How has 60/40 worked out in retirement ?

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Vivbet
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How has 60/40 worked out in retirement ?

Post by Vivbet »

So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
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HomerJ
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Re: How has 60/40 worked out in retirement ?

Post by HomerJ »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
KlangFool
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Re: How has 60/40 worked out in retirement ?

Post by KlangFool »

Vivbet wrote: Wed Jun 07, 2023 6:04 pm
HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
A) Why do you need it to grow?

B) You have 60% stock for the growth.

C) What is the size of your portfolio versus your annual expense or retirement expense? That is the key question. 25X? 50X?

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Re: How has 60/40 worked out in retirement ?

Post by ruralavalon »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Age 77, retired.

My asset allocation is 60/40 and I am satisfied with that, no regrets. My portfolio is still larger than the day I retired.
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billfromct
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Re: How has 60/40 worked out in retirement ?

Post by billfromct »

When I left my job at age 69, I wanted 10 years of my annual salary (my last full year of salary) in fixed income in my rollover IRA to ensure I could ride out any correction or bear market & not pull required minimum distributions (RMDs) from my decreased value stock allocation. That turned out to be a 65% stock/35% fixed income allocation.

Now my fixed income allocation in my rollover IRA covers about 7-8 years of RMDs so I feel pretty confident I won’t need to sell stocks that are down to fund my RMDs.

Although I am not exactly at the 60%/40% allocation, I’m close enough & it works for me.

bill
chrisdds98
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Re: How has 60/40 worked out in retirement ?

Post by chrisdds98 »

Vivbet wrote: Wed Jun 07, 2023 6:04 pm
HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
currently the real yield on TIPS is 1.7%. so not a ton of growth, but a little more than inflation
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Re: How has 60/40 worked out in retirement ?

Post by steadyosmosis »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Age<59.5. Early-retired. AA ~55/45. Taxable account, Roth IRA, HSA...all are 100% equities. 100% of fixed income is in tIRA. I spend from taxable and re-balance in tIRA.
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HomerJ
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Re: How has 60/40 worked out in retirement ?

Post by HomerJ »

Okay here's my real answer..

Being 60/40, so far, in the past, means you ended up with less money... BUT, the journey wasn't as stressful.

2008 with a 50% crash, wasn't that stressful for me BECAUSE I had a solid chunk in bonds/cash...

We were 66/33, with $750,000... $500,000 in stocks and $250,000 in bonds...

The stock side dropped 50% from $500,000 to $250,000.. 5-7 years of savings gone in 9 months... Painful... And all the pundits on TV and on the Internet (including some people here), were talking, 100% serious, that it was going to go down more..

Having the $250,000 in "safe" bonds made a huge difference. If I lost my job, I still had enough to keep my family fed, warm, and sheltered for multiple years...

So that let me "stay the course", and not panic sell, and recover all my losses from 2008 (and then some)...

That's why I think 60/40 may be okay even during accumulation.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
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HomerJ
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Re: How has 60/40 worked out in retirement ?

Post by HomerJ »

Now I'm close to retirement (and have been close for the past 5 years really), so I've been 50/50 this whole time.

Close to retirement, this gives me piece of mind, because I'm prepared for another stock market crash that takes 5-10 years to recover.

Because that could happen tomorrow.

This is always true.

Whe young, one could still be 100% stocks (with some kind of energency fund) even knowing a stock market crash could start tomorrow and take 5-10 years to recover.

But I'm old now, and could easily lose my job if another crash happens and it might be hard to find another one, so I have a ton of money in "safe" assets that I could live off for 15+ years probably, while I wait for the stock market to recover.

This gives me peace of.mind... It DOES mean I will probably have less money going forward, but I already have enough to retire.. I don't need to maximize gains anymore.. I hit my goal... I need to protect my retirement now.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
Diluted Waters
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Re: How has 60/40 worked out in retirement ?

Post by Diluted Waters »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
40% where it can "grow a lot" also means it can 'lose a lot.' That's the risk-reward tradeoff; a certain amount of growth could just as well be a certain amount of loss.

