Forget Balancing - sold all my 401k equities funds and put it in the safe short term

[daylatedollarshort]

If I’ve got inflation covered and how is that making anything more risky? The loss of potential gains? People take risk to build enough to safely retire.. once there isn’t it prudent to reduce exposure?

That does not seem to be the prevailing sentiment here, but we did that. We have a small allocation to stocks and the rest invested along the lines of matching strategies. At even a zero real return we could have a safe withdraw rate of 3.33% at our ages (100 / 30 years = 3.33%) and we should be able to up that as 10 year TIPS are .44% real return today, plus I have other investment like a fair bit of 30 years TIPS I bought when rates were higher, some 2% or more. But I like optimizing expenses and looking for easy side income streams, so we really will be closer to zero WR. We just get a big kick out of looking at what we could spend, even though we won't, as we think we live pretty well now.

One of the ideas that changed our investment strategy was me reading the book Against the Gods: The Remarkable Story of Risk and the idea of diminishing marginal utility.

 

[BeachOrCity]

Rayinpenn:
Good for you! You stated in your OP, that you have more money than you dreamed about, which implies if your money is in safe cash / cd / TBill / bonds you can live your life and not worry about losing it. Yes, you could have some eaten by inflation, but it sounds like you decided "you won the game, why keep playing?"

I find we all (incl me) project our own circumstances onto others. Your circumstances are your own, and you made a decision that was right for you, and it won't cost you, since by the tone of your post you are already set for life.

As for me, I used to ask myself what the "pros" said to ask: "if the market went down 50% would you stay the course, buy more or sell?". I woke up and realized there was a different question to ask "If the market went down 50% would you still retire?". When I asked myself the latter question, I changed my strategy and AA towards much more safety than when I asked myself the former.

Just food for thought.

 

[Sanstar]

We are in it for the long haul, so steady as she goes.

I think that if I had an inevitable upcoming expense, I would be tempted to take that money now and either put it aside or make that purchase now rather than waiting and hoping that the market will still be high or higher then. Truth be told, we did just that. We purchased a new-to-us vehicle just before New Year's Day.

We took similar action. With returns what they have been, I'm adding an additional year's expenses to the cash bucket to get us to 4 years. We paid off the remaining balances of two kids' school loans and set money aside for a new tow vehicle in the spring. I hope this isn't "market timing". I just want to position us for four years of maintaining our current lifestyle without selling equities in a down market. AA remains unchanged.

 

[43210]

This was my plan but my crazy world buzzer started making a racket.
1) I’m not the impulsive type
2) I don’t have a plan when I’ll get back in
3) I am not waiting for a dip to buy back.

I’m waiting for the crazy world buzzer to stop. I know it could be a while ...

What exactly are you saying? It does sound like you are considering getting back in at a later date.

 

[Cayman]

If you've won the game....
Market timing? It is, if you buy back in at a later date. You're an informed investor and understand the pros and cons. The choice is yours.

 

[rayinpenn]

What exactly are you saying? It does sound like you are considering getting back in at a later date.

Perhaps but I have no plans to buy back at this time. Right now the Market’s Irrational exuberance and anger in our country/world has me totally unsettled I’m thinking if I did at some point in the future I’d look for a ‘low beta’ strategy. Bricks and motor, steady Eddie dividend stuff in businesses/ETFs I understand. There is nothing as exciting as a Water company..eh?

I am working 4 days a week and have the option of going to 3 days. Once I fully retire I’d like to study our spending (excluding the expected DD’s marriage to kick in for— no ring yet).

Hey I appreciate that my move isn’t for everyone .. You stay the course guys have my admiration.

 

[Pilot2013]

Perhaps but I have no plans to buy back at this time. Right now the Market’s Irrational exuberance and anger in our country/world has me totally unsettled...

Hey I appreciate that my move isn’t for everyone ..

As well as perhaps your pessimistic view of life.

 

[220volt]

I don't see any exuberance in markets at all. Everyone from newspapers, newsletters, TV forums, is talking about big correction, crashes and how the market is too high, which means investors are cautious and pessimistic about future. No bull ever died from pessimism.
"Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria." - John Templeton

I think we are still in skepticism phase.

 

[rayinpenn]

As well as perhaps your pessimistic view of life.

“Pessimistic view of life” - Wow I doubt anyone who knows me would agree with you. I find as i get older I count my ‘blessings’ (good fortune for some) more each day. I still believe anyone can do well in this country just work hard and smart.

