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Old 12-25-2018, 07:08 PM   #101
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Glad I put 400k in a Single premium annuity a few years ago.......at least thatís 400K I donít have to worry about! Maybe I should have gone higher.
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Old 12-25-2018, 07:52 PM   #102
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Originally Posted by MarieIG View Post
Yes, I'm a bit high in equities, I'm thinking about lowering it by 5%.

But not now.
Just wait a few days. The market will lower it for you.
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Old 12-25-2018, 09:29 PM   #103
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Like many folks here I'm basically doing nothing while the market tanks. I have a relatively conservative 50/50 (nominal) AA that I'd let creep up to 54/46 in the recent run up. It's now down to 48/52 with a paper loss of a bit under 10%.


Yes, "losing" more money in the last month than I've spent during the whole of my retirement is painful, but until I end up below 40/60 (maybe in January at the rate we're going) I don't think I'll be making any adjustments.


My view is that all my money in equities is basically a longevity tax. I'm not supposed to touch it for a good 15-20 years, don't need to, and have had a tendency to screw things up whenever I've tried.
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Old 12-25-2018, 09:42 PM   #104
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When I retired in March of 2018 at 51. I went to work figuring my AA and WR
My main concern was the sequence of return risk for the 5 yrs before and 5yrs after RE.

I came up with this

40% S&P 500 index fund
10% Total international index
35% Total Bond market index
15% Cash

My whole process revolved around WR in retirement. The goal was to try not to drift above a 4% WR at any time. I am no expert by a long shot but I modeled the above portfolio on portfolio visualizer during 2008 and came up with a 26% drawdown.

I then planned my budget including taxes, healthcare, and a 10% buffer over and above.

I settled on the following

Starting WR in 3/2018 2.65%
25% drawdown 3.79%
WR as of Monday 3.05%

Hopefully I am on the right track. I have been fully invested since 1986 so I have been through all the ups and downs. I never paid much attention or stressed over downturns because I had solid long term employment that allowed me to cover my budget and max out the 401k.

Whenever things do improve ( I have no crystal ball) I will likely drift up to 60/40. Thats about the max I will be able to go and still sleep soundly

I was a bit worried how I would feel during the beginning of a drawdown after retirement. So far, so good. That 25%-30% drawdown will test my nerves I am sure.
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Old 12-25-2018, 09:45 PM   #105
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Just wait a few days. The market will lower it for you.
You have a point.
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Old 12-26-2018, 11:54 AM   #106
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We've made two small adjustments to retirement accounts in the past week. Took my wife's allocation from about 55% stock to about 48%, and moved a few percentage points of mine from international and S&P 500 to small caps, retaining about 45% stock while reducing exposure to the few overpriced tech favorites.

We're both fairly conservative in allocations, me more so than my wife. I thought these small changes could keep money available without selling more stock in case of an extended downturn.
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Old 12-26-2018, 02:20 PM   #107
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Asset allocation is severely personal IMO. Even though I don't like to be an active investor on a daily basis, I am a very aggressive investor in an up market, conservative in a sideways market, and prefer not to participate (if possible) in a down market. I also don't like to play with options and betting on the failure of a company. I do like to buy valuable assets when they are cheap tho.

Our age is very important. A 25-30 year time horizon can change your decision-making a lot. So does owning other income producing assets. It can get very complex. I've never been a huge fan of the 'conventional wisdom' investment strategies, usually promoted by large institutional investment firms. After a certain point, they are overly simplistic and self-serving (I mean, somebody has to take the hit for all those shares whose price has cratered. Right?). I bet a lot of companies now wish they had waited until Dec. 31st to do their stock buybacks.

A big factor for us is that 95% of our market investments are tax-deferred - meaning we can get in and out as much as we want without having to think about capital gains; and our gains and losses are both reduced by the taxes we will eventually pay. However, the biggest factor is that we don't depend on our IRA funds for income. It is strictly our backstop and 'mad money' fund for retirement. For these assets, we don't care about growth as much as asset preservation. Our other assets are generating cash flow and growing fast enough to make up for any missed opportunities. (We already have all the money we need. I don't need to be greedy, just keep the train on the rails.)