If your 60% can lose a lot, imagine if it was 100%, actually lost a lot, AND you needed to tap it for paying expenses. Would you have any regrets then?

My target is 65% equity, 25% bonds and 10% cash. Currently cash is a little low at about 9% and equity is a little high and that's fine. The 9% is 9% of a pretty good number so it's enough cash to cover most any unforeseen expense. Unless I was suddenly had to buy a McLaren.
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Re: How has 60/40 worked out in retirement ?

Post by goblue100 »

I'm probably not the guy you are looking for an opinion from(recent retiree), but here goes. I retired in November of 2020. The decline of 2008-2009 left an impression on me. I was something like 85/15 during that blowup. If you want more detail my model was Scott Burns 10 speed portfolio, more or less. I rode out the decline and enjoyed the subsequent 10 or so years that followed, but I knew I wanted to try to have more bonds and "safe" assets when the paychecks stopped. By the time I left work my portfolio was 60/30/10 with the 10 in a 5 year CD ladder. That has been funding my retirement so far. My feeling is the 40% isn't no growth, but should be slow growth, 2021 notwithstanding. I said in another thread my goal with the 40% is to narrow the range of possible outcomes, losing a little off the high end to eliminate some of the worst possibilities.
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Re: How has 60/40 worked out in retirement ?

Post by dogagility »

Any allocation can work. An appropriate allocation depends upon a person's financial situation. OP, what is your financial situation?
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Re: How has 60/40 worked out in retirement ?

Post by Wiggums »

Our AA is 65/35. We choose this allocation because we have a low withdrawal rate. Our fixed income portion included about 3 years of cash for Roth conversions and unexpected expenses. Our portfolio balance is holding up well. Taxes for Roth conversions has been our biggest expense.
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bradinsky
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Re: How has 60/40 worked out in retirement ?

Post by bradinsky »

Retired 5 years. We are 45% equities & 55% fixed income. About 60% of the fixed income is in MMF & MYGAs. Not exactly optimal but it keeps DW happy & it is working for us. Guess that’s really all that matters.
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Re: How has 60/40 worked out in retirement ?

Post by Rudedog »

Right now we are equities 60--- bonds 20-- CDs, T-bills, i-bonds and cash 20. T-bills are laddered. CDs were purchased recently, all pay over 5%. Works for us.
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Re: How has 60/40 worked out in retirement ?

Post by arcticpineapplecorp. »

While not 60/40, Harry Markowitz once said about his 50/50 portfolio (referencing your attempt at minimizing regret over keeping 40% out of the stock market):
Markowitz: Circa 1952, I was offered the choice of a stock/bond portfolio in the form of CREF versus TIAA.I chose a 50-50 mix. My reasoning was that if the stock market rose a great deal, I would regret it if I was completely out of it. Conversely, if stocks fell a great deal and I had nothing in bonds I would also have regrets. So, my 50-50 split minimized maximum regret. The conclusion that some commentators draw from this story is that even Markowitz, creator of MPT, does not use MPT in his own choice of portfolio. The 50-50 split was my choice at age 25 in 1952. But it would not be my recommendation now for a 25-year-old.

Source
Last edited by arcticpineapplecorp. on Wed Jun 07, 2023 9:50 pm, edited 2 times in total.
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SevenBridgesRoad
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Re: How has 60/40 worked out in retirement ?

Post by SevenBridgesRoad »

Retired at 61 and currently 66. 30/60/10 stocks/bonds/cash since retirement. Of course, every person, portfolio and situation is different. We (wife and I) use Variable Percentage Withdrawal. Working out just fine. No regrets.
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

KlangFool wrote: Wed Jun 07, 2023 6:10 pm
Vivbet wrote: Wed Jun 07, 2023 6:04 pm
HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
Hello KlangFool - thanks for your response - to answer your questions :

A) Why do you need it to grow?
This is similar to asking why someone would want more money, lol! In my case, I’d say that having more money would give me more peace of mind. The less time I spend thinking about money, the happier I’ll be. But I’d also like to have extra money to do nice things with my family

B) You have 60% stock for the growth.
True, but what I’m wondering is if more might be better. I’d have to really think through how to handle a prolonged market downturn, something many of us don’t have a lot of experience with.


