Why should I not stay with 100% stocks?

[artemis]

The main value of a SPIA is to provide longevity insurance in exchange for losing control of the money and taking it out of your estate. It’s like SS, a huge win if you live to age 95 but a financial disaster if you get hit by a bus in the first year after you buy it..

But it's a financial disaster to your heirs, NOT to you! I think that distinction matters. If you feel you owe your heirs the maximum possible amount of money, a SPIA won't work for you. But if you feel it's your money to spend as you like, that changes the equation. As a single person with no kids who plans to leave 100% of my estate to charity, I don't worry much about how much will be left when I pass away. Doesn't matter if I die with $10 million in the bank or $1 in the bank, so long as I had enough money to keep me going during my life.

[Lithium]

The main value of a SPIA is to provide longevity insurance in exchange for losing control of the money and taking it out of your estate. It’s like SS, a huge win if you live to age 95 but a financial disaster if you get hit by a bus in the first year after you buy it.

I agree that if you are able to self-insure your longevity, it’s a poor investment. I would take my money out of SS and put it in the market after the first bend point if Uncle Sam gave me the choice.

[Kamban]

If someone has pension , any risk in going 100%( I m mostly in target funds )

Target date funds start converting increasing amounts of stocks into bonds and other fixed income instruments as the target date approaches. You thing you are 100% into stocks but they change it for you as the date approaches.

[Kamban]

I have thought of this also. I have read tha age 70 is a good time to buy these. I see the beauty of a check landing in my bank with no thinking on my part. I might do it after Roth converting.

For a high net worth individual, having SPIA is something like having a financial advisor with a 6 % AUM. You are basically handing the money over to them and they are investing it and taking their cut and giving you a fixed sum each month. With Roth Conversions, cash and SS why should we not do the same, invest it ourselves and keep that money that we are handing over an insurance company.

I can see the value of annuity for someone who has not earned well and who has just saved barely enough for retirement. But for someone with $5M+ net worth, there is no way that they do not enough money to spend each year till they die, should they retire after age 55. In 99% of the cases, you will barely spend enough to overcome the compounding of the invested money that you will end up with even greater net worth when you die than when you retired.

That will happen to all the supersavers on this board.

[StateOfMyHead]

If someone has pension , any risk in going 100%( I m mostly in target funds )

Wouldn't target funds be considered diversification?

[Random1]

why do you feel uncomfortable selling stocks ?

For me it is not a comfort level , it is more a tax issue. A significant portion of my portfolio is appreciated but not realized capital gains. I am already in a high tax bracket so selling is mental misery handing money over to the government at an in opportune time.

[MPMD]

full disclosure i'm 95% stocks.

i am not an expert on this but i think we talk about the SORR way too much. seems to me like planning for basically a black swan event.

esp for those who are retiring early you would not just need to get hit w/ SORR you would also need to be unable to keep working a bit for a few years while the market recovered or unwilling/unable to cut your lifestyle a bit.

Plan A (99% probability): you are heavy stocks, retire when you want, and shave a few strokes off your golf game
Plan B (1% probability): right as you retire the market has some terrible years so you either
a) scale it back
b) work part time a few more years
c) work full time a few more years

nothing there is a catastrophe, and i'm also not sure that 20% bonds would guarantee that most of us would be comfortable hanging up the white coat if we had another 2008 style crash.

[Nysoz]

why do you feel uncomfortable selling stocks ? It’s the entire purpose of owning them. If you are never going to sell then what is the purpose of buying ? Please don’t say something like live off the dividends. The whole point is to buy stuff that goes up in value and sell it later. Lots of people seem to have a hard time with the selling part for some reason.

We are in a completely new era from a monetary policy standpoint so prevailing trends regardless equity ratios are pretty meaningless. Tons of have been calling market overvalued for years and recommending others to sit on sidelines which would have been terribly costly.

too many people think about this stuff in a static trend and assume prior trends hold true moving forward which just isn’t likely given the roads we are going down economically. Something working 50 years ago doesn’t mean it works today.

I don’t ever plan on selling my stocks unless I’m forced to. Through selling options, I make more than my current wants or needs. Also, I can borrow on margin and just pay off the interest until I pay it back or die.

