allocating for different stage of life

[GWoodle]

Originally Posted by leastprime

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.

By inheritance you mean to pass on your funds to future generations. In an inherited IRA they will face a 10 year period to take RMD's.

An annuity may be used to secure a source of income either today or sometime in the future. This could be set up if you don't have a pension. Maybe you can live with Social Security + the annuity. You could use he annuity to cover the period from 62-70 to delay claiming your Social Security.

The equity/bonds decision should be based on life expectancy. At 60 you may need 40 years to cover. So you may want higher allocation to stock over bonds. You still need growth.

[leastprime]

Originally Posted by GWoodle

By inheritance you mean to pass on your funds to future generations. In an inherited IRA they will face a 10 year period to take RMD's.

An annuity may be used to secure a source of income either today or sometime in the future. This could be set up if you don't have a pension. Maybe you can live with Social Security + the annuity. You could use he annuity to cover the period from 62-70 to delay claiming your Social Security.

The equity/bonds decision should be based on life expectancy. At 60 you may need 40 years to cover. So you may want higher allocation to stock over bonds. You still need growth.

Milevsky has some interesting insights. ($10.00 from the BigA)

Doesn't need to be in IRA but most of us have most if not all of our retirement assets in IRAs.
Our RE are not in IRA but they are retirement assets that may or may not be used for inheritance.

When you need to make withdrawals from your assets may determine the allocation.

Some may front load their withdrawals for travel, remodels, car, while they can. Some may back load withdrawals for LTC or inheritance. Some may have other models.
YMMV

[mathjak107]

it can be a good idea to review one’s allocation if not 100% equities.

the growth between this year and last year may have pushed equity allocations higher then one wants .

it’s great when things go up . but painful when we go down .

i looked at where we stand over all yesterday and some equity positions have been reaching a point where they have grown considerably.

the time to decide to maybe bring the allocation back in line is when we are up , not after we fall .

it looks like moving just 5% from the growth and income model to the income model will put things back in the target range again .

the problem with larger portfolios as they grow , and a good problem to have , is the percentages in dollars grow crazy and small percentages equal big dollar changes . that 5% adjustment worked out to multiple 6 figures being swapped .

some funds i have had crazy gains . one in particular was up 56% last year and 12% this year, that makes up 28% of the growth and income model which is my largest model . berkshire up 17% this year. my total market etf vti is only up 6% this year in comparison so clearly a stock pickers market

i try to keep things within a range of volatility so i want to tighten things up a bit.

so its a good time to remind ya’ll to make sure you are still within your bounds before things may dip and ya go shoulda made a change.

looks like from this point on every 5% - 7% move up in equity gains will get a slight move in to the less aggressive income model , which does still contain equity funds , only a smaller allocation and less aggressive funds that won’t rise and fall 40% - 50% in a year .

if we dip again , that money will naturally have to flow back the other way . so it forces one to buy when things are deteriorating instead of selling .

i find it can be nice having 3 different models to play with to temper things or make them more aggressive as needed rather then one big portfolio.

but whatever works for ya , just a reminder to make sure things are not getting above where you want them

[mathjak107]

Originally Posted by GWoodle

By inheritance you mean to pass on your funds to future generations. In an inherited IRA they will face a 10 year period to take RMD's.

An annuity may be used to secure a source of income either today or sometime in the future. This could be set up if you don't have a pension. Maybe you can live with Social Security + the annuity. You could use he annuity to cover the period from 62-70 to delay claiming your Social Security.

The equity/bonds decision should be based on life expectancy. At 60 you may need 40 years to cover. So you may want higher allocation to stock over bonds. You still need growth.

correct !

research is showing more and more that once we pass certain milestones in age we may actually need more in equities and not less as old school thinking thought.

the glide path of target date funds or the old school formulas like 100 less your age are actually not optimal and the reverse of what good planning dictates.

you may not want to let those equity levels go to high though.

usually 40-60% is comfortable and popular. you may want closer to 40% thru the red zone and closer to 60% after it so the glide path looks like a U shape from about 5 to 8 years pre retirement to about 5-8 years thru retirement causing a U SHAPE CURVE .

so a 100% equities falls to about 40% pre retirement, clears the red zone then heads back up to 50-60% or higher


. we are happy about 50%

red zone glide path

[wrat]

I retired several years ago, previous to retiring I had no W2 income for over 15 years, spouse still working,
we draw nothing from our portfolio, and live solely on income produced from spouses wages , I occasionally buy and sell collectable things that is a small supplement
So I guess that puts us in the accumulation stage.
Right now we have everything set for growth
we keep an emergency fund in a CD locally it has close to a years wages, I review that every 5-7 months
We also keep a fair bit in a slight interest bearing checking acct that covers household expenses and life bills.
we also carry zero interest accumulating debt
spouse wishes to retire at 67 at which point will draw max SSI
I due to previous choices will have very little SSI
I think we have a few more years of max growth then we will have to reevaluate for less risk

[mathjak107]

Originally Posted by mathjak107

retired , age 71 spending down

three different portfolios used

2 years cash , one of which we live on, the other accumulating interest and dividends towards next year .

an income portfolio with about 7 years spending in a 25% low volatility equity funds and 75% assorted bond funds with short durations

a growth and income portfolio 60/40 with 14 years spending in 5 different funds

all the rest in 100% equity’s in vti and berkshire

plus a small experimental portfolio that is a leveraged risk parity portfolio .just an experiment right now


taken in its entirety its is 55% equities , 35 % bonds and 10% cash for living on.


up to pre retirement all long term money which was the bulk of what we had was 100% equity funds , no bonds for 4 decades

with markets having a very nice last couple a months, equity levels were growing faster and higher then i wanted .

so moved some profits from the fairly aggressive growth and income model into the more conservative income model .

overall not a big change in allocation .


combining all models as if they were one big portfolio shows we are at 50% equities, 37% bonds ,13% cash .

that includes all cash we live on too .

the biggest change is in the types of equity funds , as even though the equity funds in the income model are 100% equities , the types of holdings in the income model equity funds are much more conservative .

one particular fund in the growth and income model is up 61% over the one year and is 28 % of that model so that is very very aggressive. that was crazy growth .

interest alone has increase in the portfolio models and cash to about 72k a year annualized ,so today it has become quite substantial compared to what it used to be .

while i will always be invested in equites,the fact is what you own makes a big difference in outcomes. , good or bad .

so i am more comfortable at this stage with a bit less in such aggressive growth funds with the few heavy hitters we have had being responsible for most of it .

i think sliding some out of such aggressive growth may be prudent at this point