- We dont need to work; We reached our goal some time ago.
- I have a job where I am well compensated and can work as much or as little as I want.
- It requires both business and technical knowledge. It is rare for someone my age to excel at it. Yet apparently based on my annual review I am and for me it is the bees knees.
- As I write this my replaced knees are pain free - a real blessing
- We went through some very tuff times as a kid. I dreamed education would pull me out of it; I get through my undergraduate on a ‘wing and a prayer’ I then did two graduate degrees at night. I used what I learned in business and in life
- I am also an intense teaser of colleagues ad known to and a little sarcasm to the mix.
- Over 30 years with the same LBYM gal.

It is hard to be pessimistic when so much went so well...
You confuse a pessimistic view of the economy with general pessimism.. I still believe given the choice most people will do the right thing.

 

[rayinpenn]

"Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria."
- John Templeton

I think we are still in skepticism phase.

Funny but when I recently added up my holdings and really looked at the growth of late I’d say i was pretty euphoric....

Like i said I hope I’m wrong.

 

[Cayman]

“Pessimistic view of life” - Wow I doubt anyone who knows me would agree with you. I find as i get older I count my ‘blessings’ (good fortune for some) more each day. I still believe anyone can do well in this country just work hard and smart.

- We dont need to work; We reached our goal some time ago.
- I have a job where I am well compensated and can work as much or as little as I want.
- It requires both business and technical knowledge. It is rare for someone my age to excel at it. Yet apparently based on my annual review I do and for me it is the bees knees.
- As I write this my replaced knees are pain free - a real blessing
- We went through some very tuff times as a kid. I dreamed education would pull me out f it; I get through my undergraduate on a ‘wing and a prayer’ I then did two graduate degrees at night. I used what I learned in business and in life
- I am also an intense teaser of colleagues ad known to ad a little sarcasm to the mix.
- Over 30 years with the same LBYM gal.

It is hard to be pessimistic when so much went so well...
You confuse a pessimistic view of the economy with general pessimism.. I still believe given the choice most people will do the right thing.

Sounds like you "got it" - a healthy perspective on life, relationships and healthy finances. Nice work RayinPenn, and thanks for sharing your thoughts/viewpoint. A respectful exchange of ideas is what makes this a great site.

 

[Major Tom]

Funny but when I recently added up my holdings and really looked at the growth recently I’d say i was pretty euphoric....

Yes, but is everybody else? During the tech stock boom of the late 1990's, I remember being surprised that, almost everywhere I went in Los Angeles - my home at the time - I was hearing conversations between people talking about "getting into stocks", or the fact that they just had. That talk was everywhere - even in the local fast food restaurants. Then the crash came. A few years later, it was the same kind of talk, but about real estate. Everyone, it seemed, had heard that real estate was "the thing to get into". Then that market peaked.

I'm not hearing that kind of talk about stocks yet but then, I now live in Oakland, California, where folk seem to be more excited about the recent legalization of recreational marijuana sales

 

[harley]

As well as perhaps your pessimistic view of life.

“Pessimistic view of life” - Wow I doubt anyone who knows me would agree with you.

Possibly not. We only see what you post here, which I have to agree often sounds pessimistic/fearful.

As far as the economy, I have no idea what will happen in the short (or even long) term. But based on my perceptions there's still a lot of room for improvement. Wages are still stagnant, and while unemployment is low, I think a lot of people are underemployed or working gig jobs. This might signal a new way of life that I'm too set in my old ways to understand, but it doesn't seem to bode well for comfort and security, two of my basic necessities for a satisfying life.

I also don't really know where things will go with the new tax plan and the increasingly business-friendly environment. I think it will lead to more investment in business, which would be good for the market. I'll have to wait and see. But having missed so much run-up after getting out of the market in 2008, I have learned my lesson and am staying the course.

 

[pacergal]

Sounds like you "got it" - a healthy perspective on life, relationships and healthy finances. Nice work RayinPenn, and thanks for sharing your thoughts/viewpoint. A respectful exchange of ideas is what makes this a great site.

+1

 

[220volt]

Funny but when I recently added up my holdings and really looked at the growth of late I’d say i was pretty euphoric....

Like i said I hope I’m wrong.

Yeah but a lot of people were saying the same thing in late 80's and bull market ran another 10 years! If you want to see euphoria just look at last years (or even months) before major crashes. 1929, 2000 and 2007.
I remember people were paying Yahoo 300 times what it was worth, and company had no earnings or real employees!
SP500 P/E in 1999 was 90. Currently, it is around 25 and it is backed by strong earnings. Plus the interest rates are low.

But markets are unpredictable so you never know, but if the market totally tanks in few months it will be highly unusual.

 

[ShokWaveRider]

We have been in fixed income for years and live quite happily off the proceeds. no need for unnecessary risk if it is not needed.