C) What is the size of your portfolio versus your annual expense or retirement expense? That is the key question. 25X? 50X?
I’d say 48x - but I haven’t budgeted for any big ticket items that may come up past one year. All of this is a work in progress for me.


KlangFool
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

ruralavalon wrote: Wed Jun 07, 2023 6:10 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Age 77, retired.

My asset allocation is 60/40 and I am satisfied with that, no regrets. My portfolio is still larger than the day I retired.
I’m glad to hear that the 60/40 allocation is working out for you, as it seems to for many people!
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Re: How has 60/40 worked out in retirement ?

Post by placeholder »

In my case the pension has covered spending since retirement in 2018 while as I mention in my ytd posts the 60/40 portfolio is up 29.27% since then so even had I been relying on it thing would have been pretty solid.
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

billfromct wrote: Wed Jun 07, 2023 6:25 pm When I left my job at age 69, I wanted 10 years of my annual salary (my last full year of salary) in fixed income in my rollover IRA to ensure I could ride out any correction or bear market & not pull required minimum distributions (RMDs) from my decreased value stock allocation. That turned out to be a 65% stock/35% fixed income allocation.

Now my fixed income allocation in my rollover IRA covers about 7-8 years of RMDs so I feel pretty confident I won’t need to sell stocks that are down to fund my RMDs.

Although I am not exactly at the 60%/40% allocation, I’m close enough & it works for me.

bill
Hi Bill, you bring up a lot of good points. I knew RMDs were lurking around the corner, but haven’t really given it much thought. I guess this means I need to plan to transition IRA funds out of stocks just to meet the RMD - even just fixed income in general may not cut it because bond funds can go down quite a bit too. Ugh, this gets very complicated. So I may need to leave money in cash or very short term fixed income just to cover RMDs? Would you be able to share kind of fixed income you used? Thanks again!
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

chrisdds98 wrote: Wed Jun 07, 2023 6:26 pm
Vivbet wrote: Wed Jun 07, 2023 6:04 pm
HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
currently the real yield on TIPS is 1.7%. so not a ton of growth, but a little more than inflation
You’re right - bonds do generally provide a slight real return - just not what I think of as growth.
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Re: How has 60/40 worked out in retirement ?

Post by RetirementClass2021 »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Retired end of 2021 at age 59. I have been 60/40 since January 2022 and plan to stay at this allocation for the rest of my days on earth.
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

steadyosmosis wrote: Wed Jun 07, 2023 6:33 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Thanks for the feedback - glad to hear it’s working for you! I noticed in your signature that you keep 100% of your taxable account in equities and then rebalance to your tax deferred account. I’m wondering if you could elaborate on how that’s going and also if you ever have any liquidity concerns in the case of a bear market? As an oversimplified example, let’s say you had 200k and wanted a 50/50 allocation. So with this strategy, you’d keep 100k in equities in taxable and 100k in your in your IRA. Then the market goes down 50% and you need to take 50k out for expense. Now you have 0 in your taxable account and 100 k in cash in your IRA. You rebalance that to 50/50 in your IRA, but the problem is you have no money left in your taxable account. Whereas if you started with 100k in cash in taxable, you could just take the 50k out and still have 50 k of cash left there, and 50 k in the equities. Of course, in the real world you’d probably never end up with 0 in your taxable account, but you’d have less resources in your taxable account to rely on - just wondering if that’s ever been a concern. Thank you!
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

HomerJ wrote: Wed Jun 07, 2023 7:35 pm Okay here's my real answer..

Being 60/40, so far, in the past, means you ended up with less money... BUT, the journey wasn't as stressful.

2008 with a 50% crash, wasn't that stressful for me BECAUSE I had a solid chunk in bonds/cash...

