I have sinned. I sold

[aja8888]

All wise thinking IMHO. But what do I know, I'm just a youth of 63

Have fun! Time flies. I remember 63 like it was yesterday!

 

[mathjak107]

Have you analyzed how closely clustered those 90 special up days were to similar down days?

Wouldn’t matter how they are clustered when stays invested

 

[audreyh1]

Out of equities?

I’m curious, since the rising equity glidepath per Kitces has been discussed here in the past.

I imagine so, yes. More the traditional approach.

The Kitces glide path is for surviving market stresses early in retirement. Whether you maintain a high equity allocation in the face of a much shorter life expectancy doesn’t matter so much.

I didn’t use the Kitces glide path since it hadn’t been published before I retired, and when it was there was no benefit changing from my allocation at the time.

 

[daylatedollarshort]

The problem is that the nervous nellies who bail out don’t have balls of steel when it comes to putting it back in.

I don't have balls of steel and I don't want a retirement investment plan that requires balls of steel. TIPS at 1.33% provide a safe withdrawal rate of 4% over 30 years. Since we likely won't even live another 30 years, and TIPS real yields are .98 - 1.22% now and rising, that is good enough for us.

I sold all the bond funds at the beginning of the year, lowered the already small stock allocation and moved what was left to a dividend fund, and have been buying Treasuries and TIPS this year with the money. Since pensions and SS cover most our expenses, this is more than good enough for us without having to worry about the stock market and glide paths.

 

[mathjak107]

For 4% to hold Michael kitces crunched the numbers and found you need at least a 2% real return the first 15 years of a 30 year retirement.

Every single failure to date , 1907, 1929 , 1937 , 1965 ,1966 happenedwhen the real return fell below 2% …

Even the best bull markets afterwards could not save them.

 

[daylatedollarshort]

For 4% to hold Michael kitces crunched the numbers and found you need at least a 2% real return the first 15 years of a 30 year retirement.

Every single failure to date , 1907, 1929 , 1937 , 1965 ,1966 happenedwhen the real return fell below 2% …

Even the best bull markets afterwards could not save them.

Even a zero real return on TIPS (same as I bonds currently) gets you a 3.33% safe withdrawal rate on TIPS (100 / 30 years = 3.33%). It is just straight math with TIPS and I bonds, held to maturity, plus taxes if held in a taxable account. Our planned withdrawal rate is 1% or less, so 1% real yield on TIPS means the inflation adjusted value of the portfolio stay the same throughout our remaining lives and that is what we can leave the kids. No chance of big gains or big losses like there is with the stock market and we're fine with that.

Safe Withdrawal Rate (SWR) with Treasury Inflation Protected Securities (prospercuity.com) - "But even a TIPS portfolio that yielded only 1.3% real would sustain a 4%, inflation-adjusted, safe withdrawal rate over a 30-year period. That is, it would safely sustain just as generous a level of retirement expenditures as a risky portfolio, to which the 4%-SWR rule was applied, but with a lot less heartburn."

 

[mathjak107]

Not really ,,,you can’t assume the cpi will match your personal inflation rate at all which means you have sequence risk .

Plus there are always expenses in left field that require more spending then budgeted for.

Our first years retired saw over 40k in dental for my wife and I unexpectedly..

We had 3 kids get married and wedding gifts blew our years budget .

In fact we just got notice our long term care premiums is going up 68% next month to 12k a year for both of us .

Numbers on a spread sheet rarely spend as planned

 

[daylatedollarshort]

Not really ,,,you can’t assume the cpi will match your personal inflation rate at all .

Plus there are always expenses in left field that require more spending then budgeted for.

Our first years retired saw over 40k in dental for my wife and I unexpectedly..

We had 3 kids get married and wedding gifts blew our years budget .

In fact we just got notice our long term care premiums is going up 68% next month to 12k a year for both of us .

Numbers on a spread sheet rarely spend as planned

We sleep pretty well with a 1% withdrawal rate and house in a HCOL area we could rent or downsize. With 1.33% real yield TIPS, and a 1% withdrawal rate, we could withdraw another 2.66%, if needed. There is no guarantee we would do any better with stocks in our remaining life span, and a chance we could do much, much worse. As the saying goes, if you've won the game, why keep playing? Especially if you value tranquility over needing steel balls.

 

[DJRR]

Just having "more than enough" to make it long term with a good lifestyle is comforting to us. Plus, we will leave a nice inheritance for the kids as it is. There comes a time when peace of mind is more important than thinking about glidepaths and a portfolio performance.

If you have won the game there is no shame in not going to the casino. For me, I think I will always have a significant exposure to stocks because I have a confidence in future earnings and want to leave a higher terminal balance for people and causes I care about. It is about the closest thing to a sure bet that I can access. Gamblers have always striven to get above a 50% chance, stocks have provided well above that for a long time - 100% over 30 years if you ignore inflation.

 

[mathjak107]

As far as counting on Tips to totally support a retirement .

