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

[JJpop]

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I guess I feel that I like to use some historical reference point along with some Monte Carlo simulators as a base reference point.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?

I like everyone else has to use history to form a guess on what stocks are likely to do.I just do not put much faith in the accuracy going forward.When I see comments like stocks very conservatively will give you 7 pct like it is a given,I am not just buying it.I just think if someone retires early based on that they may really regret it,especially if they experience a severe sequence of returns downturn.
I really believe in the cover everything with safe investments and then do whatever you want with the rest.

 

[Dtail]

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.

Agree, but if one has a mix of SS/Pensions and requires more of a 3-4%WR mixed in to make it work to support the total lifestyle which also includes discretionary expenses, then if one doesn't trust historical sequence reference points, the unknown aspects can become scarier.

I for one put a lot of value in the many calculators, acknowledging that one still must be flexible along the way if necessary.

 

[Markola]

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.

I started migrating our portfolio from 80% stock funds 2 years ago to 50% stocks today for much the same reasons of work burnout. I am surprised at how good it feels at age 53, like we’re prepared for whatever the markets do. Also, historically over a couple of decades timeframe, there’s been too little difference in outcome between the 2 allocations to warrant the risk and added volatility. Good luck.

 

[Dtail]

I like everyone else has to use history to form a guess on what stocks are likely to do.I just do not put much faith in the accuracy going forward.When I see comments like stocks very conservatively will give you 7 pct like it is a given,I am not just buying it.I just think if someone retires early based on that they may really regret it,especially if they experience a severe sequence of returns downturn.
I really believe in the cover everything with safe investments and then do whatever you want with the rest.

Well separate from the 7% comment, as I responded to Ziggy, I believe in the retirement calculators which clearly take historical SOR concepts into account.
If I can survive 1966/1929 etc scenarios, I am okay with that concept.
Otherwise, if one is mostly dependent on investment portfolio results and can't use an historical sequence result as a reference point, then they wouldn't ever retire.

 

[ziggy29]

I like everyone else has to use history to form a guess on what stocks are likely to do.

History is obviously not a guarantee for the future, but it's a heck of a lot better than any other expectation. Some day, "it's different this time" will be right when we have a financial mess and a massive bear market. I have no doubt it will happen some day. But someone who went all cash in 1965, 2000 or 2008 and stayed there for a long, long time would still probably be behind someone who stayed invested (unless they were clairvoyant enough to see all three of the coming bear markets happening). Sure, someone in their 50s, 60s or 70s may not need the growth that equities provide if their portfolio is large enough to sustain them with bond and money market returns. And if you are in that boat then there is no need to encourage you to rethink your strategy.

In summary I think it takes more of a leap of faith to assume it will be different next time than to assume it will be a lot like the last several recessions and panics. Again, if you have enough that you don't need the risk of equities, congratulations!

 

[JJpop]

Not so much that there is going to be a massive bear market.I just see a lot of posts on various websites with the attitude of go ahead and retire because stocks will give you 6,7 10 pct...you are fine.I am talking more about the individual who is cutting it close and really needs that return to retire early.To me it is needless risk that you may not be able to recover from.IF you have the ability to work another few years to eliminate that risk,for me that is a much less stressful future.
If you carry things to the extreme,everything has risk,even CDs,annuities,GO muni’s,IBonds and treasuries.I get it.
We have 2 recent histories.Stocks returning nothing for almost a decade and the great bull market since.My take is the bull might go another 10,but the decade of nothing could also have gone another 10.
Retiring is a big deal and not easy to change for most people.

 

[sengsational]

It depends a lot on how many years are left in your planning horizon. If you have 10 years left, bailing might not be a bad idea. But if you have 30 years left, bailing might be a dumb idea. I have more like the latter (if fate doesn't end it sooner), but I moved my AA to the more conservative side due to the high PE 10. And it's going to stay at that AA forever unless the ratio goes down closer to the historical average. With today's market, maybe that historical average is closer than we think, haha!

 

[flybynight]

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.