We were 66/33, with $750,000... $500,000 in stocks and $250,000 in bonds...

The stock side dropped 50% from $500,000 to $250,000.. 5-7 years of savings gone in 9 months... Painful... And all the pundits on TV and on the Internet (including some people here), were talking, 100% serious, that it was going to go down more..

Having the $250,000 in "safe" bonds made a huge difference. If I lost my job, I still had enough to keep my family fed, warm, and sheltered for multiple years...

So that let me "stay the course", and not panic sell, and recover all my losses from 2008 (and then some)...

That's why I think 60/40 may be okay even during accumulation.
Hello Homer - thank you for the “real” response. We are very like-minded as I am also by nature very conservative. I am just questioning how rational it is to be so. In other words, to what extent am I keeping less in stocks because a bear market might actually cause me to run out of money vs does doing so just help me sleep better at night and not sell during a downturn? I was also deeply impacted by what happened in 2008 as I saw many people close to or in retirement sell their stocks at the bottom and permanently reduce their standard of living. I had a small windfall around that time and invested it too conservatively at 30/70. The only reason I’m at 60/40 now is because I never rebalanced. The high cash position did give me the fortitude to buy a bunch of VOO during the depths of the covid crisis, which has really helped. Anyway, I may just continue to not re-balance. Then I will die at 90/10 and make my heirs very happy, lol!
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

HomerJ wrote: Wed Jun 07, 2023 7:44 pm Now I'm close to retirement (and have been close for the past 5 years really), so I've been 50/50 this whole time.

Close to retirement, this gives me piece of mind, because I'm prepared for another stock market crash that takes 5-10 years to recover.

Because that could happen tomorrow.

This is always true.

Whe young, one could still be 100% stocks (with some kind of energency fund) even knowing a stock market crash could start tomorrow and take 5-10 years to recover.

But I'm old now, and could easily lose my job if another crash happens and it might be hard to find another one, so I have a ton of money in "safe" assets that I could live off for 15+ years probably, while I wait for the stock market to recover.

This gives me peace of.mind... It DOES mean I will probably have less money going forward, but I already have enough to retire.. I don't need to maximize gains anymore.. I hit my goal... I need to protect my retirement now.
I agree. Peace of mind is very important. You can’t really enjoy retirement if you’re always worried about the stock market.
Soobs
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Re: How has 60/40 worked out in retirement ?

Post by Soobs »

Vivbet wrote: Wed Jun 07, 2023 6:04 pm
HomerJ wrote: Wed Jun 07, 2023 6:01 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Well the 40% right now is making 4%-5% a year so it's growing pretty well it seems.
But if that matches the inflation rate, is it really growing?
I don't consider it capital growth. It's capital preservation.
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Vivbet
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

Diluted Waters wrote: Wed Jun 07, 2023 7:49 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
40% where it can "grow a lot" also means it can 'lose a lot.' That's the risk-reward tradeoff; a certain amount of growth could just as well be a certain amount of loss.
That’s true, but the stock market is likely to eventually bounce back. It’s not likely to be a permanent loss unless you are forced to sell or if the market does not bounce back during your lifetime. If I were 80, I’d certainly not be thinking about raising my stock allocation.

If your 60% can lose a lot, imagine if it was 100%, actually lost a lot, AND you needed to tap it for paying expenses. Would you have any regrets then?
You’re right - the cash flow issues need to be thought out carefully. Thanks for pointing that out.

My target is 65% equity, 25% bonds and 10% cash. Currently cash is a little low at about 9% and equity is a little high and that's fine. The 9% is 9% of a pretty good number so it's enough cash to cover most any unforeseen expense. Unless I was suddenly had to buy a McLaren.
That’s pretty much what I’m considering - whether it makes sense to move to move to 65%.not sure I have the fortitude for more than that!
Unless I suddenly had to buy a McLaren
lol
billfromct
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Re: How has 60/40 worked out in retirement ?

