rebalance

[ripper1]

My equity proportion of my retirement accounts has grown to 55%. I am currently retired and drawing 4%. I like a 50/50 approach. If I include my cash from a money market account I am at 50/50. I don't know that I would consider this emergency money or just take a holistic approach as to this being part of my portfolio. Any thoughts?

[youbet]

Include the cash from your MM account in your AA calculations.

55/45 isn't far from your 50/50 target. (My target as well.) But if you're nervous, look at your equity holdings and see if there isn't some position that's run up more aggressively than the others and do some gentle trimming.

Be ready to accept the fact that if you do cut back on equities, the equity market will continue up. If you don't cut back on equities, they'll crash. At least that's how it works for me!

[wcv56]

Being light on bonds at this time may be a wise investment, you do realize interest rates are low and so are yields. Rebalance when interest rates rise to a more common of past history.

[pb4uski]

I agree with other posts that you should include your MM in your AA. What I do is I rebalance annually, usually after I've done my taxes, even if the rebalancing is slight. During the rest of the year I keep an eye on my AA and rebalance if the actual ratios vary significantly from target (>5%). No right answer, but by having this "approach" it keeps me disciplined.

[67walkon]

Do most of you keep a 50/50 balance, even in retirement? We're more like 75% bonds, mostly munis, and 25% equities/funds. We have some commercial real estate that generates signficant ($72K annually) net rent and another 8 years of a payout on the sale of another asset. The rent and the payout money, after taxes, is more than we live on right now, so the advice we've been getting is to try to shelter the other non-work income in tax free or tax deferred as much as possible.

How does investment real estate figure into the balancing equation?

My retirement goal is to go about half time in 2012 and see how that works out. Unfortunately, I need to keep group health insurance for another 4 years until I reach medicare age.

[nun]

If you have income from real estate you can probably be a bit more agressive in your investing. But if 25/75 is working for you why change it?

[DFA]

Is the 25/75, 50/50 AA really working for you with the projected downturn in the bond market or are you locked into a pretty good return. I am overweight in equities with 2 years to go until ER, but looking at bonds I don't see the return. Maybe I am just liking the return over the last year.

[pb4uski]

Quote:

Originally Posted by 67walkon Do most of you keep a 50/50 balance, even in retirement? We're more like 75% bonds, mostly munis, and 25% equities/funds. We have some commercial real estate that generates signficant ($72K annually) net rent and another 8 years of a payout on the sale of another asset. The rent and the payout money, after taxes, is more than we live on right now, so the advice we've been getting is to try to shelter the other non-work income in tax free or tax deferred as much as possible. How does investment real estate figure into the balancing equation? My retirement goal is to go about half time in 2012 and see how that works out. Unfortunately, I need to keep group health insurance for another 4 years until I reach medicare age.

While I don't own any commercial real estate, my Mom has a commercial building that provides more than what she spends, but I don't consider it in her AA, but if I did it would be more along the lines of fixed income since the tenant is stable and we have them in a long term lease.

Would the excess of the commercial rent and payout money over your living expenses be enough to cover the cost of individual health insurance and other health care costs? If so, perhaps you could live on that from now until you are Medicare eligible.

I went part time (50%) a few years ago and it is wonderful. Still want to pull the plug entirely - soon.

[67walkon]

PB4, the answer is yes, easily. The tenant is a long time tenant, more than 20 years, but the lease expired several years ago. We are trying to negotiate a new long term lease and if we can't, we'll sell it.

The actual plan, once we get the lease situation resolved, is to live on the payout and rents and delay SS as long as possible. We can save money from those two sources and let the other accounts just percolate.

The bonds situation is averaging a little over 5%, almost all tax free, which is a pretty good return. We are very diversified in the bonds, so if a few go bad, it won't kill us.

Now if I can just get the lease deal resolved!

[pb4uski]

Sounds like you have things in place and don't really need to work, at least full time anyway, particularly once the lease is sorted.