Crazy Not to Own Stocks?

[JJpop]

I had a goal of reaching age 70 with x amount of money and wanted no part of a huge stock market downturn. My wife is 72.

Our 2 kids are late thirties with good jobs and own their own homes with mortgages.

Our SS will be over 70K next year which pays all of our regular expenses with a little left over.

We have no debt and own our home free and clear.

We currently are invested almost 100 pct in treasuries, brokered CD’s, GO muni’s,
IBonds, agency bonds and one bond etf with a defined maturity in 3 years and a few super high quality corp bonds, Microsoft, Wells Fargo and Berkshire Hathaway.

So those all will pay interest of about 65,000 or more the next 12 months, depending on the IBonds rate and we have about 300K in IBonds.

I feel good not worrying about the stock market and knowing we are very secure.

I was thinking of buying the SP 500 whenever an interest payment is received or something matures, to DCA into the market to build up stocks to about a 20 to 25 % allocation over time, or I can just thumb my nose at the market.

If 5 or 10 year CDs or treasuries go up to over 5% the stocks would look even more undesirable but who knows.

I just bought a FDHL Agency 10 yr at 5% that is callable in March but I will gladly take that rate even if it gets called.

Most of our stuff is in IRA’s and Roths.

 

[MarieIG]

No debt, your expenses covered, some inflation protection . . .

A whole lot of people would like to be in your "crazy" shoes,

 

[2017ish]

Not what I would do, but definitely not crazy. Your social has you covered, and even if Congress does nothing and it gets cut by ~25% in X years, you are in good shape. Heck, even with a repeat of the 70s, you are solid.

I think your plan of ratcheting up to 20-25% equities is a good plan, as it should give you longer term inflation protection, if you live longer than expected--but who knows!

(We will have higher social than you, but spend a lot more. As part of transitioning to retirement in 2017, we got much more conservative and now have only 66% in equities! I don't think either of us are crazy.)

 

[Car-Guy]

I think I'd thumb my nose at the market at this point. But that's me. From the data you have provided, I say you are done. Sleep well.

 

[disneysteve]

Your SS covers your expenses and then some, and you have another 65K in portfolio income on top of that? Sounds to me like you're in great shape.


I do like the idea of adding some growth, though. Inflation may calm down but it will never go away. And the higher interest rates we're currently enjoying won't always be here, so that 65K may drift downward. Having at least some stock exposure can help offset those things. I agree that 20-25% is plenty for you.


If you do add stocks, rather than an S&P fund, I'd go with a total market index like VTI.

 

[l8_apex]

I'm 90% real estate and 10% Notes, so also lacking stocks. No worries from my end. Obviously there is more than one way to ER.

 

[JJpop]

No debt, your expenses covered, some inflation protection . . .

A whole lot of people would like to be in your "crazy" shoes,

Believe me when I say I feel blessed. Never ever expected this.

When I was 42 my net worth was less than 5000 when I started my business so I never dreamed I would own my own home in the Bay Area and be financially secure.

By crazy I was just referring to having zero stocks. I know I am good to go either way

 

[pletal]

Believe me when I say I feel blessed. Never ever expected this.

When I was 42 my net worth was less than 5000 when I started my business so I never dreamed I would own my own home in the Bay Area and be financially secure.

By crazy I was just referring to having zero stocks. I know I am good to go either way

I am crazy too then. I have about 5 percent in stocks. Rest in CD’s, differed annuities and individual muni bonds. Get low six figures fixed income a year. With interest rates going back up , I think I’ll be ok. Gonna retire soon. 57 years old. OP congrats on staying the course.

 

[The Cosmic Avenger]

I guess the real question is, once your bonds and CDs start to mature and you have to find new ones, how will you feel if we have another bull run with a 10+ year span of interest rates at 1% or below? If feel like you'll be OK with possibly losing a bit to inflation, knowing that you not only avoided losses during the downturn but also kept up with inflation, then stay where you are. But if you feel like you'll regret it, then sure, this is as good a time as any to move into equities.

 

[Time2]

Since you are set with enough with just SS, IF, your kids are going to inherit your nest egg, then you are investing for them. Does that change your outlook?
$1,300,000 at 5% for 13 yrs is $2,450,000, at 10% it is $4,880.000.


I'm 67, at 70 SS will cover most of our spending, I'm 70% in stocks thinking about my wife after I die and the kids. I just could not see investing in bonds, since rates have been so low since I retired 5 years ago, maybe that will change.

 

[ShokWaveRider]

Have not owned stocks for 30 years, FIRED at 48 and still do not own any stocks. Averaged around ~5.6% over that period in alternative investments. Made some good choices in the 90's that helped.