Post by billfromct »

Vivbet wrote: Wed Jun 07, 2023 10:21 pm
billfromct wrote: Wed Jun 07, 2023 6:25 pm When I left my job at age 69, I wanted 10 years of my annual salary (my last full year of salary) in fixed income in my rollover IRA to ensure I could ride out any correction or bear market & not pull required minimum distributions (RMDs) from my decreased value stock allocation. That turned out to be a 65% stock/35% fixed income allocation.

Now my fixed income allocation in my rollover IRA covers about 7-8 years of RMDs so I feel pretty confident I won’t need to sell stocks that are down to fund my RMDs.

Although I am not exactly at the 60%/40% allocation, I’m close enough & it works for me.

bill
Hi Bill, you bring up a lot of good points. I knew RMDs were lurking around the corner, but haven’t really given it much thought. I guess this means I need to plan to transition IRA funds out of stocks just to meet the RMD - even just fixed income in general may not cut it because bond funds can go down quite a bit too. Ugh, this gets very complicated. So I may need to leave money in cash or very short term fixed income just to cover RMDs? Would you be able to share kind of fixed income you used? Thanks again!
My rollover IRA fixed income allocation is about 40% short term & 60% intermediate term bond funds. I think the ST bond fund lost about 5% in 2022 & the IT bond fund lost about 14% in 2022. Since I did my 2022 RMD in January 2022, I beat the 2022 ST term bond fund loss.

I have Vanguard automatically take my RMD out of the ST bond fund early each January in order to "get it out of the way" so if something should happen to me, my kids won't have to worry about it. The RMD goes directly into my taxable brokerage account settlement fund then I can transfer money to my checking account or write checks (over $250) from my settlement fund (I established settlement fund check writing when I moved to the brokerage account format).

I adjust my stock/fixed income assert allocation when it gets 5% out of wack. In January 2022 I moved some money from my stock allocation to my ST bond fund to bring my bond allocation back in line. Sometimes I would rather be lucky than smart as the stock market went down much more than the ST bond fund in 2022.

bill
Grt2bOutdoors
Posts: 25625
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Location: New York

Re: How has 60/40 worked out in retirement ?

Post by Grt2bOutdoors »

Vivbet wrote: Wed Jun 07, 2023 11:04 pm
steadyosmosis wrote: Wed Jun 07, 2023 6:33 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Thanks for the feedback - glad to hear it’s working for you! I noticed in your signature that you keep 100% of your taxable account in equities and then rebalance to your tax deferred account. I’m wondering if you could elaborate on how that’s going and also if you ever have any liquidity concerns in the case of a bear market? As an oversimplified example, let’s say you had 200k and wanted a 50/50 allocation. So with this strategy, you’d keep 100k in equities in taxable and 100k in your in your IRA. Then the market goes down 50% and you need to take 50k out for expense. Now you have 0 in your taxable account and 100 k in cash in your IRA. You rebalance that to 50/50 in your IRA, but the problem is you have no money left in your taxable account. Whereas if you started with 100k in cash in taxable, you could just take the 50k out and still have 50 k of cash left there, and 50 k in the equities. Of course, in the real world you’d probably never end up with 0 in your taxable account, but you’d have less resources in your taxable account to rely on - just wondering if that’s ever been a concern. Thank you!
Your oversimplified example doesn’t work well nor should it be expected to with a 25% withdrawal rate. Monies needed in 5 years or less should be in short term vehicles, not equities.
"One should invest based on their need, ability and willingness to take risk - Larry Swedroe" Asking Portfolio Questions
steadyosmosis
Posts: 976
Joined: Mon Dec 26, 2022 11:45 am

Re: How has 60/40 worked out in retirement ?

