after retirement allocation

For investors outside the US. Personal investments, personal finance, investing news and theory.
Sister forums: Canada, Spain (en español)
---------------
Post Reply
Topic Author
Siaigi
Posts: 129
Joined: Sun May 17, 2020 4:24 am
Location: Italy

after retirement allocation

Post by Siaigi »

In the coming months I hope to retire.

I therefore did some simulations at the current face value for the next ten years to see what happen to our assett allocation because we need to spend some money at the beginning. And I think to withdrawal mostly from cash/bonds equivalent (severance pay, life insurance expired)

The trend of the breakdown between stocks, bonds and cash, I repeat at the current nominal value, without considering inflation or changes in the shares, would turn out to be that of the graph, as the age advances.

I would like to ask you please, how it would be good to improve these simulations and if you know some already developed sheets that could be useful for the same purpose ( I already use the longinvest ones Bogleheads return and VPW Accumulation and retirement sheet) and finally if maintaining an incidence of stocks that increases over the years is wise.

When would you increase the bond / cash incidence? How many of you follow the old rule 100-age to have the allocation stocks?

Image
User avatar
celia
Posts: 16764
Joined: Sun Mar 09, 2008 6:32 am
Location: SoCal

Re: after retirement allocation

Post by celia »

It would be better if you shared your portfolio using the format presented in the Asking Portfolio Questions wiki page. Since we are already familiar with this layout, you will get better answers.

In particular, we are looking to see if you will need to use the ACA for medical insurance, if you need to do Roth conversions, and if you will be subject to IRMAA surcharges after Medicare starts. You can keep any Asset Allocation that is right for you, but we may need to consider taxes and if "leveling" your income sources will benefit you.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
TedSwippet
Posts: 5166
Joined: Mon Jun 04, 2007 4:19 pm
Location: UK

Re: after retirement allocation

Post by TedSwippet »

celia wrote: Sat Apr 10, 2021 5:29 am It would be better if you shared your portfolio using the format presented in the Asking Portfolio Questions wiki page. Since we are already familiar with this layout, you will get better answers.

In particular, we are looking to see if you will need to use the ACA for medical insurance, if you need to do Roth conversions, and if you will be subject to IRMAA surcharges after Medicare starts. You can keep any Asset Allocation that is right for you, but we may need to consider taxes and if "leveling" your income sources will benefit you.
Thanks for the response. However, this is the non-US investing forum, and the topic author is not a US investor (Location: Italy), so things like ACA, Roths and Medicare don't apply.

There is suggested non-US portfolio layout here: My portfolio: seeking advice
User avatar
BeBH65
Posts: 1763
Joined: Sat Jul 04, 2015 7:28 am

Re: after retirement allocation

Post by BeBH65 »

Siaigi wrote: Sat Apr 10, 2021 5:04 am In the coming months I hope to retire.

I therefore did some simulations at the current face value for the next ten years to see what happen to our assett allocation because we need to spend some money at the beginning. And I think to withdrawal mostly from cash/bonds equivalent (severance pay, life insurance expired)

The trend of the breakdown between stocks, bonds and cash, I repeat at the current nominal value, without considering inflation or changes in the shares, would turn out to be that of the graph, as the age advances.

I would like to ask you please, how it would be good to improve these simulations and if you know some already developed sheets that could be useful for the same purpose ( I already use the longinvest ones Bogleheads return and VPW Accumulation and retirement sheet) and finally if maintaining an incidence of stocks that increases over the years is wise.

When would you increase the bond / cash incidence? How many of you follow the old rule 100-age to have the allocation stocks?

Image
It is good to have an idea what would happen with rebalancing or modification of the Asset allocation.
I understand that the graph shows the split of the portfolio, in a declining portfolio where you would be withdrawing regularly. Assuming that the values of each "share" remains the same.

