Asset allocation for retirees with pension and social security

[2HOTinPHX]

So many wise replies on this thread, but in the end any formula is coldly mathematical. When it comes to retirement finances, however, emotions play a role. DW and I are fortunate that our pensions and SS exceed our spending needs, but we still have a conservative allocation. I am in that "sleep at night" contingent.

The thing that keeps us up at night is when to pull the trigger on the SS portion of our retirement plan we are working on. Sure if we both wait until 67 SS would cover our spending needs. That's about 6 years for me and 10 for wife. If something happens to one of us before then waiting until 67 would only get the remaining party a larger monthly check but the breakeven verse both taking SS ASAP is tricky.
I guess back to sleeping better at night for me would be take SS early and leave a larger nest egg to grow for a surviving spouse?
Probably A 50/50 asset allocation would be most comfortable for us.
Planning for all the unknowns is stressful... especially if something was to happen to one of us sooner than later. Although later can get very complicated too.

 

[Chuckanut]

Is Jim Cramer still on? I haven't seen him in a while.
I guess I need to go back to the gym, I watched him while on the treadmill.

See! Who says watching Cramer will do a person no good?

 

[Chuckanut]

The thing that keeps us up at night is when to pull the trigger on the SS portion of our retirement plan we are working on. Sure if we both wait until 67 SS would cover our spending needs. That's about 6 years for me and 10 for wife. If something happens to one of us before then waiting until 67 would only get the remaining party a larger monthly check but the breakeven verse both taking SS ASAP is tricky.
I guess back to sleeping better at night for me would be take SS early and leave a larger nest egg to grow for a surviving spouse?
Probably A 50/50 asset allocation would be most comfortable for us.
Planning for all the unknowns is stressful... especially if something was to happen to one of us sooner than later. Although later can get very complicated too.

The idea of planning for the unknowns should actually reduce your stress level if you end up with plan that can be modified if events dictate. I think one can seriously overthink the issues involved in when to take SS, how much of the current assets to spend until SS takes over. Sure, it’s not easy, but at some point you make the best decision possible that leaves you some options to evaluate and adjust later if your situation significantly changes.

I took SS at 70 for several reasons. One of them was I had the option to change my mind every month between 62 and 70 if my situation changed. It didn’t so I didn’t change. I really like diversification of income sources. But, that’s just me. YMMV.

 

[Koolau]

So many wise replies on this thread, but in the end any formula is coldly mathematical. When it comes to retirement finances, however, emotions play a role. DW and I are fortunate that our pensions and SS exceed our spending needs, but we still have a conservative allocation. I am in that "sleep at night" contingent.

Heh, heh, welcome to the club! There are many of us here. Some of us linger in the background and don't share our "conservative" leanings (on financial things.) Anyway, I think most of us are pretty happy with our results AND we sleep well.

 

[Gumby]

A lot depends on your background and family circumstances. I grew up poor, knew we we poor and hated it. I have been entirely on my own financially since I graduated from high school and never had the financial safety net that some families are able to provide for their adult children. Of course, there never was a question of receiving an inheritance. Those things have made me more conservative in investing and spending than many people who have my resources might be. In a nutshell, I am willing to be less rich so that I will never be poor again and I am well aware that what I have is what I have and there will never be more coming.

 

[SnowballCamper]

Here is a short article on asset allocation https://www.aacalc.com/docs/aa_sensitivity

and there are several more listed under the "About" link at the top. When I first found this site it was notable for addressing the OPs situation where few AA calculators did. It appears he took down the AA calculator in favor of a more general calculator. The academic articles remain for your reading pleasure...

As mentioned before, AA is very much a personal decision, and the site I linked above describes how unimportant it is to get the mathematically optimal AA. However, it is generally better to err on the side of greater stock allocation (from the strictly quantitative perspective). Good luck!

 

[zippy2020]

Our pensions and SocSec cover all our expenses.

We use an independent CFP firm. After completing their Risk Analysis Profile, we were in the Balanced/Moderate segment, which is weighted between 65/35 stocks/bonds to 75/25 stocks/bonds, since the markets fluctuate and they rebalance only when necessary.

We discussed moving the portfolio to a 50/50 mix as pre-pandemic we were thinking of moving to a senior living facility and might need to pay entrance fees. As it turns out, we did not move and it looks like we probably will stay put for another 2-5 yrs.

The portfolio never got to the 50/50 level. The equity portion has done well enough to cover our 3% distributions (which we use as 'fun money') and has remained at roughly the 60/40 level even now. We advised them that since we have no immediate plans to move, the current AA is fine with us.

 

[DangerDad]

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?

I recommend you explore the “Boglehead” books and forums.

As an aside, I find it interesting that OP has receive lots of advice based only on the above information which is really insufficient for this purpose.

The relevant equation here is:
Z = X - Y

Z is the total dollar value that must be withdrawn each year from your investment portfolio. This is one of the 3 most important numbers needed to understand your financial health.

X is your total annual expenses

Y is your total retirement income (part time employment, pensions, SS, rental income, etc)

Another very important value is your Total Investable Assets (TIA). This is basically all of your liquid assets (IRA, 401k, taxable brokerage, checking account, bank account, etc). TIA does NOT include home equity, cars, jewelry, etc. Personally I don’t include 529 assets in TIA but folks discuss and disagree about a lot of this stuff. I’m just giving my approach.

Once you have Z and TIA you can easily calculate the last of the 3 most important values, N.

N = TIA/Z
N = total investable assets divided by your total annual withdrawal.

N is Your Number—I don’t have the time now to go into the “meaning” of N and how it’s used to address questions regarding asset allocation, spending, etc. Perhaps others will chime in.

But for now, notice that the original post told us only that Y = a positive number such that Z < X. With this limited info the advice we can offer is quite limited. Obviously no one is obligated to provide values for Z and TIA—this is personal/private info—but giving OP specific advice without this info could be misleading.

Cheers,
DD

 

[COcheesehead]

I recommend you explore the “Boglehead” books and forums.

As an aside, I find it interesting that OP has receive lots of advice based only on the above information which is really insufficient for this purpose.

The relevant equation here is:
Z = X - Y

Z is the total dollar value that must be withdrawn each year from your investment portfolio. This is one of the 3 most important numbers needed to understand your financial health.

X is your total annual expenses

Y is your total retirement income (part time employment, pensions, SS, rental income, etc)

Another very important value is your Total Investable Assets (TIA). This is basically all of your liquid assets (IRA, 401k, taxable brokerage, checking account, bank account, etc). TIA does NOT include home equity, cars, jewelry, etc. Personally I don’t include 529 assets in TIA but folks discuss and disagree about a lot of this stuff. I’m just giving my approach.

Once you have Z and TIA you can easily calculate the last of the 3 most important values, N.

N = TIA/Z
N = total investable assets divided by your total annual withdrawal.

N is Your Number—I don’t have the time now to go into the “meaning” of N and how it’s used to address questions regarding asset allocation, spending, etc. Perhaps others will chime in.

But for now, notice that the original post told us only that Y = a positive number such that Z < X. With this limited info the advice we can offer is quite limited. Obviously no one is obligated to provide values for X, Y and TIA—this is personal/private info—but giving OP specific advice without this info could be misleading.

Cheers,
DD

Response #2 in this thread said about the same in two sentences.