Poll:Are you in the "Won The Game" Club with reference to Fixed Income Investing?

[mrfeh]

I feel like we won the game, invest in equities, and would never consider a portfolio with only fixed income.

+1

Even if you've "won the game", it is not advisable to have 0% equities in your portfolio.

 

[aja8888]

Yes, one size does not fit all. Social Security, company pension, rental real estate all can provide an important source of retirement income. OP is not considering any of that, however, and limiting the discussion to only fixed income and equities.

Evaluating the merits of only fixed income without mentioning inflation is like asking about living in SE Florida - but not mentioning hurricanes. Not talking about the risk does not mean it isn’t still present.

Many of the posts in the "Sneaky Inflation" thread will give people who only invest in fixed income something to think about. Inflation is all around us, and it ain't just 2%.

 

[Perryinva]

The OP stated it was an attitude, not a math reason. For some, the attitude is “if I’ve won, why take any chances of a principal loss, so stay only with fixed”. But no, I do not believe in that version of “I’ve won”. I am more of the “I’ve won, so now it matters not what the dips in portfolio are, I can easily ride them through as most of my income is protected”. I will say that I HAVE reduced my % in equities only because I too believe this bull is nearing the end. I stay in equities because of greed, not need.

 

[VanWinkle]

At 50/50, half the time I wish I had more equities, and the other half of the time I wish I had less. I could go all bonds and live a good life, but I would also like to grow for heirs.

 

[HadEnuff]

i voted "no", but I think the question itself is based upon the false premise that "winning" the game equals not being invested in equities.

I feel I've "won" the game because my WR is under 3% to live the life I want, and I don't have to set my equities allocation beyond my "sleep threshold" to try to grab the highest return in order to meet my needs. Should the market really fold up, I'll take a hit, but it won't effect my ability to meet my needs.

In fact, it's my opinion that should the market take a big hit, something like it did in the late 1990s, I may in fact be better off because my AA is such that I'd be able to increase my equities allocation at a much better price.

I feel I've won the game because if I have enough in the market now to take advantage of a continued bull, but enough out of the market to take advantage of a big drop.

 

[ShokWaveRider]

i voted "no", but I think the question itself is based upon the false premise that "winning" the game equals not being invested in equities.

OP here, in retrospect, I probably should have worded the question a little differently, but there is only so much space. Game winning is not HAVING to invest in equities to achieve the desired standard of living and quality of life, but not necessarily not having them.

E.g.: If one has a $5m stash and one's cost of living for a year is say $125 - $150k then at 3% WDR they have won the game. Adding another few $$$ from SS when the time comes is just an added bonus.

We are more comfortable with good quality Fixed income (at the moment) to achieve our desired QOL. Perhaps if there is another 2008 style crash, we will get in with a little just for grins. But I do not have the stomach to get in when things are flying high. That and losing 25 - 30% of our egg would put a dampener on our QOL.

 

[RunningBum]

I don't think of it as a "game". A game has rules, and I associate some level of frivolity with games. I suppose it's just a term but I cringe when people refer to it as a game. Life and finances don't have to follow any rules, so there's no guarantee to know that I have won until it's all over. And it's certainly more serious than a game. I take less risk than I used to and feel pretty certain I won't run out of money, but still have the majority of my investments in equities.

 

[HadEnuff]

I don't think of it as a "game". A game has rules, and I associate some level of frivolity with games. I suppose it's just a term but I cringe when people refer to it as a game. Life and finances don't have to follow any rules, so there's no guarantee to know that I have won until it's all over. And it's certainly more serious than a game. I take less risk than I used to and feel pretty certain I won't run out of money, but still have the majority of my investments in equities.

Well, of course. We are using the word "game" metaphorically, and I think everyone on this board understands that.

There are some rules. For example there seems to be an unescapable correlation between reward and risk. And the point of the metaphor is to communicate how we balance reward and risk.

 

[RunningBum]

Well, of course. We are using the word "game" metaphorically, and I think everyone on this board understands that.

There are some rules. For example there seems to be an unescapable correlation between reward and risk. And the point of the metaphor is to communicate how we balance reward and risk.

I understand that, but it still irks me. I guess I should keep that to myself.

I don't think people realize there are more ways to lose this "game" than they can think of. It's not just a stock market crash or runaway personal inflation. I shouldn't have implied there are no rules, what I meant is that we can't know all the rules and they can be changed at any time. How can you know for certain you've won when you don't know all the things that can happen?

Just for example, what if a close family member has an extremely serious medical issue that can be treated, but the procedure is very very expensive, not covered by insurance, and must be paid in advance--no option for them to declare bankruptcy and skip out on the bill afterward? I don't mind taking a little risk for bigger gain to better be able to help them.

 

[HadEnuff]

I understand that, but it still irks me. I guess I should keep that to myself.

I don't think people realize there are more ways to lose this "game" than they can think of. It's not just a stock market crash or runaway personal inflation. I shouldn't have implied there are no rules, what I meant is that we can't know all the rules and they can be changed at any time. How can you know for certain you've won when you don't know all the things that can happen?

Just for example, what if a close family member has an extremely serious medical issue that can be treated, but the procedure is very very expensive, not covered by insurance, and must be paid in advance--no option for them to declare bankruptcy and skip out on the bill afterward? I don't mind taking a little risk for bigger gain to better be able to help them.

