When to decide to just quit investing?

[Gumby]

But good luck determining
- you've won, or
- what future inflation, cash returns and personal spending will be.

"Now as we keep our watch and wait the final day,
count no man happy till he dies, free of pain at last."

-- Sophocles - Oedipus Rex

 

[Kimo]

Perversely, some family members in this enviable position used this as the reason to INCREASE risk, with disastrous results. Had they been successful, they would have become fabulously wealthy, but instead they went back to work. Just being wealthy enough to FIRE wasn't enough.

So, I can live on SS, annuities and interest, do I need funds? The fund money could be put in more of what I own.

 

[Midpack]

So, I can live on SS, annuities and interest, do I need funds? The fund money could be put in more of what I own.

As long as you have an adequate $ excess/cushion for higher than expected inflation, lower than expected returns, greater longevity than planned, higher than expected personal expenses, annuity institution solvency, geopolitical catastrophes, etc. over the next 30 years - I gather you're in your mid 60's or younger from your OP.

Most/many/some of us would sleep better in all cash/pensions IF we had way more $ than SWR assuming an equity:bond:cash AA - but it's very expensive, more than double the $ or half the personal spending.

 

[Fedup]

I would hedge my bet a little just in case I'm wrong. So have some money in the market. But I now people who only invested in CDs and they came out more than ok. But the key thing is they managed to keep the same spending pattern with a paid off house.

 

[SecondCor521]

Re-reading the OP I wonder if the question is about the "hassle" of managing investments and trying to avoid that. Because who wants hassle in their lives when they're retired?

For me, I see just as much hassle in a CD+annuity approach as a stocks+bonds approach. I do the latter, and the time required to manage my investments is certainly less than an hour a month:

1. In theory I might have to reallocate if the market went crazy one way or the other, which would be a few clicks online with Vanguard. I've been retired for about 18 months and haven't had to do this yet. I can see my AA in Quicken or Excel in less than 5 minutes.
2. I do a Roth conversion once in the fall, which takes a few clicks online with Vanguard. Total time less than 5 minutes.
3. I do a partial recharacterization in the spring, which requires printing, filling out a form, and mailing it to Vanguard. Total time 30 minutes.
4. Occasionally I will need to refill savings from investments. I haven't had to do this yet, and when I do it will be maybe once or twice per year and will take 5 minutes each time.
5. I watch my checking account balance and move money to/from savings as needed. Less than 5 minutes once a week.

With CD's+annuity, I'd probably have to do something similar to 4 and 5. For me personally I'd probably spend some time managing the CD's - rolling them elsewhere for better interest, deciding whether to break one early or not, calculating the size of a CD ladder to make sure the rungs were the right size, trying to estimate my personal inflation rate and any potential lumpy/extra expenses, etc.

I do have heirs, though, so to the degree that I have "won the game" I consider myself to be playing the game on their behalf with whatever extra money I have above and beyond my needs.

TANSTAAFL may apply here.

 

[Kimo]

As long as you have an adequate $ excess/cushion for higher than expected inflation, lower than expected returns, greater longevity than planned, higher than expected personal expenses, annuity institution solvency, geopolitical catastrophes, etc. over the next 30 years - I gather you're in your mid 60's or younger from your OP.

Very good guess Midpack on my age!! 65. Over 5 years my expenses are flat. I always have money left over every year without withdrawing down. I could have 2.5 million in annuities and cd/s and have quite a bit more than I need and I am not taking SS yet.

 

[Danmar]

Retirement planning/investing/decumulation is a game you play once for a lifetime, probably not analogous to a sports team where winning is up for grabs annually. And losing at retirement can have more serious consequences to a retiree.

For example if you need $1M to fund your retirement and you find yourself with $4M, you could probably seriously consider 'quitting investing.' e.g. Many family and other endowments invest very conservatively because lasting indefinitely is a primary goal, above maximizing $.

Again, 'winning the game' is relative and incremental for most of us - we can take less risk, but not close to zero. Outright winners are probably few and far between.

We've done the exercise here a few times and historically it's taken about double the net worth to reach the same probability of success in all cash vs a 60:40 AA. If current cash rates of return persist, it'll take an even greater nest egg. And inflation will always be an unknown, among others...

