Adjusting expectations with new asset allocation

[keegs]

I'm going to roll over my 401k into an IRA and at the same time adjust my AA from an 80 - 20 to a 50 - 50 mix. My AA has been aggressive throughout my accumulation years and I'm wondering how will this more conservative mix meet my expectation and what kind of an adjustment am I in for.

 

[Corporateburnout]

I'm going to roll over my 401k into an IRA and at the same time adjust my AA from an 80 - 20 to a 50 - 50 mix. My AA has been aggressive throughout my accumulation years and I'm wondering how will this more conservative mix meet my expectation and what kind of an adjustment am I in for.

I adjusted my AA three years before I retired to 50/40/10 and have stayed the course for the last two years since I retired with just annual rebalancing. The historical returns of this AA is more than enough to support my WR in retirement so there no need to take on more risk.

If the stock market drops by 50% as it did during the great recession of 2007-2009 I will lose 25% of my portfolio and I'm able to live with it.

You have to decide on how much of a loss will keep you up at night.

 

[keegs]

Not having had to rely on savings to generate income made the volatility of the more aggressive mix a lot easier to stomach. We'll see how it goes I guess.

 

[garyt]

I'd say it depends on how much you have saved. For most of my accumulation phase I was pretty much 100% invested in equities. I never made a ton of money and figured I needed all the help I could get. If the market went and stayed sour, wouldn't make much difference ,because if I was really conservative I couldn't save enough to matter anyway. Now here I am at 58 just deciding when I should ER. I can go now if I want. Just waiting to see what happens in the election.
If you made good money through your life and have a ton saved, I guess why risk it? Me, I keep 3 years expenses in cash, bonds, and the rest I still have in equities. That gives me the time to recover from a down market and still enjoy the hopefully good returns.

 

[Gone4Good]

Not having had to rely on savings to generate income made the volatility of the more aggressive mix a lot easier to stomach. We'll see how it goes I guess.

That does make a big difference.

When you're working and saving market downturns are opportunities to put new money to work at better prices.

When you're no longer adding money to your portfolio, downturns are at best opportunities to put previously safe money at risk. But downturns also make you less financially secure which is not an ideal time to be adding risk.