winners who quit after winning

[Ticker]

I have often seen the comment here "why keep playing the game after you have won?"

with the recent uptick in the market, this comment has started to haunt me. I am not a market timer, and this question is not geared towards that issue. I am feeling like I no longer need the risk in my portfolio, but would appreciate any advice from those that have gotten to this point.

so how did you come to the conclusion that you have enough? what metrics did you use to decide to withdraw from the market? are fixed income instruments the only investment vehicles that you are using now?

Thanks in advance for any replies.

 

[braumeister]

Speaking only for myself, I would require probably ten times what I have to get out of equities.

Honestly, inflation scares the crap out of me and that's the only way I know of to deal with it.

I watched my grandfather retire in the 60s with a non-COLA pension, SS, and his savings. He was considered very well off and definitely conservative to the point that he avoided the stock market entirely. Then we had the runaway inflation of the 70s. He lived for another 30 years and was reduced to barely enough to live on. It was sad to see. I don't want that to happen to me.

 

[SecondCor521]

I think everyone at some point would be wise to decide what "enough" looks like. To me, "enough" is equal to 25x my annual expenses plus a paid off car and house plus four years of college saved for each of my three kids plus contingency plans in place if the market went south right after I retired and I became uncomfortable.

I reached that point somewhere in about 2014. After 2014, I continued to work another two years because work was still rewarding. I plowed about 60% of my salary into the market. I retired in 2016. Since then my stash has risen about another 33%.

So at this point I feel like I have more than enough.

But since I have three kids who will inherit anything left over when I die, I view my portfolio as a conglomeration of two parts: (1) The part of the portfolio I need to sustain me the rest of my life, and (2) whatever is extra that they will inherit. I invest the first part according to what I think the optimal mix for the max SWR for my predicted lifespan. The second part I invest in 100% high quality US equities index funds, since they aren't going to be getting that money for, most likely, another 30-40 years.

I understand the other side of the argument about de-risking a portfolio, and maybe if/when there is a protracted downturn I may regret my decision. But to me, the salient question is: what do you intend to do with the excess? If you decided to increase consumption, then that money would be spent sooner and more fixed income could make more sense. If you decided to pledge 10% of your portfolio to charity and planned to pay it off over 5 years, then fixed income would make even more sense.

My 2 cents.

ETA: And braumeister makes a good point. Classic thought is that de-risking by moving away from equities increases inflation risk. Which for my kids over 30-40 years is less of a risk and more of a guarantee.

 

[RunningBum]

What braumeister said. But whatever makes you comfortable.

 

[GrayHare]

For me "winning the game" means I can afford to take less investment risk. Less risk comes in the form of allocating a larger % in cash because I no longer need to hope for higher gains via equities.

 

[Danmar]

I don’t really acknowledge it as a game so I wouldn’t even consider quitting. We have by most measures “more than enough” so in reality I’m really investing for my daughter. I could easily live with a 50% permanent “haircut”. So why not keep going? For sure, It helps to have a high risk tolerance, and I do. Inflation, as Braumeister says will always be a risk.

Boils down to the question. “should I take more risk because I can afford to or less risk because I dont need to.” The answer to this question is quite personal and will depend on your risk tolerance and spending utility function. Ie do you have a productive use for more wealth/income?

Do you think people who are mega rich ie billionaires, ever consider “quitting the game”? Not sure, but I doubt it.

 

[audreyh1]

As the stash keeps growing beyond my wildest dreams (knock on wood) I’ve decided that hedging my bets 50/50 and occasionally rebalancing is a reasonable approach for my long term investments. As Braumeister said we still have to deal with inflation in the long term. Plus I’ve accumulated a pretty good war chest of short term funds to tide us through dark times.

 

[Asher Aion]

We have moved over the decades from being 100% invested in my own company (yikes!) to more recently 60/40 equities/fixed. The past 6 or so months we have reduced down to 50/50 as more of a preservation outlook as opposed to growth. We feel we will need about a 2.5% withdrawal rate (ambiguity in medicine costs for DW) when I finally stop darkening the door at wo@k, and we are there now in our early 50's.

Will we ratchet up? Perhaps in 3-5 years depending on inflation or perhaps as we approach 65 where medicine costs are 'free' for Canadians.

On the other hand I am falling in love with forex, and that is a place where winners and losers never quit after winning or losing!

 

[daylatedollarshort]

We read up on matching strategies and the idea that even at a zero real return our safe withdrawal rate was 100 / years remaining = SWR. (Matching strategies do account for inflation.) At the time 30 year TIPS were paying 2% real return, so we thought hey good enough. At our current ages even if we made a zero real real return our maximum SWR is 3.33%, which is more than many of the financial talking heads have been saying is safe even with a higher stock allocation. There is a poster on Bogleheads called Bobcat2 who had a lot of good ideas for us. Plus the book Against the Gods: The Remarkable Story of Risk and the idea of diminishing marginal returns made an impact. And research on happiness, consumerism and materialism played a role. As a result of that we are trying to simplify and declutter, not buy more stuff unless it is something we really need.

I like to optimize expenses, enter contests and we get a lot of consumables and event tickets for free or deep discounts, so we can live on less than half of what we used to for the same or better lifestyle. Low overhead is our financial safety net in retirement, instead of going for stock market gains.

 

[Red Badger]

Survey says.....

Braumeister nailed it!

My FIdo guy used the "won the game" phrase when suggesting an annuity. I asked him (young guy) if he remembers WIN badges. They were popular is the seventies (when I was in high school). He looked confused. I suggested he google the topic and wished him a good day as I left.