Agree with just about everything you said, but still think there is no correct answer. Let's say you have a very generous pension that would put you in the top 1-2%f all earners. You can easily live on this pension for the rest of your life but wouldn't mind spending/gifting more than that. What would you do with your fairly large portfolio? Go very conservative, go fairly aggressive or somewhere in between.

This is my position and I have decided to effectively invest my portfolio for the next generation in a fairly aggressive AA. Spending divs in the meantime. Many approaches but I agree one shouldn't risk everything to increase their wealth a bit.

 

[Midpack]

Agree with just about everything you said, but still think there is no correct answer. Let's say you have a very generous pension that would put you in the top 1-2%f all earners. You can easily live on this pension for the rest of your life but wouldn't mind spending/gifting more than that. What would you do with your fairly large portfolio? Go very conservative, go fairly aggressive or somewhere in between.

This is my position and I have decided to effectively invest my portfolio for the next generation in a fairly aggressive AA. Spending divs in the meantime. Many approaches but I agree one shouldn't risk everything to increase their wealth a bit.

Where did I say there's a "correct answer?" Quite the opposite actually...

 

[ShokWaveRider]

And if inflation takes a jump you could put some in funds, bonds and keep some cd's. Do you agree?

Really depends on what financial climate is going to be like in 2019. I was luck to lock at 3% for a very long time, to I will cross that bridge when I get to it.

 

[Fedup]

I don't see any 3% CDs on bankrate even.

 

[ShokWaveRider]

I don't see any 3% CDs on bankrate even.

That is because it is not 3 - 5 years ago when I got mine.

 

[Koolau]

Kimo, I've always had this fantasy of enough cash that no investing would be needed. When the pockets are empty, just go to the closet filled with bushel baskets of folding green and stuff the pockets again. Even though I am quite conservative, I do still invest because of all the "what ifs?" I suppose the two biggest "what ifs?" are run-away inflation and long term care. YMMV

 

[Kimo]

Aloha Koolau, the answer for me (I think) after reading all of the posts and links is somewhere in the middle. Although I do like the closet idea!!!

 

[Koolau]

"Now as we keep our watch and wait the final day,
count no man happy till he dies, free of pain at last."

-- Sophocles - Oedipus Rex

For the full story, one can alway count on Tom Lehrer

 

[GrayHare]

When you've "won the game" I think it makes sense to reduce risk by adjusting AA to include more cash. Many people keep a year or two's expenses in a cash bucket (a CD ladder, for example), but if you no longer need appreciation from equities you might increase that to 5 to 10 years of expenses, plus another 5 to 10 years worth in bonds.

 

[daylatedollarshort]

I have looked at just about everywhere I can think of but I can't find this discussion. When (or should you)do you determine that it makes no sense to keep your money in stock and bonds, either funds or individually? If you have no heirs, everything will go to your younger spouse your assets have grown quite a bit in the 5 years since retirement and you never spend more than the yearly income form your assets. I could take all the money out of my investments, put them in 5 year CDs and maybe an annuity, start taking my SS at 66 or 67 and still not spend the principal. Has anyone ever just gotten rid of everything and done this? FYI, no debt, no expensive hobbies, living like we want doing whatever we want without really paying to much attention to the cost although we always look first.

There was a comment I heard years ago, why play the game if you don't have to? Is this what it means?

Thank you in advance for any comments, good or bad!

We use a matching strategy and invest mainly for capital preservation. I was influenced by reading up on Harry Browne and the permanent portfolio, Zvi Bodie and most of all a poster named Bobcat2 over at Bogleheads. Also the book Against the Gods: The Story of Risk and the idea of diminishing marginal returns. More on matching strategies here:

https://www.bogleheads.org/wiki/Matching_strategy

Pensions, SS and a little side income cover all our basic expenses in a high cost of living area, including a low fixed rate mortgage, which we plan to keep in retirement as long as we keep the house. We plan to take out a small amount from the portfolio for a few frills. If we needed more money we would work more part-time, rent out the current house, move to a lower cost of living city or suburb and/or downsize, not take on more investment risk.

