Ideal Bond allocation by age

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NabSh
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Ideal Bond allocation by age

Post by NabSh »

We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
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Re: Ideal Bond allocation by age

Post by Horton »

You will get more helpful responses if you ask your question in this format:

viewtopic.php?f=1&t=6212
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Re: Ideal Bond allocation by age

Post by Marseille07 »

It's a personal decision. Some people do 120 - age in stocks, some people don't hold any, some people do 50/50.
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Re: Ideal Bond allocation by age

Post by randomtimbersfan »

You might want to look at a target date fund to see what is considered "normal" for your age. The Vanguard Target Retirement 2045 fund has about 10.5% in bonds. The Vanguard Target Retirement 2040 has about 18% in bonds.
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Beensabu
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Re: Ideal Bond allocation by age

Post by Beensabu »

Age doesn't have that much to do with it on an individual level. Your personal situation does. What do you need? When do you need it? What can you afford to lose? How much of it can you make up with future contributions if you lose part of it and that doesn't all come back relatively quickly or ever? Etc.

Anywhere between 75/25 to 25/75 is fine IMO, as long as you've answered those questions ^. You're at one end of that range. I'm a little younger than you, and I'm in the middle.
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Re: Ideal Bond allocation by age

Post by vineviz »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
Are the CDs your emergency fund or something else. It’s an usually high cash allocation for someone at your age.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Ideal Bond allocation by age

Post by vineviz »

Beensabu wrote: Sat Apr 17, 2021 4:41 pm Age doesn't have that much to do with it on an individual level. Your personal situation does. What do you need? When do you need it? What can you afford to lose? How much of it can you make up with future contributions if you lose part of it and that doesn't all come back relatively quickly or ever? Etc.

Anywhere between 75/25 to 25/75 is fine IMO, as long as you've answered those questions ^. You're at one end of that range. I'm a little younger than you, and I'm in the middle.

25/75 would be insanely conservative for all but the most unusual couple in their mid-40s.

Even 75/25 is probably a little on the conservative side for a couple with “typical” tolerance for investment risks.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Ideal Bond allocation by age

Post by Beensabu »

vineviz wrote: Sat Apr 17, 2021 4:44 pm
Beensabu wrote: Sat Apr 17, 2021 4:41 pm Age doesn't have that much to do with it on an individual level. Your personal situation does. What do you need? When do you need it? What can you afford to lose? How much of it can you make up with future contributions if you lose part of it and that doesn't all come back relatively quickly or ever? Etc.

Anywhere between 75/25 to 25/75 is fine IMO, as long as you've answered those questions ^. You're at one end of that range. I'm a little younger than you, and I'm in the middle.

25/75 would be insanely conservative for all but the most unusual couple in their mid-40s.

Even 75/25 is probably a little on the conservative side for a couple with “typical” tolerance for investment risks.
Sure. We don't know anything about them though. And 75/25 is not conservative. That is aggressive.
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Re: Ideal Bond allocation by age

Post by theorist »

The Morningstar lifetime allocation indices (which they call “indexes,” but come on):

https://assets.contentstack.io/v3/asset ... _Sheet.pdf

now say that for 2035 retirement, an aggressive investor would have just under 90% in stocks, while a moderately aggressive one would be just below 75%.
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Re: Ideal Bond allocation by age

Post by tennisplyr »

This Vanguard tool will give you some AA guidance.

https://retirementplans.vanguard.com/VG ... -YYA4-CW3H
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Re: Ideal Bond allocation by age

Post by NabSh »

I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
Beensabu wrote: Sat Apr 17, 2021 5:00 pm
vineviz wrote: Sat Apr 17, 2021 4:44 pm
Beensabu wrote: Sat Apr 17, 2021 4:41 pm Age doesn't have that much to do with it on an individual level. Your personal situation does. What do you need? When do you need it? What can you afford to lose? How much of it can you make up with future contributions if you lose part of it and that doesn't all come back relatively quickly or ever? Etc.

Anywhere between 75/25 to 25/75 is fine IMO, as long as you've answered those questions ^. You're at one end of that range. I'm a little younger than you, and I'm in the middle.

25/75 would be insanely conservative for all but the most unusual couple in their mid-40s.

