Poll: Lowest equity allocation possible from retirement tools

[COcheesehead]

What is the lowest equity allocation you can use with 95%+ success from any of the popular retirement tools based on YOUR actual situation.

I know more may be better for individuals, but what is the lowest you can go with success?

 

[SecondCor521]

I don't understand the poll. I think there are missing requirements/assumptions.

Anyone can get 100% success in FIREcalc with 0% equities with a low enough WR% and/or a short enough time frame and/or enough SS income.

For example, $1M in FIREcalc, spending $20K per year, 0% equities, for 5 years is probably 100% successful. For another, $40K in SS, spending $30K, $500K in assets, 0% equities, for 10 years is probably also 100% successful.

Do you mean what is the lowest equity percentage I can use with all of my other actual particulars and still get to 95% success? For my particulars, I can do 0% equities and get 100% success.

(Didn't vote yet in the poll.)

 

[COcheesehead]

I don't understand the poll. I think there are missing requirements/assumptions.

Anyone can get 100% success in FIREcalc with 0% equities with a low enough WR% and/or a short enough time frame and/or enough SS income.

For example, $1M in FIREcalc, spending $20K per year, 0% equities, for 5 years is probably 100% successful. For another, $40K in SS, spending $30K, $500K in assets, 0% equities, for 10 years is probably also 100% successful.

Base it on your situation, not a hypothetical. What is the answer for YOU?

 

[jollystomper]

Base it on your situation, not a hypothetical. What is the answer for YOU?

OK, I'll bite with what I think you are asking .

For our situation, using a 30 year horizon and 0% equities (Selecting "Total Market" on the FIRECalc "Your Portfolio" tab" and setting the "percentage of equities..." value to zero) yields a 100% success rate in FireCalc. A pension (even though non-COLA) and getting (in the future) the maximum SS payout makes the difference.

For a 95% success rate, FIRECalc says we could increase our spending by about $45K/year. But we are fine where it is now .

 

[COcheesehead]

OK, I'll bite with what I think you are asking .

For our situation, using a 30 year horizon and 0% equities (Selecting "Total Market" on the FIRECalc "Your Portfolio" tab" and setting the "percentage of equities..." value to zero) yields a 100% success rate in FireCalc. A pension (even though non-COLA) and getting (in the future) the maximum SS payout makes the difference.

For a 95% success rate, FIRECalc says we could increase our spending by about $45K/year. But we are fine where it is now .

You get the question. Thank you.

 

[SecondCor521]

Base it on your situation, not a hypothetical. What is the answer for YOU?

Ah, I thought that might be what you meant.

With my particulars in FIREcalc, I get 100% success across the entire spectrum (0% equities to 100% equities). I'm 54 and have a 36 year planning horizon, SS at 70 which covers my current spending, a side gig, and about a 1.39% net WR.

 

[Koolau]

I only have a 23 year time horizon as I plan to die at 99 (DW as well in our planning.)

I get 100% with zero equities - though I'd likely never do that.

IF I deleted all my equities (maybe 1/3 now) I'd be investing very differently in cash investments and bonds.

I look at "plan killers" as two of us in LTC for 15 years, runaway inflation, or a big asteroid hitting the mid pacific. Maybe something else unknown, but unimaginable at this point??

 

[Jimonlimon]

For my specific situation- needing an 8 year bridge to SS starting soon-

0% equities gives the highest withdrawal rate with zero failures.

25% equities gives a slightly higher withdrawal rate with around 5% failures.

60% (my current portfolio) gives a higher rate with around 8% failures. I’m going to stick with this approach. Going up doesn’t increase the withdrawal rate without significantly increasing failures.

This account is only half of our 401k. We can always adjust withdrawals or SS start date based on performance.

 

[TheWizard]

What is the lowest equity allocation you can use with 95%+ success from any of the popular retirement tools based on YOUR actual situation.

