Retired Asset Allocation Based on Portfolio Size

[marko]

I've always liked getting more money, but don't find the game to be "fun." Good results = fun. Game = drudgery. YMMV

Well, I also cringe at the comparison to a casino, but in a way I now feel a bit like a professional high roller at one: some days you win big, other days you lose big but you're at the point where a heavy loss is just part of the action.

Tomorrow's another day and on average you're coming out way ahead of the working straights.

As noted, it's my hobby now and I enjoy monitoring and tracking my progress.....some people do crosswords, I do Excel sheets! I'm not into crazy investments, I'm at 70/30, averaging about 8% yoy and just find the whole environment very interesting. I'd go mad with everything in TBills!

 

[pjigar]

The bigger my portfolio gets, the more equities I hold. I have plenty of fixed to live on, so why not?

This is exactly our position when it comes to investing. We have a saying my native language: A camel always stays taller than a goat even when a camel sits down.

 

[bonvoyage]

I think of the amount we hold in bonds and cash (or equivalents) in terms of years of living expenses rather than as a fraction of our overall investments. My current goal is to keep about ten years worth of money in this category and the rest as stock.

 

[audreyh1]

I think of the amount we hold in bonds and cash (or equivalents) in terms of years of living expenses rather than as a fraction of our overall investments. My current goal is to keep about ten years worth of money in this category and the rest as stock.

I think of fixed income that way too but I don’t have a hard limit.

 

[MarieIG]

I am 68 so will start SS in two years and RMD in five. SS will cover roughly half of my spend if it does not get cut.

Once SS kicks in it may look like I have too much fixed income and would flip flop the way I look at things and the equity allocation may be the balancing anchor instead of the fixed income.

Our plan is to defer SS until age 70 to allow more room for Roth conversions and to provide a bit of additional longevity insurance.

 

[enjoyinglife102]

It's all "fun" when the downturns over the last 30-40 years have rebounded fairly quickly and in retrospect have provided buying (or holding) opportunities. Recency bias has resulted in the belief that we can get a couple of bad years but nothing terrible longer term. That is far from the case though and at 66, my focus is to minimize any restrictions on spending during my healthy and mobile years ahead that could result from a prolonged equity downturn. To me, for many, the process of managing and accumulating wealth has taken on a life of it's own.

 

[VanWinkle]

I love compromise, so I'm always 50/50. Something about pigs and hogs and getting slaughtered.

 

[USGrant1962]

I'm also targeting about 10 years spending in fixed income and the rest in equities. More than that in fixed income feels like dead money to me.

 

[marko]

It's all "fun" when the downturns over the last 30-40 years have rebounded fairly quickly and in retrospect have provided buying (or holding) opportunities. Recency bias has resulted in the belief that we can get a couple of bad years but nothing terrible longer term.

30 or 40 years? How long does it have to be before it's not "recency" bias?

IMO the world/markets are much different than they were 70, 80 or 100 years ago and hardly worth the comparison other than historical footnotes.

 

[Diogenes]

To me it is a sleep-at-night factor, because once you have won the game, either 100% stocks or 100% bonds or anything in between are a-ok.

"SWAN" (that's the fashionable acronym, no?) is crucial, but 2022 taught me that bonds offer no serenity. On the contrary, I had a strong suspicion that my equities would soon recover (which they did), but that bonds are dead-money that won't recover in any short timeframe (and as of this writing, nearly 3 years later, indeed they have not).

I also learned that whether a crash is deep but short (March 2020) or a merely moderate decline (2018) or a multi-decade malaise (ex-US stocks in the 21st century), my sleeping-patterns will suffer. I realized that likely the only way to sleep soundly, is to surrender 100% of my money and to become a ward of the State. Wealth means sleeping with one proverbial eye open, since the more that one possesses, the more one stands to lose.

The practical consequence, is that playing games (to abuse the OP's usage of the term) with one's asset allocation, offers no solace or comfort. Neither a 30/70 portfolio nor 70/30 assuages one's dread during trying times. Might as well stay aggressive, never cease "playing the game" and just try to maximize wealth.

 

[marko]

The practical consequence, is that playing games (to abuse the OP's usage of the term) with one's asset allocation, offers no solace or comfort. Neither a 30/70 portfolio nor 70/30 assuages one's dread during trying times. Might as well stay aggressive, never cease "playing the game" and just try to maximize wealth

+1 This is why I dislike the term "won the game". IMO you've only won the game when you're ahead on the day that you die.

