Why should I not stay with 100% stocks?

[Shant]

Something that has always troubled me about the SPIA approach, if the markets are so poor that I couldn't live on a 50% bear market then how is the SPIA company going to still be able to pay?

[Turf Doc]

Something that has always troubled me about the SPIA approach, if the markets are so poor that I couldn't live on a 50% bear market then how is the SPIA company going to still be able to pay?

Because you have to plan for the possibility that you live to be 102 and the insurance company doesn't. Well, at least they don't have to worry that everyone they insure will live until 102. They also end up with all the money you almost surely would've left to your heirs

[Hatton]

Another move along those lines that can make sense (especially if you are retiring at or later than age 65) is buying a SPIA. If the combination of monthly SS + annuity check covers all of your essential spending, you can afford to take more risk with your "luxury spending" money.

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.

[Hatton]

Something that has always troubled me about the SPIA approach, if the markets are so poor that I couldn't live on a 50% bear market then how is the SPIA company going to still be able to pay?

Your state should have a guaranty association. Also you buy annuities from several different companies.

[wfpbFI]

I've always had 1-2 years expenses in cash on hand, the rest in stocks. My plan at retirment was the sale of my practice would fill up 5-10 years of living expenses in bonds/cash/fixed, anything above that from the sale adds to stocks. This is essentially my version of an immediate bond tent, to help soften a poor sequence of returns. This has been my plan, if the practice didn't sell, I'd keep working. Ask me in a week if it sells, I'll know for sure by then.

Right or wrong, I don't like planning with asset allocation percentages. I prefer to base our plans on our needs, meaning our expenses which we track yearly (We don't really budget, but we track them)

Just my to cents

[billy]

when I retire I plan on getting a SPIA, but using that as part of my "bond/fixed income" allocation, along with whatever's left of SS and my (albeit small) NYC pension and (hopefully large) NYC TDA, and cash/EF. So technically my bond allocation will be a combo of all 5 of those things.

[Shant]

Mortality credits make sense to me. Is that all there is to it?

[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

[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

[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...

[uksho]

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

[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.

[Tinroofsundae]

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

[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.

[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.