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Asset allocation vs amount saved towards goal

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  • Asset allocation vs amount saved towards goal

    I have a general question about asset allocation: I understand you want to take less risk as you get older or lose the ability to generate income -- so traditional asset allocation is that you would move to higher bonds or safe funds [bond tent] as you near retirement age and then for the first couple of years into retirement.

    However, I have not heard it explained how savings/wealth plays into this. For example I am just under 40 with anticipated working life / desire to work 20+ years. I have just reached my retirement savings goal [x] and plan on keeping investing in the market. I am 100% stocks [US/INTL]. I plan to start adding some bonds gradually over time.

    What happens 10 years from now [if I continue to be a supersaver -- >60% net income into savings], if I have 5x or 7x in retirement? My question is does asset allocation only take into account years out from retirement or does it also take into account overall wealth. It makes no sense to me to keep in bonds or more safe allocation a greater amount than one would actually need for retirement.

    What is the down side of keeping x dollars [that needed in retirement] in bonds, and the remainder in stocks?


  • #2
    If you are a super saver, smart investor, and generally don't overspend then you'll be investing on a longer time horizon (i.e. generations) in which you could afford to take bigger risks. I'm 100% equities and, as of now, will likely never go over 20% bonds during my lifetime.

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    • #3
      ability, willingness, need

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      • #4
        20% max bonds was a number I had in my head but I have no scientific data to back that up

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        • #5
          Originally posted by runfast00 View Post
          20% max bonds was a number I had in my head but I have no scientific data to back that up
          It's a 'see how it goes' type of thing. The further along you get the more information you'll have on what will be right for your situation.

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          • #6
            I am 63 and have 30% in bonds and 5% in cash equivalents. Seems ok.

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            • #7
              The timing that matters is not when you hit the number, it is when you are going to start relyIng on the investments to support yourself.

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              • #8
                I’m in a possibly similar situation in that I’m young, save a lot, plan to work for a couple more decades, and will have many, many multiples of my FI number saved by retirement if my current trajectory continues (plus a realistic rate of return). Therefore I am 100% equity and will remain that way for the foreseeable future. Maybe I’ll consider bonds/cash as retirement actually nears and I worry about SORR. Maybe not.

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