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

[skipro33]

It won't be clear if I truly won the game until both DW and I are dead. Right now our pensions cover our expenses and SS is mad money, but we are keeping our powder dry for end of life expenses. That powder includes 60% stocks to cover inflation.

Ditto, except we are 100% stock equities. (Just figure we still have the house to sell if it came to it at end-of-life)

 

[IMATERP]

I’ve WON the Game.

I’m 30% invested in Equities for the purpose of giving my portfolio a little oomph!

Adjusted pension inclusive of blended Social Security covers my annual projected expenses with ease. Minimal side hustle allows me to add to my Roth, house is paid off, Health insurance is covered via State Health Plan - so anything in my portfolio is pure discretionary. Thus, it really wouldn’t matter if the portfolio was all fixed income or all equities.

Thankfully, RMDs don’t start for another 11 1/2 years.

I

 

[brett]

Not certain why these would be mutually exclusive.

 

[Car-Guy]

I really can't vote since neither option fits me. I feel I've won the game financially but I still buy and sell equities. Bucket #1 has about 2m all in fixed income which I consider my base investments and it's enough to say I've won the game. Bucket #2 is for playing the market. If bucket 2 ever runs dry (very unlikely) I'll just keep bucket #1 invested in fixed income and sit back. If bucket #1 ever runs dry (extremely unlikely unless we turn into another Venezuela) I still have my zero debt physical assets and SS to live off of. (Assuming SS would still exit in a Venezuela like state)


So, I feel I've won the game anyway I look at it, especially now that I'm in my late 60's.

 

[ziggy29]

If you have more money than you can possibly spend down even with no growth, I suppose what you have won is the ability to set your AA wherever you feel good about it without worry of busting your retirement. When people ask about the “optimal” AA, it is usually in terms of the allocation that is least likely to fail, not necessarily the one that will, on average, bring the highest returns. So if someone has more than they can ever spend, any allocation is unlikely to fail. They can be as aggressive or as conservative as makes them sleep better.

 

[mickeyd]

Game over. According t the rules of simple arithmetic, our income stream and our 50/50 investment portfolio will be ample in order to make it to the end in grand style.

 

[JJpop]

People are feeling really invincible right now because of the stock market the last 10 years.That will change soon enough.

 

[audreyh1]

Looking at a lot of efficient frontier curves, even by decade, the sweet spot for lower volatility AND higher returns than 100% bonds is usually 20 to 30% stocks, annual rebalancing. So I’ve never been motivated to go 100% fixed income.

 

[audreyh1]

People are feeling really invincible right now because of the stock market the last 10 years.That will change soon enough.

A lot of people here survived 2008-2009. Some of us even retired into the face of the 2000-2002 big bad bear and got a double whammy in the same decade.

Maybe some memories are short, but not so much on this forum. You still hear people here worry about 70s/80s type inflation!

 

[Markola]

We couldn’t keep our current spending level if we engaged in zero paid work. However, we could win that game if we moved to an apartment or lower cost of living area or country, so I guess my answer is “We could choose to win the game”?

Many comments above make me wonder about our true AA. Our stock and bond portfolio is 50/50 and globally diversified. However, when I consider our home equity and our future SS, maybe our entire portfolio is a lot more conservative than I realize. Hmmmm.

 

[gstillson]

1920 smug German to another 1920 German: "I think we have won the game, I am 100% into German bonds"

 

[youbet]

Many comments above make me wonder about our true AA. Our stock and bond portfolio is 50/50 and globally diversified. However, when I consider our home equity and our future SS, maybe our entire portfolio is a lot more conservative than I realize. Hmmmm.

Yes, the concept of a "phantom portfolio" (as Bob Brinker used to describe it) can be important. Our current AA is 52/38/10 or so, typical for many early 70's retired folks. But, our routine, day-to-day expenses are substantially covered by pensions and SS so when I rethink our current AA, I realize it's pretty darn conservative.

If (or when) we experience a significant equity market correction, I'm looking at increasing equities to something in the 60% range by decreasing cash. We can tolerate the short term increase in portfolio value variability this might cause and it would be nice to be able to add to our grandson's special needs trust. Probably wouldn't do this if pensions and SS covered only a small part of our annual expenses.

 

[Offgrid Organic Farmer]

A lot of people here survived 2008-2009. Some of us even retired into the face of the 2000-2002 big bad bear and got a double whammy in the same decade.

Maybe some memories are short, but not so much on this forum. You still hear people here worry about 70s/80s type inflation!

My parents hammered into me the experiences of the Great Depression.
Then I retired in 2001 and survived 2008-2009, it set me back a bit, but I survived.

 

[youbet]

One more thing. It is all about risk and sleeping at night. If you don't need to take on more risk (stocks) then why take the risk. If you have to take unnecessary risk you probably retired too early.

You need to do what you need to do in order to feel comfortable with your personal finances. I'm not suggesting any other path for you. But, just to enhance your own personal understanding of investing, you might want to look into the difference between "risk" and "variability."

For many FIRE situations, historical numbers suggest that a prudent equity allocation actually reduces risk (the chance of running out of money or of needing to reduce spending in uncomfortable ways). However, including an equity allocation generally results in more portfolio value variability, a different thing than increasing risk.

But again, if you can't become comfortable with that concept or if your particular financial situation wouldn't tolerate some portfolio value dips over the short run, stick with your plan and sleep at night.

 

[Rustic23]

We won the game, well if our horse does not get disqualified. However, we do not fit either choice. We have stocks because in the long term our kids are going t get them.

