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Old 08-30-2017, 01:40 PM
 
Location: Near San Francisco, CA
184 posts, read 115,218 times
Reputation: 241

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Quote:
Originally Posted by mathjak107 View Post
why not skip the 3 years cash and make it more growth oriented anyway if you are increasing the allocation to equities ? . once you increase the volatility on the equity side you increase volatility -period.
That is one way to go, but in a market downturn the maximum drawdown will be larger with an increased allocation to equities. The cash allows one to increase the allocation to equities, but not sell during a large market downturn.

It has been an interesting discussion, thank you.
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Old 08-30-2017, 01:43 PM
 
Location: Upstate, NY
609 posts, read 262,058 times
Reputation: 753
Quote:
Originally Posted by Q44 View Post
Mind my asking approximately what part of Upstate you are in? We sat down to look at what the budget would include in retirement and I had $$ set aside to snowbird. My wife asked me if I was nuts. She asked if I wanted to go south for the winter and I said not really but I thought she might. She said she has zero desire to go to Florida for months at a time. She does want to go visit her parents but said she'd rather do that 2-3 times a year for a week at a time. It really doesn't get so cold so often for so long that we want to leave for the whole winter. But if we lived near the Great Lakes we might think differently.
We are in the Capital District. I do not want to be here December through March. I'm happy to visit, though!
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Old 08-30-2017, 01:44 PM
 
71,700 posts, read 71,801,099 times
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the larger draw down is offset with the fact you draw down from higher levels . the cash over time cuts where you are quite a bit when you use buckets with quite a few years cash.

the math shows since 67% of the time markets are up and only down 1/3 the weight in up years of cash tends to have you drawing down from lower balances .

increasing equities to offset cash is not really an answer for someone who did want that high of a level in the first place .

if i want 60/40 i don't want 70/30/10. in fact 70/30/10 would be even more volatile since cash may not do the rising in a downturn bonds might .

if i stay with 60/30/10 then studies show drawing from a 60/40 mix in good and bad actually did a bit better
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Old 08-30-2017, 02:31 PM
 
1,210 posts, read 709,384 times
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I don't know how others do it but if I wanted a 60/40 mix, I'm too much in equities in the retirement accounts but if I look at everything, savings accounts, a balance in checking, an account that has accumulated some RMD amounts, than the mix is different. No one place shows everything.
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Old 08-30-2017, 03:00 PM
 
Location: Gilbert, AZ
3,182 posts, read 1,963,283 times
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Quote:
Originally Posted by oldsoldier1976 View Post
The question stems from thinking on what happens during bad times. If the equities market is down that could mean the bond market is up. Drawing from there and then is okay but what if both are down and you are in need of cash. You are now stuck.
We can look at history. Taking records that go back to 1928 there have been three calendar years when both the S&P500 and the 10-year T-note both had negative returns.

In 1931 the S&P returned -43.8% while the T-note returned -2.6%
In 1941 it was -12.8% and -2%
In 1969 it was -8.2% and -5%

There were 21 additional years when the S&P return was negative, and the T-note return was positive.

In short, I'm fine holding good-quality bonds instead of cash, knowing that if there are losses they will be modest, and over 20+ years the outcome using cash will almost certainly be worse than if using bonds.
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Old 09-01-2017, 04:00 AM
 
71,700 posts, read 71,801,099 times
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excellednt pod cast by michael kitces on draw rates .

the shiller p/e 10 are terrible predictors of what markets will do short term . but it's predictive ability longer term like over the next 10 years is spooky accurate when it comes to stock valuations vs draw rates .

depending where valuations are when you set your draw rate day 1 ------ 4 to 6.50% can be a safe withdrawal rate .

those who pulled the plug after the lows of 2008-2009 could actually have gone with as much as 5.50- 6.50% . in fact it has been that way after every major down turn .there seems to be a direct link between valuations and draw and it has never veered .

excellent podcast by one of the top researchers today in the area of retirement planning .



Michael Kitces

Last edited by mathjak107; 09-01-2017 at 04:14 AM..
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Old 09-01-2017, 11:32 AM
 
Location: SoCal
13,252 posts, read 6,345,210 times
Reputation: 9873
How may years do you have to wait to make sure you will not be afraid of SoRR.
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Old 09-01-2017, 01:55 PM
 
71,700 posts, read 71,801,099 times
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what is that ?
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Old 09-01-2017, 01:59 PM
 
Location: SoCal
13,252 posts, read 6,345,210 times
Reputation: 9873
SoRR- Sequence of Returns Risk( I believe)
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Old 09-01-2017, 02:04 PM
 
71,700 posts, read 71,801,099 times
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Quote:
Originally Posted by NewbieHere View Post
How may years do you have to wait to make sure you will not be afraid of SoRR.
the first 5 years are the most crucial . but unless you maintain at least a 2% real return average the first 15 years you may be in trouble . after that point if markets sucked we usually have a good run up due .
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