Midpack
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
While staying out of equities certainly reduces volatility/risk and that 'uncertainty' - at what cost? Some members choose to invest entirely in munis, CDs and other non-equity asset classes which is fine. But to tacitly suggest that's likely to provide the same or better results as a traditional equity/bond portfolio is 'unprecedented' in the US since 1871.
But let's say the US (or worse) is doomed and equities are just too risky. For those who take this approach, how about quantifying what it actually means in $ to build a portfolio that relies entirely on non-equity assets, so other members can fully evaluate that option?
I don't claim to know what the full costs are, but presumably folks who take that approach would have a better handle on it since they've chosen that path. With nothing better as a basis I used FIRECALC and solved for a 95% success rate over 30 years yields and using $1M as the baseline for a FIRECALC default 75% equity portfolio (and BTW, that's retiring at 65, not even early retirement). Again, the first line is simply to show the results for the presumed discredited 75%/25% portfolio of the past.
Holdings|Nest Egg Required|WR@95% success
75% equity / 25% bonds|$1,000,000|4%
100% bonds|$1,410,000|2.8%
50% US LT Treas / 50% LT Corp Bond|$1,624,000|2.45%
If either of these are in the ballpark, avoiding stocks means you'll have to work 40-60% longer or spend 40-60% less in retirement, or some combination. At current yields, much worse than historical averages, presumably it would be even more difficult.
I hope someone will come along and improve on my crude estimate regarding the cost of reducing/eliminating uncertainty.
But let's say the US (or worse) is doomed and equities are just too risky. For those who take this approach, how about quantifying what it actually means in $ to build a portfolio that relies entirely on non-equity assets, so other members can fully evaluate that option?
I don't claim to know what the full costs are, but presumably folks who take that approach would have a better handle on it since they've chosen that path. With nothing better as a basis I used FIRECALC and solved for a 95% success rate over 30 years yields and using $1M as the baseline for a FIRECALC default 75% equity portfolio (and BTW, that's retiring at 65, not even early retirement). Again, the first line is simply to show the results for the presumed discredited 75%/25% portfolio of the past.
75% equity / 25% bonds|$1,000,000|4%
100% bonds|$1,410,000|2.8%
50% US LT Treas / 50% LT Corp Bond|$1,624,000|2.45%
If either of these are in the ballpark, avoiding stocks means you'll have to work 40-60% longer or spend 40-60% less in retirement, or some combination. At current yields, much worse than historical averages, presumably it would be even more difficult.
I hope someone will come along and improve on my crude estimate regarding the cost of reducing/eliminating uncertainty.
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