Anyone Retired And Using Buffett’s Recommended AA (90/10)?

[RetiredAt49]

I love the simplicity of Warren Buffett’s recommended portfolio (90% in a low-cost S&P 500 index fund, 10% in a low-cost short term bond fund).

I promised my spouse (after convincing her that we should fire our AUM wealth management company) that we’d stick to a “couch potato” 2 or 3 fund portfolio.

Having just retired earlier this year at age 49, about 40% of our NW is in a taxable brokerage account. Another 15% are in traditional IRA’s. The rest is in rental properties, our primary home, a business buyout, and a cabin.

I’m planning to transition my brokerage and IRA accounts to a 100% S&P 500 index fund…. As we sell rental properties over the next 5-8 years, we will slowly transition from a 100% S&P 500 ETF to a 90/10 Buffett strategy.

Anyone using this or similar strategy?

[VanWinkle]

I'm not using that 90/10, but I think it may be appropriate for you if you meet several conditions:

Able to withstand a 45-50% drop in your portfolio due to a severe bear market.

The 10% short term bond is enough to handle your expenses for 3-5 years during the severe bear market

Your wife is on board with this idea, since you indicate you will be breaking a promise you made to her.

Remember, Buffet's wife could live on the 10% bond portion for the rest of her life due to the size of his portfolio.

Best to you,

VW

[FLSUnFIRE]

I'm close IMO. A mix of Total Market (~14%), Small Cap index (~39%) and S&P equivalent (~23%) with a splash of international index (10%) make up ~95% of my investable assets. The rest is cash/equivalent. The slightly odd mix is due to available investments available in various accounts and decisions made decades ago. Small Cap takes away a bit of influence of so much weighting by the megacaps that dominate S&P and Total Market.... wasn't quite by design but I'm happy with that now. If I just had a lump of cash now I would put it all in Total Market.

[DrRoy]

No way. I am overfunded and have about 50% in equities to reduce risk.

[street]

I'm at ~80/20 with 5 different investable assets. I would feel comfortable with 90% but have been around that 80% for so many years I have just left it along.

VanWinkle, had some great and essential points on being at a high-risk investor.

[donheff]

Why the S&P instead of a total market fund?

[tulak]

Quote:

Originally Posted by donheff Why the S&P instead of a total market fund?

Because that’s what Buffett recommends?

Personally, I use a total market fund. There’s a chance I’ll be around 90% when retired, but I still have a small allocation to international. I don’t know if I’ll keep that allocation in retirement, but odds are it’ll be high.

[38Chevy454]

I was running close to that 90% equities after all the stock increases before this year's downturn. My target AA is 80/20. Basically just let it sit and rebalance if it gets too far out. My recent runup didn't rebalance since i wasn't happy with fixed income alternatives. In hindsight should have rebalanced to just cash.

I do think some total market is better than pure S&P 500. Never been much of a fan of international. I feel enough exposure with US based companies that have international business.

Being fairly long term on your retirement, I think you should be higher equities. Having real estate gives you something on the non-equity side.

[pjigar]

We are about 50%-50% split between real estate and stocks in our invested capital. Stocks are split 30% BRK-B and 70% Total US market. No international equity, no bonds. I treat RE as my bonds because they have been throwing regular free cash flow as long as we have owned them (about a decade) and we expect the cash flow to continue. YMMV.


We don't count primary home in our investments. But we live on a large acreage which represents about 25% of our net-worth so selling the acreage is our backup plan if all else fail.

[GravitySucks]

I was 90/10 the first year I retired but thinking a 2 year downturn would use up most of the safety net got me to reallocate to 80/20. The first drop taught me my true risk tolerance was not as great as I thought, and I've moved to 60/40. I sleep soundly through the ups and downs now.
I'm hoping to let it organically go back to around 70/30 as I get closer to 70 years old when SS will cover all my essential expenses.
Never was just 2 funds though.