Last year I was worried about the direction of the economy, so I sold everything in August and got out of the market until January 2018 on the personal observation that most profits in the market seem to be made in the first half of the year. It didn't work out exactly as I thought in 2017, but we had very nice growth for the year nevertheless.

This year, I waited a bit longer (and gave up most of our 2018 profits) but got out [almost] completely before our November vacation - all but 20 shares of Amazon. I do think that this current downturn is more than just a temporary market correction, and we're in for a lot more pain until the impact of these new tariffs and treaties works its way through the system. It also appears obvious this last week that those holding the levers of power don't really understand how the machine operates, and that is causing a lot of uncertainty and concern on Wall Street.

Corporate America is also to blame because they had a lot to do with the overheated stock market as a result of their buybacks. That offshore money juiced the market for a while, but has run out; and there's nothing to replace it with (and no cash for new investments to generate more income). I'll bet their balance sheets will look a lot worse than they did last year, now that all their repatriated cash has evaporated in a market crash. Liquidity (and inflation) will be the next big self-imposed crisis. Hang on in 2019.

(I think this next cycle will be great for people with liquidity in ways that haven't been possible since '09.)
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Old 12-26-2018, 06:29 PM   #108
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I have done the 100 minus your age = stocks thing. Hubby and I are at like 38S/62B. he is 64 and I am 62- no pensions and I stopped working. Not collecting SS- I want to wait until FRA at 66 and 4 months. Hubby at 70. Not sure that will be realistic for us as we live in a high tax state and have to go through trying to sell our home and so forth.


Anyway- I am thinking I will tweak it a bit more- re-balance it to like 30/70.
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Old 12-27-2018, 06:35 AM   #109
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Asset allocation is severely personal IMO.
Absolutely correct.
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Reevaluating your AA?
Old 12-27-2018, 07:02 AM   #110
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Reevaluating your AA?

As far as timing for rebalancing.... some thoughts......

One needs to have this defined in their IPS. My own says rebalancing within +/-5% of my target AA is allowed at my own descretion throughout the year. If the market moves beyond those bounds I have to rebalance immediately. I also insist that rebalancing happen atleast once per year at a time of my choosing.

I caution folks not set late December or early January as their default time to rebalance. The reason is I believe selling or buying can be exacerbated by electronic trading and auto rebalance at end of year and beginning of year and one doesnít want to be on the wrong end of that. Better to use these times at your discretion rather than as a mandatory time to do so.

Just my opinion...
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Old 12-27-2018, 11:10 AM   #111
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Originally Posted by BeachOrCity View Post
As far as timing for rebalancing.... some thoughts......

One needs to have this defined in their IPS. My own says rebalancing within +/-5% of my target AA is allowed at my own descretion throughout the year. If the market moves beyond those bounds I have to rebalance immediately. I also insist that rebalancing happen atleast once per year at a time of my choosing.

I caution folks not set late December or early January as their default time to rebalance. The reason is I believe selling or buying can be exacerbated by electronic trading and auto rebalance at end of year and beginning of year and one doesn’t want to be on the wrong end of that. Better to use these times at your discretion rather than as a mandatory time to do so.

Just my opinion...
I really don’t worry about using Dec 31 and Jan 2 as my dates. Jan 2 is often an up market day and part of a Santa Claus rally, but most years I am not buying stock on that day but if anything selling. I use the Dec 31 value in my withdrawal calculation, and then rebalance as needed on Jan 2.

Usually I have enough paid out in distributions in Dec to cover withdrawal and rebalancing. In the down market years, there is rarely a strong Santa Claus rally and I don’t worry about any small rises on Jan 2.

I usually do the minimal rebalance I can in Jan 2, only bothering to buy or sell if a given fund is off by say at least $2,000.

My equities are down so much this year with AA hitting triggers that I did some initial equity buying on Dec 24th, but I’ll probably wait until Jan 2nd to do the remainder. I still have some distributions paying out this week and New Year’s Eve.
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Old 12-30-2018, 05:21 PM   #112
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I probably should have built age into my AA from the beginning, but did not. Instead, I went from a 100:0 (equities:fixed) AA during accumulation phase, to a 45:55 AA during my entire retirement. I slowly switched over from 100:0 to 45:55 during last few years before I retired and had it in place before the 2008-2009 recession hit.

