Investing as you get older

[Car-Guy]

Did your investment strategy change “significantly” as you got older? While I’m sure opinions will vary on what is an aggressive vs conservative or high risk vs low risk investment strategy, “do you feel” that your strategy is becoming more aggressive or more conservative as you get older (or is it staying about the same)?

For those who have retired, did retiring “significantly” change your strategy?

So, I’m retired and I still invest in many of the same things I did before I retired, however my overall strategy (or AA if you like that term) has become much more conservative (IMO). That started about 5 years before I retired and continues today.

 

[calmloki]

We are doing more lending and less renting. Kinda cool - we bought a fair number of places and were always in debt tens or hundreds of thousands on the rentals and pushing every dime at them to get them paid off ASAP. It was very in our faces just how much the interest was costing. At one point when carrying in a payment to a loan broker I told him I wanted to be on the other side of the deal. As the properties paid off and the payoff rate snowballed we began to have money building up, which felt really odd. Started lending on property to investors and that has really increased - right now our annualized interest rate on the amount we have lent out is sufficient to about match our annual rental profit. We do have a certain amount of paperwork doing and closing the loans, but no tenant hassles or maintenance. We've also put a bit in the market (again) this year, and I hope to increase that amount while moving out of the rentals over time.

 

[W2R]

I know it will be hard for anyone here to believe, but in the accumulation phase my asset allocation was 100:0 (equities:fixed). I didn't have much time to save for retirement due to a late divorce, so I just went all in and figuratively shut my eyes and held my breath.

To pass the time, I determined that in retirement, I wanted to move it to 45:55 (equities:fixed), where it is now.

I started moving it gradually to that allocation in late 2006, and finished the move in 2008, before the recession hit hard at all. So, I was able to see that I wasn't tempted to sell low and I knew I had chosen the right retirement AA for me. Then in 2009 I retired and it has remained the same, 45:55, ever since.

I feel that my retirement AA is more conservative now than it was earlier. I don't intend to get more conservative as I age further, although that is subject to re-thinking as time passes.

 

[Brian]

This is a topic where I know I'm going against main stream wisdom.

I'm approaching ER and am still 100% in stocks. Since my retirement plan includes living to be over 90, I still consider myself a long term (40 years) investor.

I do see a need for moving say 2 to 3 year's worth of expenses into less volatile funds. This is the fund I would pull monthly from and refill on typically an annual basis. If the market takes a big hit, I would delay the refill and try to reduce spending. This approach would hopefully give the market time to correct before I need to pull funds out at a short term lose.

As long as I can stomach short term fluctuations, in the long term I'll be better off in stocks than bonds.

 

[Meadbh]

I have a few investment properties with mortgages and I'm glad I have them, but I would not add to my investment property portfolio in retirement, because my goal is to eliminate debt rather than increase it. I have out ruled most alternative investments in the future, because the risks of failure are too high. My current equity allocation is about 40% and I might increase that a little after the first few years, based on Pfau's recent paper. We'll see!

 

[splitwdw]

This is a topic where I know I'm going against main stream wisdom.

I'm approaching ER and am still 100% in stocks. Since my retirement plan includes living to be over 90, I still consider myself a long term (40 years) investor.

I do see a need for moving say 2 to 3 year's worth of expenses into less volatile funds. This is the fund I would pull monthly from and refill on typically an annual basis. If the market takes a big hit, I would delay the refill and try to reduce spending. This approach would hopefully give the market time to correct before I need to pull funds out at a short term lose.

As long as I can stomach short term fluctuations, in the long term I'll be better off in stocks than bonds.

Brian, I feel the same way. I'm still working (love my job) and don't understand the thinking that you should decrease your holdings in the stock market as you age. I thought we were living longer and in retirement longer, so shouldn't we have risk for longer? Guess it's whatever you'll comfortable with.

 

[Totoro]

Another thing I don't understand about decreasing allocations when you get older.

At a certain point many of us (not me I fear) will end up with more than enough, and essentially the money you'll have in excess goes to others. Typically children and grandchildren.

Since the downside risk for you is zero and the time horizon so long, why not put it fully in stocks?

 

[haha]

Since the downside risk for you is zero and the time horizon so long, why not put it fully in stocks?

When you reason deductively from a questionable premise, it cannot achieve anything meaningful.

 

[heeyy_joe]

youse gotta' have money at the bottom to buy at the bottom. '

 

[scrabbler1]

When I ERed in late 2008, I sold the 1/3 of my overall portfolio in company stock and bought into a corporate bond fund. That greatly tilted my overall AA. The company stock was still holding its value despite the crumbling financial markets while the bond fund I bought into was available for purchase at rock-bottom prices.

Since that time, I have not done any major changes to my AA other than a slight move toward the bond fund in my rollover IRA (from 55/45 to 50/50).

