Regrets from seniors on aggressive AA? [Asset Allocation]

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Youngblood
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Regrets from seniors on aggressive AA? [Asset Allocation]

Post by Youngblood »

So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
"I made my money by selling too soon." | Bernard M. Baruch
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BogleFanGal
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Re: Regrets from seniors on aggressive AA?

Post by BogleFanGal »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
dbr
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Re: Regrets from seniors on aggressive AA?

Post by dbr »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
I don't have an aggressive asset allocation but could have. If I had for the fifteen years I am retired I would be wealthier today than we are even if stocks lose 50% now. Ten years at 14% return in stocks does amazing things. Of course it didn't have to be that way, which is why most people like us would not do that. But I don't regret being more conservative either.

The reason I say "could have" is because more than half our income is from pensions and Social Security and we live in a paid for house on a budget that has wiggle room. You can't address an issue like this without considering all aspects of one's financial situation. You should look at models like FireCalc that allow entry of income streams and investments relative to a level of spending. This is bread and butter retirement planning.
rockstar
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Re: Regrets from seniors on aggressive AA?

Post by rockstar »

Having an aggressive bond allocation, especially on the long end of the curve didn't do seniors much good this year.

I think, rather than just talk about bonds and equities, duration and duration matching need to be discussed more in terms of AA.

Should seniors have been heavily invested in the long bond?
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Riprap
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Re: Regrets from seniors on aggressive AA?

Post by Riprap »

No regrets. Dividends and interest are all I need. But I plan to stay within Ben Graham's 75/25 limit although I have briefly strayed out of it a time or two.

I don't care how many times people show me the mathematics behind "creating your own dividend" there is something comforting about not selling in a down market and collecting dividends instead even if it's from a plain vanilla index fund. If it's psychological, so be it.

Social Security will be pushed back as far as the law allows.

I think the longer one has invested however, the more one is able to roll with the punches so to speak and not worry about periodic bear markets.
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Re: Regrets from seniors on aggressive AA?

Post by dbr »

rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
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Re: Regrets from seniors on aggressive AA?

Post by DetroitRick »

No regrets. I've pretty consistently stayed in the 70% equity range through retirement. Including the Great Recession. It's not something I worry about, because I've prepared for the inevitable downturns (debt management, cash buffers, some duration matching in bonds, and general lifestyle, etc.). I have pensions, but they are far too small to influence this decision in any way. No plans to change this much in the future. While I certainly don't enjoy downturns, they don't worry me.
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Re: Regrets from seniors on aggressive AA?

Post by rockstar »

dbr wrote: Thu May 19, 2022 9:33 am
rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm

Now, if you have a family history of living a long time, then I agree that a long bond held to maturity becomes more realistic. However, if you have to sell before maturity, you're going to lose money if rates go up during the withdraw period. Your return assumption is based on the bond market bull continuing. It's already stopped for now, and the returns are already in. This is why looking at historical data and projecting it forward doesn't always make sense, which is why duration matching maturities to withdrawals makes sense.

And even the intermediate is problematic. BND has now return over the last 10 years only 1.66%. It hasn't kept up with inflation even before inflation went through the roof. It returned a negative real yield.
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Re: Regrets from seniors on aggressive AA?

Post by Marseille07 »

rockstar wrote: Thu May 19, 2022 9:22 am Should seniors have been heavily invested in the long bond?
Imo bonds are way overrated and it's better to simply hold cash. If you seek returns, hold equities.
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Re: Regrets from seniors on aggressive AA?

Post by niagara_guy »

I have a very high stock percentage compared to most people my age, but I have always been more aggressive and have done well over the years, so a big drop in the market will probably still leave me on the plus side. I do probably have lower expenses than most and a good Social Security benefit.
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Re: Regrets from seniors on aggressive AA?

Post by Marseille07 »

I'm close to walking; no regrets, as my withdrawal method adjusts spending automatically. I'm still debating if I should walk later this year, but my AA would remain aggressive either way.
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Re: Regrets from seniors on aggressive AA?

Post by Ramjet »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors...
I think you might be exaggerating. Seniors advocating for 95%+ equities on Bogleheads is not common in the slightest. I would classify them as the extreme minority, under 1% probably
dbr
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Re: Regrets from seniors on aggressive AA?

Post by dbr »

rockstar wrote: Thu May 19, 2022 9:41 am
dbr wrote: Thu May 19, 2022 9:33 am
rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm

Now, if you have a family history of living a long time, then I agree that a long bond held to maturity becomes more realistic. However, if you have to sell before maturity, you're going to lose money if rates go up during the withdraw period. Your return assumption is based on the bond market bull continuing. It's already stopped for now, and the returns are already in. This is why looking at historical data and projecting it forward doesn't always make sense, which is why duration matching maturities to withdrawals makes sense.

