Five year cash bucket - TIPS?

[saralvr]

Originally Posted by mathjak107

actually the equities portion should not be dependent on age as much as goal for the money and your ratio of discretionary to non discretionary income .

a 70 year old with a pension that covers things and is investing for legacy money can be 100% in equities if they wanted to .

on the other hand a 60 year old with a budget with little discretionary income should not even be in equities if everything in the budget is a need and not a want . with no where to cut back if need be they can end up in bigger trouble if markets head down.

trying to associate age and allocation is always a bad way to do things .

first question should be who am i investing for , myself or legacy money . then the other stuff gets figured in like draw rate needed , pucker factor and ratio of the budget .

Mathjak, please explain this bold part I quoted from you. I have always heard (and agree) that you need to keep a portion of your money in equities otherwise you lose your money to inflation. I also agree that a 60 y/o with little descretionary income should be conservative in their investments, even 30/70, but they need to be in the market. I'm not sure I understand why the suggestion to keep their money in a CD or other safe, almost no interest account. Please clarify, thank you!

[mathjak107]

the reason i said that is because in order to invest in equities for an income there is always the chance you will get hit with a prolonged downturn day 1 of retirement or even in the early years . .

if you have no or very little discretionary income and your budget is all needs and not wants , you have no where to cut back .

so as much as someone in that shape needs the assistance of equities the reality is they can be left in a worse predicament .

you need slack in your plan when dealing with variables like equities and the ability to cut back if need be . you need a nice comfortable ratio of wants that you can shed if you have to if things don't go as planned if you want to count on equities . even a 30/70 mix lost about 18% in 2008 depending if the bond side had a lot of that toxic paper or not . conservative wellesley was down 10% .

2008 was luckily a non event for the most part since while deep it was short lived and recovery was a quick v-shape . a modest prolonged u-shaped recovery can be very hard on your portfolio and with no room for spending cuts you could be hurt beyond repair .

you really have to think your allocation through and kind of ball park if you had to take a pay cut how much can you cut ? then back in to an allocation .

unless you have that little in discretionary spending your allocation and cutting back likely won't be an issue .

[saralvr]

Thank you. Appreciate, as always, your detailed response.
We are in a conservative Fidelity fund (40/60) for that reason. No pension to cover the gap between SS and expenses, but we do have savings we plan on using which, according to Firecalc and Fidelity we'll be ok.

[mathjak107]

which fidelity fund do you use ?