Even 75/25 is probably a little on the conservative side for a couple with “typical” tolerance for investment risks.
Sure. We don't know anything about them though. And 75/25 is not conservative. That is aggressive.
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NabSh
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Re: Ideal Bond allocation by age

Post by NabSh »

vineviz wrote: Sat Apr 17, 2021 4:42 pm
NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
Are the CDs your emergency fund or something else. It’s an usually high cash allocation for someone at your age.
No.

At one time I was saving in CDs due to stock market crashed. I never found a good time to move this money to a real investment account. So I just continue to consider them no interest paying short term bonds.
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Re: Ideal Bond allocation by age

Post by GrowthSeeker »

The ideal AA is a function of several variables:
- age
- financial ability to tolerate risk
- stomach's ability to tolerate acid due to risk
- portfolio value relative to annual expenses
- years remaining of human capital ; ability to produce income.

What I did was look at several rules of thumb and more or less took the average.

My favorite rule of thumb is a kind of "stress test": suppose stocks suddenly dropped 50% in value but bonds remained unchanged. Your portfolio therefore, per these assumptions, would drop by half of whatever your percent allocation to stocks is. Adjust your AA so that this percent drop in pf value is within your comfort range. But that's just one rule of thumb.
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Re: Ideal Bond allocation by age

Post by vineviz »

NabSh wrote: Sat Apr 17, 2021 5:54 pm
vineviz wrote: Sat Apr 17, 2021 4:42 pm
NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
Are the CDs your emergency fund or something else. It’s an usually high cash allocation for someone at your age.
No.

At one time I was saving in CDs due to stock market crashed. I never found a good time to move this money to a real investment account. So I just continue to consider them no interest paying short term bonds.
As I hope you've learned, a stock market crash is a great time to invest in stocks.

In any case, you should stop the bleeding as soon as you realize you're wounded: now is a good time to move this money into a "real investment account and leave your market timing days behind you.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Ideal Bond allocation by age

Post by vineviz »

NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Ideal Bond allocation by age

Post by UpperNwGuy »

NabSh wrote: Sat Apr 17, 2021 5:54 pm At one time I was saving in CDs due to stock market crashed. I never found a good time to move this money to a real investment account. So I just continue to consider them no interest paying short term bonds.
You never found a good time??? There have been literally hundreds of good times over the past year. Why were you not taking advantage of them?
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Re: Ideal Bond allocation by age

Post by Beensabu »

NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
Beensabu wrote: Sat Apr 17, 2021 5:00 pm
vineviz wrote: Sat Apr 17, 2021 4:44 pm
Beensabu wrote: Sat Apr 17, 2021 4:41 pm Age doesn't have that much to do with it on an individual level. Your personal situation does. What do you need? When do you need it? What can you afford to lose? How much of it can you make up with future contributions if you lose part of it and that doesn't all come back relatively quickly or ever? Etc.

Anywhere between 75/25 to 25/75 is fine IMO, as long as you've answered those questions ^. You're at one end of that range. I'm a little younger than you, and I'm in the middle.

25/75 would be insanely conservative for all but the most unusual couple in their mid-40s.

Even 75/25 is probably a little on the conservative side for a couple with “typical” tolerance for investment risks.
Sure. We don't know anything about them though. And 75/25 is not conservative. That is aggressive.
It's not considered aggressive anymore by a lot of people who point to current low bond yields and the last 10 year performance of US equities.

100/0 to 75/25 is aggressive.

75/25 to 60/40 is moderately aggressive.

60/40 to 40/60 is moderately aggressive to moderately conservative.

40/60 to 25/75 is moderately conservative to conservative.

25/75 to 0/100 is ultra conservative.

Nobody has a problem warning people away from being too bond heavy, because that's the environment we happen to find ourselves in currently. Not too terribly long ago (relatively speaking), you'd find the opposite recommendation.

Consensus recommendations change based on market conditions. They just do. There's no getting away from that.

75/25 to 25/75 is the range recommended by Graham way back when. As in, don't exceed either bound. As in, don't hold too much or too little risk at any time.