I have found this 45:55 AA was something I could stick with like glue throughout the terrifying days of that recession. Consequently I feel that AA was very well tested during those times and worked for me. So, I think I will just hang on to it throughout whatever is to come.

Actually I was unusually lucky, in that the economy provided a test of my "stick-to-it-iveness" or lack of same during 2008-2009, just before I retired in late 2009. I think I was more of a seasoned investor coming out of the recession than I was going into it.

Anyway, the answer to the question "Reevaluating your AA?" is pretty much no, although I have thought of going to 110-age and thus tying it to my age, but probably will not do that.
After thinking about it for a week and a half, I have decided to go to 110-age. I am 70 now, so I'll make the shift over a three year period:

age date Target AA 110 Minus Age
70 12/30/2018 45:55 110 - 70 = 40
70 1/1/2019) 42:58 110 - 70 = 40
71 1/1/2020) 40:60 110 - 71 = 39
72 1/1/2021) 38:62 110 - 72 = 38

I think that is slow enough that I won't feel like a DMT. Also my actual AA today is (41.6) : (58.4) so all I will have to do is less rebalancing during the first week in January, when I always rebalance.
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Old 12-30-2018, 05:28 PM   #113
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I think that is slow enough that I won't feel like a DMT. Also my actual AA today is (41.6) : (58.4) so all I will have to do is less rebalancing during the first week in January, when I always rebalance.

I think itís totally OK to revise your allocation strategy as long as you donít do it like every week. Shot in the dark: thatís not how you roll.
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Old 12-31-2018, 10:32 AM   #114
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After thinking about it for a week and a half, I have decided to go to 110-age. I am 70 now, so I'll make the shift over a three year period:

age date Target AA 110 Minus Age
70 12/30/2018 45:55 110 - 70 = 40
70 1/1/2019) 42:58 110 - 70 = 40
71 1/1/2020) 40:60 110 - 71 = 39
72 1/1/2021) 38:62 110 - 72 = 38

I think that is slow enough that I won't feel like a DMT. Also my actual AA today is (41.6) : (58.4) so all I will have to do is less rebalancing during the first week in January, when I always rebalance.
I've been using 100-age as target AA for equities for years. From that, I use other formulas to determine what I want for the other asset classes. I don't vary the formulas but instead they are predetermined to keep myself honest. How did I come up with the predetermined numbers? The old "I can sleep well at night" approach .

Through the use of a spreadsheet, when time to rebalance at start of year, I just plug in an age and let the spreadsheet do the work. When I reach 70, my AA will be as on the attached (easy peasy) :
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Old 01-02-2019, 09:38 AM   #115
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Well, I sort of reallocating my AA for 2019 already.

I say sort of because since retiring,I wasn't counting my cash reserve as part of my AA so reallocated according to that. But then every year working through my spreadsheets that I go through start of every year to reallocate I struggle. So I said "Scr*w it!" and decided to just include the cash reserve. By doing so makes my spreadsheet flow a lot easier.

The good news is now I have some extra cash to dump into the market to get to my simpler target AA .
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Old 01-02-2019, 01:14 PM   #116
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Well, I sort of reallocating my AA for 2019 already.

I say sort of because since retiring,I wasn't counting my cash reserve as part of my AA so reallocated according to that. But then every year working through my spreadsheets that I go through start of every year to reallocate I struggle. So I said "Scr*w it!" and decided to just include the cash reserve. By doing so makes my spreadsheet flow a lot easier.

The good news is now I have some extra cash to dump into the market to get to my simpler target AA .
It's hard to know what to do with cash sometimes! I used my leftover cash from 2018 as my annual withdrawal (for 2019 this time). Essentially, leaving it in the bank has the same effect as returning it to Vanguard and then withdrawing it again, a 3.84% WR based on my lower 12/31/2018 portfolio value. In 2018 I did not spend enough. I do plan to improve on my Blow That Dough initiative, and hopefully having it right here at hand will help with that endeavor this time; but realistically much of its function will be as a cash buffer for unexpected big expenses.