I know more may be better for individuals, but what is the lowest you can go with success?

0% equities, obviously.
You simply need a large portfolio of bonds relative to your withdrawal/spending amount...

 

[COcheesehead]

0% equities, obviously.
You simply need a large portfolio of bonds relative to your withdrawal/spending amount...

So 0% works for you in you current situation?

 

[Bigdawg]

Ah, I thought that might be what you meant.

With my particulars in FIREcalc, I get 100% success across the entire spectrum (0% equities to 100% equities). I'm 54 and have a 36 year planning horizon, SS at 70 which covers my current spending, a side gig, and about a 1.39% net WR.

^This is us. Mutiple COLA pensions currently totaling over 100k/yr. Eventually with SS and DW's future FERS COLA pension we will be at aprox 180k/yr. Budget is aprox 110k now so we could definitely be fine with 0% equities.

 

[PatrickA5]

I have a feeling the vast majority on this forum will have enough money to show 0% equities - especially if they add in SS and other income. Mine was 100% at 0% equities.

My actual allocation is 50/25/25

 

[TheWizard]

So 0% works for you in you current situation?

Not for me.
But I have a negative withdrawal rate now in year eleven of retirement, so how I invest my portfolio has close to zero impact on my lifestyle and spending...

 

[badatmath]

Disregard my vote of 11-20 as I didn't understand the question!

 

[Gumby]

My success rate is 100% at 0% equities and 100% at 100% equities and 100% at all points in between.

 

[COcheesehead]

Interesting so far. Many, including myself, could sustain a nice retirement without any equities.

 

[pb4uski]

What is the lowest equity allocation you can use with 95%+ success from any of the popular retirement tools based on YOUR actual situation.

I know more may be better for individuals, but what is the lowest you can go with success?

0%

If I started SS today our WR, with very generous annual spending (more than we actually spend) would be 1.85%, so we can easily afford to avoid equities.

And I have recently. Not because I disfavor equities, but because I think they are overvalued and I don't "need" them. For the risk portion of my portfoio I delve into investment grade preferred stocks. If equities ever become reasonably priced then I'll reconsider them.

 

[ERD50]

So 0% works for you in your current situation?

You are looking at this all wrong. It has nothing to do with anyone's particular situation, it just depends on your withdrawal rate and number of years you model.

A portfolio with a 4% WD rate will fail 5% of the time over 30 years (historically) with the default portfolio. Makes no difference if you have SS, pensions, etc. The portfolio can only support 4% for 95% success.

If you go to the investigate tab, you can get a chart of AA vs success. This will vary somewhat depending on your WD % (and # of years).

IOW, I think what you really should be looking at is understanding how AA, WD% and # of years interact. Just try a few scenarios to get a handle on this. Asking for specifics from people is just throwing a bunch of variables and different ways to measure it and confusing the issue.

I think what we are seeing in the replies was covered by Groucho Marx many years ago. Something about him investing only in Treasuries, and friends saying you can't live off that. And Groucho said "You can if you have enough of them". And that's all there is.

So as your WR% goes down, at some point you could live off of cash in your mattress. Get it?

-ERD50

 

[TheWizard]

You are looking at this all wrong. It has nothing to do with anyone's particular situation, it just depends on your withdrawal rate and number of years you model.

A portfolio with a 4% WD rate will fail 5% of the time over 30 years (historically) with the default portfolio. Makes no difference if you have SS, pensions, etc. The portfolio can only support 4% for 95% success.

If you go to the investigate tab, you can get a chart of AA vs success. This will vary somewhat depending on your WD % (and # of years).

IOW, I think what you really should be looking at is understanding how AA, WD% and # of years interact. Just try a few scenarios to get a handle on this. Asking for specifics from people is just throwing a bunch of variables and different ways to measure it and confusing the issue.

I think what we are seeing in the replies was covered by Groucho Marx many years ago. Something about him investing only in Treasuries, and friends saying you can't live off that. And Groucho said "You can if you have enough of them". And that's all there is.