[SecondCor521]

Quote:

Originally Posted by RetiredAt49 I love the simplicity of Warren Buffett’s recommended portfolio (90% in a low-cost S&P 500 index fund, 10% in a low-cost short term bond fund). I promised my spouse (after convincing her that we should fire our AUM wealth management company) that we’d stick to a “couch potato” 2 or 3 fund portfolio. Having just retired earlier this year at age 49, about 40% of our NW is in a taxable brokerage account. Another 15% are in traditional IRA’s. The rest is in rental properties, our primary home, a business buyout, and a cabin. I’m planning to transition my brokerage and IRA accounts to a 100% S&P 500 index fund…. As we sell rental properties over the next 5-8 years, we will slowly transition from a 100% S&P 500 ETF to a 90/10 Buffett strategy. Anyone using this or similar strategy?

I do, although it's because of FIREcalc analysis, not because of Buffett's opinion.

I'm 53, single, FIREd at age 46. My AA is 90/10 VTSAX+VFIAX/VBTLX for the portion of my portfolio that I expect to use. The remainder of my portfolio, which I expect my kids to inherit about 30 years from now, is 100% VTSAX.

Other than my paid off home, I own no real estate.

It's pretty couch potato, because I really don't buy or sell (except for rebalancing, when I need cash, and for tax reasons).

Quote:

Originally Posted by VanWinkle Your wife is on board with this idea, since you indicate you will be breaking a promise you made to her.

I don't understand the part about breaking a promise. 90/10 VFIAX/VBTLX would fit my definition of a 2 fund couch potato portfolio.

I do agree with the idea that spouses should be in agreement about investments.

[rodi]

It all depends on your risk tolerance.

I am more comfortable with risk than my DH... I've pushed him to Wellesely as a compromise from his former position of CDs. (50/50AA). My accounts are 70/30 and our common accounts invested in a manner to keep our overall portfolio at 60/40.

60/40 lets me sleep at night and makes DH who is much more risk averse sleep at night. Neither of us lost sleep due to worry during the recent fluctuations.

As others have pointed it out - it depends, in part, on the size of your total assets, and also on what other income streams and non-market assets you have. If you have pension and/or rental income that covers your spending - you can be more aggressive. If you have a big enough portfolio you can ride out downturns because your withdrawals are a small enough percentage.

[RetiredAt49]

Here's a research paper published by Javier Estrada. He specifically performed research on Warren Buffet's 90/10 portfolio from the perspective of one who is retired: https://blog.iese.edu/jestrada/files...Buffett-AA.pdf

[MarieIG]

Quote:

Originally Posted by RetiredAt49 Here's a research paper published by Javier Estrada. He specifically performed research on Warren Buffet's 90/10 portfolio from the perspective of one who is retired: https://blog.iese.edu/jestrada/files...Buffett-AA.pdf

with a "twist."

[Bamaman]

I followed a little of Buffett's suggestion and moved a bunch into S&P 500 last year. I had one other equity account that was just too large.

And I'm sucking wind on the S&P account year to date.

What's bad is I have to make a RMD before the end of 2022, and it's about equal to the most yearly salary I ever made working. And I don't really have anything to do with the money other than reinvest it.

[RetMD21]

Quote:

Originally Posted by RetiredAt49 Here's a research paper published by Javier Estrada. He specifically performed research on Warren Buffet's 90/10 portfolio from the perspective of one who is retired: https://blog.iese.edu/jestrada/files...Buffett-AA.pdf

Interesting paper but Astrid probably won't need to take 4% withdrawals

[MarieIG]

Quote:

Originally Posted by RetMD21 Interesting paper but Astrid probably won't need to take 4% withdrawals

Yes. And OP is likely too young to aim for 4 percent with increases for inflation, in particular in light of SORR.

[Koolau]

I don't need to increase my stash and am only interested in maintaining. So roughly 35% equities is plenty for me and lets me sleep nights. Also, I'm not constantly looking at my holdings. YMMV

[Markola]

Jimmy Buffett has an asset allocation?

[GravitySucks]

Quote:

Originally Posted by Markola Jimmy Buffett has an asset allocation?

90% Cheeseburgers / 10% Margaritas