I see the probability of inflation going higher than 5% for the long time as very low.