How many years expenses in cash/bonds if the rest is 100% stock?

[mathjak107]

you can see here the 30 year cumulative results for 1965/1966 were pretty average .

but it was inflation that did them in the first 15 years .


30 years

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were:

stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%



so lets look at the first 15 years

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38%

 

[NW-Bound]

For reference, $1 in Nov 1967 became 13.7c in Nov 2017. That inflation over the past 50-year period works out to 4.06% per year.

PS. Yes, it is true that "sequence of inflation" hurts the same as "sequence of returns".

 

[mathjak107]

average inflation still would not matter when spending down . only the sequence of how everything meshes counts in the order it plays out ..

 

[ShokWaveRider]

Inflation statistics are all well and good, but the REAL measurement is how it affects one (one's family) personally. For us the last 10 years has been petty static based on our budget spreadsheets, especially since we both retired.

 

[mathjak107]

the cpi figures are not a personal cost of living measurement .



when it comes to your personal cost of living their is no link to the cpi's at all . we are 1500 mini economies and the cpi is only a price change index on goods and services most of which we have no use for personally .some we use most we don't ..

a personal cost of living is very different . it depends on what you buy AND HOW OFTEN YOU BUY IT . it depends on the quality of the items as higher quality sees higher price inflation but may last a lot longer and it depends on what you personally are willing to sub .

so what the gov't uses to take the countries temperature and the 1500 mini economies we are comprised of may be very very different than your expenses .

i am so much lower than even two years ago . we have not had rent increases allowed in 2 years in nyc and 1/2 of all rentals are stabilized apartments so that represents millions of people . i went from way over priced health insurance to far cheaper medicare and medigap .

my sister refinanced in arizona and she is spending less today than years ago . so we are all different and you have to adjust on your own to what you see , not what some index of price changes shows . .

 

[NW-Bound]

From Jan 1976 to Jan 1981, the cumulative inflation was a horrendous 56.5%.

I still remember getting a salary increase at a 6-month interval instead of yearly. The reason was that megacorp needed to raise starting salary to get new hires, and if they did not give raises to existing engineers the latter would work for less pay than new hires.

Scary stuff, but I was young then, so did not realize the severity of the problem.

 

[Dawg52]

Yep. Health premiums have been a real kicker in the a$$ the last few years. Premium increases way ahead of average inflation rates. But in 19 months(not that I'm counting) my premium will be cut almost in half with medicare and supplements. Hopefully I live long enough to see the reduction.

 

[Car-Guy]

How many years expenses in cash/bonds if the rest is 100% stock?

If cash equals, actual cash, CD's, etc then I'd estimate 25 to 30. Maybe not a popular position around here, but that's my answer.

 

[audreyh1]

If cash equals, actual cash, CD's, etc then I'd estimate 25 to 30. Maybe not a popular position around here, but that's my answer.

There was a recent poll. There are plenty of folks here with high numbers of years in cash or fixed income.

 

[mathjak107]

the reason usually given is i don't want to sell stocks when they are down , but with a typical 40/60 to 60/40 mix you would not be selling selling if that is what plunged . you would be rebalancing bonds in to cash and perhaps even in to more stocks .

2008 saw most bond funds that were not proxies for stock like high yield actually go up . high quality long term treasuries were up about 40% .

total bond funds were up too .some like fidelity's had held to much in those cdo's but that was an isolated event . even my money market lost money because of it .

generally bonds pay more than cash does and they tend to rise when stocks take a bad hit unlike cash .

 

[Car-Guy]

There was a recent poll. There are plenty of folks here with high numbers of years in cash or fixed income.

True, this question seems to come up from time to time, (like many topics here) and honestly, I'm surprised that so many folks now to seem to keep a lot in cash. Especially with the market the way has been recently (or maybe that's why ) I've been visiting this site for well over 10 years now (only posting about half of that time) and it's my "impression" that the number of folks keeping a lot in cash is getting higher as time goes on. Or maybe it's just more are talking about it now.

 

[ShokWaveRider]

I've been visiting this site for well over 10 years now (only posting about half of that time) and it's my "impression" that the number of folks keeping a lot of cash is getting higher as time goes on. Or maybe more are talking about it.

Could this be age related? My tolerance for risk have been inversely proportional to my age.

 

[Car-Guy]

Could this be age related? My tolerance for risk have been inversely proportional to my age.

Could be, or it could be a more receptive attitude on this forum to those who choose to manage their own money in such a manner, so they are opening up about it.

 

[audreyh1]

Could be, or it could be a more receptive attitude on this forum to those who choose to manage their own money in such a manner, so they are opening up.

I think far more are willing to admit it now.

