Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Change the Plan or Hold Steady?
Old 12-09-2020, 09:58 AM   #1
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 2,955
Change the Plan or Hold Steady?

So I reviewed my retirement investment plan this week and am wondering if it still valid as a few actions should be made now.
Plan says stay 60/40 and rebalance at 55 or 65. Bonds are to transition to 5 year treasuries or an intermediate treasury fund (FUAMX).
I'm now at 66/34 and a rung of the bond ladder maturing next week. The plan says I should rebalance and reinvest the bond proceeds both to FUAMX. That brings my bond ladder down to the 5 years my revised plan calls for and increases FUAMX to about 5 years of living expenses. However FUAMX has a 30 day yield of 0.58% and the 7 year duration is not ideal if rates rise. (Of course I've been wrong on rate directions consistantly.) I have over 6 months of preCovid level spending in MM funds and don't want to increase that.
So the options as I see them:
1. Stick to the plan. Hold my nose and rebalance and reinvest the bonds into the low yield FUAMX fund.
2. Change the plan. Move AA to 65/35 and let it ride to 70/30 and extend the bond ladder another year. This still leaves enough bonds to make it to SS at 70 which covers all essential expenses.
3. Punt. Rebalance and put the funds in a very short term bond fund and reinvest the bond in a one or two year CD.

I'm sure others here are looking at options in this current environment. Are you changing plans?
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-09-2020, 10:23 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
RunningBum's Avatar
 
Join Date: Jun 2007
Posts: 10,875
I'm not changing plans. I think people are too hung up on the very low bond rate and not thinking about how bonds reduce volatility. 0.58% looks low compared to past rates. But it's really good compared to a 25% loss if stocks take a dive after this long bull market.

Maybe there's a better alternative than FUAMX. Perhaps TIPS?
RunningBum is offline   Reply With Quote
Old 12-09-2020, 10:28 AM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Hard to say without some more pieces: age? pension prospects? dependents and/or spouse at retirement? spouse's resources and pension prospects? ... and the big one: How does 4% of your current total portfolio compare to your expected portfolio income needs at retirement?

FWIW, we had a comfortable amount of money by the time we turned 50, so we left our AA at 90/10 until almost the point where we retired at 56 and 58. We rode out all the commotions from 1987, tech bubble, housing bubble, etc. without touching our portfolio. We are now 73YO and AA at 75/25, with the 75 probably ending up in our estate.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 12-09-2020, 10:41 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,138
Punt. If you qualify for membership, Navy Federal is offering 0.65%, 0.75% and 0.90%, respectively, on its 1, 2 and 3 year CDs... similiar interest income yield and no interest rate risk.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 12-09-2020, 10:57 AM   #5
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 2,955
Quote:
Originally Posted by OldShooter View Post
Hard to say without some more pieces: age? pension prospects? dependents and/or spouse at retirement? spouse's resources and pension prospects? ... and the big one: How does 4% of your current total portfolio compare to your expected portfolio income needs at retirement?

FWIW, we had a comfortable amount of money by the time we turned 50, so we left our AA at 90/10 until almost the point where we retired at 56 and 58. We rode out all the commotions from 1987, tech bubble, housing bubble, etc. without touching our portfolio. We are now 73YO and AA at 75/25, with the 75 probably ending up in our estate.
Age 62. Retired 7 years
No pension
SS at 70 about $35k year (covers essentials, about what I'm spending this Covid reduced year.)
Planned spending is 4.5% of current portfolio but haven't come close in last 2 years.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Old 12-09-2020, 11:42 AM   #6
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 44,820
Quote:
Originally Posted by GravitySucks View Post
So the options as I see them:
1. Stick to the plan. Hold my nose and rebalance and reinvest the bonds into the low yield FUAMX fund.
[...]
I'm sure others here are looking at options in this current environment. Are you changing plans?
(bolded emphasis mine)
It's tough to do Option #1, believe me, I know! But sticking to my plan is what I intend to do if I can possibly do it. Sticking to the plan got me through so many "iffy" times thus far, that I know it is really the best choice.
__________________
Happily retired since 2009, at age 61.
W2R is offline   Reply With Quote
Old 12-09-2020, 11:42 AM   #7
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Quote:
Originally Posted by GravitySucks View Post
Age 62. Retired 7 years
No pension
SS at 70 about $35k year (covers essentials, about what I'm spending this Covid reduced year.)
Planned spending is 4.5% of current portfolio but haven't come close in last 2 years.
Others will weigh in here but I would say that your low withdrawal rate gives you a great deal of flexibility in choosing an AA.

