Warning from Fidelity to Boomers

[HMMY]

I didn't read the article, but I did go from 80/20 to 70/30 the year I hit my target and to 55/45 the next year when I retired. My retirement rule is to keep the lesser of 45% or 12 yrs expenses in fixed income. At the moment, I have 12 yrs expenses in fixed income and a ratio of 59/41.

[DSC800]

Quote:

Originally Posted by Souschef The old conventional wisdom was to hold 100% less your age in stocks. In my case, I would have been 30 % in stocks in 2008, and 20 %. now. I would have missed the run up in those 10 years big time. BTW, I am 100% in equities..now and then.

Souschef, I'm with you, 100% equities (actually >95%, but close enough). I'm 58 and my wife and I both just retired. Everyone is different with the biggest factors being how much we've accumulated, how much we need and our tolerance level. For us, I only invest in DGI stocks, a rental I've owned for 30 years along with zero debt of any kind. We expect to live another 30 years, plan on a 2-3% WR, but could live off of 1% of current assets if we had too (eat more oatmeal). This does not count SS, which might be enough by itself (more oatmeal though).

Bonds, Treasurys, CD's, just don't perform well, with little to no inflation protection and are usually taxed as ordinary income. Dividends and LTCG have a favorable tax treatment, including zero up to $77k.

Considering all, after managing my own investments all my life, I'd have a difficult time even going to 20% fixed income, so why bother with any since that allocation would not be much of a cushion.

[Markola]

About the best one can do is set an AA based on one’s risk tolerance and keep it there, diversify, keep costs low.

[inkitnow]

I told my financial guy five years ago that I don’t care about making a killing or even seeing substantial gains. I just don’t want to lose anything.

I’m in 80% municipal bonds; 20% stocks.

[aja8888]

Quote:

Originally Posted by inkitnow I told my financial guy five years ago that I don’t care about making a killing or even seeing substantial gains. I just don’t want to lose anything. I’m in 80% municipal bonds; 20% stocks.

If you told him you didn't need any performance, why use him at all?

[inkitnow]

I ask his advice on a small Fidelity account I “play” with and I do have some stocks. He oversees the bond management company too. Besides, he talks me down from the ledge from time to time.

[Mike93]

Some watercooler talk:

I heard that the more robocalls you get from annuity salesmen means the more the market is likely to go up. The idea being that selling an annuity to lock in your returns is a bad business deal if the market goes down. I guess this implies that it has to be one of those 'hybrid' annuities.

Mike

[Ducati52]

Quote:

Originally Posted by freedomatlast .He did say that they see US economy slowing down next year and being down for a year and then coming out of it. I've heard one "expert" or another say that every year since 2014 1817.

Fixed it for you . . .

[Running_Man]

Quote:

Originally Posted by LOL! Did you buy Fidelity Total Bond -- the high expense ratio actively-managed bond fund? Why that one and not a total bond market low-expense ratio index bond fund?

Because index bonds are forced to purchase negative yielding bonds

[audreyh1]

Quote:

Originally Posted by Running_Man Because index bonds are forced to purchase negative yielding bonds

Which index bond funds? FXNAX? It has a very small exposure to non-US bonds and I suspect they might be corporate bonds.

This is an issue for international bond index funds.

[pb4uski]

Quote:

Originally Posted by audreyh1 Which index bond funds? FXNAX? It has a very small exposure to non-US bonds and I suspect they might be corporate bonds. This is an issue for international bond index funds.

+1. Not a significant issue for domestic bond funds, or probably even managed international bond funds... principally index international bond funds.

[PoorOldCountryBoy]

Quote:

Originally Posted by RobotMom I've basically seen the same article three or four times today that Fidelity is sounding the alarm to baby boomers within 10 years of retirement to cut back on stocks. They are recommending that people in this category have their portfolio in 70% or less stocks. I've been in the process over the last few years to increase my bond holdings. My DH and I fired our financial planner a few years back and he had us in all stocks (some market sector mutual funds - like healthcare and real estate). I've been slowing shedding some of that stuff and rebalancing. I logged in today and discovered that I am at 76% stocks. So I decided to trade $50k of Fidelity Small Cap Discovery to Fidelity Total Bond (which I already hold) and $50k of Fidelity Low Priced Stock to Fidelity Capital and Income. I discovered through my research that the two stock funds historically have done about the same performance as the bond funds. So I **think** I preserved my growth potential while also reducing risk... Is anyone else contemplating changes based on the Fidelity guidance? Or have opinions on my exchange?

