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If you are old enough to be a retiree, you have lived through market ups and downs. Seems like the next crash is a question of when and not if. What percentage of your portfolio in cash (not bonds) would keep you from worrying too much?
How about the advice, "Subtract your age from 100, that's the percentage of stocks you should have". Do you agree with this advice?
percentage of bonds should never be age based . never!
it has to do with your own pucker factor , goals and income draw needs as well as who you are investing for .
a retiree with a pension covering most of their needs may be investing mostly for heirs . they can be as aggressively invested as when they were in their younger years .
the types of bonds matter too . you need about 70% in intermediate and shorter term bonds to do the same up lifting in a down turn long term bonds can do with just 20% .
so there is a whole lot more to your allocation than a magic bond number linked to age .
i run about 50% equities and about 50% in assorted bond funds and cash . i find that is a good balance between the volatility i want and the portfolio meeting our goals. if valuations fall i can see 60/40
The basic answer depends on how much of your basic daily expenses are being meet by selling securities or to a lesser extent dividend income.
Do not see why you eliminated bonds. Are CD's also eliminated?
I would say you should have 3 to 5 years of "cash" to cover expenses you would like to incur during a market downturn that are not covered by SS, pension, or annuities.
I've been trading in and out, so at the moment I have a lot in cash. Recently I had to buy some mutual fund to increase my equity. I don't trade mutual funds just a ETF. But I have about less than 25% in stocks. My goal is to be 50% in stocks. At the moment I don't have any bonds, not even short term bonds.
If you are old enough to be a retiree, you have lived through market ups and downs. Seems like the next crash is a question of when and not if. What percentage of your portfolio in cash (not bonds) would keep you from worrying too much?
In 2001, I went into retirement without much worry.
I had/have a small pension and 100% of our Net Worth was in apartment complexes. I figured that so long as our tenants could find jobs and pay rent, I was insulated from the economy.
In 2008 our tenants lost their jobs and were no longer able to pay rent. For the first 7 years I had no worries.
Quote:
... How about the advice, "Subtract your age from 100, that's the percentage of stocks you should have". Do you agree with this advice?
No I do not agree.
You need to invest in whatever you feel is right for you.
It is 2017 and I am going right back into apartments. I still 'believe' in them.
The basic answer depends on how much of your basic daily expenses are being meet by selling securities or to a lesser extent dividend income.
Do not see why you eliminated bonds. Are CD's also eliminated?
I would say you should have 3 to 5 years of "cash" to cover expenses you would like to incur during a market downturn that are not covered by SS, pension, or annuities.
3 to 5 years in my opinion in cash is much to high . i can see up to 2 years in cash , but 5 years in an income portfolio is fine .
that is what i do . i have 2 years in cash and an income model to cover about 5 or 6 years which is 75% assorted bond funds and 25% a dividend equity income fund.
The basic answer depends on how much of your basic daily expenses are being meet by selling securities or to a lesser extent dividend income.
Do not see why you eliminated bonds. Are CD's also eliminated?
I would say you should have 3 to 5 years of "cash" to cover expenses you would like to incur during a market downturn that are not covered by SS, pension, or annuities.
I have bond funds, about 23% across my portfolio. I don't care to tie up money in CDs; I'd rather use my money market account.
Figure out what it cost you to survive and then work backwards from there since each circumstance will likely be different, so it will depend on what expenses you have and what other income you have or will have, if you have a pension and or SS then figure out how that amount will offset your expenses, if no pension, then you would need more cash, in my case I have both and they would cover all we would need to live on while I am alive but with some wasteful spending cut out, so I keep about 2 years in cash and some older I Bonds (which are just about as good as cash) in case I die first and before she reaches SS widow age, thus leaving my wife without my pension or SS since she is now 49 and I am 69.
the most dangerous part of retirement is the first five years . if you have a nice run up right up front than even spending from 100% equities when markets are down would likely be not a problem .
but have the down turn up front and you can be in trouble .
so protecting the first 5 years can be a good idea . but that does not mean sitting on 5 years of low yielding cash .
2 years cash is fine , and if you have a decent run up you may need just the current year in cash . the rest of the years can be in an income portfolio .
the one i use is about 75% less volatile than the s&p 500 and consists of assorted bond funds and a 23% stake in a dividend equity fund . it currently produces 4-6% depending how the dividend equity fund does
the rest of the money is invested more aggressively for the long term .
if you retired in 2008 , while it was scary it really was relatively short lived and had a quick v-shaped recovery . today the 2008 retiree is on par with any other average retiree group in history .
even a modest u-shaped recovery in a down turn can harm a new retiree if it goes on to long .. it is not the steepness of the drop as much as how long the recovery time takes that can be the problem
Last edited by mathjak107; 07-27-2017 at 04:00 AM..
as mathjak says it is a matter of pucker factor. Having cash to cover 2 years should be plenty. In addition if you have a steady income of pensions you can decrease the cash amount but to be safe you should have some emergency funds and access to non-equities funds.
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