Similar to you I was always 100% equities until 3.5 yrs ago. Then I started building the cash/ST bond buckets in preparation for retirement. Now I'm 80% stocks and I can't stomach any less. I'm retiring next month. The 20% cash/ST bonds gives us 5 years spending at fat levels and 10 years if need be at leaner spending levels. As none of that includes SS, I've got several layers of cushion. I slept like a baby last December. AA is very personal. Unless capitalism gets blown up, equities will always return more than bonds in the long run. I'm 57, so If I live another 20-30 years I consider that the long run. Hopefully this means I'll leave a larger legacy for generations to come.

 

[NW-Bound]

To OP of quote: The S&P was about $1,300 (approaching tech bubble) in April 1999 and $2,950 now. That is only about 4.2% growth (anybody confirm or disagree?). I was surprised not higher. Your method avoided the highs and lows, but not too far off.

To everyone: However, I'd say if "you won!" then you can invest in equities and ride out any bumps to achieve the avg 10% (ignoring inflation) that has existed historically. In today's situation, hard to take fixed income that is same as inflation.

You left out the stock dividend in the above return number.

According to Morningstar, a $10K invested in VFINX, Vanguard S&P 500 mutual fund, would have grown to $30.753K from 5/1999 to 5/2019 if dividends were reinvested. That's a return of 5.78% per annum.

During the same time period, the cumulative inflation was 2.18% per annum.

 

[audreyh1]

To OP of quote: The S&P was about $1,300 (approaching tech bubble) in April 1999 and $2,950 now. That is only about 4.2% growth (anybody confirm or disagree?). I was surprised not higher. Your method avoided the highs and lows, but not too far off.

As NW-Bound pointed out - you must look at total return which includes dividends paid over the period, not just at the index values. Makes a huge difference.

 

[thepalmersinking]

I can't for the life of me understand why anyone would want $1.5m invested in TIPs? There are much better investments out there that are just as safe. Anyone should be able to get at least 5 or 6% from income investments and around 10% growth from a mixed portfolio. So on 1.5m there is no reason why there shouldn't be plenty to live on plus meet inflation and save some aside to improve standard of living.

Share how we can get 6% safely, using what specific investments?

 

[JJpop]

Really?

Share how we can get 6% safely, using what specific investments?

There are no safe income investments paying 6 pct.Easily getting 10 pct going forward comes from someone living in the recent stock market bull euphoria.
Please share this wisdom so we can all be so lucky.

 

[Lawrencewendall]

Share how we can get 6% safely, using what specific investments?

There are no safe income investments paying 6 pct.Easily getting 10 pct going forward comes from someone living in the recent stock market bull euphoria.
Please share this wisdom so we can all be so lucky.

What is your definition of "safely"? Consistently or on average? Even my precious metals tanked in 2008 when logic says that should have been the place that speculators flocked to.

Feel free to fact check me. It's been awhile since I ran the numbers.

MFV (MFS Special Value Trust) has been paying monthly dividends since 1989 (30 years) at a rate of 9% annual returns. Ponzi scheme? Do like the monthly dividends.

FIDO Total US Market has pulled 10% growth since inception (1998) which includes the .com bust and the 2008 crash. The history is tough to piece together since they have changed ticker symbols several time (FSTMX, FSKAX, FZROX).

There are others but these 2 stick out.

 

[rkser]

Yes, I think we have won the game, have the dough planned till the age of 90, left it at 50/50 Stocks to Bonds Ratio,

We have about 3 to 4 yrs worth of yearly expenses in CDs, so we do not have to withdraw from the Market at an importune time.

At times, due to the old habits coming in the way, we have trouble spending the monies marked for that year. .

 

[MRSPOCK]

But how do I get 6% return with very low risk? I can get 3-3.5% in CD and bonds but would love to get 6% low risk

 

[Lawrencewendall]

But how do I get 6% return with very low risk? I can get 3-3.5% in CD and bonds but would love to get 6% low risk

Here's another one.