So as your WR% goes down, at some point you could live off of cash in your mattress. Get it?

-ERD50

I like the "get it" quip.
Reminds me of Phil Ochs...

 

[COcheesehead]

You are looking at this all wrong. It has nothing to do with anyone's particular situation, it just depends on your withdrawal rate and number of years you model.

A portfolio with a 4% WD rate will fail 5% of the time over 30 years (historically) with the default portfolio. Makes no difference if you have SS, pensions, etc. The portfolio can only support 4% for 95% success.

If you go to the investigate tab, you can get a chart of AA vs success. This will vary somewhat depending on your WD % (and # of years).

IOW, I think what you really should be looking at is understanding how AA, WD% and # of years interact. Just try a few scenarios to get a handle on this. Asking for specifics from people is just throwing a bunch of variables and different ways to measure it and confusing the issue.

I think what we are seeing in the replies was covered by Groucho Marx many years ago. Something about him investing only in Treasuries, and friends saying you can't live off that. And Groucho said "You can if you have enough of them". And that's all there is.

So as your WR% goes down, at some point you could live off of cash in your mattress. Get it?

-ERD50

I think you are not understanding the question and maybe that is my fault. I thought it was clear. It is essentially who doesn’t need equities to have a great retirement.

 

[SecondCor521]

0%

If I started SS today our WR, with very generous annual spending (more than we actually spend) would be 1.85%, so we can easily afford to avoid equities.

And I have recently. Not because I disfavor equities, but because I think they are overvalued and I don't "need" them. For the risk portion of my portfoio I delve into investment grade preferred stocks. If equities ever become reasonably priced then I'll reconsider them.

I respect @pb4uski, and I know this (side) topic is discussed from time to time.

I take the opposite tack. I invest "my" money (the 25x expenses I expect to need for my lifetime) 90/10 because that's the best survivability for my particulars in FIREcalc.

The money above that which I don't expect to need, conceptually I thin of as going to my kids in 30 years when I die. Given that 30 year time frame, I invest 100% of "their" money in stocks.

The average of the two is about 98%, which is where my AA is now. I review and update things periodically but it doesn't move much.

 

[COcheesehead]

I respect @pb4uski, and I know this (side) topic is discussed from time to time.

I take the opposite tack. I invest "my" money (the 25x expenses I expect to need for my lifetime) 90/10 because that's the best survivability for my particulars in FIREcalc.

The money above that which I don't expect to need, conceptually I thin of as going to my kids in 30 years when I die. Given that 30 year time frame, I invest 100% of "their" money in stocks.

The average of the two is about 98%, which is where my AA is now. I review and update things periodically but it doesn't move much.

And that makes sense when there is a clear purpose for funds way down the road. For my wife and I we have no kids. Charities will get the leftovers. So we will spend it or someone else will. Leaning more fixed income, though we still have seven figures of equity exposure, just makes things fairly predictable and frankly, easy for us.

 

[SecondCor521]

And that makes sense when there is a clear purpose for funds way down the road. For my wife and I we have no kids. Charities will get the leftovers. So we will spend it or someone else will. Leaning more fixed income, though we still have seven figures of equity exposure, just makes things fairly predictable and frankly, easy for us.

Yeah, forgot to mention in my previous post that legacy plans - and kids/no kids can definitely affect that - can play a huge part in how one looks at the topic.

Although I have kids, there is a variation of your rule for me: "Fly first class or else my kids will" ;-)

 

[ERD50]

I think you are not understanding the question and maybe that is my fault. I thought it was clear. It is essentially who doesn’t need equities to have a great retirement.

And the answer is:

Anyone with a low enough WR (from the portfolio). That's all there is. You are making it complicated.

-ERD50

 

[RetireAge50]

0% equities needed so will likely go 100% equities (after age 65 or so).