Your comments are always interesting, and your insights, well...insightful. We all appreciate them. I don't think you should keep them to yourself. (well, you probably have somethat you should keep to yourself, as we all do)

 

[samclem]

I don't think people realize there are more ways to lose this "game" than they can think of. It's not just a stock market crash or runaway personal inflation. I shouldn't have implied there are no rules, what I meant is that we can't know all the rules and they can be changed at any time. How can you know for certain you've won when you don't know all the things that can happen?

Just for example, what if a close family member has an extremely serious medical issue that can be treated, but the procedure is very very expensive, not covered by insurance, and must be paid in advance--no option for them to declare bankruptcy and skip out on the bill afterward? I don't mind taking a little risk for bigger gain to better be able to help them.

+1. There are many sources of "risk," and market risk (aka equity price volatility) is just one. For some reason, people fixate on it and even use the term "risk" as a synonym for equity price volatility.
If a retiree has locked themselves into 100% fixed income investments that just match present inflation and provides an annual income that just matches their (presently anticipated) spending needs, they have zero market risk. But, IMO, they are exposed to many other significant risks that might be reduced if they accepted more market risk. Chief among these are inflation and greater-than-anticipated spending requirements.

 

[audreyh1]

We feel like we won the game, and we lowered our equity exposure considerably upon retiring after taking considerable risk while working.

But we still stay around 50/50 to 60/40. I see it as evenly hedging my bets.

We have a big war chest of cash available for short term needs. Our income exceeds our expenses. We should be able to survive a long downturn (knock on wood). So I feel like we have a large personal financial safety cushion and am comfortable with moderate equity exposure.

Our retirement assets well exceed 20x to 25x annual expenses.

 

[Golden sunsets]

+1 We have won the game.... which I define as 100% success rate in FIRECalc for any AA.

We could avoid equities entirely but choose to remain invested in equities since at the end of the day we are effectively investing for our heirs and charities and as far as we are concerned, the more for them the better.

This.

We feel like we won the game, and we lowered our equity exposure considerably upon retiring after taking considerable risk while working.

But we still stay around 50/50 to 60/40. I see it as evenly hedging my bets.

We have a big war chest of cash available for short term needs. Our income exceeds our expenses. We should be able to survive a long downturn (knock on wood). So I feel like we have a large personal financial safety cushion and am comfortable with moderate equity exposure.

And this.

 

[marko]

Evaluating the merits of only fixed income without mentioning inflation is like asking about living in SE Florida - but not mentioning hurricanes. Not talking about the risk does not mean it isn’t still present.

+1
And within that context, IMO, the game isn't won until the buzzer sounds.

 

[Alan]

With 8 pensions between the 2 of us we have no need for equities but maintain a 50/50 AA.

 

[REWahoo]

With [-]8 pensions between the 2 of us[/-] money out the wazoo we have no need for equities but maintain a 50/50 AA.

FIFY...again.

 

[Alan]

FIFY...again.

 

[imoldernu]

FIFY...again.

 

[Which Roger]

The common definition of "won the game" seems to be a 100% success rate in FireCalc. But FireCalc assumes that the future will not be worse than the worst of the past. Once one has won the game by this definition, it would seem that the next step would be to position oneself for scenarios where the future is worse than the past.

 

[MichaelB]

Another relevant factor not often discussed is improvements in standard of living (SoL) over time. By definition (BLS) SoL improvements are things such as cell phones, automobile safety features, streaming video service, new medical discoveries and techniques.

They are not considered part of the CPI. They are additional, and if we want to enjoy this increasing standard of living during all of our retirement, our budgets need to grow more than (inflation + taxes).

Just thinking about the changes we’ve enjoyed over the past 30 years, I definitely would not want to miss out on the next 30. That means my portfolio needs to provide for inflation + taxes+ withdrawals + SoL improvements. Over a 30-40 year period, this is at least 7% annualized. In order to get there with only fixed income options, my guess is the amount saved (total portfolio) would need to be >50% more. That equates to many years of additional work.

 

[MichaelB]

With 8 pensions between the 2 of us we have no need for equities but maintain a 50/50 AA.

Dad? Is that you? Hey ...

 

[Spanky]

FIRECalc indicates that 100% success for 30 years on a 4% growth & 3% inflation or 100% 1-month treasury. However, we still have more than 50% in equity. The reason, I think, is the tenacity to have more and insecurity.

 

[marko]

This chart shows that a 28/72 stocks/bonds has the lowest risk vs 100% bonds. Not sure how that fits into true 'fixed income' but FWIW

Even more interesting is that a 50/50 carries less risk than 100% bonds.

 

[imoldernu]

Except for a few stray tiny stocks, never invested in equities.

Bonds and Annuity have paid well over 4% for the past 30 years... that and Social Security has left our net worth in better shape than when we retired, and with a small LTC policy, we feel safe. Dunno if that means "winning the game", but we're pretty happy, though it might be nice to be back in our 50's...

I plan to come back as a hummingbird. We're waiting our friends return from Panama. Feeder is out. Pair of yellow finch this morning.

Life is good!

 

[Cobra9777]

I didn't answer the poll because I don't understand the premise of the question.

It won't be clear if I truly won the game until both DW and I are dead...

+1

Our WR is below the portfolio's dividend rate with SS still to come. I suppose most people would define that as having "won the game." Or perhaps spending too conservatively. But I retired at 52; and chances are reasonably good that one of us will live into our 90s. That's a really long time with more risks and uncertainties than any planning tool can possibly comprehend.

Our portfolio is 70% stock and real estate. This is intended to cover inflation, longevity, and LTC risks... without becoming a financial burden on our kids or the state. If none of that happens, then our kids and grandkids will likely inherit a tidy sum. Only then, will the game's outcome be clear.