Poll: Lowest equity allocation possible from retirement tools

[COcheesehead]

Doesn't the poll response depend on a number of individual factors including age, portfolio size, risk tolerance, and income from SS, pensions or annuities?

The question is asked from your perspective.

 

[MarieIG]

Zero.

 

[COcheesehead]

81% of the respondents so far can likely have a success retirement without equities.

 

[MarieIG]

Doesn't the poll response depend on a number of individual factors including age, portfolio size, risk tolerance, and income from SS, pensions or annuities?

IMHO - yes - it certainly does.

 

[COcheesehead]

IMHO - yes - it certainly does.

Yes, completely agree.

 

[bada bing]

81% of the respondents so far can likely have a success retirement without equities.

I can just barely get my desired withdrawal with 100% success using 0% equities. Worst case prediction for my plan is $9K portfolio value at the end of 30 years if using 0% equity.

A related but unasked question is why ? IMO its a rather non-sensical question. 0% equities is not the safest portfolio allocation and is just the opposite of diversification. If I was "I've won the game and don't wish to play anymore", I would adopt a 20-80 portfolio. The lowest overall risk portfolio according to Efficient Frontier studies.

I get Firecalc higher ending portfolio balances and/or higher permissible withdrawal rates using higher equity allocations. I've been 60/40 for years, but I'm currently on a "rising equity glideslope" by spending just from fixed income. I expect to be 70/30 by age 70 (5.5 years). But 0% equities? Not even a consideration for me. But yeah, I could do it.

 

[street]

Doesn't the poll response depend on a number of individual factors including age, portfolio size, risk tolerance, and income from SS, pensions or annuities?

Absolutely.

 

[COcheesehead]

I can just barely get my desired withdrawal with 100% success using 0% equities. Worst case prediction for my plan is $9K portfolio value at the end of 30 years if using 0% equity.

A related but unasked question is why ? IMO its a rather non-sensical question. 0% equities is not the safest portfolio allocation and is just the opposite of diversification. If I was "I've won the game and don't wish to play anymore", I would adopt a 20-80 portfolio. The lowest overall risk portfolio according to Efficient Frontier studies.

I get Firecalc higher ending portfolio balances and/or higher permissible withdrawal rates using higher equity allocations. I've been 60/40 for years, but I'm currently on a "rising equity glideslope" by spending just from fixed income. I expect to be 70/30 by age 70 (5.5 years). But 0% equities? Not even a consideration for me. But yeah, I could do it.

You sound like me. Rising equity glide path. I currently hold about 27% ish in equities, but could die with millions having 0% in equities.
Non sensical question is up for debate. It was more an exercise is expanding the paradigm of what is possible and at least based on this tiny sample, there are a lot of overfunded folks on this forum.

 

[Out-to-Lunch]

Personally, I thought it was an odd question at first. But once I understood the question, I realized that I had never considered this scenario for myself before. I mean, I am well aware of the LMP/RP framework and the "won the game, why play?" considerations, but never really thought about how far I could extend it in my own situation. Once I ran the numbers through FireCalc, I realized that (historically speaking) I could probably use 0% equities AND spend more than I am planning to spend. I was grateful to have this consideration foisted upon me.

However, I am not planning to alter my AA plan (which is remarkably similar to Bada Bing's last paragraph). I still feel that gives me the best chance for a comfortable dotage.

 

[COcheesehead]

Personally, I thought it was an odd question at first. But once I understood the question, I realized that I had never considered this scenario for myself before. I mean, I am well aware of the LMP/RP framework and the "wone the game, why play?" considerations, but never really thought about how far I could extend it in my own situation. Once I ran the numbers through FireCalc, I realized that (historically speaking) I could probably use 0% equities AND spend more than I am planning to spend. I was grateful to have this consideration foisted upon me.

However, I am not planning to alter my AA plan (which is remarkably similar to Bada Bing's last paragraph). I still feel that gives me the best chance for a comfortable dotage.