 

[Blue Collar Guy]

I cant remember who said it, maybe Benjamin Graham or warren buffet, maybe John Bogle, I read them all. If you have won the game keep 25 % in equities, then the other 75 you can do bonds. So if we ever rethink our AA we can go to 25 % stocks. I think we won the game. Im at 80/20 stocks. Some unknowns thats why im shooting the dice. What if my pension goes to zero, what if i get stiffed out of my social security, what if the market crashes, what if we have hyperinflation.

 

[Kimo]

I cant remember who said it, maybe Benjamin Graham or warren buffet, maybe John Bogle, I read them all. If you have won the game keep 25 % in equities, then the other 75 you can do bonds. So if we ever rethink our AA we can go to 25 % stocks. I think we won the game. Im at 80/20 stocks. Some unknowns thats why im shooting the dice. What if my pension goes to zero, what if i get stiffed out of my social security, what if the market crashes, what if we have hyperinflation.

I am really starting to think along these lines. Maybe 80/20 with the 80 consisting of bonds and cd's.

 

[marko]

There was a comment I heard years ago, why play the game if you don't have to?

If you're relatively young I'm not sure "you don't have to " is a safe strategy.
One word: Inflation. Over the next 30 years? Who knows.
If you're 80 years old that's one thing. Otherwise....risky IMO

 

[Blue Collar Guy]

I am really starting to think along these lines. Maybe 80/20 with the 80 consisting of bonds and cd's.

Yeah, one of them said not less than 25 % in equities. so 20/80 stocks/bonds is in the ballpark.

 

[daylatedollarshort]

If you're relatively young I'm not sure "you don't have to " is a safe strategy.
One word: Inflation. Over the next 30 years? Who knows.
If you're 80 years old that's one thing. Otherwise....risky IMO

Inflation strategies are outlined in the matching strategies in the Boglehead wiki link above.

 

[audreyh1]

The quote I recall is "Why keep trying to run up the score when you've won the game." I see this as asking when you have enough (however you choose to define that amount), why maintain an AA that is subject to significant volatility.

In my own situation I view that as going from a 60/40 AA prior to retirement to a 40/50/10 AA. Considerably more conservative, provides a nice cash "bucket" in the event of a prolonged downturn, yet has sufficient equities to hedge against the unlikely return of high inflation.

Moving to 100% fixed income investments is too risky for my blood.

I do a small version of this by not reinvesting funds that I have withdrawn from my portfolio but not spent in a given year. To me reinvesting those funds that I was already allowed to spend but just did not happen to spend, is like trying to run up the score, which for me has very small additional benefit. I prefer to leave those unspent funds in CDs and short-term safe investments.

The portfolio itself, however, is exposed to moderate market risk. I am not comfortable dropping below 50% equity exposure because of inflation concerns long term = decades, and those same decades allow us to recover from bear markets. I'm sure are the long-term shrinks, as we enter our 70s and 80s, I will be reevaluating the equity exposure, and probably dropping it.

I view 20% equities as a minimum, however, even when we are much older. And maybe 30% would be OK. Even if only my surviving siblings will benefit!

 

[audreyh1]

I don't see any 3% CDs on bankrate even.

I bought some earlier this year. They show up occasionally.

That is because it is not 3 - 5 years ago when I got mine.

Some were available at the end of 2016 and early 2017.

 

[audreyh1]

I am really starting to think along these lines. Maybe 80/20 with the 80 consisting of bonds and cd's.

Kitces has recommended a "Rising Equity Glide Path" strategy that starts at 30% equities for the new retiree, and gradually lets equities increase from there. This method was good for surviving early "bad times" and had good long term characteristics.
https://www.kitces.com/blog/should-...is-a-rising-equity-glidepath-actually-better/

Just another option, and to point out that you can start out with low equity exposure, and let it gradually drift up, and reap some benefits.

 

[daylatedollarshort]

I like bargain hunting and trying to find ways to live well without spending a lot of money so that keeps our overhead low. I don't like losing money, having to ever worry about running out of money or ever have to worry about what the stock market is doing. I know the odds are good that if we had more stocks we would end up with more money but we already have more than enough to live a nice life. We live on a lot less than when we were both working full-time and we are much happier now so I know spending more would not necessarily make us any happier.