And even the intermediate is problematic. BND has now return over the last 10 years only 1.66%. It hasn't kept up with inflation even before inflation went through the roof. It returned a negative real yield.
The only return assumption in what I posted was that "interest rates would not promise repeating that for the next forty years." That is certainly not based on the bull bond market continuing but rather the opposite. Duration matching maturities to withdrawals might be helpful but you would have to do your own math for what durations those are. I expect my own timeline of liabilities is 10-20 years and I hold intermediate bonds, all TIPS, as an approximation to that. With pensions and SS the issue is not very important anyway.

What duration/type bonds are you holding?
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Re: Regrets from seniors on aggressive AA?

Post by delamer »

I disagree with your contention that there are many posts here by or about seniors that advocate for 95%+ stock allocations.

While that sometimes happens, I’d say that the opposite is more common — that seniors, particularly those under 75 (the young old) are too heavily weighted in cash or bonds.

I’m a young old, myself. And would be more stock-heavy with our retirement savings if my husband would agree. No regrets due to the current market slide. By the time you get to my age, investors should 1) have adequate cash equivalents or other income sources to cover a few years of expenses and 2) understand from experience that eventually the stock (and bond) market will come back.

In our case, we do have substantial pensions/Social Security so our savings are largely for legacy and/or luxury purposes.
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Re: Regrets from seniors on aggressive AA?

Post by Tundrama »

BogleFanGal wrote: Thu May 19, 2022 9:08 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
Very true, tough I’ve never been afraid to mention it and I do within various posts as appropriate. My intentions are to be as transparent as possible in hopes of helping others.

I’m 57, retired and no job of any kind. After 3 decades of a difficult job, no one will ever tell me what to do again (wifee exclusion).
No house payment although building a home and pay as we go…no loan/no hurry/no stress.
Between my monthly retirement and wife’s nursing pay we take home about 10k per month.

100% TSP C fund….S & P index fund for those who aren’t familiar.
Still putting 2k per month into C fund.

Down $400 to $500k as of yesterday. And yes, I took the opportunity to harass the wife and yes I’m sick (We both laugh). My career had me around so much death and the worst parts of humanity, I’m sorry but the stock market ain’t in my top ten worries.

Zero regrets or stress over the current market. I don’t know how to better describe my feelings. Ricky Gervais…”I don’t care.” That said, I do have a ton of empathy folks who cannot deal with the current state of affairs mentally.

I would absolutely not have the AA we currently have if we didn’t have the monthly non-play dollars to live on.

disclaimer…if things weren’t this way for me, and I needed a job to help out while waiting for the market to get better (and it will), I’d do it in a heartbeat. Good old fashion labor is one of my favorite tonics.

If you are retired and getting mentally crushed in the market, simply get a job. You are needed and you have purpose!!!
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Re: Regrets from seniors on aggressive AA?

Post by calmaniac »

BogleFanGal wrote: Thu May 19, 2022 9:08 am Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
+1

Our 70% equity AA is based on our pensions and Social Security providing most or all of our expenses.

I can see going to 80% in the future as part of a "bond tent" approach. 95%+ not happening here.
"Pretired", working 20 h/wk. AA 75/25: 30% TSM, 19% value (VFVA/AVUV), 18% Int'l LC, 8% emerging, 25% GFund/VBTLX. Military pension ≈60% of expenses. Pension+SS@age 70 ≈100% of expenses.
Motostash
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Re: Regrets from seniors on aggressive AA?

Post by Motostash »

rockstar wrote: Thu May 19, 2022 9:41 am

The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm
True, but the average life expectancy of the affluent is much higher.
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Re: Regrets from seniors on aggressive AA?

Post by Motostash »

rockstar wrote: Thu May 19, 2022 9:41 am

The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm
True, but the average life expectancy of the affluent is much higher.
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Re: Regrets from seniors on aggressive AA?

Post by harvestbook »

Depends almost entirely on individual circumstances. What does losing a million fundamentally matter if you have 10 million? It took me a while from reading here to not overthink good advice that didn't really apply to me, a rather normal frugal person who never had a high salary. I quit looking at details so much (like what type of bond would give me an extra quarter of a percentage point over 20 years) and just absorbed the principles of simplicity, steadiness, and patience.

Depending on how you measure AA, in purely liquid investable assets I am somewhere like 95/5 basically retired at age 60 next month. It works fine for my situation, with a trickle of residual royalties coming in, a much-younger wife still working, low cost of living, and no debt. My only "regret" is that I wish I was earning more so I could invest more. But at this point I will not do anything unless I love it because time is my most valuable commodity. I'm not going to work six months just so I can take two extra vacations when I'm 80.