Almost makes me want to have the roof replaced before the Giant Market Crash that people say might or might not happen soon. But, my roof isn't leaking at all and it is maybe 10-15 years old, so that would be a bit premature.

I did my reallocation to 42:58 yesterday morning. When I logged in to Vanguard a couple of hours ago, they still didn't have the revised number of shares of each mutual fund so that I could doublecheck my computations. Grrr. I thought that when I switched to brokerage accounts, these things would show up more quickly but I was mistaken.

I do my reallocation on my spreadsheet, too. I have a target allocation by percent for equities and fixed, but also for each individual mutual fund. The spreadsheet tells me what to sell and how much, to adjust everything to its target percentage.
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Old 01-02-2019, 01:26 PM   #117
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It's hard to know what to do with cash sometimes! I used my leftover cash from 2018 as my annual withdrawal (for 2019 this time). Essentially, leaving it in the bank has the same effect as returning it to Vanguard and then withdrawing it again, a 3.84% WR based on my lower 12/31/2018 portfolio value. In 2018 I did not spend enough. I do plan to improve on my Blow That Dough initiative, and hopefully having it right here at hand will help with that endeavor this time; but realistically much of its function will be as a cash buffer for unexpected big expenses.

Almost makes me want to have the roof replaced before the Giant Market Crash that might or might not happen soon. But, my roof isn't leaking at all and it is maybe 10-15 years old, so that would be a bit premature.

I did my reallocation to 42:58 yesterday morning. When I logged in to Vanguard a couple of hours ago, they still didn't have the revised number of shares of each mutual fund so that I could doublecheck my computations. Grrr. I thought that when I switched to brokerage accounts, these things would show up more quickly but I was mistaken.
+1 about hard to know what to do with cash sometimes.

Back in my working days, I counted that as part as my AA but after retired, was using the reserve portion as chicken money and not counting. But trying to account for that was challenging at best on a spreadsheet I made. Decided to just go back to counting reserve portion for simplicity. If I get too afraid, I can always changed my 100-age formula to something else, but don't plan to.

My goal on new years' day is to quickly get the rebalance then call that done and not spending the day trying to figure out a spreadsheet I haven't looked at in detail for about a year .
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Old 01-02-2019, 02:27 PM   #118
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As far as timing for rebalancing.... some thoughts......

One needs to have this defined in their IPS. My own says rebalancing within +/-5% of my target AA is allowed at my own descretion throughout the year. If the market moves beyond those bounds I have to rebalance immediately. I also insist that rebalancing happen atleast once per year at a time of my choosing.

I caution folks not set late December or early January as their default time to rebalance. The reason is I believe selling or buying can be exacerbated by electronic trading and auto rebalance at end of year and beginning of year and one doesnít want to be on the wrong end of that. Better to use these times at your discretion rather than as a mandatory time to do so.

Just my opinion...
+1. Exactly how you said it. I hadn't needed to rebalance last year as my DCA into Large Cap and smaller DCA into Mid Cap set me straight all year long. If the market rebounds I will re balance when that 5% threshold triggers it.
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Old 01-03-2019, 11:59 AM   #119
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Well, I sort of reallocating my AA for 2019 already.

I say sort of because since retiring,I wasn't counting my cash reserve as part of my AA so reallocated according to that. But then every year working through my spreadsheets that I go through start of every year to reallocate I struggle. So I said "Scr*w it!" and decided to just include the cash reserve. By doing so makes my spreadsheet flow a lot easier.

The good news is now I have some extra cash to dump into the market to get to my simpler target AA .
Just set up some automatic exchanges on Vanguard. DCA for 3 months to put a bit of the extra cash in the other asset classes. Should be back on track by end of March. I'm done. No more reallocating for me until 2020 .
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Old 01-04-2019, 10:21 AM   #120
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I finally bit the bullet yesterday and bought $100k of VG Total Stock. So far today that looks smart. For the rest of the year.... who knows.
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