To determine how/when you should change your asset allocation you would need to run some scenarios.
e.g. assume that the stock market crashes with 50% the day you retire and that it remains low for many years after that.
There are many other scenarios to consider.

searches on "sequence of returns risk", "bond tent" might give you some input
BeBH65. (only an investment enthusiast, not a financial adviser, perform your due diligence). | Have a look at https://www.bogleheads.org/wiki/Outline_of_Non-US_domiciles
User avatar
galeno
Posts: 2653
Joined: Fri Dec 21, 2007 11:06 am

Re: after retirement allocation

Post by galeno »

We use the Vanguard Target Retirement Fund 2020 as our benchmark guide regarding equities and fixed income.

It's 50/50.
KISS & STC.
Topic Author
Siaigi
Posts: 129
Joined: Sun May 17, 2020 4:24 am
Location: Italy

Re: after retirement allocation

Post by Siaigi »

TedSwippet wrote: Sat Apr 10, 2021 6:01 am There is suggested non-US portfolio layout here: My portfolio: seeking advice
Thank you Ted, BeBH65 and Galeno.

Here my layout:

Country of Residence: Italy.

International Lifestyle: At the moment Italy. Even if we'd like Greece or Portugal.

Currency: EUR

Emergency funds: 4 months of expenses

Debt: 2 years of mortgage @1,45%

Age: 63

Desired Asset allocation: 40% / 60% bonds (50%/50% it seems reasonable but I like to see more in deep sequence of return risks and bond tent concept)
Desired allocation to stocks outside your country of residence: 98% of stocks
Low six-figures current total portfolio.

Our State pensions will cover 76% of the living expenses we have incurred in recent years. The severance pay and the redemption of two life policies expiring in 2 years seem to allow us not to touch our portfolio for several years.

General investment account, taxable
8% cash (for investing and emergency funds)
11,4% Vanguard VUSA (0,07)
24% Vanguard VWRL (0,25)
4,7% Vanguard VFEM (0,25)
3,2% Vanguard VEUR (0,1)
1,6% Xtrackers XXSC EU Small Caps (0,3)
2,2% Wisdom SGBS (0,19) Gold
7,5% iShares IUSP (0,4) Reit
3,8% Vanguard VAGF (0,1) Hedged Eur
6,9% Vanguard VUTY (0,07)
3,3% Vanguard VETY (0,07)
4,2% Vanguard VEMT (0,25)
7,7% Italian Gov Fixed Bond (0)
11,7% Italian Tips Bond (0)

In the next years I think to sell VUTY, VETY and VEMT and buy VAGF. Then I'd sell VEUR to buy VWRL that already include EU countries.

Retirement savings account, tax deferred (Italian PIP)
Thanks to other Bogleheads I discover this opportunity recently and I'm evaluating if I could save few money here to have deduction from annual taxation.


_______________________________________________________________
Questions:
1. What are the wisest strategies, in terms of allocation, for a retiree?

2.How it would be good to improve the forecast of your retirement? Do you know some already developed sheets that could be useful for the same purpose ( I already use the longinvest ones Bogleheads return and VPW Accumulation and retirement sheet). Would it be good to also consider inflation in a future forecast?

3.At what age would you recommend simplifying further by focusing only on VWRL and VAGF?
User avatar
galeno
Posts: 2653
Joined: Fri Dec 21, 2007 11:06 am

Re: after retirement allocation

Post by galeno »

1. 40/60
2. Worthless
3. Now
KISS & STC.
Laurizas
Posts: 515
Joined: Mon Dec 31, 2018 3:44 am
Location: Lithuania

Re: after retirement allocation

Post by Laurizas »

1. The wisest strategy for a retiree in terms of allocation I would say would be the one which helps him/her sleep well at night. I know that it is nothing new but I have not heard any special strategy for a retiree except for "bond tent" and "rising equity glide path".
2. Forecasts might be a dangerous thing in retirement that is why I think VPW is a great tool. There is also https://www.cfiresim.com/ but it is based on US data.
Post Reply