Long-term most of the reasonable choices (60/40, 70/30, etc) are actually going to perform similarly. Retirement is different - you need to have the peace of mind to know **exactly** where you'll be getting the money. Plan out at least 3 years of guaranteed income (tbills, cash, cds). Years 3-5 should be low risk funds like a medium duration investment grade bond portfolio. Anything after 5 years can be a little more risky.

You want to survive a period like 1929-1937. That means guaranteed liquid investments.

If you're more than 5 years away from retirement, then you still have time to go.

[Koolau]

I'm sure I've said this before. I guess I've never understood why those of us who've "won" the FIRE game (amassed enough of a stash to be FI and RE) keep more than a minimum amount in stocks. Yes, we need to have a strategy to counteract inflation. My personal approach is about 30% stocks or so (plus a few % in PM.) More than that, I begin to feel like I'm trying to play the Lotto - when I don't need to. Thus far, my "stash" has continued to grow with my strategy (beginning in '05). I even weathered the unpleasantness of '08 to '10 without losses. As always, YMMV.

[DrRoy]

Due to the great run this year, I have pulled more to spend next year, and along with rebalancing for that, also notched my AA down another point to 58%.

[UnrealizedPotential]

I am age 50. I have a 50/47/3 portfolio. I still remember in 2007 when I was riding the market to the highs. Then in 2008/2009 I rode it to the market lows.
It was ugly for me and I never forgot the experience. I fully recovered and since then I have never been in 100% equities again.
No, I have no idea what the stock market will do in 2020 but then neither does anyone else. I do know what a full blown bear market will do to a portfolio that is 100% in equities and it isn't pretty.

[pacergal]

I am comfortable anywhere from 70/30 to 60/40, have a pension so that helps the sleep at night factor.

[Bir48die]

Quote:

Originally Posted by pacergal I am comfortable anywhere from 70/30 to 60/40, have a pension so that helps the sleep at night factor.

We are at the exact point you are so we have the pension and DW's SS to fall back on. I have Deferred Comp that I'm obligated to take for another six years so that could vary for sure. However, my SS can be activated at any time which allows us enough by far to have a nice monthly budget and not touch our portfolio. That will be my sleeping pill.

[LRDave]

We have about 8% in short-term savings/CDs and about 15% in TIAA Traditional. We could live for 10 years (or more) on that. We also have a modest COLA'd pension starting next year.

I've finally gotten DW to see a market correction in the coming years as good timing (Roth conversions of equities) - given that a correction is going to happen SOME time.

[karen1972]

I often seen advise like that for bond ratios but I often don't see any advise on cash on hand.

I keep roughly 2 years of cash equivalent on hand. Dividends would provide another year and half, cutting back on the budget could give us up to another year and half, so like 5 years.

Maybe I'm wrong but it always seems to me its not a bond/stock issue but a zero cash issue that forces one to make poor decisions out of need rather than due diligence.

[gayl]

Quote:

Originally Posted by RobotMom I've basically seen the same article three or four times today that Fidelity is sounding the alarm to baby boomers within 10 years of retirement to cut back on stocks. They are recommending that people in this category have their portfolio in 70% or less stocks. .... Is anyone else contemplating changes based on the Fidelity guidance? Or have opinions on my exchange?

No. It will be higher in 10-20 yrs than it is now, I'll be required to take it out (RMD) in 4 and that's okay. But sticking to my:
80% SPY/SCHB
9% International Index (will increase this)
1% holdover individual stocks
10% bonds / CDs (decreasing this)
+ 6 months 'travel expenses'

Articles like that don't fit everyone. As previously stated:

Quote:

Originally Posted by Dtail ...I think a large part of this decision is how dependent one is on their portfolio for living expenses.