I hope I never have to sell assets because I like buying. I don't even mind that this downturn is hitting right when it theoretically could hurt me the most. Seems like a valuable experience and there will be the other side. I'm not wasting a lot of time second-guessing. If you are me, I'd say 95 percent is fine. If you're not me, I wouldn't.
Last edited by harvestbook on Thu May 19, 2022 10:19 am, edited 2 times in total.
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Youngblood
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Re: Regrets from seniors on aggressive AA?

Post by Youngblood »

Ramjet wrote: Thu May 19, 2022 9:52 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors...
I think you might be exaggerating. Seniors advocating for 95%+ equities on Bogleheads is not common in the slightest. I would classify them as the extreme minority, under 1% probably
Yes, you're probably right! Thinking from my own personal point of view and situation I wouldn't consider it.
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Youngblood
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Re: Regrets from seniors on aggressive AA?

Post by Youngblood »

rockstar wrote: Thu May 19, 2022 9:22 am Having an aggressive bond allocation, especially on the long end of the curve didn't do seniors much good this year.

I think, rather than just talk about bonds and equities, duration and duration matching need to be discussed more in terms of AA.

Should seniors have been heavily invested in the long bond?
It wasn't for me. A decent amount of I bonds, 3-5 year CD's and mostly 3-5 year treasuries.
"I made my money by selling too soon." | Bernard M. Baruch
dbr
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Re: Regrets from seniors on aggressive AA?

Post by dbr »

Motostash wrote: Thu May 19, 2022 10:12 am
rockstar wrote: Thu May 19, 2022 9:41 am

The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm
True, but the average life expectancy of the affluent is much higher.
The statistic of interest for seniors would be more like the 25th percentile conditional on already being 70 years old or so. That number for the 50% percentile is about 15 years, so that takes you out to 85.. If you are already older than 77 then knowing the average is 77 is not helpful.

At age 77 the male life expectancy (50%) in the US is about 11 years and 13 for women, so that already takes us out to 88-90. Matching bonds with duration of 5-6 years to that might make sense.

How high the equity allocation might be still goes back to what withdrawal rate is being taken and is still strongly influenced by how much income is life certain.
rockstar
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Re: Regrets from seniors on aggressive AA?

Post by rockstar »

Youngblood wrote: Thu May 19, 2022 10:21 am
rockstar wrote: Thu May 19, 2022 9:22 am Having an aggressive bond allocation, especially on the long end of the curve didn't do seniors much good this year.

I think, rather than just talk about bonds and equities, duration and duration matching need to be discussed more in terms of AA.

Should seniors have been heavily invested in the long bond?
It wasn't for me. A decent amount of I bonds, 3-5 year CD's and mostly 3-5 year treasuries.
This is what my grandma did in the 80s: CD ladders. She wasn't a sophisticated investor, but given the rates back then, it made sense. And she didn't lose money nominally this way. I feel like this is much less risky than bond funds in retirement.
RetiredCSProf
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Re: Regrets from seniors on aggressive AA?

Post by RetiredCSProf »

I'm 74 and have 95%+ equities invested in my Roth accounts. That's because I plan to use my Roth for legacy or for my centenarian years. I have a more conservative investment in pension, SS, tIRA, LTCi, etc., to cover my expenses for the next 25 years. No regrets on my AA, so far.
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Re: Regrets from seniors on aggressive AA?

Post by Activesloth »

I’m 65, retired. I’m 100% US stocks. Year to date, I’m down 13%. S&P500 is down 18%. A 60/40 portfolio with VTI and BND would be down around 15%. Nothing to regret I think.
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Re: Regrets from seniors on aggressive AA?

Post by ResearchMed »

rockstar wrote: Thu May 19, 2022 9:41 am
dbr wrote: Thu May 19, 2022 9:33 am
rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm

Now, if you have a family history of living a long time, then I agree that a long bond held to maturity becomes more realistic. However, if you have to sell before maturity, you're going to lose money if rates go up during the withdraw period. Your return assumption is based on the bond market bull continuing. It's already stopped for now, and the returns are already in. This is why looking at historical data and projecting it forward doesn't always make sense, which is why duration matching maturities to withdrawals makes sense.

And even the intermediate is problematic. BND has now return over the last 10 years only 1.66%. It hasn't kept up with inflation even before inflation went through the roof. It returned a negative real yield.
[emphasis added]


The average life expectancy in the simple tables, such as where you no doubt got this figure
( https://www.cdc.gov/nchs/products/databriefs/db427.htm )

is the number figured *from birth*.
Most of us here are a bit older than that, so our life expectancies no longer include those who passed at the younger ages.

You'd need to look separately at "life expectancy at age X" for each age group, and yes, for women, it's a bit longer than for men. All of this is "averages", of course, so it's not particularly predictive of a single individual. (For pooled use, such as for life insurance or life annuities, it's great.)

RM
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rockstar
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Re: Regrets from seniors on aggressive AA?