 

[aja8888]

Looking at a lot of efficient frontier curves, even by decade, the sweet spot for lower volatility AND higher returns than 100% bonds is usually 20 to 30% stocks, annual rebalancing. So I’ve never been motivated to go 100% fixed income.

I've survived the early 1970s, October 1987, the 2000 meltdown, 2008 - 2009, and a very messy California divorce in 1994 that brought me to my knees.

However, I kept working and saving through all of that, and now at 75 1/2, my AA is 27/15/58, with the 58% in a 5 year CD ladder, and 15% in tax free municipal bonds. The 27% is in an S&P Fund at VG. Our portfolio value is on the lower end of the scale here.

That's enough risk for this boy. No one in my family made it past their early 80's, although I have a good head start on being the first. Now DW, she's not doing well, but not bad enough for assisted living yet.

SS and RMD's pay the bills, medical and the taxes. No pension, but paid off real estate.

 

[JJpop]

We just retired and have had no stocks for awhile.When the market has it’s next big meltdown we will be buying with a goal of 25/75.If no major drop happens I am perfectly fine as we are.I do not put so much trust in historical returns because the high tech,globalized,climate change,energy change,politically changed world of today bears little resemblance to even 30 years ago,much less 50 plus.The market and trading practices have also become night and day.I really could not care less about what stocks did from 1945 to 1970...might as well have been a different civilization.

 

[FreeBear]

I hate "lazy money", so I'd carry equities no matter what, at least 30%. In reality, our relatively high withdrawal rate calls for at least 50-60% equities long term, so this is what we hold, perhaps for decades. When w*rking, I was nearly all equities...

 

[FreeBear]

There is always some level of risk to investing.

I am comfortable with apartment complexes. We did really well with rentals for years. But during the recession, we lost all our tenants and we still had a mortgage of service. That got ugly for us.

Now as we are going back into rentals, we are doing it without the mortgage. So if another recession hits, at least it will not be a mortgage company after us, this time.

Sobering perspective and reminder, especially in light of our currently strong economy. Things do go wrong, especially so with greater leverage.

 

[Dtail]

We just retired and have had no stocks for awhile.When the market has it’s next big meltdown we will be buying with a goal of 25/75.If no major drop happens I am perfectly fine as we are.I do not put so much trust in historical returns because the high tech,globalized,climate change,energy change,politically changed world of today bears little resemblance to even 30 years ago,much less 50 plus.The market and trading practices have also become night and day.I really could not care less about what stocks did from 1945 to 1970...might as well have been a different civilization.

Just curious if you don't put much trust in historical returns which would include reversion to mean concepts, why would putting in 25% equities after a market drop make more sense than putting in 25% currently?

 

[dadu007]

Up until a week ago tomorrow, we were 93% stocks.
I'm 58 and the BS bucket is filling. Work is very chaotic after a recent merger.

I finally made peace with taking some some money off the table.
Transferred a large amount from Vanguard mid and small cap index funds into a Prudential Guaranteed Income Fund in my 401k. (Those funds were at or near their all-time high the day of that transfer.)

I also changed from 22% contributions to the before-tax bucket to 7% before tax (to get the company match) and 15% Roth 401k (still a total of 22%).

So now, since I turn 59.5 next summer, I can breathe a little easier and sleep better if the rails come off at work or lose my job...We'd have enough in that fixed income bucket to live for quite awhile.
Current allocation is now 75% stocks and 25% bonds/fixed.
I'm still feeling good about the decision.

All that said, I will never go to all fixed income.

 

[JJpop]

Just curious if you don't put much trust in historical returns which would include reversion to mean concepts, why would putting in 25% equities after a market drop make more sense than putting in 25% currently?

Well I guess because basic math will tell you if you buy stock x today at $100 and I buy stock x 6 months from now at $50,in 5 years I believe there is a difference in outcome,no?
I have zero knowledge of how stocks will perform going forward but I see using historical returns to be about equal to comparing the 1960 Celtics to the 2019 Celtics.Both are basketball teams but the sport has evolved and changed so much they are almost different sports.

I will wait for the big clearance sale and if it never happens I am fine with it.At age 67 and retired I evaluate it differently than I would if I was 30.

 

[RenoJay]

I won the game. My stock allocation is low currently (around 12%) but that’s because I believe valuations are high. I’d go 60% into stocks if I felt they were low. And for fixed income I’m mostly in hard money lending which is probably a lot riskier than CDs, but the yields are way better. Having “won the game” makes me feel I don’t need unnecessary risks, but I’m fine with the kind of risks that got me here in the first place.

 

[Dtail]

Well I guess because basic math will tell you if you buy stock x today at $100 and I buy stock x 6 months from now at $50,in 5 years I believe there is a difference in outcome,no?
I have zero knowledge of how stocks will perform going forward but I see using historical returns to be about equal to comparing the 1960 Celtics to the 2019 Celtics.Both are basketball teams but the sport has evolved and changed so much they are almost different sports.

I will wait for the big clearance sale and if it never happens I am fine with it.At age 67 and retired I evaluate it differently than I would if I was 30.

Understand your point.
I guess I feel that I like to use some historical reference point along with some Monte Carlo simulators as a base reference point.
The flip side is how would anyone who doesn't have their SS and Pensions cover all their expenses ever be comfortable in retiring?

 

[ziggy29]

The flip side is how would anyone who doesn't have their SS and Pensions cover all their expenses ever be comfortable in retiring?

If someone has a large enough portfolio that they need less than 2% of it each year to supplement SS and DB pensions, it's not hard. But those are exactly the kind of people who can basically choose their own AA and not bust their retirement because they could go 0/100 or 100/0 and almost certainly not bust because of too much (or not enough) equity exposure.