Good to explore the possibilities occasionally.

 

[Alan]

0% for me because pensions cover all our expenses.

 

[Koolau]

I mean, I am well aware of the LMP/RP framework and the "won the game, why play?" considerations, but never really thought about how far I could extend it in my own situation.

I had to chuckle when I looked at the poll. For the first 10 years of my ER, everyone said "You should be at at least 50% equities" even after I explained "I'd already won the game, why play" explanation for my 1/3 equities.

Heh, heh, all those folks who used to say "equities, equities, equities" have finally come clean and admitted, well, I COULD have made it without equities - but I didn't want to.

 

[dknighd]

My success rate is 100% at 0% equities and 100% at 100% equities and 100% at all points in between.

Which is a good answer since we have no idea how equities will perform in the future. We also have no idea what inflation will be. Or, whether holding equities actually puts a dent in inflation. Or what future bond returns might be.
The only knob we really control is spending. And if that knob has some flexibility it does not matter if you hold stocks or not.


Edit: I'm currently at about 33% stocks, but expect to ramp up slowly to about 50%

 

[Koolau]

Which is a good answer since we have no idea how equities will perform in the future. We also have no idea what inflation will be. Or, whether holding equities actually puts a dent in inflation. Or what future bond returns might be.
The only knob we really control is spending. And if that knob has some flexibility it does not matter if you hold stocks or not.


Edit: I'm currently at about 33% stocks, but expect to ramp up slowly to about 50%

Yep, the knob of spending is the single most important tool we have in insuring our FIRE finances. I could cut my expenses in half if need be - though it would mean moving away from Paradise. Not what I want, but I could do it.

 

[dknighd]

Yep, the knob of spending is the single most important tool we have in insuring our FIRE finances. I could cut my expenses in half if need be - though it would mean moving away from Paradise. Not what I want, but I could do it.

I would not like to have my retirement based on the "Asset Allocation" knob. But I admit, it is another knob we could turn. The problem is we really do not know what that knob does. So leave it near the middle?

 

[Koolau]

I would not like to have my retirement based on the "Asset Allocation" knob. But I admit, it is another knob we could turn. The problem is we really do not know what that knob does. So leave it near the middle?

More importantly, turn the knob to where you are most comfortable. Retirement isn't fun if you are worried. I'd rather have less money and less worry than the reverse. YMMV

 

[COcheesehead]

If predictability is important, individual fixed income assets are some of the most predictable investments out there. You’ll know what you are going to get and when you are going to get it.
Some of the financial planners I follow call it liability matching. You can lay in bonds/CDs to match however many years of virtually guaranteed income that you want even overfund it to have an inflation hedge all the while still have some degree of liquidity if you want out.

I didn’t want to have to turn the expense knob down. I wanted a retirement with consistent, reliable income. Our bond ladders fund us up to and now even past taking social security at age 70.

We really don’t worry about income, though we have no pensions.

 

[dknighd]

A clever person once said "there are many roads to Dublin"

 

[ERD50]

If predictability is important, individual fixed income assets are some of the most predictable investments out there. ....

But inflation isn't.

See bada bing's excellent post #56.

-ERD50

 

[COcheesehead]

Overfunding a ladder is a good inflation hedge.

 

[dknighd]

I think I'll add Dublin as a place I want to visit.

 

[pacergal]

Well, I guess we could be at 0, haven't run firecalc to see.

However, we have pensions and ss which cover our nice budget. Even If we had NO other savings, we could live much more fugally and save more from pension and SS for emergencies. And we could still create an enjoyable retirement life.

 

[ERD50]

Overfunding a ladder is a good inflation hedge.

Overfunding is a good hedge against anything.

But that may keep some people working much longer. No free lunch.

-ERD50

 

[COcheesehead]

Overfunding is a good hedge against anything.

But that may keep some people working much longer. No free lunch.

-ERD50

Or just how funds are allocated, more fixed income, less equity.

 

[COcheesehead]

71% so far could get by on 0% equities.