Post by rockstar »

ResearchMed wrote: Thu May 19, 2022 7:19 pm
rockstar wrote: Thu May 19, 2022 9:41 am
dbr wrote: Thu May 19, 2022 9:33 am
rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm

Now, if you have a family history of living a long time, then I agree that a long bond held to maturity becomes more realistic. However, if you have to sell before maturity, you're going to lose money if rates go up during the withdraw period. Your return assumption is based on the bond market bull continuing. It's already stopped for now, and the returns are already in. This is why looking at historical data and projecting it forward doesn't always make sense, which is why duration matching maturities to withdrawals makes sense.

And even the intermediate is problematic. BND has now return over the last 10 years only 1.66%. It hasn't kept up with inflation even before inflation went through the roof. It returned a negative real yield.
[emphasis added]


The average life expectancy in the simple tables, such as where you no doubt got this figure
( https://www.cdc.gov/nchs/products/databriefs/db427.htm )

is the number figured *from birth*.
Most of us here are a bit older than that, so our life expectancies no longer include those who passed at the younger ages.

You'd need to look separately at "life expectancy at age X" for each age group, and yes, for women, it's a bit longer than for men. All of this is "averages", of course, so it's not particularly predictive of a single individual. (For pooled use, such as for life insurance or life annuities, it's great.)

RM
And genetics and health also play a huge part. But it's a starting spot for planning. Most people are not going to live to hundred because of their genetics. I'm planning for 85, but I can just as likely go at 50. Until I cross over the 65 barrier, it's hard to know. And family medical history plays a huge role.
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Re: Regrets from seniors on aggressive AA?

Post by montanagirl »

I moved deliberately to 70/30 after years of 60/40 or 55/45, at *just the wrong time*.

But bond funds are down too do what's the diff. I tell myself when the market comes back I'll be 80/20. :greedy

I took my RMD early and don't need the money for anything this year. I'm just glad I waited to file SS because I can live on that.
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Re: Regrets from seniors on aggressive AA?

Post by ResearchMed »

rockstar wrote: Thu May 19, 2022 7:36 pm
ResearchMed wrote: Thu May 19, 2022 7:19 pm
rockstar wrote: Thu May 19, 2022 9:41 am
dbr wrote: Thu May 19, 2022 9:33 am
rockstar wrote: Thu May 19, 2022 9:22 am
Should seniors have been heavily invested in the long bond?
That was never my choice. But the math would suggest that, as an example, starting at age 30 and planning to invest to as long as age 100 one might have long bonds most of that time. By age 85 or 90 you can keep them and just think of them as belonging to your heirs.

Watching long bonds fluctuate over a period of a few years is a waste of time. Long treasuries returned about 7% overall since 1985. Secular trends in interest rates would not promise that repeating for the next forty years. Investing is a long game. There aren't any bonds longer than 30 years which is only half of the investment time line.

But the answer to your question is no to the "should" because it isn't helpful enough to justify possible anxiety. As to "could" the answer is probably yes.
The average life expectancy in the US is 77, not 100. And women outlive men. https://www.cdc.gov/nchs/products/databriefs/db427.htm

Now, if you have a family history of living a long time, then I agree that a long bond held to maturity becomes more realistic. However, if you have to sell before maturity, you're going to lose money if rates go up during the withdraw period. Your return assumption is based on the bond market bull continuing. It's already stopped for now, and the returns are already in. This is why looking at historical data and projecting it forward doesn't always make sense, which is why duration matching maturities to withdrawals makes sense.

And even the intermediate is problematic. BND has now return over the last 10 years only 1.66%. It hasn't kept up with inflation even before inflation went through the roof. It returned a negative real yield.
[emphasis added]


The average life expectancy in the simple tables, such as where you no doubt got this figure
( https://www.cdc.gov/nchs/products/databriefs/db427.htm )

is the number figured *from birth*.
Most of us here are a bit older than that, so our life expectancies no longer include those who passed at the younger ages.

You'd need to look separately at "life expectancy at age X" for each age group, and yes, for women, it's a bit longer than for men. All of this is "averages", of course, so it's not particularly predictive of a single individual. (For pooled use, such as for life insurance or life annuities, it's great.)

RM
And genetics and health also play a huge part. But it's a starting spot for planning. Most people are not going to live to hundred because of their genetics. I'm planning for 85, but I can just as likely go at 50. Until I cross over the 65 barrier, it's hard to know. And family medical history plays a huge role.
Of course there are many other factors, including traffic safety (!)...

However, if someone at age 60 or 65 is using age 77 as their "life expectancy", they may be delighted from a "life" perspective, but a bit less so from a financial perspective.