It’s an interesting conundrum about planning for the future. Past performance don’t guarantee future results. But swr and everything else is based off past performance and historical data. This time it’s different has been said many times before in the past as well.

I think the most important part is to create a plan that’s good for you personally and allows you to stay the course. Then the tricky part is to have flexibility built into your life/plan that doesn’t necessarily mean changing your plan. But that would allow you to react to changing policy/environment if necessary.

[Panscan]

My plan when I retire is to be 40% stocks, 10% bonds and cash, and 50% cash flowing real estate. Stocks have to be sold in retirement and decumulation feels generally uncomfortable to me, in particular when the market is down.

So many of you saying you are comfortable being 100% stocks is a strong contrarian signal to me, full of recency bias given that all of the recent downturns in the market have been short, sweet, and pretty much pain free. A huge market downturn that lasts more than a decade is overdue. Maybe it will come, maybe it won’t. But a period of significant inflation will require painful increases in interest rates, and that will hurt stock market returns for quite a while.

why do you feel uncomfortable selling stocks ? It’s the entire purpose of owning them. If you are never going to sell then what is the purpose of buying ? Please don’t say something like live off the dividends. The whole point is to buy stuff that goes up in value and sell it later. Lots of people seem to have a hard time with the selling part for some reason.

We are in a completely new era from a monetary policy standpoint so prevailing trends such as regarding equity ratios are pretty meaningless. Tons of have been calling market overvalued for years and recommending others to sit on sidelines which would have been terribly costly.

too many people think about this stuff in a static trend and assume prior trends hold true moving forward which just isn’t likely given the roads we are going down economically. Something working 50 years ago doesn’t mean it works today.

[Tinroofsundae]

Regarding the question about having a pension, see the other recent thread that addresses this specific question.

[Tinroofsundae]

Wow, great responses in the last 24 hrs! Clarification: I am 100% stocks, maybe 3 months cash on hand for emergencies. I have enough for 25x and can retire now. But dont feel compelled to, so I am dropping back to part time, which will cover all expenses. So in a bear market, I will just keep working if I feel like it. I may work another 5-10 years, in which time I will be very overfunded due to compounding. Note we are dual income, and can live comfortably on just one income. And have disability through my employer.

The concept of cash = sleep better resonates with me.

So I'm leaning towards stay the course, see how the market does, and adjust asset allocation accordingly.

[uksho]

If someone has pension , any risk in going 100%( I m mostly in target funds )

[F0017S0]

I've gone back and forth about the wisdom of 100% stocks; right now I am hovering at 86-87% stocks (my ideal target has laways been around 85%). The only serious bear market I have encountered as an investor has been the COVID flash crash, but I kept buying on the way down (VTI, SCHD, SCHB). Turned out to be fine and I don't regret the decision.

Perhaps from dumb luck, during that crash, my portfolio never went below a gain of 0.7% (dropped from a gain of about 30%). I'd like to think that the small dash of bonds (BND) prevented my portfolio from eroding principal.

Seems like it comes down to risk tolerance and the three critical elements that define an adult's life: 1) whom you married, 2) how many kids you have, and 3) how much debt you have. If none of those apply then going all in could be beneficial...

[billy]

Agree, reading all the zealous praise for a 100% stock portfolio does seem concerning. It could be a strong contrarian signal? Cloudy crystal but ………..

Cash/bonds = sleep aide

Also younger forum members, some who never invested in a real/prolonged bear, have ability to tolerate more risk bc longer horizon, etc etc

[Tangler]

My plan when I retire is to be 40% stocks, 10% bonds and cash, and 50% cash flowing real estate. Stocks have to be sold in retirement and decumulation feels generally uncomfortable to me, in particular when the market is down.

So many of you saying you are comfortable being 100% stocks is a strong contrarian signal to me, full of recency bias given that all of the recent downturns in the market have been short, sweet, and pretty much pain free. A huge market downturn that lasts more than a decade is overdue. Maybe it will come, maybe it won’t. But a period of significant inflation will require painful increases in interest rates, and that will hurt stock market returns for quite a while.

Agree, reading all the zealous praise for a 100% stock portfolio does seem concerning. It could be a strong contrarian signal? Cloudy crystal but ………..

Cash/bonds = sleep aide