 

[scrabbler1]

I knew I had won when the value of the company stock I was going to cash out could buy enough shares of my chosen bond fund to provide me enough monthly dividend income to cover my expenses with a decent cushion to spare. When this could get me to age ~60 without using up too much of my total principal (and keep the main bond fund's principal intact), I knew I had won the game. Getting to this point actually occurred rather quickly because certain factors came together all at once in 2007-08 and the market downturn in 2008 actually helped me out a lot because it created a huge but temporary buying opportunity I could not pass up.

 

[Texas Proud]

I am also with Braumeister....


But, if you think you have won then you can lower your equities to 20% to 30%.... that would not put you too much into the market and also have some insurance in case of higher inflation...



For me to be all cash or similar, I would need say 100X spending... DW will probably live 40+ years and who knows what will happen to inflation... and I want to earn money off that 100X even though it is low right now....

 

[Independent]

I have often seen the comment here "why keep playing the game after you have won?"

with the recent uptick in the market, this comment has started to haunt me. I am not a market timer, and this question is not geared towards that issue. I am feeling like I no longer need the risk in my portfolio, but would appreciate any advice from those that have gotten to this point.

so how did you come to the conclusion that you have enough? what metrics did you use to decide to withdraw from the market? are fixed income instruments the only investment vehicles that you are using now?

Thanks in advance for any replies.

When I can meet all my needs and "enough" of my wants by moving my assets to a TIPS ladder, while also spending 75% of current SS and whatever DB pension I might have.

 

[ShokWaveRider]

We did, no greed gland here. Just me and the "old" girl to look after, no kids, no parasites, no heirs. Just us. We have more than enough for 2 lifetimes let alone one. Anything that is left goes to the blind dogs.

Signed, a VERY sound sleeper.

 

[Ticker]

my sincerest thanks for the replies...got a lot to consider about risk vs inflation, and appreciate the collective wisdom of the group.

I can't discuss this with DW, she doesn't care about the details-her only demand is that we don't have to eat Alpo in our later years.....

Red- I remember the WIN buttons, and that when they came out the price of a federal duck stamp doubled, leading me to question the sincerity of the federal gov't. I got special bond money for a mortgage at 12.5%

thanks again for all of your responses!

 

[IMATERP]

I'm 57 and I am comfortable with 40 - 50 % in equities. In addition, I have a pension and State provided Health Care which begins at 60.

I can afford a lower percentage due to the fact we have our house paid off and most of my personal living costs are quite minimal, even with a couple of vacations each year.

Inflation scares me - but I firmly believe that the "forces" will need to adopt different policies to quash any mass increases + the countries debt is too high to absorb a high percentage of inflation.

Is it possible, of course.... But we will be able to survive much longer than most others.

I

 

[Aerides]

Enough to RE is one number.

Enough to say "take it off the table and put it all in a CD" is entirely another number, probably would have to be at least double your RE number for a 15 year retirement, triple for a 30, etc.

For me to say "won the game" in that definition, idk I'd want at least 8 figures, even then...I think I'd still keep 20% invested.

 

[flyingaway]

Moving from 85/15 to 70/30. Don't want too much risk anymore.

 

[Gumby]

. . . Plus the book Against the Gods: The Remarkable Story of Risk . . . .

That was a very good book for anyone at all interested in finance.

 

[easysurfer]

I rebalanced on Jan 2, and haven't looked that closely since.

Don't want to look as I don't want to think about tinkering around more than my plan of only rebalance once a year. Otherwise, I'd be saying I'm NOT market timing and having to plead my case .

 

[Mdlerth]

The game never ends because the rules will keep changing

Enough to RE is one number.

Enough to say "take it off the table and put it all in a CD" is entirely another number, probably would have to be at least double your RE number for a 15 year retirement, triple for a 30, etc.

For me to say "won the game" in that definition, idk I'd want at least 8 figures, even then...I think I'd still keep 20% invested.

+1

I have enough to RE now, based on a number. But that number is a function of other numbers, some of which need to exhibit growth to be a reliable funding source in the face of inflation/taxes/miscellaneous threats. I expect that some equity exposure will therefore be necessary over my anticipated 30 year retirement.

If I can't rely on some growth, then my RE number would need to be so large I'd never retire.

 

[RobbieB]

My Pops died at 92 years of age.

At that time he was 75% equities, 25% cash/bonds.

 

[growing_older]

I'm with Braumeister. People who talk about "winning the game" and moving entirely out of equities seem to me to be playing an even more dangerous game. If you want to lower equity percentage to 50% or 40%, fine. But going too low introduces a new way to fail and in my lifetime I have seen high inflation destroy fixed income investments.

I'd rather "win the game" by having such a big pile divided every which way, so I'm sure to have both winners and losers and cover as many economic possibilities as I can. It doesn't bother me to have more than I need and leave some for family or charity. I'm going to have to do that anyway since I do not know how long I'll live or what higher medical expenses I might face.

 

[JoeWras]

Survey says.....

Braumeister nailed it!

My FIdo guy used the "won the game" phrase when suggesting an annuity. I asked him (young guy) if he remembers WIN badges. They were popular is the seventies (when I was in high school). He looked confused. I suggested he google the topic and wished him a good day as I left.

I remember! Wasn't that "I'm going to Whip His A..." wait, wait. Wrong President. It was the one before. "Whip Inflation Now". What's my prize?

Yes, I've won, but that simply means only being 50-55% in equities instead of 75%.

 

[audreyh1]

Technically 30% equities would be enough to protect against inflation, but I’m not ready to go that low until I think my retirement horizon has dropped to say under 25 years.