Just retired, age 60. No pension, no inheritances, but wife and I have lived a happy life and saved diligently from the start of our careers.
With a real return of 1% we can maintain our standard of living til we are over 100 (based on a personally constructed spreadsheet). Online calculators show a very high probability of success though our planning age of 100. In the unlikely but possible event one of us lives longer than that we could draw on our housing equity.
So my read is we don't need to take much risk. My current thinking is we will start with an equity allocation of ~30%, which is where we are now. I've always focused on equities and am content with our current holdings. I am strongly inclined to go to a total return portfolio, drawing down assets. and starting Social Security at age 70.
I have no plan for the large fixed income component. Currently I have ~10% of fixed income in Total Bond funds and ~10% in a TIPS fund. A whopping 80% is sitting in CD's and Zero's maturing in 2 years or less.
By coincidence the real yield on TIPS is ~1% which is tempting me to build a TIPS ladder. Thinking out loud:
- Increase Total Bond funds to 20% of fixed income, sell the TIPS fund, keep 1 year of expenses in cash. With remainder:
- For first 5 years, ladder CD's or zero's to meet planned expenses
- Ladder TIPS for years 6-15. For years 6-9 consider nominal bonds. Not sure what the breakeven tips rate would be.
- Re-evaluate where we are at at year 15 (age 75)
I am open to all suggestions.
thanks for any input