The why not was stated best in ERIC DESLAURIERS book on the PERMANENT PORTFOLIO., INVESTING EQUANIMITY


Numbers in a spreadsheet do not tell you about political risk that often comes with high inflation. You have to use some intuition and historical extrapolation to guess what results from high inflation and why you don't want to use TIPS.

1) High inflation is a political problem in almost every case. The people causing the inflation know they are doing it.
2) Because high inflation is unpopular with the masses, the people in charge are always going to lie about it as long as possible to deflect blame.
3) Then when lying doesn't work, they will implement policies like price controls to make it look like they are doing something. This always makes it worse.
4) Along the way, they will manipulate economic numbers to try to trick the markets. However the markets are much smarter than the typical politician, who is usually an idiot based on my experience.

But these things are not going to show up in Excel. There is no ("IDIOT POLITICIAN ) function you can call. There is no way for you to anticipate what actions they will take to lie about the situation. And, there is no way for you to know how the markets are going to react to the mess.

I will only suggest that the markets will figure out the right thing to do and that right thing usually is not relying on government numbers about inflation.

so tips are like buying fire insurance from an arsonist

Or you can simply go back and read Nixon's, Ford's and Carter's speeches about inflation in the 1970s. It was lie after lie after lie. A decade of lies.

TIPS may be OK for the cash portion of the portfolio. But I wouldn't rely on them in the slightest for protection against high inflation. For lower inflation the bonds and stocks are all you need.

 

[target2019]

Yep. If you don’t like the results, broaden the time frame.

I am up $300,000 since January of 2020 and that includes taking out almost three years of expenses, buying a car, furnishing a new house, some trips…

If I just look at the last 12 months, I’d feel bad too.

S&P 500 is -10% for 1 year. That doesn't make me feel bad.

Going into retirement 2.5 years ago I had gradually set our investments to 50/50 AA. I did that recognizing the worst drawdown on various AA ratios. IOW, I accept what happens and don't make strategy changes.

I realize every one is different. I can only offer what we do as an example. It's just talk.

 

[Lsbcal]

I always kind of like these threads and yet find them somewhat worrying. Is A right and how about B's take? How does my position check out with the consensus but wait, there seems to be no consensus.

Anyway, most of us here do not describe the complete picture of our situations. Factors like age, risk tolerance, holdings in other asset classes, spending patterns, pensions, etc. are rarely fully described. I wouldn't want to discuss all that stuff fully myself. So how could I criticize others strategy?

FWIW, I recently sold down from a 70/30 portfolio to a 60/40 one. Did that at an intermediate high point when the market was off -10% for the year. Sort of lucky but I was waiting for the counter rally which did actually happen. As of yesterday it was off -16.5% YTD. I did this after analyzing our fixed income, future RMD's, etc. and realizing that I needed more FI. So these were kind of personal reasons as well as having a better sleep factor. Also I had sold off all the bond funds in early January due to being an FI chicken.

As Cramer says, "there's always a bull market somewhere". Right now for me it is in TIPS. The 5 year TIPS at about 0.93% look pretty good. Might go higher, who knows.

 

[daylatedollarshort]

But I wouldn't rely on them in the slightest for protection against high inflation. For lower inflation the bonds and stocks are all you need.

How have stock and bond funds been working out this year with high inflation compared to TIPS and I bonds?

 

[Dtail]

IMHO, selling bond funds and substituting with individual bonds, CD's, MYGA's etc, is not the same as trying to time getting in and out of equities.
If one sells equities and truly stays out forever, then that is a different decision. If one is waiting for certain levels to get back into the market, that usually does not work out so well.

 

[mathjak107]

How have stock and bond funds been working out this year with high inflation compared to TIPS and I bonds?

One year in the life cycle of an asset means nothing.

For the record the etf TIP is down about 9% ytd

 

[frayne]

I am more worried about staying healthy at this age, although I am in great shape for my age, than I am about "glidepaths" or long term return on equities.

Just having "more than enough" to make it long term with a good lifestyle is comforting to us. Plus, we will leave a nice inheritance for the kids as it is. There comes a time when peace of mind is more important than thinking about glidepaths and a portfolio performance.

I'll take 4% long term now as long term may not be that long anymore.

I'm sleeping well and my golf game is pretty good.

Thanks and these are pretty much the bullet points of my life and have been for the last 17 years. Wealth without health is meaningless.

 

[COcheesehead]

S&P 500 is -10% for 1 year. That doesn't make me feel bad.

Going into retirement 2.5 years ago I had gradually set our investments to 50/50 AA. I did that recognizing the worst drawdown on various AA ratios. IOW, I accept what happens and don't make strategy changes.

I realize every one is different. I can only offer what we do as an example. It's just talk.

10% doesn’t sound bad, but when you look at whole numbers and see you are down a value in the high six figure range, you just have to look away. Broaden the time frame is my mantra. Broaden the time frame.

 

[daylatedollarshort]

One year in the life cycle of an asset means nothing.

For the record the etf TIP is down about 9% ytd

TIPS ETFs have the same issues as bond funds right now - rising rates and no maturity dates. TIPS as individual bonds are always redeemed at par or the accumulated inflation factor, whichever is higher, and do not have the same issue. We only hold individual bonds. Bond ETFs without maturity dates are an entirely different investment than individual bonds.