 

[RetireBy90]

Did your investment strategy change “significantly” as you got older? While I’m sure opinions will vary on what is an aggressive vs conservative or high risk vs low risk investment strategy, “do you feel” that your strategy is becoming more aggressive or more conservative as you get older (or is it staying about the same)?

For those who have retired, did retiring “significantly” change your strategy?

So, I’m retired and I still invest in many of the same things I did before I retired, however my overall strategy (or AA if you like that term) has become much more conservative (IMO). That started about 5 years before I retired and continues today.

I'll bite. I'm about 2 years from fire, but at 58 and realizing Im getting more adverse to risk of my 80:20 AA. I still think I need a 30 year outlook, but more uneasy. Also, wondering how aging will affect my ability to make appropriate financial decisions as I age. I'm watching mom's pile and she has some moments. I expect that I'll have such moments also, how do you plan for that?

 

[Car-Guy]

Also, wondering how aging will affect my ability to make appropriate financial decisions as I age. I'm watching mom's pile and she has some moments. I expect that I'll have such moments also, how do you plan for that?

Could be a good reason to consider simplifying things later in life. Particually if you don't have someone around that you trust to handle it for you.

 

[brewer12345]

Could be a good reason to consider simplifying things later in life. Particually if you don't have someone around that you trust to handle it for you.

I am already busy training my 10 YO up for that one.

I have definitely changed portfolio as I aged and got wealthier. I got pretty badly hurt in the crash, so after I rebuilt the manor by taking some very greedy risks near the bottom I decided it was time to start acting like I had a material amount of money (which I did). I set an asset allocation and adhere to it, plus I set myself individual position limits and have steadily converted more of my portfolio to index investments, CDs, bond funds, etc. Not only has that greatly reduced portfolio volatility, but it has also forced me to concentrate on my handful of "best ideas" when I do pick individual securities.

 

[jerome len]

I can live off of muni bond interest and mutual fund dividends. So, I have a year in cash, replenish with dividends and enjoy life. I know I'll leave a little to my kids and grandkids, not so much since DW and I live modestly.....kids will still have to work but they'll be able to take a vacation and buy a new car on their inheritance. I'm really lucky!!!!!!!!

 

[eytonxav]

I have been a conservative investor over many of my working years, and while not hitting home runs, the singles and doubles were fine, as once you have won the race, being aggressive was not necessary.

That approach worked OK until we went into the minuscule interest rate environment, so while still pretty conservative, I have increased my equity position when opportunities presented themselves, but am still only about 40% equity currently on my way to about 50%.

 

[Greg V]

As I got within 4 to 5 years of retirement, I transitioned my asset allocation from 95/5 to 50/50 where it will remain.

 

[Car-Guy]

I have been a conservative investor over many of my working years, and while not hitting home runs, the singles and doubles were fine, as once you have won the race, being aggressive was not necessary.

I expected a football analogy from you DFW_M5 but I like the baseball analogy pretty well. (Probably because it sounds like my financial situation too) I've never hit a home run (not even close) Never got a triple either, maybe a few doubles but enough singles and walks to have won the game and hopefully "my" series.

 

[eytonxav]

I expected a football analogy from you DFW_M5 but I like the baseball analogy pretty well.

Nope, I still play baseball, but only watch football

 

[nash031]

This is a topic where I know I'm going against main stream wisdom.

I'm approaching ER and am still 100% in stocks. Since my retirement plan includes living to be over 90, I still consider myself a long term (40 years) investor.

I do see a need for moving say 2 to 3 year's worth of expenses into less volatile funds. This is the fund I would pull monthly from and refill on typically an annual basis. If the market takes a big hit, I would delay the refill and try to reduce spending. This approach would hopefully give the market time to correct before I need to pull funds out at a short term lose.

As long as I can stomach short term fluctuations, in the long term I'll be better off in stocks than bonds.

This is close to my plan. At 37, I'm five years away from my notional retirement date. I plan maintain my 85/15 (or close to it) for the duration, but a lot of that is because my pension income should cover most (if not all) of our day to day expenses. I'll keep some reserve in cash to cover wants so I don't have to draw down accounts in downturns, but it'll be about half of what I figure our yearly spending to be, times two or three to cover longer bear.

 

[EastWest Gal]

This is a topic where I know I'm going against main stream wisdom.

I'm approaching ER and am still 100% in stocks. Since my retirement plan includes living to be over 90, I still consider myself a long term (40 years) investor.

I do see a need for moving say 2 to 3 year's worth of expenses into less volatile funds. This is the fund I would pull monthly from and refill on typically an annual basis. If the market takes a big hit, I would delay the refill and try to reduce spending. This approach would hopefully give the market time to correct before I need to pull funds out at a short term lose.

As long as I can stomach short term fluctuations, in the long term I'll be better off in stocks than bonds.

I feel the same way. A significant amount of my investment money may still be needed 20 years from now. I've been investing after tax money for 21 years, 401K for longer. Since much is still needed long term, I was almost 100% equities until this year.

I still intend to keep a large % of my AA in equities going forward.


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