ATAX (America First Tax Exempt Investors LP) Federally backed (Freddie Mac and Fannie Mae I think) and Fed Tax free. Been around since 1998. Pays quarterly and currently pays 7% (equivalent to >10% depending on your tax bracket). Still subject to applicable state tax. Does have a K-1 instead of a 1099.

 

[JJpop]

No

What is your definition of "safely"? Consistently or on average? Even my precious metals tanked in 2008 when logic says that should have been the place that speculators flocked to.

Feel free to fact check me. It's been awhile since I ran the numbers.

MFV (MFS Special Value Trust) has been paying monthly dividends since 1989 (30 years) at a rate of 9% annual returns. Ponzi scheme? Do like the monthly dividends.

FIDO Total US Market has pulled 10% growth since inception (1998) which includes the .com bust and the 2008 crash. The history is tough to piece together since they have changed ticker symbols several time (FSTMX, FSKAX, FZROX).

There are others but these 2 stick out.

MFV is almost 35 pct stocks.It is not safe fixed income.Because FIDO returned 10 pct since 1998 does not mean it will automatically continue to do so as you suggest.Research it’s return for the decade of 2000 to 2010.It is nice to be optimistic but you have to deal with reality and what could easily happen either way,especially dealing with retiring now.

 

[pb4uski]

....MFV (MFS Special Value Trust) has been paying monthly dividends since 1989 (30 years) at a rate of 9% annual returns. Ponzi scheme? Do like the monthly dividends.

FIDO Total US Market has pulled 10% growth since inception (1998) which includes the .com bust and the 2008 crash. The history is tough to piece together since they have changed ticker symbols several time (FSTMX, FSKAX, FZROX).

There are others but these 2 stick out.

On MFV, you are confusing distributions with dividends. Distributions are what you receive but dividends come from income. MFV is paying out 9%+, but a lot of those distributions are returns of capital. MFV paid out $0.58201 for its fiscal year ended Nov 30, 2018.... but $0.32883 (56%) was return of capital. For FY2017, 66% of distributions were return of capital. For the 5 years ended Sept 30, 2018 it paid out 10.08% on average but only earned 6.25%... so for that 5 year period 45% of its distributions were return of capital. Not a Ponzi scheme but the distributions are not anywhere indicative of their investment performance.

https://www.mfs.com/content/dam/mfs...ts/dividend_source_information/mfv_102018.pdf

https://www.mfs.com/content/dam/mfs...ts/dividend_source_information/mfv_102017.pdf

FIDO Total US Stock Market is nothing special... just Fido's version of VTSAX.

 

[pb4uski]

MFV is almost 35 pct stocks.It is not safe fixed income.Because FIDO returned 10 pct since 1998 does not mean it will automatically continue to do so as you suggest.Research it’s return for the decade of 2000 to 2010.It is nice to be optimistic but you have to deal with reality and what could easily happen either way,especially dealing with retiring now.

+1 at 39% US equities and 52% BB and B rated high yield corporates... MFV is not for the faint of heart.

https://www.mfs.com/en-us/individua...-special-value-trust.html#tab-characteristics

 

[SeattleRocks]

Yes, I won my game and sleep at night with my 3.3% return on my CDs (average) in my post tax investments. I personally just feel the market is really frothy right now and I feel a lot of political risk to the markets.

I am just going to wait this one out for awhile, keep my powder dry, and wait for a good correction.

 

[Cayman]

About 55% equities, with 10+ years in cash/CDs in case of a long downturn. For fun I just ran Firecalc with all treasuries and got 100%. I'd go all fixed income if equities kept me up at night but I sleep well, so no need to.

 

[Osprey]

Just started retirement at 50/50 allocation and plan on using rising glide path to 60/40.

 

[53anddone]

56 years old, won the game and have 55% in blue chip dividend players, 30% CD, 10% AAA Munis and 5% cash. Generating enough income to not touch capital. As time goes buy will be upping the CD/Muni and slowing taking the equities down.

 

[Mountain skier]

Awesome thread...so relevant. We are 58. DW retired. I will probably retire May 2020. Our AA is 45/55 (55-is cash CD's). We will have pensions. Feel very comfortable with the flexibility this allocation provides.