When to decide to just quit investing?

[Kimo]

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!

 

[Midpack]

'If you've won the game, why keep playing' is a significant consideration (Bernstein IIRC), but it's relative in that there's no guarantee when you've won. In practical terms I've always taken it to mean seriously consider reducing your equity exposure to a lower level that still allows for a comfortable withdrawal rate**.

And later in life, that could mean completely eliminating equity holdings, and then maybe bond holdings too. My Dad has more than won the game, and he went all cash in his mid 80's, a couple years before the 08-09 crisis. Of course he didn't expect to still be alive in 2017, but he couldn't run out of money now if he tried.

** Example: If I needed $1M at 60:40 stock:bonds to achieve what I consider a safe withdrawal rate, and I have $1.5M - I'd keep the extra $500K in bonds and/or cash equivalents. So my AA could then be 40:60 having 'won the game.'

 

[Dawg52]

Discussed many times here over the years. Some believe in going super conservative(me).....some don't.

 

[Kimo]

Discussed many times here over the years. Some believe in going super conservative(me).....some don't.

Any chance you have a link or suggested phrase so I can dig deeper, this is very much on my mind and thank you for the response.
Paul

 

[W2R]

Personally I prefer to stay in the market, in case of runaway inflation. Annuities and cash are great if the companies holding them do not fail, and inflation never becomes a problem.

It's hard to think of Social Security as set in stone, although it might be. I planned my retirement income as though it had been cancelled.

How about a combination plan? Put enough in cash and annuities to support yourself, and enough in the market to support yourself. In other words, why choose if you have enough to essentially do it both ways. I'm half asleep at the moment but I think that sounds better than relying on one plan or the other.

 

[Kimo]

This is what I have kind of been doing for the last 5 years in retirement, I just feel like I have enough to cover problems you brought up. Maybe I just want to never read or see anything regarding financial matters again, kidding, kind of..

 

[W2R]

This is what I have kind of been doing for the last 5 years in retirement, I just feel like I have enough to cover problems you brought up. Maybe I just want to never read or see anything regarding financial matters again, kidding, kind of..

If both plans will (honestly) cover all the money you will ever need, then there are zero reasons for you to ever read or see anything regarding financial matters again. So why are you doing it?

Half in "buy and hold" broad mutual funds, and half in annuities and bank accounts? I'd just set up automatic transfers to my checking account and go travel, play golf, or whatever it is that you want to do.

 

[Midpack]

Any chance you have a link or suggested phrase so I can dig deeper, this is very much on my mind and thank you for the response.
Paul

Just Google for lots more but here's one https://www.whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/

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

 

[REWahoo]

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

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.

 

[Kimo]

I understand what you are saying but at any time you could start running up the score again by using the CD money and put it back in investments? Make any sense to you?

 

[Dawg52]

Any chance you have a link or suggested phrase so I can dig deeper, this is very much on my mind and thank you for the response.
Paul

Here's one......

http://www.early-retirement.org/forums/f28/would-you-still-invest-if-you-didnt-have-to-82181.html

And another.....

https://www.bogleheads.org/forum/viewtopic.php?t=163863

 

[Kimo]

Midpack and Dawg52, thanks! My face will be buried in my computer all day!

 

[W2R]

Just Google for lots more but here's one https://www.whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/

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

Thanks!! That was very interesting and great food for thought.

As of today, I have 88 times my residual spending needs after SS and pension (not that I'm fabulously wealthy, but I just don't need or want much to live on). So according to the article, I could start slowly moving into a less risky AA. I dunno. I think that article makes a lot of assumptions that could be unfounded. I like where I am at 45:55. Zimbabwe type inflation and more recently, the problems in Venezuela come to mind. While not likely, life is full of nasty surprises.

 

[Bestwifeever]

It sounds like the question is when to move into the least risky (taking inflation out if the equation) investments, not really when to stop investing. That used to be age-related (a 70-year-old would have 70 percent bonds) but most of the old conventional wisdom is out the window--look how many retired people here have decided to carry mortgages because their investments can generate more than the mortgage rates. In which case one would probably not also be able to move all one's investments into CDs as they would probably not beat the mortgage rate.

 

[REWahoo]

I understand what you are saying but at any time you could start running up the score again by using the CD money and put it back in investments? Make any sense to you?

Not with today's CD rates. And what about the often-mentioned potential for increased inflation rates?

To me, going to 100% annuities and CDs is simply trading one risk for another.

 

[Danmar]

Depends on a number of factors. Personal risk tolerance, existence of heirs, whether you would like to spend more if it was available, presence of any pensions, whether you enjoy investing, etc. Very personal decision. In my case I went the other direction, ie I have certainly "won the game" but enjoy it and apparently am pretty good at it, so I keep playing.

If we carry the analogy to the real world of sports, (may not be the best analogy in the first place) does a team quit competing just because they won the championship last year?

 

[growing_older]

Maybe it depends on your idea of the nature of the game. I think my current asset allocation is the best long term position to cover all my needs for the future. Changing to an all cash or all bonds or some other version of the "no longer need to play the game" portfolio seems MORE risky to me. My best defense against future problems seems to be just allowing the score to run up so that I have such a big portfolio that temporary losses don't matter to my lifestyle. If I can do that with a passive investment plan, then there's nothing to gain by "stopping playing the game" and only more risk if I make the changes.

 

[Kimo]

All very good information and I agree that there might be a bit of just what your personal preference is. (Still buried in all your links and new ones) LOL

 

[jetpack]

I'm almost there... I have a considerable amount is CD ladder.. But, then I consider options for giving excess away... Some long projects have it out to many millions too much for me, and while no kids, I do have niblings that might need it eventually.

Example: if you had 200K at dollarsavings direct account at 1.3%, you'd have $2.6k in interest after a year.

 

[Midpack]

If we carry the analogy to the real world of sports, (may not be the best analogy in the first place) does a team quit competing just because they won the championship last year?

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...

 

[kcowan]

There are 4 types Of investment:
CDs which return a % period
Bonds which return a market rate, higher if interest rates go down
Dividend-paying stocks which give you a return plus protection against inflation
Non- dividend payers which pure capital returns.

And the choice of mix depends on your objectives. I have left out annuities which offer longevity risk to the first category because that is a separate issue.

Because we have been in a low inflation period, it is tougher to decide.

We have chosen the third category because I want to leave a legacy but you don't. So you would probably be better off with an annuity.

 

[Kimo]

kcowan, I actually have all 4 of your types of investments and you are so right about the low inflation period making it a harder decision.

 

[ShokWaveRider]

We have very closely laddered CDs all at 3% + a smidgen. Trouble is they come due in 2019. They generate more than enough for us to live well on.

 

[Kimo]

We have very closely laddered CDs all at 3% + a smidgen. Trouble is they come due in 2019. They generate more than enough for us to live well on.

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

 

[growing_older]

For example if you need $1M to fund your retirement and you find yourself with $4M, you could probably seriously consider 'quitting investing.'

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.