Until then you're merely "ahead of the game" and in a situation where, as they say, 'fortunes can change in an instant'. Unless you're in the Gates/Bezos class, you never know what can happen tomorrow. For most of us, some black swan, LTC, massive market crash, anything, etc can wipe out much of those 'winnings'.

We've all seen those 'at the top' who, for any number of reasons, sadly end up having to sell everything, massively downsize and humbly carry on. (paging MC Hammer, paging the Vanderbilts) Best to keep the engine running and create a heavy cushion than to take the foot off the gas, coast along and hope for the best. YMMV.

 

[enjoyinglife102]

30 or 40 years? How long does it have to be before it's not "recency" bias?

IMO the world/markets are much different than they were 70, 80 or 100 years ago and hardly worth the comparison other than historical footnotes.

I agree there are many differences from 70, 80 or 100 years ago. The same that the next 30 or 40 years will have many differences from the past 30 or 40 years. Therefore, I am not comfortable assuming downturns won't be more severe and prolonged than most of us have experienced over our lifetimes. Conclusion for me; don't take unnecessary risks.

 

[Digger1000]

Are you ready for a 50% or more drop in the market? I always am, I always live like I have half as much money as I have. I am 100% stocks and retired 8 years with no pension or SS. My spending is less than 1% of my current investable assets (and I am poor by this boards standards I'm sure) so a 67% drop would leave me at 2.6% swr.

 

[marko]

Are you ready for a 50% or more drop in the market? I always am, I always live like I have half as much money as I have.

I think it's useful for everyone to occasionally do a "SHTF" analysis. How would you fare if half your portfolio disappeared in some massive black swan?

I found it comforting to see that with some relatively minor spending tweaks, we'd manage just fine. With that kind of information, it can tell you how thick or thin the ice is under your feet and whether your risk aversion is justified and matches reality.

 

[Earl E Retyre]

Everyone is different. I like to have my fixed income (CDs/treasuries) cover all my expenses (fixed and discretionary) and the rest in equities (and real estate) for inflation protection and growth. If the market completely tanks, it doesn’t affect my daily life and will likely come back. If the market returns over 10% on average (like it has historically done) then there is more blow the dough money.

 

[FREE866]

Are you ready for a 50% or more drop in the market? I always am, I always live like I have half as much money as I have. I am 100% stocks and retired 8 years with no pension or SS. My spending is less than 1% of my current investable assets (and I am poor by this boards standards I'm sure) so a 67% drop would leave me at 2.6% swr.

We are in a similar position. I just started my 9th year of retirement, ~98% stock, etc My WR , however, is ~3.5%.

 

[Digger1000]

We are in a similar position. I just started my 9th year of retirement, ~98% stock, etc My WR , however, is ~3.5%.

I was 50 when you retired and 51 when I retired 3 months later.

 

[Koolau]

30 or 40 years? How long does it have to be before it's not "recency" bias?

IMO the world/markets are much different than they were 70, 80 or 100 years ago and hardly worth the comparison other than historical footnotes.

I agree there are many differences from 70, 80 or 100 years ago. The same that the next 30 or 40 years will have many differences from the past 30 or 40 years. Therefore, I am not comfortable assuming downturns won't be more severe and prolonged than most of us have experienced over our lifetimes. Conclusion for me; don't take unnecessary risks.

What hasn't changed is human nature. There are plenty of different things driving markets and a lot more (so-called) safe guards in the markets than 100 years ago. BUT what typically sets off big shifts in markets is human reaction to things which are just gonna happen from time to time (both good and bad).

 

[pb4uski]

"SWAN" (that's the fashionable acronym, no?) is crucial, but 2022 taught me that bonds offer no serenity. On the contrary, I had a strong suspicion that my equities would soon recover (which they did), but that bonds are dead-money that won't recover in any short timeframe (and as of this writing, nearly 3 years later, indeed they have not). ...

I think you are referring to bond funds rather than bonds. There was extensive discussion on this forum of the perils of interest rate risk back a few years ago and many of us shortened duration in response and shifted from bond funds to CDs and individual bonds and hold to maturity, something that you can't do with a bond fund (except for target maturity bond ETFs).

 

[flyingaway]

Everyone is different. I like to have my fixed income (CDs/treasuries) cover all my expenses (fixed and discretionary) and the rest in equities (and real estate) for inflation protection and growth. If the market completely tanks, it doesn’t affect my daily life and will likely come back. If the market returns over 10% on average (like it has historically done) then there is more blow the dough money.

Fixed income covers all your expenses for one year or for the rest of your life?