We've had a high allocation to TIPS for over a decade now and they have worked well for us, especially this year. We have low overhead, a low fixed rate mortgage and our property taxes are capped at 2%, so our personal inflation rate is just not that high. Maybe for someone like you, with a long list of high expenses and it sounds like a higher withdrawal rate, you might need to take more risk with stocks. But I don't get a thrill from stock investing like some here do, and we don't need to take on more risk for higher gains, so TIPS work great for us. YMMV.

 

[Lsbcal]

One year in the life cycle of an asset means nothing.

For the record the etf TIP is down about 9% ytd

Yes, we have to look at longer time spans, on the other hand most people don't feel comfortable with sharp drops.

ETF TIPS funds might have had a hard time this year but my individual TIPS bonds went up. If you can get maybe 1% over inflation on individual TIPS it seems like a safe bet (close to that now). If the funds were buying -2% TIPS when they were at that level, it is no wonder they suffered losses when real rates went up sharply.

 

[mathjak107]

Your base interest is fixed on individual bonds ..payments have increased over the year on the funds from January .

Over the duration value of the fund they will come out close as the increased interest offset the drop in nav …eventually you are close to the deal you bought in to when you bought or added money

 

[Lsbcal]

Your base interest is fixed on individual bonds ..payments have increased over the year on the funds from January .

Over the duration value of the fund they will come out close as the increased interest offset the drop in nav …eventually you are close to the deal you bought in to when you bought or added money

I'm not following you. M* reports the return on Vanguard Inflation Protected VAIPX as -8.5% YTD. Agrees with your previous comment about ETF's and TIPS.

We are talking about different things as my comments were about this year and how my purchase in 2018 of TIPS at high real rates worked out.

Who knows how this works out over the duration of this fund which is 7 years. If I buy at relatively high real rates that is pretty much guaranteed to pay just that. But they have to buy continuously depending on fund inflows and they bought a lot at low and negative real rates. The fund investor has no control over this. The fund's holding now fully reflect relatively high real rates, well at least positive real rates.

 

[COcheesehead]

There is a fallacy that a bond fund will equal an individual bond over the same duration. What is often left out is expense drag and forced redemption drag at mark to market prices of the fund. Funds have no predetermined par and duration is fluid. A fund and an individual bond are different. Even a ladder and a fund are different, though they appear to be the same.

 

[daylatedollarshort]

There is a fallacy that a bond fund will equal an individual bond over the same duration. What is often left out is expense drag and forced redemption drag at mark to market prices of the fund. Funds have no predetermined par and duration is fluid. A fund and an individual bond are different. Even a ladder and a fund are different, though they appear to be the same.

In addition to those points, it is also a fallacy that you can only hold either bonds or bond funds, in the "I'm losing money now but I'll catch up in 6 years" examples. Many posters here sold their bond funds earlier in the year and avoided what is now a 12% NAV loss and may not be the end of it, with yields lower than 1 year Treasuries, which have no risk to principal. An investor can always rebuy the bond funds if rates level off or start to decline, and the funds start holding bonds with higher yields. There is no law that says you can't switch back and forth and this Kiplinger's article recommends doing exactly that - https://www.early-retirement.org/fo...-holding-bond-funds-114338-9.html#post2790753.

 

[COcheesehead]

In addition to those points, it is also a fallacy that you can only hold either bonds or bond funds, in the "I'm losing money now but I'll catch up in 6 years" examples. Many posters here sold their bond funds earlier in the year and avoided what is now a 12% NAV loss and may not be the end of it, with yields lower than 1 year Treasuries, which have no risk to principal. An investor can always rebuy the bond funds if rates level off or start to decline, and the funds start holding bonds with higher yields. There is no law that says you can't switch back and forth and this Kiplinger's article recommends doing exactly that - https://www.early-retirement.org/fo...-holding-bond-funds-114338-9.html#post2790753.

I enjoy the pragmatism of a ladder. It works, if executed properly. No loss of capital short of default. An interest rate hedge, some control over costs and worst case, if I need to sell, I get to chose what to liquidate.

 

[Born2Fish]

Yes. The last time I was up rather high - I wanted to be a prudent holder and I held. And now - temporarily I'm worth $300k less.

Over the last week on good days, I've sold 30% of my stocks. If things rebound hard now - oh well I missed some of it.

If things get rough because of random little things like higher rates,Fed tightening, labor shortage, Europe enjoying "going green" thanks to certain energy shortages, China Taiwan, Venezuela, earnings per share coming down, etc...then I'd love to re deploy it.

I won't try to call a bottom. S/P 3750 I'll start buying ....and keep buying in increments if it keeps going lower.

The cash is earning 2% in the bank account till then, and if a rehab flip house gets reasonable I might buy one.

They say I'm losing money with cash. I dunno, I didn't lose $300k with cash - but I did holding stocks at my apex at end of 2021.

Don't want to see my remaining holdings tank.....but if SP goes to 3500-3600...I'd really like to start some nice positions.

I think there's a pretty good chance you will get a buy opportunity soon.