But certainly the high equities market is part of it. Many folks are reducing their equity exposure now out of concern for high stock valuations.

 

[Car-Guy]

i think far more are willing to admit it now.

+1

but certainly the high equities market is part of it. Many folks are reducing their equity exposure now out of concern for high stock valuations.

+1

 

[sengsational]

the reason usually given is i don't want to sell stocks when they are down , but with a typical 40/60 to 60/40 mix you would not be selling selling if that is what plunged . you would be rebalancing bonds in to cash and perhaps even in to more stocks .

2008 saw most bond funds that were not proxies for stock like high yield actually go up . high quality long term treasuries were up about 40% .

total bond funds were up too .some like fidelity's had held to much in those cdo's but that was an isolated event . even my money market lost money because of it .

generally bonds pay more than cash does and they tend to rise when stocks take a bad hit unlike cash .

I urge anyone who thinks that their bond portfolio will go up at all, much less up 40%, do their own research on what happened in 2008. The bond fund I had available to me in my 401k was down 7% from 1/1/2008 to 2/28/2009. There are many funds that did better that can be cherry picked, but I had one bond fund to pick from. It was an index and not overly expensive fees, but it went down. The idea should be that bond funds will just go down less, certainly not the fairy tale that bonds go up when equities go down.

 

[Cayman]

28-30% cash and cash equivalents. Retired in 2017@50. We expect a WR of 2.6% or less in 2018.... we have enough dough to have fun, no need for us to move more cash to equities at this point.

 

[Winemaker]

My 5 year cash stash will be reduced to a 4 year stash in about an hour, when I take my annul allotment. It will be up 50% from last year, but about 2.08% WR over all. I'm starting to get a good idea about this retirement thing after 39 months. We have been able to meet all expenses so far, so we're loosening the purse strings a little more. But remain cautiously optimistic with the new tax law and economy. FRA is still 6 years out.

 

[mathjak107]

I urge anyone who thinks that their bond portfolio will go up at all, much less up 40%, do their own research on what happened in 2008. The bond fund I had available to me in my 401k was down 7% from 1/1/2008 to 2/28/2009. There are many funds that did better that can be cherry picked, but I had one bond fund to pick from. It was an index and not overly expensive fees, but it went down. The idea should be that bond funds will just go down less, certainly not the fairy tale that bonds go up when equities go down.

in 2008 what bond fund was down that you had ? i know my fidelity total bond was down about 5% but they got caught up in the toxic paper .

on the other hand my TLT long treasury bond fund was up 34%.

but in any case even with the fidelity bond fund being down in 2008 it still was not stocks that were sold when cash was created from rebalancing .

 

[Live And Learn]

I assume that my dividends will be cut in half and from there keep 5 years of cash and short term bonds. I exclude this amount when I calculate WR. It just makes me sleep better. I know I am losing money but sleep is priceless.

 

[gayl]

Caveat : I have a govt pension and it's 88% funded

My ex-advisor at Schwab (level A but we had a disagreement in philosophy) suggested enough to carry my kids / grands × 2 years ' just in case.' Did I state she's my ex-advisor? The newbie supposed to handle accounts > 250k stated 1 year travel 'just in case' as I can use my dividends if needs be

My take: 1 year cash, 1 year bonds no frills living expenses 'just in case'

 

[HMMY]

Planning to retire next year. 55/45. I have 13 yrs expenses in fixed income (1 yr savings, 3 yrs CDs, and the balance in bond fund) based on current expenses. That could easily stretch to 15+yrs. Not taking SS for 19 yrs. Will keep 10 yrs in expenses in fixed income until SS and then let equities glide up.

 

[43210]

There are currently many threads here, due to recent stock run up, especially by people with high stock allocations, approaching/exceeding sufficient numbers, figuring how to dial back.

So I guess this is my version of one of these "How/when to take winnings off the table" threads.

I'm >90% stock, approaching sufficient portfolio size (not exceeding, kind of borderline), and wanting to retire in near future. I need to move somewhat towards safer investments, but have "Fear Of Missing Out" on continued gains. I don't want to sell a bunch of stock that could be much higher 10, 20, 30 years from now.

My solution(s):
Put 100% of all new contributions into cash/bonds(stable value etc).
Start to sell stocks in excess of a fixed dollar value (that's my way of tricking myself that I'm not really selling, as I preserve a dollar value in stocks).
And the main theme for this thread, aim for a target level of cash/bonds in terms of years of spending. I think I'll go for 10 years worth of basic (needs) spending, or fewer years of higher spending levels. I have to hit that level before quitting and extinguishing the human capital (that I can also think of as bonds, but only while working).