Warning from Fidelity to Boomers

I'm a boomer 5 years into retirement and at 77% equities. Not changing anything, but selling equities in IRA for cash.
 
Isn't this warning too late for Boomers ?
It should have happened about 10-15 years earlier, as many (most) Boomers are now retired and not age 55.

We are retired already, about 90% (rough guess) in equities. But got lots of CD money to last out a downturn.

However, since the market is at a high point, maybe I'll be a DMT and sell some big amount to stuff into some 2% CD/bonds :(
 
RobbieB said:
I'm a boomer 5 years into retirement and at 77% equities. Not changing anything, but selling equities in IRA for cash.
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I'm taking SEPP from a Fido IRA to the tune of about $2,100 a month. Lately, with valuations fairly high, I've taken to selling $2100 in equities each month to effectively "fund" my withdrawal until I get my AA back down closer to 55/45 which is where I want it. I haven't fully rebalanced in a couple years so my AA is a bit on the high side, especially since my money market fund has been liquidated to make the payments.

It's almost like a "buckets" approach since I've been drawing current income from the safe "cash" bucket for a year and a half now, and it needs to be brought back into proportion with assets from the more appreciated, riskier stuff.
 
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I'm going by the premise that it'll be harder to rebalance at a higher AA in equities. Sticking with 60/40. Also, I have no experience rebalancing in a down market. Have been selling equities to maintain 60/40 which I find to be a pleasant chore. Not sure about the other way around.
 
Sunset said:
Isn't this warning too late for Boomers ?
It should have happened about 10-15 years earlier, as many (most) Boomers are now retired and not age 55.

We are retired already, about 90% (rough guess) in equities. But got lots of CD money to last out a downturn.

However, since the market is at a high point, maybe I'll be a DMT and sell some big amount to stuff into some 2% CD/bonds :(
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Apparently not as there has been a big bull market over the last 10.5 years!
 
OK. Found the original report here:

https://www.fidelity.com/bin-public...elease/quarterly-retirement-trends-111419.pdf


An excerpt:

Fidelity compared average asset allocations to an age-based target date fund and found nearly a quarter (23.1%) of 401(k) savers still have a higher percentage of equities than recommended, including 7% who are 100% equity. Among Baby Boomers, the over-allocation of stock was even higher – 37.6% have too much equity, including 7.9% who are in 100% equities.
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Sunset said:
Isn't this warning too late for Boomers ?
It should have happened about 10-15 years earlier, as many (most) Boomers are now retired and not age 55.
Click to expand...


Maybe because the peak years of the baby boom were 1956-1961, with 1957 being the highest year. Current ages 58-63, and my guess is most in that range have not yet retired. And the "normal" retirement expectation is between 65-70.
 
ER2B said:
I'm going by the premise that it'll be harder to rebalance at a higher AA in equities. Sticking with 60/40. ...
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I don't understand what you are saying here. Why would this be?
 
OldShooter said:
I don't understand what you are saying here. Why would this be?
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What I meant is that if I have to buy more equities to get back to my AA in a down market, it will be a lot easier if I had more bonds. I will have more bonds with an AA of 60/40 than 70/30.
 
ER2B said:
What I meant is that if I have to buy more equities to get back to my AA in a down market, it will be a lot easier if I had more bonds. I will have more bonds with an AA of 60/40 than 70/30.
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Got it. Agree.
 
.He did say that they see US economy slowing down next year and being down for a year and then coming out of it.

I've heard one "expert" or another say that every year since 2014.
 
ER2B said:
What I meant is that if I have to buy more equities to get back to my AA in a down market, it will be a lot easier if I had more bonds. I will have more bonds with an AA of 60/40 than 70/30.
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If you hold 100% stock, you will never have to rebalance. Stocks lose 1/2 their value, and you will still be at 100% stock. :cool:

And if you hold $99 in stock out of $100 (99% AA) with $1 in bond/cash, then when stock drops to $49 (1/2 the value), your stock AA will be 98% ($49 in stock out of $50 total).

All you have to do is to move $0.50 in bond to stock, and you are back to 99% stock AA ($49.5 stock + $0.50 bond). Easy peasy. :)

In fact, when you have a really high stock AA, it is hardly worthwhile to rebalance at all. Makes life a lot simpler, doesn't it? :)
 
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travelover said:
More broadly, I think that the point is that it is a bad idea to be 100% in stocks when retired for the simple reason that if you need to sell a part of your portfolio regularly to live on, you will sell at a loss in a big, long downturn.


A retired relative learned this harsh lesson in the 2009 recession - he was 100% into stocks and had to take out a home equity loan to avoid selling stocks at a big loss. He wrongly thought that dividends would tide him over, but they were inadequate.


Beyond that, the article sounds like market timing.
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This sounds reasonable, but I was shocked when I looked at the data. 1929 was the only bad year for a 30 year retirement that had a well balanced 100% stock portfolio. In fact, 100% stock outperformed the standard 60/40 portfolio from 1932 onwards, except for 1969, when they both had a 4.7% SWR. Sure, there were times when money had to be withdrawn in a down market, but 30 years of compounding returns more than made up for this.
 
The old conventional wisdom was to hold 100% less your age in stocks. In my case, I would have been 30 % in stocks in 2008, and 20 %. now. I would have missed the run up in those 10 years big time.
BTW, I am 100% in equities..now and then.
 
Souschef said:
The old conventional wisdom was to hold 100% less your age in stocks. In my case, I would have been 30 % in stocks in 2008, and 20 %. now. I would have missed the run up in those 10 years big time.
BTW, I am 100% in equities..now and then.
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For what it's worth, I am increasingly hearing 120% minus age now. Is that just bull market recency talking? Perhaps, perhaps not. But yeah, by the time you hit 60 or so, you can easily look at your situation and decide if you can afford to take more than 40/60 risk, which is what the old '100 minus age' would tell you, and if you can, and you can stomach volatility, it's *probably* a good idea to do so.
 
I'm not reacting to Fido but am at 59%.
 
Isn’t inflation as big a risk to greater bond allocation, given the insane Fed actions since 2008 or so?
 
I thought TIPS were essentially nothing more than T-bills, which pay almost nothing. If so, non-inflation of nothing doesn't really address the end goal: preserving your money's actual purchasing power. Does it?
 
BoodaGazelle said:
I thought TIPS were essentially nothing more than T-bills, which pay almost nothing. If so, non-inflation of nothing doesn't really address the end goal: preserving your money's actual purchasing power. Does it?
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If inflation is nothing then your actual purchasing power will not change anyway?
 
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