At age 70, there is an average life expectancy of approximately 14-16 years (M/F), not 7, and even then a good number will live longer than even that higher age.
https://www.google.com/search?client=sa ... 8&oe=UTF-8

And the bottom line is that given these are *averages*, it's risky to rely upon any such "average", without some sort of backup plan in case one gets lucky and beats the odds (life expectancy average).

Absent unusual health concerns, I'd recommend estimating longer, not shorter!

RM
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FRANK2009
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Re: Regrets from seniors on aggressive AA?

Post by FRANK2009 »

I'm 63 years old and retired. My AA is about 85% equity/15% fixed income. My home is paid off. I easily live off my modest pension and smallish social security payment. In times like these I don't sell shares in the equity funds unless absolutely necessary. This isn't my first rodeo and confident the market will return at some point.
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Re: Regrets from seniors on aggressive AA?

Post by galawdawg »

With a pension that fully meets all of our retirement spending needs (not yet taking SS), we are 75/25 and retired with no regrets.

Regardless of other income sources, more aggressive portfolio allocations for retirees have done well over the past ten, twenty and thirty year periods. Here are the portfolio visualizer results from each period of time (through April 2022) with a starting balance of $1 million, five (5%) percent fixed withdrawal rate and a two-fund portfolio of Total Stock Market Index and Total Bond Index allocated at 100/0, 75/25 and 50/50.

May 2012 retiree through April 2022: https://www.portfoliovisualizer.com/bac ... tion2_3=50
May 2002 retiree through April 2022: https://www.portfoliovisualizer.com/bac ... tion2_3=50
May 1992 retiree through April 2022: https://www.portfoliovisualizer.com/bac ... tion2_3=50

Of course, past performance does not predict future results. All investors, senior and otherwise, should select an asset allocation that meets their personal and individual circumstances and which will allow them to stay the course and sleep well at night! :beer
hudson
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Re: Regrets from seniors on aggressive AA?

Post by hudson »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
95% plus stocks will work fine for some 70+ investors. They are likely snapping up the bargains with their dry powder.
You pay your money, you take your chances.
Dividends are likely still rolling in.

I'm not one of those with a high stock allocation. Stocks give me heartburn.
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Re: Regrets from seniors on aggressive AA?

Post by Dude2 »

It's a legitimate question, but not one that I think is timed appropriately. People with faith in stocks seem to have no trouble with this sort of volatility. On the other hand, after a dip and when stocks fail to return to expected levels for ten plus years, that's possibly the time they might question their actions/philosophy. This is really all about economics and capitalism mixed into finite human lifespans. If the extreme risk takers get rewarded, bravo. The rest of us will likely have to get there by a safer route which probably involves working.
Then ’tis like the breath of an unfee’d lawyer.
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Youngblood
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Re: Regrets from seniors on aggressive AA?

Post by Youngblood »

hudson wrote: Fri May 20, 2022 11:38 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
95% plus stocks will work fine for some 70+ investors. They are likely snapping up the bargains with their dry powder.
You pay your money, you take your chances.
Dividends are likely still rolling in.

I'm not one of those with a high stock allocation. Stocks give me heartburn.
Not likely to snap up too many bargains with 95+ already accounted for. LOL
As mentioned, I would (at this age 70+) be demoralized at losing so much money.
Likewise had I purchased any mid or long term bond funds.
From reading all these thoughtful responses, I'm for the most part in the minority.
Been retired since 50 and enjoying life most of the time.
"I made my money by selling too soon." | Bernard M. Baruch
sweetness9
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Re: Regrets from seniors on aggressive AA?

Post by sweetness9 »

On life expectancy, people both underestimate their odds and overestimate the relevance of family history. A large study found that only about 7% of life span variation is explained by genetics: https://www.statnews.com/2018/11/06/lif ... -database/ Spouses' life expectancy is much better correlated, than siblings' life expectancy, for example. There are exceptions for some rare, inheritable diseases, but I wouldn't put too much stock in family history.a

Also, life expectancy varies a lot by income. Among the top 1%, life expectancy at age 40 is about 87M/89F, and it's close to those figures for the top quartile of earners. http://www.equality-of-opportunity.org/health/ Once you're already retired, if you are in the top quartile financially--which many people here are--I would guess many people have a life expectancy around 90.
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Youngblood
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Re: Regrets from seniors on aggressive AA?

Post by Youngblood »

sweetness9 wrote: Fri May 20, 2022 12:32 pm On life expectancy, people both underestimate their odds and overestimate the relevance of family history. A large study found that only about 7% of life span variation is explained by genetics: https://www.statnews.com/2018/11/06/lif ... -database/ Spouses' life expectancy is much better correlated, than siblings' life expectancy, for example. There are exceptions for some rare, inheritable diseases, but I wouldn't put too much stock in family history.a

Also, life expectancy varies a lot by income. Among the top 1%, life expectancy at age 40 is about 87M/89F, and it's close to those figures for the top quartile of earners. http://www.equality-of-opportunity.org/health/ Once you're already retired, if you are in the top quartile financially--which many people here are--I would guess many people have a life expectancy around 90.
Actual lifespan of an individual, like the market, isn't known until the end date.
I think most of us here just try to play the probabilities.
"I made my money by selling too soon." | Bernard M. Baruch
r.walker
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Re: Regrets from seniors on aggressive AA?