 

[redduck]

We took similar action. With returns what they have been, I'm adding an additional year's expenses to the cash bucket to get us to 4 years. We paid off the remaining balances of two kids' school loans and set money aside for a new tow vehicle in the spring. I hope this isn't "market timing". I just want to position us for four years of maintaining our current lifestyle without selling equities in a down market. AA remains unchanged.

Sounds like a prudent and sensible plan. I wouldn't think that this would be considered market timing--and even if were, why care?, it's still a good move.

note: highlight by redduck

 

[joeea]

To me it has never screamed as loud as it is now.

The memory of that is still pretty vivid just maybe it clouds my judgement.

You've got to do whatever lets you sleep at night. If that tamps down the bad memories and stops the lambs from screaming then so be it.

I don't really understand the desire to have others agree with you though. Maybe that helps you sleep too, it's just not part of my personality.

 

[rayinpenn]

Yes, but is everybody else?

55% of Americans participate in the stock market.
https://www.statista.com/statistics...s-to-have-money-invested-in-the-stock-market/

I expect the remainder wouldn’t or couldn’t..
Like i said those true buy and hold guys have my respect. I didn’t expect ‘buy in’ from anyone. I do appreciate the various perspectives.

A few years back I posted that i thought people retired with municipal pensions were at risk. Brother I got the tongue lashing of a lifetime. A couple of years later Ive seen some pensioners take hits.

The fact is i have no crystal ball noone does...
Good times means employment and i think everyone deserves a job.
So let the good times roll.

 

[MuirWannabe]

You've got to do whatever lets you sleep at night. If that tamps down the bad memories and stops the lambs from screaming then so be it.

I love the ‘lambs from screaming’ reference. Thank you Clarice.

 

[Aerides]

I don't think you're being pessimistic, and it is true (or, I believe) that there is a lot of potential for volatility, probably more now than in the past few years. There's a whole bunch of geopolitical stuff that might cause many to have uncertainty, and seek to mitigate that.

If your move means you can sleep well at night, then it's good for you.

 

[1-31-18]

+1

The Market Unpleasantness of 08/09 educated me on where I needed to be to manage the pucker factor. For me, an AA in the 40-45/60-55 range does the trick and keeps the urge to "sell now before the crash" at a non-lethal level. Thanks to the Wellington and Wellesley management team and crack computer staff, I can maintain that AA range by doing what I do best - nothing.

+1 on AA at my advanced old age of 61 and still working — doing the best, most creative, work of my life. FI but will not RE.

My only annoyance is that the fixed income piece of my port is far more cash than bonds. I’m afraid of getting whacked by inflation. Need a sound way to deploy (too much) cash. Maybe real estate. Or an eight-year-or-so CD ladder.

Open to ideas. Wellington and Wellesley surely have paid well in hindsight.

 

[flyingaway]

I don't see any exuberance in markets at all. Everyone from newspapers, newsletters, TV forums, is talking about big correction, crashes and how the market is too high, which means investors are cautious and pessimistic about future. No bull ever died from pessimism.
"Bull markets are born on pessimism, grown on skepticism, mature on optimism, and die on euphoria." - John Templeton

I think we are still in skepticism phase.

You just demonstrated the optimizm.

 

[Markola]

52 and still w*rking. I understand and agree with the admonitions above to ride out whatever happens. On the other hand, I am nervous and I admit to both tightening up a bit and diversifying more lately. This fall I went through the Vanguard asset allocation tool questionnaire https://personal.vanguard.com/us/FundsInvQuestionnaire , which yielded a recommendation of 60/40 vs. our all-domestic 80/20 portfolio. I compromised by adjusting to 70/30. I also mimicked the allocation of the four index funds in the VG 2030 Target Date Fund, though I hope to semi-FIRE in 2021. (Total Stock, Total Bond, Total International Stock, Total International Bond). I figure the Vanguard folks have access to better macro economic info than me, so if they are tilting more international in their various funds-of-index-funds these days, it’s probably for well-informed reasons, so I’ll copy their percentages, only placed in the right tax buckets across our whole portfolio. DW has access to the unique G Fund at w*rk, so I’m thinking about putting half of our fixed income portion there and consider it our cash cushion.

That is a lot of change but also a lot more diversification than we had. Should I have done it? We’ll find out. Taylor Larrimore is coming out with a book soon on his 3 Fund Portfolio, which is what ours now approximates, exposed as it is now to some 23,000+ indexed securities around the planet vs. 10,000 domestic ones previously. Maybe it will help when the time inevitably comes? Fingers crossed.

 

[ncbill]

This advisor recommends 30/70 for just before & retirement:

Ferri: Wisdom Of 60/40 Portfolios Timeless | ETF.com

Looks like the standard 4% withdrawal is "safe" with the above approach.