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Why should I not stay with 100% stocks?

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

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  • billy
    replied
    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.

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  • wfpbFI
    replied
    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

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  • Hatton
    replied
    Originally posted by Shant View Post
    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.

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  • Hatton
    replied
    Originally posted by artemis View Post

    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.

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  • Turf Doc
    replied
    Originally posted by Shant View Post
    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

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  • Shant
    replied
    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?

    Leave a comment:


  • artemis
    replied
    Originally posted by Hatton View Post
    When you are actually getting serious about pulling the trigger on retirement I think having 3-5 years in cash (MMFs) makes a lot of sense. You sleep at night. You can go pay cash for a new car or whatever.
    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.

    Leave a comment:


  • Tim
    replied
    Originally posted by Lordosis View Post
    Hard to say without numbers but it is possible for some supersavers to get to 40-50x spending and than it really does not matter because you are almost just living on the dividends. So you sell so little even in a down market you are not hurting yourself too much. And the extra growth from the good years makes up for it.
    Rock on!
    WBD and Hatton will never spend down to the theory of 4% withdrawal. Most will not. The AA is as much determined by the market performance an tax increase rather than risk assessment. Yes, stocks and real estate have had gains. Let it run and resize the E Fund.

    Leave a comment:


  • GasFIRE
    replied
    I’m fast approaching retirement and use to be 100% equities until the 2008/09 Lehman Bros/Bear Stearns debacle when I created my first bond position. Now like Hatton I’m about 70/30 equities vs cash/bonds. When I was a 100% equities investor it was because I didn’t want to give up any potential gains by having “less able” holdings like bonds. Now I don’t view them as a performance drag but as ballast for my portfolio especially during a significant downturn. I don’t need the 30% to return more but to minimize potential losses. Since I consider myself fatFI I feel like I can live the rest of my life on my 30% cash/bond position plus SS @ 70 barring some black swan event. I’m willing to let the 70% equities position ride the future markets while the 30% cash/bond position is not a % allocation but a specific amount set aside for cash/bonds. As the market varies the ratio will too.

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  • Hoopoe
    replied
    Originally posted by White.Beard.Doc View Post
    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.
    I was a 100% stocks boglehead investor for years but am moving towards the White Beard strategy. Real estate, especially well chosen and owned privately or through syndications can offer diversification and cash flow while meeting or exceeding stock market returns. They also work nicely together to help protect against different kinds if risk. Current talking heads are very concerned about inflation and I hope to soon be at the point where huge inflation and interest rate hikes might tank tech stocks that need cheap credit to fuel growth (goodbye SP500, QQQ etc), but that would explode the value of my real estate holdings and I could live on either. Assuming normal balanced economy, then both win! Good adage I heard somewhere: real estate for cash flow, stocks for diversification and growth. My wife and I are currently 25% real estate in various forms, 70% stocks and 5% other like bits of cash, some practice equity etc. Real estate accumulation has been in the last few years and will likely rise up to around 50%. I wouldn’t go above that.

    As I get very close to retirement I’ll likely also add in 2-3 years of expenses in bond ladder, ibonds for inflation protection and some cash.

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  • Jack_Sparrow
    replied
    Split the difference, go 5% cash then go 5% leveraged 3x index, then 90% stocks.

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  • Lordosis
    replied
    Hard to say without numbers but it is possible for some supersavers to get to 40-50x spending and than it really does not matter because you are almost just living on the dividends. So you sell so little even in a down market you are not hurting yourself too much. And the extra growth from the good years makes up for it.

    Rock on!

    Leave a comment:


  • Dewangski1
    replied
    Originally posted by Random1 View Post
    I read recommendations of 100% stock , but then other reports show over certain periods T-Bills substantial out performed stocks for an extended period of time. Wondering is my thought process just suffering from recency bias or is this time different from the past. I am currently 65/35 hoping to retire soon. I think if I were 20 years away , I would still be in 100% stocks.
    Maybe recency bias isn’t a bad thing? I think it can depend on how you get your bond exposure. Directly holding a bond would be best. Indirect bond exposure via funds risks your principle getting eaten by a rising rate environment. The only difference now vs in the past 30 years is a bond bull market. Now rates are about as low as they can go, which likely signifies the end of the bond bull market. Hence, TINA with equities until rates rise to the 2-3% levels that can support more meaningful income.

    Leave a comment:


  • Random1
    replied
    I read recommendations of 100% stock , but then other reports show over certain periods T-Bills substantial out performed stocks for an extended period of time. Wondering is my thought process just suffering from recency bias or is this time different from the past. I am currently 65/35 hoping to retire soon. I think if I were 20 years away , I would still be in 100% stocks.

    Leave a comment:

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