Regardless of market conditions. (Edit: But really though he was saying those are the extremes that could actually be excused by market conditions... Nobody cares...)
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Re: Ideal Bond allocation by age

Post by Beensabu »

vineviz wrote: Sat Apr 17, 2021 6:25 pm
NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
Is this what you tell your clients? :shock:
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Re: Ideal Bond allocation by age

Post by Doc7 »

Having been a boglehead for my entire investing career, since 2007, it’s really interesting to see how things have changed in the Bull market run.

In 07 I never read a post on here that made question my 60/40 “to see if I had good risk tolerance as a new investor” and then my change to 70/30 in 2012 “I realized I’ve never changed my AA or skipped a rebalance”. I’ve been there ever since, including following a scheduled rebalancing on the morning Mar 24 the very bottom last year.

Nowadays, all I see are posts about anything as conservative as mine or even more so (70/30 at age 36) as being almost ridiculously risk averse.

I’ll stick to 70/30 like I planned the whole time....
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Re: Ideal Bond allocation by age

Post by KlangFool »

NabSh wrote: Sat Apr 17, 2021 5:50 pm
I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
NabSh,

A) Unless you can predict your future, how do you know that you are 20 years from retirement? Many of my peers are permanently unemployed or under-employed in their 40s and 50s.

B) Unless and until we know your portfolio size, annual saving rate, and annual expense, how do you know that you are 20 years from reaching your Financially Independence number?

C) Have you calculated your number?

D) In my opinion, any AA between 75/25 to 25/75 is reasonable.

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Re: Ideal Bond allocation by age

Post by reln »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
You're at a reasonable allocation.
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Re: Ideal Bond allocation by age

Post by vineviz »

Beensabu wrote: Sat Apr 17, 2021 6:59 pm
vineviz wrote: Sat Apr 17, 2021 6:25 pm
NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
Is this what you tell your clients? :shock:
Clients gets customized recommendations, of course, but here I'm merely reporting industry averages: the majority of investors in their early 40s settle on bond allocations between 12% and 20%. Morningstar, which has a large business in defined-benefit plan consulting, uses the definitions of "aggressive" and "conservative" that I reference above.
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Re: Ideal Bond allocation by age

Post by Beensabu »

vineviz wrote: Sat Apr 17, 2021 9:00 pm
Beensabu wrote: Sat Apr 17, 2021 6:59 pm
vineviz wrote: Sat Apr 17, 2021 6:25 pm
NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
Is this what you tell your clients? :shock:
Clients gets customized recommendations, of course, but here I'm merely reporting industry averages: the majority of investors in their early 40s settle on bond allocations between 12% and 20%. Morningstar, which has a large business in defined-benefit plan consulting, uses the definitions of "aggressive" and "conservative" that I reference above.
You and I both know that averages in this context mean... what the actual average of an age group happens to be doing... That's not a recommendation. That's reporting the consensus.
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Re: Ideal Bond allocation by age

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UpperNwGuy wrote: Sat Apr 17, 2021 6:30 pm
NabSh wrote: Sat Apr 17, 2021 5:54 pm At one time I was saving in CDs due to stock market crashed. I never found a good time to move this money to a real investment account. So I just continue to consider them no interest paying short term bonds.
You never found a good time??? There have been literally hundreds of good times over the past year. Why were you not taking advantage of them?
I think I was concerned that there could be a market crash. I had been auto investing. But didn’t want move a large lump sum money. I could have. Should have. But I didn’t
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Re: Ideal Bond allocation by age

Post by vineviz »

Beensabu wrote: Sat Apr 17, 2021 10:15 pm
vineviz wrote: Sat Apr 17, 2021 9:00 pm
Beensabu wrote: Sat Apr 17, 2021 6:59 pm
vineviz wrote: Sat Apr 17, 2021 6:25 pm
NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
Is this what you tell your clients? :shock:
Clients gets customized recommendations, of course, but here I'm merely reporting industry averages: the majority of investors in their early 40s settle on bond allocations between 12% and 20%. Morningstar, which has a large business in defined-benefit plan consulting, uses the definitions of "aggressive" and "conservative" that I reference above.
You and I both know that averages in this context mean... what the actual average of an age group happens to be doing... That's not a recommendation. That's reporting the consensus.
What word besides “conservative” would you use to describe an allocation which contains more bonds than 90% of similar investors choose and which contains more than twice as much in bonds as the consists of experts recommend?
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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Re: Ideal Bond allocation by age

Post by Beensabu »

vineviz wrote: Sun Apr 18, 2021 12:45 am
Beensabu wrote: Sat Apr 17, 2021 10:15 pm
vineviz wrote: Sat Apr 17, 2021 9:00 pm
Beensabu wrote: Sat Apr 17, 2021 6:59 pm
vineviz wrote: Sat Apr 17, 2021 6:25 pm

It's not.