Post by r.walker »

67, still working. Aiming to retire between 68-70. 98% Equity, 2% Cash. House paid off. No debt. Taxable dividends and SS at 70 will more than cover expenses. Never owned bonds. Only regret is no dry powder beyond minimum cash reserves. Can't back up the truck as I did in previous bears.
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Re: Regrets from seniors on aggressive AA?

Post by sean.mcgrath »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
No regrets, but only because I have always had a very high savings rate. I look at the gain as for my kids / charities, so the time horizon is longer.
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celia
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Re: Regrets from seniors on aggressive AA?

Post by celia »

Ramjet wrote: Thu May 19, 2022 9:52 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors...
I think you might be exaggerating. Seniors advocating for 95%+ equities on Bogleheads is not common in the slightest. I would classify them as the extreme minority, under 1% probably
Ramjet, you are mistaken. There are lots of us here but to talk about it feels like bragging, especially when others are struggling. Of course, we are not the majority, but I’d guess we’re more like 25% of the over-65 crowd (that could go to 95% equities if they wanted). I base that on the number of Bogleheads who have problems figuring out how to bring down their large RMDs. I am including anyone who is retired and has a pension. Some of them don’t post much unless they have a question, as they’re “busy” being retired.

In our case, we both have pensions which we were able to live on until we both started SS at 70. We used part of our tax-deferred funds to buy extra years of “service credit” as we were retiring. The pensions are from government jobs we earned during about 40% of our working years. Once SS started, 85% of it was always taxed. (Our tax brackets are higher now than when working since we don’t have enough to itemize anymore with the house paid for. Our former defendants are now self-supporting and we no longer need to save for retirement, so don’t get any tax breaks.)

Once SS started, it was pretty much “gravy” so we can easily invest our assets in 95% stocks as we have extra income we don’t need. But right now, we’re more like 70% in stock, having sold some assets near the beginning of the year with the idea the funds will be re-purchased later at a higher price. I may not know when we hit bottom, when we do, but it doesn’t matter as long as we re-buy for less than we sold for. I’ve done this before and the market didn’t go down, but this time it has. So it evens out in the long run. Yes, I’m a risk taker while others are satisfied to have “won the game”.

I acknowledge that not all seniors in our position are like this as everyone has their own comfort zone. Even if they could invest 95% in equities, they may not want to. In some cases, the investor spouse expects their non-investor partner to survive them and wants to set things up for the future. I’m doing that somewhat even though I expect to outlive my own non-investor spouse. He will be fine as both pensions will continue as well as the higher SS. (We both took lower pensions so the survivor would continue the other person’s pension.)


Our decisions that led to this situation were:
* being married
* both worked and had college degrees
* finding government jobs after both were laid off at the same time
* taking reduced pensions for survivor income continuity
* delaying SS to 70
* starting Roth conversions while working and using tax-deferred to buy “bigger pensions” than our work history defined

We’re also lucky that we both came from large families and get inheritances when someone dies (usually under $100K). They are not that big since they are divided amongst many heirs. But, we try not to spend them unless our extended families need help. I’d like to give a warning to anyone who might inherit an IRA to be prepared to take distributions while trying to do your own Roth conversions. Leave some wiggle room in your tax brackets for this.
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.
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Re: Regrets from seniors on aggressive AA?

Post by Harmanic »

I know someone who retired in the late 1990s, sold their house and moved to a LCOL town. Invested the proceeds in the stock market. Then the dot bomb disaster hit, while housing soared. But the time of the great recession some years later, this person was forced to come out of retirement.

An aggressive AA is fine if you have a secure foundation and the money invested is mainly for fun, legacy, etc. I have a family member with a large pension who could live just fine if her investments went to zero. She could put it all in ARKK (not suggesting she does) and come out okay. Of course, she has most of her investments in CDs paying low rates, but again that is just fine. She won the game, so who cares!
The question isn't at what age I want to retire, it's at what income. | - George Foreman
JDave
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Re: Regrets from seniors on aggressive AA?

Post by JDave »

If you make your plans based on average life expectancy, you have a 50% chance of failing.
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Re: Regrets from seniors on aggressive AA?

Post by martincmartin »

The idea that stocks are more "aggressive" is based on a common but flawed way of looking at AA. In retirement, you're taking out only a very small fraction every year, so any gains/losses are (mostly) paper losses.