 

[enjoyinglife102]

Objectively, you're financially solid. With that, the only thing that matters is what is right for you and your actions speak for themselves. You'll hear opinions about why you should invest in stocks from adding some growth to increasing what you leave to your kids. Your actions say that it would be crazier though to invest in stocks at this point. Why introduce the anxiety of possibly experiencing a significant loss, even if just within 20% of your portfolio, and then holding on waiting for a recovery? Which by the way may never happen - see Japan over the last few decades.

Enjoy the worry-free life you've created for yourself!

 

[mrfeh]

Since you are set with enough with just SS, IF, your kids are going to inherit your nest egg, then you are investing for them. Does that change your outlook?

This was my only thought also.

If OP is likely to leave a bunch of money behind, they should own equities.

 

[pacergal]

You state you feel good not owning stocks, so why do you want to change? What is driving that decision?

It looks like you are well covered for your retirement needs, why change?

oh, and congratulations on reaching your goal, enjoy retirement !

 

[JJpop]

Since you are set with enough with just SS, IF, your kids are going to inherit your nest egg, then you are investing for them. Does that change your outlook?
$1,300,000 at 5% for 13 yrs is $2,450,000, at 10% it is $4,880.000.


I'm 67, at 70 SS will cover most of our spending, I'm 70% in stocks thinking about my wife after I die and the kids. I just could not see investing in bonds, since rates have been so low since I retired 5 years ago, maybe that will change.

Yes this is the burning question.
We have 2 grandkids 4 and 8 which I believe I mentioned and the other grandparents are very well off, so no worries about the inheritances.

My wife hates investing and if something happens to me our son will have to help her. I am trying to simplify but not that easy. Multiple Schwab accounts. Outside of Schwab we have HSA accounts at Fidelity, some muni bonds at another firm, 2 MYGA’s at different insurance companies, our banking account and of course Treasury Direct.

I also had the crazy thought of putting everything as it pays interest and matures and pays interest into a balanced fund. The MYGA’s will be back at Schwab in a couple years when they mature.

 

[OldShooter]

Since you are set with enough with just SS, IF, your kids are going to inherit your nest egg, then you are investing for them. ...

This is our situation. AA has run as high as 90/10 depending on our financial situation. Right now it is lower because we are building a house, paying cash, so moved out of some equities last year. When the dust settles next year we will probably end up between 70/30 and 90/10. We are 75YO.

... My wife hates investing and if something happens to me our son will have to help her. I am trying to simplify but not that easy. Multiple Schwab accounts. Outside of Schwab we have HSA accounts at Fidelity, some muni bonds at another firm, 2 MYGA’s at different insurance companies, our banking account and of course Treasury Direct.

I also had the crazy thought of putting everything as it pays interest and matures and pays interest into a balanced fund. The MYGA’s will be back at Schwab in a couple years when they mature.

We are fortunate because both of us are investing savvy. In your situation moving to simplify as you say is a good plan. You may also want to interview a few FAs who will work on an hourly basis for now with the thought that they will run the portfolio upon your demise. You should be able to find one who will run the money as you want it run and who can develop a good rapport with your wife. Older, female, maybe?

 

[Koolau]

I've always thought the ideal retirement would be to have so much money in FDIC protected bank accounts (spread around a lot of banks) that no amount of inflation or war or pestilence could affect your retirement life-style. But, having said that, most of us have a smaller stash than that ideal.

With that in mind, the watchword of investment that I've always heard is diversification. So, while I'm on the low end of equity investments, compared to most here (30+%) I think it's valuable to have some exposure to equities - just for diversity. I don't think it's crazy to avoid equities - especially when, as in your case, you can survive without them. But I'd still want some equities even if I had a lot more non-equity investments than I need to cover my expenses.

Keep in mind that diversity is designed to not only grow your assets but also preserve your assets. Right now, it's difficult to keep up with inflation in cash or cash-like investments. Having some equities gives you another opportunity to keep up with inflation though it's not guaranteed.

I'm no expert and do not consider myself a good investor. I was a good saver which it appear you are as well. You have to do what makes you feel good about your investments so YMMV.

 

[Koolau]

Have not owned stocks for 30 years, FIRED at 48 and still do not own any stocks. Averaged around ~5.6% over that period in alternative investments. Made some good choices in the 90's that helped.

I'm sure you've mentioned your investments a dozen times, but would you be willing to share what has allowed your relatively good results without equities?