The typical bond allocation for someone 20 years from retirement would in the range of 12% to 20%.

<10% would be aggressive
>25% would be conservative

18% is about where most people would aim.
Is this what you tell your clients? :shock:
Clients gets customized recommendations, of course, but here I'm merely reporting industry averages: the majority of investors in their early 40s settle on bond allocations between 12% and 20%. Morningstar, which has a large business in defined-benefit plan consulting, uses the definitions of "aggressive" and "conservative" that I reference above.
You and I both know that averages in this context mean... what the actual average of an age group happens to be doing... That's not a recommendation. That's reporting the consensus.
What word besides “conservative” would you use to describe an allocation which contains more bonds than 90% of similar investors choose and which contains more than twice as much in bonds as the consists of experts recommend?
Contrarian?

75/25 is not conservative, and you simply will never convince me that it is.
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Re: Ideal Bond allocation by age

Post by Blue456 »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
I picked the date I want to retire and I picked target date fund with such date. For my current age 40 my target date fund is showing 30% fixed income and 70% equities. Note that I picked 60 not 65 as the age of retirement.
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Re: Ideal Bond allocation by age

Post by zaboomafoozarg »

For me, it's 25% for life.
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Re: Ideal Bond allocation by age

Post by dogagility »

NabSh wrote: Sat Apr 17, 2021 5:50 pm I didn't realize for someone in mid 40s (i.e. 20 years from retirement) 75% in stocks and 25% bonds is considered aggressive.
I agree with Vineviz; it's not aggressive for someone 20 years from retirement.

I haven't read the entire thread yet, but this topic will likely dissolve into the many BH threads discussing 100:0 vs 70:30 asset allocation for accumulators.
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Re: Ideal Bond allocation by age

Post by ROIGuy »

NabSh wrote: Sat Apr 17, 2021 11:56 pm
UpperNwGuy wrote: Sat Apr 17, 2021 6:30 pm
NabSh wrote: Sat Apr 17, 2021 5:54 pm At one time I was saving in CDs due to stock market crashed. I never found a good time to move this money to a real investment account. So I just continue to consider them no interest paying short term bonds.
You never found a good time??? There have been literally hundreds of good times over the past year. Why were you not taking advantage of them?
I think I was concerned that there could be a market crash. I had been auto investing. But didn’t want move a large lump sum money. I could have. Should have. But I didn’t
“Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.” — Peter Lynch.
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Re: Ideal Bond allocation by age

Post by goingup »

Blue456 wrote: Sun Apr 18, 2021 6:28 am
NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
I picked the date I want to retire and I picked target date fund with such date. For my current age 40 my target date fund is showing 30% fixed income and 70% equities. Note that I picked 60 not 65 as the age of retirement.
Vanguard’s 2040 fund is 18% bonds. The 2045 fund is 11% bonds. I think serves as a recommendation of how much bonds to hold. Of course, we’re all free to choose to hold more or less.
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Re: Ideal Bond allocation by age

Post by Blue456 »

goingup wrote: Sun Apr 18, 2021 7:12 am
Blue456 wrote: Sun Apr 18, 2021 6:28 am
NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
I picked the date I want to retire and I picked target date fund with such date. For my current age 40 my target date fund is showing 30% fixed income and 70% equities. Note that I picked 60 not 65 as the age of retirement.
Vanguard’s 2040 fund is 18% bonds. The 2045 fund is 11% bonds. I think serves as a recommendation of how much bonds to hold. Of course, we’re all free to choose to hold more or less.
To be exact TSP 2040 is 28% fixed income. I just rounded it off. Really 10% different is not going to make or break anyone. I think my biggest point is go with TDF especially in tax deferred accounts.
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Re: Ideal Bond allocation by age

Post by steve r »

Beensabu wrote: Sat Apr 17, 2021 6:49 pmConsensus recommendations change based on market conditions. They just do. There's no getting away from that.
+1

Recently on BH we had a 10+ page thread on triple levered ETFs. Could it be that someday a 100% equity will be considered conservative? I doubt it, but hey???