Post by steadyosmosis »

Vivbet wrote: Wed Jun 07, 2023 11:04 pm
steadyosmosis wrote: Wed Jun 07, 2023 6:33 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Thanks for the feedback - glad to hear it’s working for you! I noticed in your signature that you keep 100% of your taxable account in equities and then rebalance to your tax deferred account. I’m wondering if you could elaborate on how that’s going and also if you ever have any liquidity concerns in the case of a bear market? As an oversimplified example, let’s say you had 200k and wanted a 50/50 allocation. So with this strategy, you’d keep 100k in equities in taxable and 100k in your in your IRA. Then the market goes down 50% and you need to take 50k out for expense. Now you have 0 in your taxable account and 100 k in cash in your IRA. You rebalance that to 50/50 in your IRA, but the problem is you have no money left in your taxable account. Whereas if you started with 100k in cash in taxable, you could just take the 50k out and still have 50 k of cash left there, and 50 k in the equities. Of course, in the real world you’d probably never end up with 0 in your taxable account, but you’d have less resources in your taxable account to rely on - just wondering if that’s ever been a concern. Thank you!
Asset location seems to be working just as well as asset allocation is working.
No liquidity concerns.
If taxable account gets to zero, I will then begin to spend from Roth contributions.
Age<59.5. Early-retired. AA ~55/45. Taxable account, Roth IRA, HSA...all are 100% equities. 100% of fixed income is in tIRA. I spend from taxable and re-balance in tIRA.
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: How has 60/40 worked out in retirement ?

Post by dbr »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Here is a display of how different asset allocations have worked out historically. You can choose your asset allocation, how much you are spending or saving (negative spending number for saving), and the length of time you want to follow. Obviously you can't look at start years so recent that there is not yet enough history to see, but you can set a shorter term to see how more recent years have gone so far. This is standard stuff for people who have been looking at the retirement withdrawal problem at least since the late 1980's by this method.

https://engaging-data.com/visualizing-4-rule/

There are a number of similar models but this one has a uniquely interesting display of the data. If you want a different approach to looking forward from here and have a good idea what future performance might look like you can run a Monte Carlo model such as here: https://www.portfoliovisualizer.com/mon ... simulation
rkhusky
Posts: 17764
Joined: Thu Aug 18, 2011 8:09 pm

Re: How has 60/40 worked out in retirement ?

Post by rkhusky »

Vivbet wrote: Wed Jun 07, 2023 10:01 pm I’d say 48x - but I haven’t budgeted for any big ticket items that may come up past one year. All of this is a work in progress for me.
Then you don’t have to worry. Any asset allocation will work, unless you are trying to leave a large inheritance or charitable donation.
Varsh
Posts: 111
Joined: Fri Mar 18, 2022 9:50 am

Re: How has 60/40 worked out in retirement ?

Post by Varsh »

60/40 has been my plan. When the market moves well, I'd say should I have had more in. When the market does not perform upward, I say it works well for me. I am in Intermediate govt - SPTI and SCHR, short term, both VGSH, and BIL. Besides my settlement account, I have added a Treas. MM and have a ladder of up to six months of treasuries (3,6 intervals with auto roll). I still invest monthly in FXAIX, VXUS, IJR, and SLYV. (25,15,10,10) as a percentage in each. It works for me. Great funds, low cost and a history of performing over longer periods of time (10 years plus).
dbr
Posts: 46181
Joined: Sun Mar 04, 2007 8:50 am

Re: How has 60/40 worked out in retirement ?

Post by dbr »

Vivbet wrote: Wed Jun 07, 2023 10:01 pm
KlangFool wrote: Wed Jun 07, 2023 6:10 pm
C) What is the size of your portfolio versus your annual expense or retirement expense? That is the key question. 25X? 50X?
I’d say 48x - but I haven’t budgeted for any big ticket items that may come up past one year. All of this is a work in progress for me.


KlangFool
Retiring on 48x of expenses if your estimate of expenses is reliable means your portfolio allocation can be anything and you should stop worrying about how you are invested and maybe worry more about who is going to get all that money.

The risk is now in how well you are estimating costs and allowing for contingencies.

A retirement model like FireCalc could handle that by either just increasing your spending estimate by a factor, like 25% more, or by going in and taking out a lump sum from your portfolio in some to represent a contingency expense, or by starting an extra expense in some real to represent for sample long term care at end of life. www.firecalc.com.

