Stay in VBIAX fund after retirement?

[mountainsoft]

I currently have my IRA in a VBIAX fund through Vanguard. It has a 60% stocks/ 40% bonds split.

I'm still about 8 years from retirement, but curious what the pro's and con's are of staying with that fund after retirement? Obviously it's more risky with 60% stocks, but the long term returns are better.

Are there similar Vanguard funds that would be safer after retirement? I need something simple, set and forget.

 

[Happyras]

Well, Well, Well......Wellington 60/40, Wellesley 35/65 you pick. Std dev good on both, returns better than VBIAX pending market conditions. Long term, VWENX a great fund. Admiral shares in both. Also add some VHCOX for growth.

 

[REWahoo]

Wellington 60/40, Wellesley 35/65 you pick.

+1

And if the AA of one is too low and the other too high, do a mix to get a blended AA of your liking.

 

[Happyras]

I like this chart since 2002 to date;
PerfCharts | Free Charts | StockCharts.com
Kind of tells the story

 

[nun]

VBIAX is my default retirement fund. I have a solo401k and it's all in VBIAX because of low fees and a diversifued and sensible asset allocation.

 

[ejman]

I like this chart since 2002 to date;
PerfCharts | Free Charts | StockCharts.com
Kind of tells the story

Thank you for that chart. Interesting that when set for maximum time span (14 May 2001 to Jan 27 Jan 2017), the two actively managed funds Wellesley and Wellington come out way ahead of the index funds.

Also notable that Wellesley comes out ahead of Wellington. The lowest volatility (and presumably risk) fund ahead of the other ones. I remember reading in investment books that higher risk would result in higher return over long periods of time. I guess a 15+ year period is not long enough for that pattern to establish itself, particularly a period with two extreme bear markets.

 

[pb4uski]

IMO nothing wrong with 60/40.... if so, then I've been doing it all wrong.

 

[mountainsoft]

IMO nothing wrong with 60/40.... if so, then I've been doing it all wrong.

I'm happy with that balance at this stage in our lives, but I didn't know if that was considered too risky after retirement? We will have my wife's pension and our social security incomes as well.

 

[REWahoo]

I'm happy with that balance at this stage in our lives, but I didn't know if that was considered too risky after retirement? We will have my wife's pension and our social security incomes as well.

Only you can tell if an asset allocation is too risky in retirement since risk is entirely up to an individual's personal level of tolerance. In 08/09 many people who thought they were comfortable with a 60/40 allocation found out they were way wrong. Others were OK with it.

One last note: FIRECalc tells us that any allocation between ~35/65 and 80/20 has a 95% or greater chance of surviving for 30 years or more. Those closer to an 80/20 AA had a far more volatile ride but almost always ended up buried with larger portfolios than those with fewer equities. YMMV...

 

[travelover]

It can be useful to hold bonds separately from stocks so that the bonds can be mostly in a pretax account with more stocks in after tax account, for tax efficiency. Also, in a downturn you can just sell bonds with out also selling stocks, too, as would happen in a balanced fund.

 

[exnavynuke]

Thank you for that chart. Interesting that when set for maximum time span (14 May 2001 to Jan 27 Jan 2017), the two actively managed funds Wellesley and Wellington come out way ahead of the index funds.

Also notable that Wellesley comes out ahead of Wellington. The lowest volatility (and presumably risk) fund ahead of the other ones. I remember reading in investment books that higher risk would result in higher return over long periods of time. I guess a 15+ year period is not long enough for that pattern to establish itself, particularly a period with two extreme bear markets.

What "performed better" is directly correlated to what time period you pick. If you pick from the bottom in 2009 until now then you'd say that the W's have severely underperformed with the index funds having about twice their averaged return. When you start just before a crash, the more conservative funds lose less and even missing out on some of the gains show outperformance. How would they perform relative to the index funds without two major pullbacks in the same decade, probably not as well?

Then there is the whole "efficient frontier" side to the risk:reward discussion as well.

 

[travelover]

..........If you pick from the bottom in 2009 until now then you'd say that the W's have severely under performed with the index funds having about twice their averaged return. ........

Are you comparing the Ws to all stock index funds? Over the long run, an all stocks fund will outperform a fund with a significant bond component, but at the price of volatility.

 

[exnavynuke]

Are you comparing the Ws to all stock index funds? Over the long run, an all stocks fund will outperform a fund with a significant bond component, but at the price of volatility.

I was using the S&P 500 and Vanguard's associated fund shown on the chart linked earlier.

 

[ejman]

What "performed better" is directly correlated to what time period you pick. If you pick from the bottom in 2009 until now then you'd say that the W's have severely underperformed with the index funds having about twice their averaged return. When you start just before a crash, the more conservative funds lose less and even missing out on some of the gains show outperformance. How would they perform relative to the index funds without two major pullbacks in the same decade, probably not as well?

Then there is the whole "efficient frontier" side to the risk:reward discussion as well.

Of course, that's the beauty of data mining no? It stands to reason that in a strong bull market as in 2009 - 2016 an all stock fund will perform better than a balanced fund.

But it's surprising to me how well Wellington stacks up against 100% stocks over really long periods i.e.return from inception July 1929 is 8.25%. The s&p 500 from the same date is 9.185 % (as index- no associated costs).

Likewise Wellesley 9.85% since inception July 1970 vs S&P 500 - 10.764%

Of course, the above means nothing since past performance is no guarantee of future results etc etc.

 

[nun]

Thank you for that chart. Interesting that when set for maximum time span (14 May 2001 to Jan 27 Jan 2017), the two actively managed funds Wellesley and Wellington come out way ahead of the index funds.

Also notable that Wellesley comes out ahead of Wellington. The lowest volatility (and presumably risk) fund ahead of the other ones. I remember reading in investment books that higher risk would result in higher return over long periods of time. I guess a 15+ year period is not long enough for that pattern to establish itself, particularly a period with two extreme bear markets.

Wellesley benefits from the extended bond bull market.

You'll be fine in VBIAX, Wellesley or Wellington. When I was deciding on VBIAX or Wellington I chose VBIAX simply on the lower fees.

 

[Happyras]

Are you comparing the Ws to all stock index funds? Over the long run, an all stocks fund will outperform a fund with a significant bond component, but at the price of volatility.

OK try this link, set up your mix or use one of the standards given and compare to VWIAX or the Wells over any period. If you go with index bond and indexed equities in the same allocation as say Wellington, it gives a better picture of the managed fund versus indexed for the same allocations and risk.

https://www.portfoliovisualizer.com/backtest-portfolio#analysisResults

Use 40% BND 60% SPY, versus 100% VWENX versus 100% VBIAX

Portfolio Returns Wellington has a higher Std Dev, but higher return 2008 to date.

Portfolio performance statistics
# Initial Balance Final Balance CAGR Std.Dev. Best Year Worst Year Max. Drawdown Sharpe Ratio Sortino Ratio US Mkt Correlation
1 $10,000 $17,495 6.41% 10.00% 20.11% -22.12% -30.99% 0.65 0.96 0.99
2 $10,000 $18,115 6.82% 10.65% 22.34% -22.23% -31.19% 0.66 0.97 0.97
3 $10,000 $17,428 6.37% 9.51% 18.54% -19.34% -28.94% 0.68 1.00 0.98