100 minus your age.... When did you start investing safer?

JoseSantiago

Dryer sheet aficionado
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I'm reading some experts suggest that 100 minus your age is how much you should invest in things like bonds/high yield savings.... This seems extremely irrational to me as I don't think a 20 year old should have any money in bonds, let alone 20%... I'm mid 40s, I have around 10% in safe funds... Most of my funds are in s/p index funds.

What are your thoughts?
 
A couple of years prior to retirement I started to gear down with new money. I didn't follow any formulas. Once we decided on a target allocation that had more bonds I used the new money to get there.
 
I've read the same as Sunset - 100 has moved to 120.

But, as they say, personal finance is personal. There is a lot more to consider than the 120-minus your age rule of thumb.

Take two retired 60 yr olds - one with a pension that pays all their bills and one living solely off their investments. Or take two 50 year olds - ready to retire early and one that loves their job and wants to work 15 more years.
In each of those cases, how conservative one needs/wants to be may vary.
 
What are your thoughts?
Same as yours. Those formulas are stupid. Portfolio designs depend on lots of things, one of which is the amount of money a person has vs that person's needs. A 76YO widow with $100K has to deal with a lot different situation than a 76YO widow with $10M. One size fits none.
 
I doubt their expertise.

I'm FIREd, 55 with a sub 1% WR, and my AA is 99/1. I pick my AA as the maximal historically safe AA using FIREcalc on the portion I might spend; the rest is 100% stocks for my kids that they will inherit, hopefully in about 30 or 35 years.
 
I still have a high percentage in stocks, almost 70 yrs old now and soon to start SS. I'm pretty much investing for my kids future as our SS plus dividends on our taxable account is plenty for us.
 
Late 50's. Now 72.

During that time equities have averaged 60-75 percent. Now 65 percent or so. I an OK with 70 percent depending on the market.
 
I think the point of this sort of rule-of-thumb is not so much the precise number to subtract one's age from but rather to emphasize that there is a school of thought that conservatively advises not putting 100 percent of one's savings into the stock market, even in one's early 20s. I followed that advice when I started my 401k, and I suppose a year later when the "crash of 1987" happened I wasn't as freaked out as I could have been. But my 401k would have recovered all the same had I put 100 percent into stocks back then.

My guess is that most FIRE-ees have ignored such advice and put a higher percentage into stocks. If one wants to retire early, they will have to take on more risk.
 
I believe the traditional rule of thumb for investing can still be a good guideline, but much depends on your risk tolerance and time horizon. At 73, I maintain a portfolio that's about 60-65% equities, primarily S&P index mutual funds, and 35-40% in bonds, CDs, and other fixed-income assets. I've been investing since 1974, and through both good and bad markets, I've never lost a minute of sleep. Ultimately, it all comes down to your personal risk tolerance and how long you plan to stay invested.
 
I was 60/40 in indexes for my working career. When I retired 4 years ago I started drawing from only fixed income with the idea of drifting up to 70/30 or maybe 75/25. I'm at 68/32 now.

One aspect that I account for is that I'm currently deferring both SS and a modest pension. Doing so can be thought of as similar to making an investment in bonds. Not exactly, but it reduces plan risk even if it doesn't strictly figure into allocation. In 4 years, when I hit age 70, my SS and pension will cover my needs with something close to a zero withdrawal rate after. When I start SS and pension, I'm thinking of no longer rebalancing or targeting an allocation.. Set dividends and interest to reinvest in their respective sources and just let it ride. If I live long enough and the market does well enough I might drift up tp 90% equity indexes.

A simple age based rule of thumb for allocation isn't very valuable because it doesn't factor in your withdrawal rates. The ratio of how SIRE to FIRE a person is is an indicator of how much risk they could reasonably consider appropriate.
 
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We toyed with that "formula" for a little bit but have pretty much ditched it. I turned my entire IRA into fixed income (annuity), and my taxable is 100% equities. My husband who is in his mid-70s is now at 80-20 equities to fixed income. He was at 95-5 until July when he sold some of the positions to get MYGAs.
 
I'm confused. I thought the general advice was to invest more in "riskier" stocks when younger, and more in "safer" bonds as you age. Putting 100 (or 120) minus age in bonds would be the opposite.
 
I think of it in terms of future needs. This means 100% of my near term money in "safe" investments, and 100% of my long term money is in riskier assets. What has increased with time is the number of years worth of spending I keep in near term.
 
The difference in returns between 80/20 and 100/0 are minimal.

That being said, we didn't follow any formula related to age. We were 100% equities until about 5 years before retirement, then went 67/33.

In retirement, at 60/40 and plan on just leaving it there.
 
If you were to explain AA to somebody, that might be the first example of the concept. I don't think it is useful for anybody to apply.
 
Pretty conservative here. Possibly even ultra conservative but I have enough and preservation is more important to me than further accumulation. I rebalanced a year ago to 35/65. Equities is a total market fund and fixed is a MYGA and CD’s. I’m 63 and DW is 67. Pension and SS meet most of our needs so no real withdrawal needed. We have about 10 years in our taxable brokerage account given that our needs above SS and Pension are minimal.

At this point, I’m ignoring my AA with the belief that it will likely drift higher on the equity side as the market grows and any spend will come from the fixed side.

ROTH’s are 100% equity and hopefully that will pass untouched to my daughters. Hopefully even more but that’s all dependent on health needs down the road.
 
I've posted this here before. A bit dated but still relevant IMO. Note that 100% bonds are only slightly less risk than 60/40 but with much less gain.
Personally, 2008 and the subsequent impressive recovery has made me quite sanguine about market risk.


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I always heard it as: 100 minus your age... if you are retired. The implication there (or maybe I was inferring...?) was, you were no longer adding to it or not adding much so preservation of capital was now more important than it used to be, and you were down to covering just your last 20-30 years, not your whole life.
 
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