Ridiculously low bond yields / borrowing cost have really altered a lot of thinking over the years. The debate over mortgage is / is not a negative bond is another example in addition to bond AA.
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Re: Ideal Bond allocation by age

Post by abuss368 »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
The correct answer is so easy: it is the one that works for you! No one can tell you what that answer should be. If the market pulls back 50%, will you panic or ride it out (better yet buy more)?

Hold enough in cash, bonds, and so forth.

Tony
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Re: Ideal Bond allocation by age

Post by Robot Monster »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
You'll be humored to know that Jim Cramer recommended a 20% to 30% bond allocation for someone in their 40's in an article from the tail end of 2019. link
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Re: Ideal Bond allocation by age

Post by Sandtrap »

OP:
Your question topic:
"Ideal Bond Allocation by Age"

Read:
"Ages of the Investor: Life Cycle Investing" by W. Bernstein.

j :D
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Re: Ideal Bond allocation by age

Post by LateFire »

Given low yields and inflation fears, I have less than 10% of my allocation in bonds and I am almost 50. I am replacing my bond bucket with alternatives, Value funds, and high dividend/closed-end funds.
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secondopinion
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Re: Ideal Bond allocation by age

Post by secondopinion »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
It seems fine to me on the "bond" allocation; however, I think the duration risk taken within your "bonds", especially given the time until retirement. In my opinion, the general bond market is the minimum duration risk taken for those far from retirement. This is because we do not need the liquidity in the retirement account; we need a hedge to ensure future returns. I counteract my CDs with some long-term bonds.
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Garco
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Re: Ideal Bond allocation by age

Post by Garco »

I think this decision depends on (a) your total accumulation today, (b) whether you (and your spouse if you have one) are still employed and contributing to savings/investments, (c) how much debt you have (mortgage, student loans, etc.), (d) your yearly budget (spending needs), (e) your age, and (f) your family needs (number of children or other dependents).

I'm not putting them in rank order. A lot depends on personal circumstance. In my case, we had a one-income family, two grown children, a 403b retirement fund that amounted to 10-12 times my gross income from work in my final working years. We have no debt. We own our properties outright. I waited until I was age 70 to retire and to draw on Social Security and RMD's from my tax-deferred retirement funds to live on. We have excellent comprehensive health-care insurance from my former employer and Medicare.

Now, after 6 years in retirement, I've got what some would classify as an aggressive portfolio of stocks and fixed income: 58% equities. I intend to keep it above 50%. We also got some unexpected money in bequests, part of which we invested in real estate. So we have significant financial reserves.
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billthecat
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Re: Ideal Bond allocation by age

Post by billthecat »

Some people do age -10. I do age -11, for that extra push.
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arcticpineapplecorp.
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Re: Ideal Bond allocation by age

Post by arcticpineapplecorp. »

the amount is based on the need, ability and willingness to take risk:

https://www.cbsnews.com/news/asset-allo ... -you-take/

https://www.cbsnews.com/news/asset-allo ... tolerance/

https://www.cbsnews.com/news/asset-allo ... -you-need/

https://www.cbsnews.com/news/asset-allo ... ing-goals/

there is no one right answer by age. Here's why. Most people off the cuff would say young people should have little in bonds and older people should have much more in bonds, right? Is that true all the time? Here are two examples when not:

1. Mark Zuckerberg. Need I say more? He's won the game so he could stop playing and be very conservative. he doesn't need to take risk so why have very little in bonds? He could take risk but that's because if his plan blows up it has no impact on him and he'd be taking risk for the benefit of others (beneficiaries) rather than himself.

So he can take great risk or he doesn't need to take great risk. It's a personal decision for Zuck, isn't it?

