Talk me out of selling everything

[RetiredAt49]

A retiree would be smart to go mostly fixed income, especially now that CD rates are improving. An easy math sample: $1M at 4%= $40,000. That generated income would really help in my humble opinion.

I’ll stick with my 100% equities allocation at an average return rate (based on historical data going back more than a century) of just over 10%

 

[COcheesehead]

I’ll stick with my 100% equities allocation at an average return rate (based on historical data going back more than a century) of just over 10%

With the theme from Jaws playing in the background…

The SORR monster lurks

 

[FREE866]

I’ll stick with my 100% equities allocation at an average return rate (based on historical data going back more than a century) of just over 10%

Yep. Emotionally it can be a hell of a ride and it isn't for everyone, but strictly numbers wise it renders the largest portfolio balance.

 

[COcheesehead]

Yep. Emotionally it can be a hell of a ride and it isn't for everyone, but strictly numbers wise it renders the largest portfolio balance.

Not always - if you have significant downturns early in retirement and you are taking money out - classic return sequence risk - you are selling equities low without the opportunity for those sold shares to rebound.

 

[Mountain skier]

Not always - if you have significant downturns early in retirement and you are taking money out - classic return sequence risk - you are selling equities low without the opportunity for those sold shares to rebound.

Very true.

 

[FREE866]

Not always - if you have significant downturns early in retirement and you are taking money out - classic return sequence risk - you are selling equities low without the opportunity for those sold shares to rebound.

Right, but depending on the % you're withdrawing the effect isn't tremendous. Yes, significant downturns happen, but when they do they are followed by huge bull markets. If you want or need growth you want to have a big % in equities.



For me, it's about time frame--I retired at 50, am 56 now so barring a tragedy I still have a multi decade investment horizon. I also have ~ a years expenses in cash so April of 2020 for example I dipped into that as opposed to selling equities.

 

[COcheesehead]

Right, but depending on the % you're withdrawing the effect isn't tremendous. Yes, significant downturns happen, but when they do they are followed by huge bull markets. If you want or need growth you want to have a big % in equities.



For me, it's about time frame--I retired at 50, am 56 now so barring a tragedy I still have a multi decade investment horizon. I also have ~ a years expenses in cash so April of 2020 for example I dipped into that as opposed to selling equities.

You are right. Cash is one way to ward off SORR, but the post I responded to said 100% equities.

I still have funds in equities. In dollar terms it’s over 7 figures, but in percentage terms I am at 25%.

 

[FREE866]

You are right. Cash is one way to ward off SORR, but the post I responded to said 100% equities.

I still have funds in equities. In dollar terms it’s over 7 figures, but in percentage terms I am at 25%.

wow...you have a lot of money


well done!

 

[yosemite]

Hopefully you didn't sell everything OP. The last 2 weeks were quite great. I'm new to the forum but rereading JL Collins and Morgan Housel always helps

 

[Mountain skier]

For me it has come down to preserving what I have. I just placed an order to sell the worst investment I have ever made (MDDCX). I've lost 31% ..I also took a big hit when I sold my investment grade bond fund (VFIDX) a few months ago..Glad I sold when I did. It's lower now but I'm left with an amount I am happy with. I have begun buying my own investment grade bonds which are mostly C.D's, treasuries, and govenment agencies. I am still about 10% in an equity index fund (SWTSX) which will give a little upside should the market go back up.. I just can find no compelling reasons why the stock market will go up any appreciable amount any time soon..When I was working I wanted to grow the nest egg. Now I just want to keep it from breaking.. I'm sleeping better now. Good luck to ya..

I too have very little faith in the market being overly positive currently; at least not until the results of the 2024 election and probably the near end of Fed rate increases to name a few items of concern. As a retiree I feel it is time to buckle down

 

[RetiredAt49]

Not always - if you have significant downturns early in retirement and you are taking money out - classic return sequence risk - you are selling equities low without the opportunity for those sold shares to rebound.

I understand SORR very well and so did the father of the 4% rule, which takes into account the worst period one could have retired and still not run out of money.

I am a math guy (and a software engineer) and so when it comes to retirement I am okay with having over a century's worth of data + analysis to base my retirement and asset allocation decision on.

If things get horrible (stock market drops 80% tomorrow for over a year) I'll cut back my expenses and if things are really bleak I'd pick up a software gig or become a Walmart greeter... actually, scratch that last comment

 

[Mountain skier]

I understand SORR very well and so did the father of the 4% rule, which takes into account the worst period one could have retired and still not run out of money.

I am a math guy (and a software engineer) and so when it comes to retirement I am okay with having over a century's worth of data + analysis to base my retirement and asset allocation decision on.

If things get horrible (stock market drops 80% tomorrow for over a year) I'll cut back my expenses and if things are really bleak I'd pick up a software gig or become a Walmart greeter... actually, scratch that last comment

RetiredAt 49, is your AA 100/0? I do not have the bravery for such an AA lol.

 

[RetiredAt49]

RetiredAt 49, is your AA 100/0? I do not have the bravery for such an AA lol.

My AA is very close to 100% equities... however, we have some rental properties that don't generate much revenue (because some of our kids live and rent from us) so if things get desperate we could sell a rental (or two). However, everything else (taxable brokerage, traditional/roth IRA's) are 100% equities.

 

[Mountain skier]

My AA is very close to 100% equities... however, we have some rental properties that don't generate much revenue (because some of our kids live and rent from us) so if things get desperate we could sell a rental (or two). However, everything else (taxable brokerage, traditional/roth IRA's) are 100% equities.

Wow. Just curious, if I may ask, do you have pension income too?

 

[Chuckanut]

A retiree would be smart to go mostly fixed income, especially now that CD rates are improving. An easy math sample: $1M at 4%= $40,000. That generated income would really help in my humble opinion.