Over any period greater than 20 years, if you have no contributions or withdrawals, stocks have outperformed bonds historically. Stocks are certainly riskier over months or years, but if you're looking over decades, bonds are actually more likely to leave you eating cat food.

Of course, in retirement you have withdrawals, so it's a little more complicated. But basically being 70% stocks or so is safest, in the sense of having the least chance of running out of money in retirement, at least historically in the US, UK and Japan.

If you look at the data, a bond tent does slightly better: retire with 50% bonds, then slowly increase stocks over the next 10 to 15 years. That's what I'm doing.

I announced my retirement in December and haven't looked back. I have 50% bonds to cover just the scenario we seem to be in, namely bad real bond returns (from inflation) plus bad stock returns. I plan to increase my stock holding over the next decade or so, even if the stock market stays bad for years.
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Re: Regrets from seniors on aggressive AA?

Post by 02nz »

Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
It depends so much on what else one's holdings are and what the purpose is for the investment. It may well be sensible for someone whose living expenses are covered by Social Security and/or a pension, and who is primarily investing the money for heirs, to have an AA of mostly stocks.

BTW it's risk-averse, not adverse. (Averse means wanting to avoid something, whereas adverse means bad.)
rich126
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Re: Regrets from seniors on aggressive AA?

Post by rich126 »

BogleFanGal wrote: Thu May 19, 2022 9:08 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
That is by far the biggest thing to look out for on any investment board anywhere. I see other places where people seem to assume everyone has a decent sized pension while forgetting that now most workers (85%?) no longer have pensions while most retirees (almost 80%) do have pensions.

I have an uncle who has all his expenses covered (and more so when you include RMDs) by his pension, social security and some z-coupon bonds he bought eons ago so he can be 100% in the market and it doesn't matter (he is now 80).
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
delamer
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Re: Regrets from seniors on aggressive AA?

Post by delamer »

rich126 wrote: Sat May 21, 2022 7:44 am
BogleFanGal wrote: Thu May 19, 2022 9:08 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
That is by far the biggest thing to look out for on any investment board anywhere. I see other places where people seem to assume everyone has a decent sized pension while forgetting that now most workers (85%?) no longer have pensions while most retirees (almost 80%) do have pensions.

I have an uncle who has all his expenses covered (and more so when you include RMDs) by his pension, social security and some z-coupon bonds he bought eons ago so he can be 100% in the market and it doesn't matter (he is now 80).
Here are the numbers for current retirees, by percent with certain types of income: https://www.federalreserve.gov/publicat ... rement.htm

It an exaggeration to say that 80% have pensions, but the number is higher than I expected. Some of that is probably due to the fact that many government (federal, state, and local) workers did not contribute to Social Security and as retirees only have pensions and no SS (or small SS from non-government jobs. And I know people who are retired with small pensions that they vested in from a job they held in their 30’s for 10 years. Everything helps, but these pensions aren’t big enough to eliminate the need for significant withdrawals from savings.

As I noted earlier, I wish we’d been stock-heavier in our accumulation years and yes, we do have substantial pensions. But we’re financially secure, so we’ve met our most important goal. It’s easy to Monday-morning quarterback yourself.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
rich126
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Re: Regrets from seniors on aggressive AA?

Post by rich126 »

delamer wrote: Sat May 21, 2022 10:31 am
rich126 wrote: Sat May 21, 2022 7:44 am
BogleFanGal wrote: Thu May 19, 2022 9:08 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
That is by far the biggest thing to look out for on any investment board anywhere. I see other places where people seem to assume everyone has a decent sized pension while forgetting that now most workers (85%?) no longer have pensions while most retirees (almost 80%) do have pensions.

I have an uncle who has all his expenses covered (and more so when you include RMDs) by his pension, social security and some z-coupon bonds he bought eons ago so he can be 100% in the market and it doesn't matter (he is now 80).
Here are the numbers for current retirees, by percent with certain types of income: https://www.federalreserve.gov/publicat ... rement.htm

It an exaggeration to say that 80% have pensions, but the number is higher than I expected. Some of that is probably due to the fact that many government (federal, state, and local) workers did not contribute to Social Security and as retirees only have pensions and no SS (or small SS from non-government jobs. And I know people who are retired with small pensions that they vested in from a job they held in their 30’s for 10 years. Everything helps, but these pensions aren’t big enough to eliminate the need for significant withdrawals from savings.

As I noted earlier, I wish we’d been stock-heavier in our accumulation years and yes, we do have substantial pensions. But we’re financially secure, so we’ve met our most important goal. It’s easy to Monday-morning quarterback yourself.
I looked this up a while ago (couple of years?) because this came up on another forum and the numbers were mostly opposites of each other. I know virtually everyone in my family had a pension despite none of them being federal nor state employees. Finding a non-state/federal job now that has a pension is tough. And places that did have them have frozen them an eliminated them for new employees. Certainly a few exceptions but not many.