2. Say an older person meets their expenses with their SS and pension and they don't even need to draw down their assets. Should they be very conservative just because they're older and that's "expected"? They could because they don't need the money either for living expenses. Or because they don't need to rely on the money they could take more risk and not be conservative (for the same reason as #1 above).

so again, it's a personal decision. you have to look at your own situation but understand your own need, ability and willingness to take risk. Age has very little to do with it.
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DB2
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Re: Ideal Bond allocation by age

Post by DB2 »

Beensabu wrote: Sat Apr 17, 2021 6:49 pm Consensus recommendations change based on market conditions. They just do. There's no getting away from that.
Agreed. Equities have done remarkably well since 2009 and surely that has an influence to some degree on popular recommendations. Low bond yields and concerns of inflation probably skews it even more.
Orthodoc1.
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Re: Ideal Bond allocation by age

Post by Orthodoc1. »

Seems to me that everyone has gotten more aggressive recently. Years ago both Jack Bogle and Wiki recommended to keep your age in bonds. Now most Vanguard target funds use age in bonds - 20%. I can not help to wonder if it is because of long bull run or decreasing interest rates, or quick snap backs after market corrections. I remember when Nasdaq took 12 years to come back to even. Just a thought...
FIREyourself
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Re: Ideal Bond allocation by age

Post by FIREyourself »

I like the idea of age in bonds scaled for wealth relative to your goal. If you have less money than you want, have less bonds than age in bonds; if you have more money than you want, have more bonds than age in bonds.
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Nivek
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Re: Ideal Bond allocation by age

Post by Nivek »

tennisplyr wrote: Sat Apr 17, 2021 5:45 pm This Vanguard tool will give you some AA guidance.

https://retirementplans.vanguard.com/VG ... -YYA4-CW3H
Never used this before but I chuckled when I got the results back. I’m 50 years old and plan to retire in either one year and 5 months (one time lump sum payout date due to restructuring) or 4 years and 5 months. Bit of a gap but if I stay to 55, I keep options and stay on company healthcare. Just depends how I’m liking the work (MegaCorp for 24 years that is getting more and more, well, MegaCorp). Regardless I’m in a position where I can retire and am slowly looking to get my asset allocation to 50% stocks (at 58%). I’m in no huge rush due to my age but this survey came back that my preferred AA is 50/50. Pretty spot on.
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Re: Ideal Bond allocation by age

Post by willthrill81 »

I believe that an investor's risk tolerance is of far more importance than what anyone else thinks their AA should be.

That said, if an investor's risk tolerance allows for it, I believe that a compelling historical and mathematical argument can be made for 100% stocks until about 10 years from retirement, then progressively moving to somewhere around 75/25.
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Orthodoc1.
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Re: Ideal Bond allocation by age

Post by Orthodoc1. »

I never quite understand the allocation formulas based solely on age. I would think that a person approaching retirement who relies totally on their nest egg for retirement living expenses might have a more conservative asset allocation then someone of the same age approaching retirement that has a pension that pays 80% of their expected living expenses in retirement.
carminered2019
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Re: Ideal Bond allocation by age

Post by carminered2019 »

Add bonds 10 years before retirement is what I went with and in my early retirement, my AA was 70/30 but would never go below 70 equities with no plan to rebalance.
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Re: Ideal Bond allocation by age

Post by grok87 »

NabSh wrote: Sat Apr 17, 2021 4:06 pm We are in our mid 40s and have 12 % of our allocation to Bonds. The percentage goes higher to 25% if count CDs.
I am trying to see if this too much or too little of the allocation
here is a framework for thinking about this using David Swensen's approach.
viewtopic.php?f=10&t=311560

The basic idea is to keep a constant asset allocation up until 10 years before retirement. David Swensen recommends 70/30 Equities/Bonds where the Bonds are split evenly between treasuries and Tips. But you could substitute your own.

Then as you move closer to retirement you start building up a cash position until it is 18% of your portfolio. So on retirement you are: 57/25/18 Stocks/Bonds/Cash. So 43% fixed income when you retire. This is slightly more aggressive than the Vanguard Target date funds which are basically 50/50 when you retire
https://www.vanguard.com/pdf/s167.pdf

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3funder
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Re: Ideal Bond allocation by age

Post by 3funder »

I hold age minus 15 in bonds.
Global stocks, US bonds, and time.
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