Possibly, but 4% is still well below the inflation rate leaving one with negative real return.

I realize that depending upon one's personal inflation rate that may or may not be bad. But, a personal rate can also change. For example, in my area property taxes are due to rise considerably next year, a carbon tax will boost fuel prices, medical expenses - while still small - increase every year, and utilities are also increasing quite a bit. So is the cost of of paying people for certain car and home repairs that I cannot do for myself.

IOW, I still need a few long term inflation beaters - stocks and maybe inflation protected Treasuries.

 

[ERD50]

Not always - if you have significant downturns early in retirement and you are taking money out - classic return sequence risk - you are selling equities low without the opportunity for those sold shares to rebound.

Very true.

True, but historically, even a 100/0 is safer (fewer failures, or another way to say it - you can spend more w/o running out) than getting down to or below 35/65.

Here's the output of FIRECalc, % equities ve success rate:


-ERD50

 

[Mountain skier]

True, but historically, even a 100/0 is safer (fewer failures, or another way to say it - you can spend more w/o running out) than getting down to or below 35/65.

Here's the output of FIRECalc, % equities ve success rate:


-ERD50

I do not believe one can put much trust in historical averages because many situations/causes that made the USA so productive are not nearly as prominent or possible now.

 

[SecondCor521]

With the theme from Jaws playing in the background…

The SORR monster lurks

I agree with RetireAt49.

I'm at about 99/1 AA at age 53. No rentals, no pension. SS at 70. 1% net WR.

I base my 99/1 AA on the *historically safest* results from FIREcalc based on my inputs and a 95% safe spending rate. That indicates that historically a 90/10 portfolio has the highest safety margin over my 37 year time frame. (With my own particular inputs, I get graphs pretty similar to ERD50's from a couple of posts above.)

Because I have about 5x what I need, I have my 1x needs at 90/10, and the remaining 4x at 100/0 for my kids, which averages to 98/2. I'm currently out of whack by about one percentage point.

I also think the structural economic advantages that the US has remain and are likely to remain into the future. As I have said a few times before, I am a relentless optimist.

 

[COcheesehead]

True, but historically, even a 100/0 is safer (fewer failures, or another way to say it - you can spend more w/o running out) than getting down to or below 35/65.

Here's the output of FIRECalc, % equities ve success rate:


-ERD50

For me Firecalc says I can go down to 15% equities and still have my plan work.

Edit, I just reran it. FireCalc says I can have 0% in equities and have my plan work. Maybe it’s tell to sell all my equities. LOL

 

[daylatedollarshort]

I understand SORR very well and so did the father of the 4% rule, which takes into account the worst period one could have retired and still not run out of money.

This article is from this past June - Is It Time to Move to Cash? The Father of the 4% Retirement Withdrawal Rule Did. | Kiplinger

 

[ERD50]

I do not believe one can put much trust in historical averages because many situations/causes that made the USA so productive are not nearly as prominent or possible now.

You could be right of course. But I think that would mean that companies would not be able to pay high rates for bonds either? So I'm not sure the balance would change.

Also recall, this isn't about averages, it's about the worst of the worst of that history - that's where the failures are. Will the future be worse than the historical worst (maybe)? But that's way different from being worse than average.

-ERD50

 

[RetiredAt49]

This article is from this past June - Is It Time to Move to Cash? The Father of the 4% Retirement Withdrawal Rule Did. | Kiplinger

Yep, I saw that article when it was published. I also watched him discuss that decision with Rob Berger and apparently he's always been a market timer so the analysis he performed regarding the 4% rule was not based on what he personally does in retirement. He also mentioned that he personally could live on a cash account exclusively until he passes (e.g. he doesn't need to make any return on his investment). I'm perhaps not quite that lucky as I'm only 50 but again a person's AA (and more importantly what we invest in) is a very personal decision we all make.

I retired 1/1/2022 so watching my portfolio tank ~25% wasn't fun but I trust in capital markets and the strength of the US economy - in addition to having and analyzing over 100 years of data and having a ton of people study the data and produce things like Bill Bengen's 4% WR.

 

[copyright1997reloaded]

Disclaimer: At this point in time I have a lot (% wise) in fixed, almost all short term. This is somewhat a function of transferring a large 401K to IRA (not in kind), which I am slowly deploying into both fixed (T-Bills, slightly longer dated CD's) and equities.

I do not believe 100% fixed is a good plan, simply because the fundamental issues causing inflation will not be going away. There is simply no will on the part of our leaders to return our economy to a path which does not include tremendous government debt and transfer payments.

Given 4% rates, just the income on my net worth would be enough for my lifetime - without my pension and without social security. (ETA: Assuming inflation is reduced and can stay at a low 2% rate -- which is NOT my assumption.) As big as the temptation is, I intend to increase my equity allocation back to the 50% mark. For better or worse. In the meantime, I am buying (almost every day) another fixed instrument to move money market funds into pieces of a relatively short term bond ladder.

 

[RetiredAt49]

Wow. Just curious, if I may ask, do you have pension income too?

No I do not have a pension…. We have a taxable brokerage account, Roth/Traditional IRA’s, rental properties, and a small business buyout.

Our taxable and retirement accounts are 100% in equities. Our rental properties and business buyout (which will last for another ~8 years) cover about 50% of our current expenses so our WR from our taxable account is about 1.5%.

 

[Mountain skier]

No I do not have a pension…. We have a taxable brokerage account, Roth/Traditional IRA’s, rental properties, and a small business buyout.

Our taxable and retirement accounts are 100% in equities. Our rental properties and business buyout (which will last for another ~8 years) cover about 50% of our current expenses so our WR from our taxable account is about 1.5%.

Thank you for sharing