My principal holding outside of equities is a GIF (guaranteed income fund or stable value fund). It hasn't done too well lately since it's aligned more with bond-like investments. Then, I have SPDA/MYGA/Cash-value insurance type investments which average around 4.5% (because they are relatively old.) I-bonds are probably my favorite investment, though I kick myself for not buying more when they actually paid interest - not just inflation. I also have some precious metals and a couple of minor collections. My average is less than 5.6% of late. Just looking to see what I have missed or how I can tweak my non-equity investments.

 

[JJpop]

I've always thought the ideal retirement would be to have so much money in FDIC protected bank accounts (spread around a lot of banks) that no amount of inflation or war or pestilence could affect your retirement life-style. But, having said that, most of us have a smaller stash than that ideal.

With that in mind, the watchword of investment that I've always heard is diversification. So, while I'm on the low end of equity investments, compared to most here (30+%) I think it's valuable to have some exposure to equities - just for diversity. I don't think it's crazy to avoid equities - especially when, as in your case, you can survive without them. But I'd still want some equities even if I had a lot more non-equity investments than I need to cover my expenses.

Keep in mind that diversity is designed to not only grow your assets but also preserve your assets. Right now, it's difficult to keep up with inflation in cash or cash-like investments. Having some equities gives you another opportunity to keep up with inflation though it's not guaranteed.

I'm no expert and do not consider myself a good investor. I was a good saver which it appear you are as well. You have to do what makes you feel good about your investments so YMMV.

If I was a good investor I would have a lot more than I do, but I am happy that I made to financial security.
Like I mentioned, I will add some stocks if I see a great buying opportunity again, but I feel good about the fact our SS is high which gives us great COLA’s when they happen to be high and the same with our IBonds.

 

[Rianne]

We've left our stock portfolio untouched (60%), with no selling or trading for the last 8 years. At the beginning of this year, sold our bond funds to laddered treasuries. Bond funds are dismal long-term and considering those funds as a hedge was a common strategy for the dividends. I can see treasuries, CDs, and individual bonds as a solid long-term strategy
Stock index funds performance:
8 yr - 7.9%
5yr - 8.3%
3yr - 9.1%
1 yr - -13.2%
ytd - - 11%

Now we're turning 65 and will gradually sell our stock funds and move those funds into treasuries, but plan to stay in the 12% tax bracket. The stock funds are taxable, so hopefully won't be too bad since they're long-term investments.

 

[Midpack]

Like Bernstein said, 'if you've won the game, stop playing?' Most people need some equity exposure to combat inflation over a 20-30 year retirement. If you don't, crazy isn't on the table - it's whatever you're comfortable with for a projected residual then. There are no guarantees, only (good) odds.

 

[OldShooter]

Like Bernstein said, 'if you've won the game, stop playing?' Most people need some equity exposure to combat inflation over a 20-30 year retirement. If you don't, crazy isn't on the table - it's whatever you're comfortable with for a projected residual then. There are no guarantees, only (good) odds.

Perennial discussion topic here. Some of us winners continue to play the game with the objective of benefiting our heirs.

 

[daylatedollarshort]

We have some stocks, but their returns don't impact our retirement budget. Pensions and SS cover most of our retirement expenses. I get more thrills from trying to figure out how to live well on a frugal budget than I do from playing the stock market. Our planned withdrawal rate is 1%, but I think I can get that down even further with some upcoming projects, like solar panels and a heat pump. If we can be happy without spending a fortune, why not? I'd rather leave the money to our kids than give it to some designer clothes maker's profits.

 

[foxfirev5]

We have some stocks, but their returns don't impact our retirement budget. Pensions and SS cover most of our retirement expenses. I get more thrills from trying to figure out how to live well on a frugal budget than I do from playing the stock market. Our planned withdrawal rate is 1%, but I think I can get that down even further with some upcoming projects, like solar panels and a heat pump. If we can be happy without spending a fortune, why not? I'd rather leave the money to our kids than give it to some designer clothes maker's profits.

I have no idea about designer clothes. I've observed that it will probably go to someone else anyway. Someone here once posted that when your biggest concern is what class Mercedes your DIL will be driving - you've probably oversaved.

 

[HI Bill]

So those all will pay interest of about 65,000 or more the next 12 months, depending on the IBonds rate and we have about 300K in IBonds.

I feel good not worrying about the stock market and knowing we are very secure.

With equities (MFs or ETFs), you can defer taxes rather than having taxable interest that you can't defer. Since you'll likely be leaving the bulk of your assets to your kids, IMHO, I'd definitely be at least 50% in equities. You're much more likely to double your investments in a decade, and leave your kids with more!

On the other hand, if being in the market really makes you nervous, you can let your kids decide what to do once they take control of the assets. The amount would likely be much smaller, but it sounds like they'll have plenty, either way! Great position to be in!