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Age 71, husband is 75. He has been retired since 2015 and I retired in 2018. We are in the spending down, retired category.
We do not run separate portfolios -- have one portfolio with 5 different mutual funds. Currently our asset mix is 45% stocks, 45% bonds and 10% cash. We have 2 to 2 1/2 years of cash on reserve and we are currently using that to supplement our SS (he took his at FRA and I took mine at age 68) and his RMD from one of our funds, Vanguary Wellsely Income. I have 2 more years before I have to start drawing my RMD, which is in TRowe Price Retirement 2025.
I am thinking of bumping up our equity and an easy way for me to do that is to switch my IRA to TRowe Price Retirement 2030.
I have made ONE mistake recently when I got all excited about the good CD rates and tied up too much of our cash in a CD that doesn't come due until July -- meanwhile we have decided to go on a couple of big trips this spring and now I am scrambling to pay for those. I know I can sell from one of our 3 taxable funds but it is stupid when we have a wad of cash. As an interesting side tidbit -- we decided that being in good health and fit and mobile at our age to go ALL IN on travel in the next two years -- hence the higher spending pattern although it will most likely be temporary. We are treating ourselves to nice trips and splurging on first class tickets.
1) What stage are you in , accumulation or spending down retired.
Accumulation
2) Do you maintain separate money invested differently from money ear marked for the long term .
Yes. Wife and I have been saving for a home expansion over the last ~2 years so we have been buying short duration t-bills (3-6 months) depending on what is giving the best yield.
3) What is you allocation on that money ear marked for the long term …
90% public equities; 10% private real estate offerings. Not really something I have a specific allocation, as when these opportunities come up and pay off is variable.
4) What percentage of total investable assets including long term money do you hold for the short term ?
25% is in short term t-bills, but that is for a specific purpose. Once that is complete, other than ~$25K for liquidity/checking accounts / monthly spend, I plan to be back to 100% in equities/real estate.
depends on what is being used and if you are in the red zone or not .
if we are talking retirement 40-60% is decent for retirement if spending down to live
as well as if you are living off it or if it is just some fun money or legacy money .
i always count all models in my total equity holdings as well as all cash looking at it from 35,000 ft as a whole despite what the individual buckets or portfolios used are
as i said in other threads , if in the accumulation stage i would want two buckets .
short term money for now and long term money with a view looking out decades which is 100% diversified equity funds .
if one is in the red zone of retirement using something like the permanent portfolio or the golden butterfly they need less equities because the portfolio contains other capable movers like gold and long term treasuries so 25 to 40% is good .
there is a suggested glide path for conventional investing which use other assets besides equities which usually aren’t as capable as equities like total bond funds so higher levels are needed .
i can tell you i was 35-40% when i was in the red zone but used something like the butterfly.
now i cleared the red zone so i am 50-60% equities.
as far as what the red zone is
EXECUTIVE SUMMARY
The final decade leading up to retirement, and the first decade of retirement itself, form a retirement danger zone, where the size of ongoing contributions and the benefits of continuing to work are dwarfed by the returns of the portfolio itself. As a result of this “portfolio size effect”, the portfolio becomes almost entirely dependent on getting a favorable sequence of returns to carry through.
And because the consequences of a bear market can be so severe when the portfolio’s value is at its peak, it becomes necessary to dampen down the volatility of the portfolio to navigate the danger – a strategy commonly implemented by many lifecycle and target date funds, which use a decreasing equity glidepath that drifts equity exposure lower each year.
Yet the reality is that the retirement danger zone is still limited – after the first decade, good returns will have already carried the retiree past the point of danger, and bad returns at least mean that good returns are likely coming soon, as valuation normalizes and the market cycle takes over. Which means while it’s necessary to be conservative to defend against the portfolio size effect, it’s not necessary to reduce equity exposure indefinitely.
Instead, the optimal glidepath for asset allocation appears to be a V-shaped equity exposure, that starts out high in the early working years, gets lower as retirement approaches, and then rebuilds again through the first half of retirement. Or viewed another way, the prospective retiree builds a reserve of bonds in the final decade leading up to retirement, and then spends down that bond reserve in the early years of retirement itself (allowing equity exposure to return to normal).
Ultimately, further research is necessary to determine the exact ideal shape of this “bond tent” (named for the shape of the bond allocation as it rises leading up to retirement and then falls thereafter). But the point remains that perhaps the best way to manage sequence of return risk in the years leading up to retirement and thereafter is simply to build up and then use a reserve of bonds to weather the storm.
here is a suggested glide path .
so we reduce down pre retirement, then through retirement keep reducing until we bottom out about 30-35% , then we increase back up to 60% or so again .
many just buy something like wellesly pre retirement and stay with it .Wellesley is 40/60
Yeah my mom uses an advisor and retired in 2010 (she wanted to retire in 2008, but due to the stock market taking a pounding she decided to keep working for 2 years and contribute to her retirement instead of starting draw down).
For the next 10 years she probably was 55% equities / 45% bonds + additional real estate income. However, starting in about 2020, she upped her equity portfolio to about 70% as she felt comfortable that there is basically no scenario where she won't outlive her portfolio and she was more comfortable taking on additional risk for future generational wealth. Now her focus is on how to decrease her taxable estate in anticipation with the 2026 exemption amount being cut down.
what stage are you in , accumulation or spending down retired .
do you maintain separate money invested differently from money ear marked for the long term .
what is you allocation on that money ear marked for the long term …
what percentage of total investable assets including long term money do you hold for the short term ?
Not sure I even think like that. I've been retired nearly 2 years, and I live off of my SS and pension, and have not touched any retirement investments. I don't have anything "long term" planned really. 2/3 of my uninvested cash is in a 5% CD. The rest of my cash is in savings, and if I have a big expenditure (my new deck - OUCH!) it will come out of that.
Location: Was Midvalley Oregon; Now Eastside Seattle area
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Longevity Insurance for a Biological Age,Why Your retirement Plan shouldn't Be Based on the Number of Times You Circled the Sun. 2019. Milevsky, Miles. Booklet 115pages.
Some thoughts on how to model your retirement be it with equity, bonds, RE, annuities, or inheritance.
I’m 57. Retired at 50. Been at 95-100 % stock for decades. ETFs only. I learned a long time ago I stink at stock picking so ETFs are perfect for me as I just want market returns. Admittedly I’ve gotten lucky in that market didn’t crash in 2017 , my first year of retirement. Immensely grateful.
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I've been retired nearly 2 years, and I live off of my SS and pension, and have not touched any retirement investments. I don't have anything "long term" planned really. 2/3 of my uninvested cash is in a 5% CD. The rest of my cash is in savings, and if I have a big expenditure (my new deck - OUCH!) it will come out of that.