Probably your AA decision will be based more on your comfort with volatility than anything else. Remember though that volatility is not risk. Personally I'd carry a fixed income tranche large enough to feel safe from SORR, then consider investing he balance in equities. Maybe dollar cost average any increases to balance FOMO against fear of buying too high. But I am not you.
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 12-09-2020, 12:02 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 29,138
Quote:
Originally Posted by pb4uski View Post
Punt. If you qualify for membership, Navy Federal is offering 0.65%, 0.75% and 0.90%, respectively, on its 1, 2 and 3 year CDs... similiar interest income yield and no interest rate risk.
I would suggest this is sticking to the plan... your AA is unchanged, it is just that you are chosing to invest in fixed shorter to mitigate interest rate risk... or you could go with a 5-year CD and be sticking to the plan.

BTW, the rates I quoted were for $100k+. For $1-99K, the rates are 0.5% lower... so 0.60%, 0.70% and 0.85%, respectively, on 1, 2 and 3 year CDs. the 5-year is at 1.15% for $1-99K.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA TBD
pb4uski is offline   Reply With Quote
Old 12-09-2020, 12:43 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 4,298
Stick with the plan. Now seems like a great time to get back to 60/40.

I sort of stick with 75/25. The 25% is ballast. I use bonds to get a little better gain than cash, but neither are equities. I don't really care what the gains on the bond side are, though I'll try to maximize it a bit. In a bear market I'll shift my AA to buy more equites.

If you continue to feel that 70/30 is what you want, I'd wait until the next bear market and then make the move to add equities.

If selling equities at new market highs or buying them during a bear market seems too worry-inducing then stick precisely to your rebalancing plan. Currently you're wandering off the path and thinking of buying equites when they're high and selling when they're low.
Animorph is offline   Reply With Quote
Old 12-09-2020, 01:10 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
OldShooter's Avatar
 
Join Date: Mar 2017
Location: City
Posts: 6,507
Sticking with the plan is always a good default when you're not sure what to do, but the fact is "the plan" does need to change occasionally as life circumstances and financial circumstances change. We were 90/10 for most of our lives, then 60/40 for 10-15 years or so, now 75/25. None of the changes was caused or affected by market behavior at the time.

That said, changes are made more difficult by our urge to market time. "Wait until the next bear market" is good advice but hard to implement. Taylor Larimore's market timing quotes https://www.bogleheads.org/wiki/Tayl..._timing_quotes
__________________
Ignoramus et ignorabimus
OldShooter is offline   Reply With Quote
Old 12-09-2020, 02:11 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 29,071
Sticking to my AA plan. I don’t care about interest rates. Rebalancing takes care of the ups and downs.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 12-09-2020, 02:34 PM   #12
Thinks s/he gets paid by the post
 
Join Date: Mar 2009
Posts: 2,509
Not buying or selling equities at this point. I am slowly evolving into a
barometer/speedometer approach where I watch my total investment $$. Take my withdrawals and keep my net investment worth in the acceptable range. Many ways to get there.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
foxfirev5 is offline   Reply With Quote
Old 12-09-2020, 06:28 PM   #13
Thinks s/he gets paid by the post
GravitySucks's Avatar
 
Join Date: Feb 2014
Location: Syracuse
Posts: 2,955
Thanks folks. I appreciate the input.
I'm leaning toward the punt.
Maintain the 60/40 AA.
Cash in the wins but go more short term on the durations.
__________________
“No, not rich. I am a poor man with money, which is not the same thing"
GravitySucks is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Slow and steady, smooth ride Sun456 Hi, I am... 4 10-10-2012 08:17 AM
What happens to the human psyche (and body) when they’re fed a steady diet of unsettl HFWR Health and Early Retirement 24 03-01-2011 09:13 AM
Slow and Steady Saving Still Pays Onward Young Dreamers 4 01-02-2011 12:05 PM
21 year old college student with $2m in assets and a "steady" income xSoup Hi, I am... 27 05-30-2008 06:50 PM
Steady as she goes................ John Galt Life after FIRE 7 03-06-2005 02:38 AM

» Quick Links

 
All times are GMT -6. The time now is 11:31 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.