Burned more than once by the market

[pb4uski]

'Ya dance with who brung ya' or if you'd rather '[equities] have been very, very good to me'.

I agree with CRLLS's sentiment "If one has enough resources to fund retirement using a safe return rate, WHY NOT continue with the bulk of one's assets in the stock market?"

At this point, I am investing for my children and grand-children and if lucky even my great grand-children. I'm not 100% in equities by any means but certainly never going to be part of the 'ages in bonds' crowd either.

Exactly. I continue to invest in equities because I am very comfortable with equities having been a regular investor since the late 1970s and I believe that they will deliver superior returns in the long run and I take the long view.

I also invest in bonds for the stability that they provide. If there was a prolonged bear market (think... Japan), there are steps that I can take to mitigate such an event. It is extremely unlikely that we will run out of money, so investing in equities is most likely for the benefit of our kids and grandkids.

Overall, I target 60/35/5.

 

[Markola]

If there was a prolonged bear market (think... Japan), there are steps that I can take to mitigate such an event.

What steps, please? In this time of maximum stimulus yet modest growth outlook, inquiring minds want to know!

 

[pb4uski]

We could start SS earlier than planned (currently FRA or perhaps FRA for DW and 70 for me) for one or both of us. If we went back a couple years, I would have said that I could start my company pension earlier than planned.

We could scale back on discretionary spending. We currently spend a lot on recreation (mostly golf) and travel and those could easily be scaled back. We might not need to though as if there was a prolonged period of low economic activity such discretionary activities might become less expensive due to demand elasticity.

We could sell one of our two properties and make due with one house. We could take out a reverse mortgage on the remaining home. We could downshift to one vehicle rather than two.

If our assets dwindled to a certain point, I could consider buying a SPIA and shift the longevity risk to one or more insurers.

There are all sort of buttons that one can push if needed... necessity is the mother of invention.

While I agree with your modest growth comment, maximum stimulus is a big stretch IMO.

 

[Dawg52]

To each their own, but I'm not wanting to push some of those buttons just because I was over weight(for me) equities. I would rather continue with a conservative approach and maintain my current lifestyle even during a prolong market downturn. But I'm single with no children and not worried about leaving a big pile for someone.

 

[GravitySucks]

I'm single with no children and not worried about leaving a big pile for someone.

You can marry well.

 

[DEC-1982]

Post #43

>>> Retirement is fully funded at net return of zero.

I don't think many people (percentage wise) retire like that. Good for OP, but obviously others who are not in that same state need to invest appropriately to fund their long-term needs. What "appropriate" is varies by person.

 

[jollystomper]

I am fortunate to have a 401K with a Stable Value fund. Right now I have about 60% of my 401K in that fund. Over the last 10 years its annual return has ranged from 2.7% to 4.5%. Currently it is around 2.9%.

If I moved the rest of my 401K into that fund, that return alone would be about 2/3 of my projected SWR, and I have enough cash to cover the other third until I hit our planned SS age. At that point, SS + the Stable Value Fund return, if it stays at its current rate or higher, would, along with my pension, completely cover our planned expenses, without having to touch any of our non-401K equities.

So it tempting to get out of equities for my 401K... but I am also concerned - perhaps irrationally - about having that much invested into a single fund. Also, inflation is low, and that current return would just about keep me on pace with it. But if inflation jumps, who knows.

 

[2017ish]

Post #43

>>> Retirement is fully funded at net return of zero.

I don't think many people (percentage wise) retire like that. Good for OP, but obviously others who are not in that same state need to invest appropriately to fund their long-term needs. What "appropriate" is varies by person.

I suspect that there are quite a few more who could make that statement with spending adjustments.... We could, but life in retirement would be a lot less fun than what we have planned!

 

[Spanky]

I've been 100% in equities for over 25 years and I do remember 2008. I never got burned because I didn't sell. My 401K is now worth 6 times more than what it was worth at the end of 2008. And, I don't have enough for a "safe return" rate. In 5 or 6 years, I hope I do have enough. But even then, I can't see me going below 80% equities.

6 times? Holy Smoke!

 

[DrRoy]

If I'm reading this correctly, 1929 to 1954 - so it took ~25 years for the Dow Jones to recover?

Yes

And is the chart inflation corrected? Does it include dividends?

The chart does not factor in dividends or inflation.

 

[Lawrencewendall]

Just came across this:

https://seekingalpha.com/article/4073875-retirees-going-cash-bonds?ifp=0

Update: Personalcapital.com says I have:
Cash 1.56%
Intl Bonds 1.73%
U.S. Bonds 7.99%
Intl Stocks 9.04%
U.S. Stocks 60.13%
Real Estate 19.54%
YTD +7.75%

 

[ESRwannabe]

I am surprised at the group think on this board that seems to have most fully invested in stocks. This is my question...if one has enough resources to fund retirement using a 'safe return' rate, why gamble with the bulk of one's assets in the stock market? (Doesn't anyone else remember '08?) We're planning to spend down. At 85 we can age in place and live comfortably on SS if we're still kickin. We're not planning on catastrophic LTC costs etc, hoping to be dust in the wind before that happens.

I'm trying something new... Put around 80% in something relatively safe, and then go bat s* crazy with the other 20%.

I have about 80% in high credit quality municipal bond CEFs and 20% in highly leveraged assets (mREIT, BDCs, MLPs, various CEFs) some of which are further levered in 2x ETNs/ETFs...

Now where I can really screw myself over is if we get run away inflation. However, I don't think that is likely for many reasons. Anyway, if we do get high inflation I guess I will put some money into JNUG (3x levered junior gold miners). lol

The central banks want people to borrow money. So I am just being patriotic. lol

 

[CoAndy]

Personally, I am all over the place investment wise. 401(k) is Vanguard Target Retirement 2035 and Stable Value Fund. 457 is a smattering of equities, bonds, TIPS, and cash. I need to right this ship!