Just shows that ideally it is best to have multiple sources of income in retirement and a diversified portfolio. Maximizing returns should be very low on a retiree or near retiree's list and instead avoiding serious drops in portfolio should be up high.
----------------------------- | If you think something is important and it doesn't involve the health of someone, think again. Life goes too fast, enjoy it and be nice.
delamer
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Re: Regrets from seniors on aggressive AA?

Post by delamer »

rich126 wrote: Sat May 21, 2022 10:50 am
delamer wrote: Sat May 21, 2022 10:31 am
rich126 wrote: Sat May 21, 2022 7:44 am
BogleFanGal wrote: Thu May 19, 2022 9:08 am
Youngblood wrote: Thu May 19, 2022 8:35 am So many times I've read posts that advocate an asset allocation of 95%+ in equities. When those postings come from seniors I am puzzled by
the risk taken by the choice of such an aggressive approach. I guess that's because as a 70+ senior I am, by most recommendations, under invested in
stocks or stock mutual funds and definitely risk adverse.

So, just wondering whether or not seniors, retirees or those close to either have any regrets now that the market has fallen so much?
Many retirees heavier on the equity side may not mention that they also have generous pensions that fully fund all their expenses. Or have other sources of guaranteed income. That would make a big difference vs needing to rely 100% on one's investments for remaining lifespan.
That is by far the biggest thing to look out for on any investment board anywhere. I see other places where people seem to assume everyone has a decent sized pension while forgetting that now most workers (85%?) no longer have pensions while most retirees (almost 80%) do have pensions.

I have an uncle who has all his expenses covered (and more so when you include RMDs) by his pension, social security and some z-coupon bonds he bought eons ago so he can be 100% in the market and it doesn't matter (he is now 80).
Here are the numbers for current retirees, by percent with certain types of income: https://www.federalreserve.gov/publicat ... rement.htm

It an exaggeration to say that 80% have pensions, but the number is higher than I expected. Some of that is probably due to the fact that many government (federal, state, and local) workers did not contribute to Social Security and as retirees only have pensions and no SS (or small SS from non-government jobs. And I know people who are retired with small pensions that they vested in from a job they held in their 30’s for 10 years. Everything helps, but these pensions aren’t big enough to eliminate the need for significant withdrawals from savings.

As I noted earlier, I wish we’d been stock-heavier in our accumulation years and yes, we do have substantial pensions. But we’re financially secure, so we’ve met our most important goal. It’s easy to Monday-morning quarterback yourself.
I looked this up a while ago (couple of years?) because this came up on another forum and the numbers were mostly opposites of each other. I know virtually everyone in my family had a pension despite none of them being federal nor state employees. Finding a non-state/federal job now that has a pension is tough. And places that did have them have frozen them an eliminated them for new employees. Certainly a few exceptions but not many.

Just shows that ideally it is best to have multiple sources of income in retirement and a diversified portfolio. Maximizing returns should be very low on a retiree or near retiree's list and instead avoiding serious drops in portfolio should be up high.
Forty years ago when the family members in my parents’ generation were retiring, the majority had pensions from jobs in the private sector that involved 30+ year careers with the same company.

Life isn’t like that any more.

Multiple sources of retirement income absolutely is the way to go. It’s the reason that we jumpstarted our kids’ IRAs as soon as they had earned income.
One thing that humbles me deeply is to see that human genius has its limits while human stupidity does not. - Alexandre Dumas, fils
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JoeRetire
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Re: Regrets from seniors on aggressive AA?

Post by JoeRetire »

rockstar wrote: Thu May 19, 2022 9:41 am The average life expectancy in the US is 77, not 100.
That's life expectancy at birth, which is seldom relevant unless you were just born or are investing for someone who was just born.
The OP is "70+".
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meowcat
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Re: Regrets from seniors on aggressive AA?

Post by meowcat »

I'm coming up on 59 YO, not retired, still 100% in equities. No pension to speak of. I know it's playing with fire but I've been in total market for so long. I sleep well at night.
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Marseille07
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Re: Regrets from seniors on aggressive AA?

Post by Marseille07 »

Youngblood wrote: Fri May 20, 2022 12:26 pm Not likely to snap up too many bargains with 95+ already accounted for. LOL
As mentioned, I would (at this age 70+) be demoralized at losing so much money.
Likewise had I purchased any mid or long term bond funds.
From reading all these thoughtful responses, I'm for the most part in the minority.
Been retired since 50 and enjoying life most of the time.
What was your asset allocation plan since 50?

I'm sure it sucks for those 70+ and 95% equities to be in this situation, but the flipside is that they also gained a lot from 50 to 70+. It's not so clear cut who came out ahead.
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