Those models are not actual plans but they are helpful for getting insight into how things work under different circumstances.
AlohaBill
Posts: 765
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Location: California

Re: How has 60/40 worked out in retirement ?

Post by AlohaBill »

Hi Vivbet,
We started retirement in 2007 and 2017 ? at 30/70 mostly Vanguard Target Retirement Income fund, but 30/70 at Fidelity (total stock/total bond). Our portfolio increased almost $300,000 from 2017 to today.
We knew from 2010 to 2013 that our expenses were from $33,000 to $55,000. We have been very conservative over the years: 25/75 stk/bond from 1979 to 1989, 75/25 from 1990 to 2000 , 30/70 from 2001 to 2017, 42/58 from 2017 to present day.
In 2020 we spent a total of $75,000 (new car purchase). We are living on our pension and social security. We are only spending from our portfolio (under 1%) to cover the cost of roth conversions. I guess if we wanted to we could spend about $140,000 a year.
I am 72 this year and all my retirement savings (403b and ira) have been converted to roth. We converting my wife’s retirement savings now.
We don’t worry about SORR or asset allocation or safe withdrawal rates.
I do think about how long I have left . I know my wife is secure financially and that my kids/grandkids will probably inherit a fair amount.
Ricola
Posts: 966
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Re: How has 60/40 worked out in retirement ?

Post by Ricola »

All of my IRA is in VBIAX Balanced Fund. RMDs will come straight from that fund and go back similarly on the taxable side. This is set it and forget it and was a recommended single fund by Mr. Bogle. It is not only mentally freeing but it guards against any angst of market timing when adding funds, balancing funds, or taking funds out.
Topic Author
Vivbet
Posts: 107
Joined: Sun May 21, 2023 4:49 pm

Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

I just wanted to take a moment to thank everyone for sharing their wisdom and expertise with me. You’re all incredible!
Topic Author
Vivbet
Posts: 107
Joined: Sun May 21, 2023 4:49 pm

Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

billfromct wrote: Thu Jun 08, 2023 1:15 am
Vivbet wrote: Wed Jun 07, 2023 10:21 pm
billfromct wrote: Wed Jun 07, 2023 6:25 pm When I left my job at age 69, I wanted 10 years of my annual salary (my last full year of salary) in fixed income in my rollover IRA to ensure I could ride out any correction or bear market & not pull required minimum distributions (RMDs) from my decreased value stock allocation. That turned out to be a 65% stock/35% fixed income allocation.

Now my fixed income allocation in my rollover IRA covers about 7-8 years of RMDs so I feel pretty confident I won’t need to sell stocks that are down to fund my RMDs.

Although I am not exactly at the 60%/40% allocation, I’m close enough & it works for me.

bill
Thank you for sharing your RMD strategy with me, Bill. That’s very helpful!
Hi Bill, you bring up a lot of good points. I knew RMDs were lurking around the corner, but haven’t really given it much thought. I guess this means I need to plan to transition IRA funds out of stocks just to meet the RMD - even just fixed income in general may not cut it because bond funds can go down quite a bit too. Ugh, this gets very complicated. So I may need to leave money in cash or very short term fixed income just to cover RMDs? Would you be able to share kind of fixed income you used? Thanks again!
My rollover IRA fixed income allocation is about 40% short term & 60% intermediate term bond funds. I think the ST bond fund lost about 5% in 2022 & the IT bond fund lost about 14% in 2022. Since I did my 2022 RMD in January 2022, I beat the 2022 ST term bond fund loss.

I have Vanguard automatically take my RMD out of the ST bond fund early each January in order to "get it out of the way" so if something should happen to me, my kids won't have to worry about it. The RMD goes directly into my taxable brokerage account settlement fund then I can transfer money to my checking account or write checks (over $250) from my settlement fund (I established settlement fund check writing when I moved to the brokerage account format).

I adjust my stock/fixed income assert allocation when it gets 5% out of wack. In January 2022 I moved some money from my stock allocation to my ST bond fund to bring my bond allocation back in line. Sometimes I would rather be lucky than smart as the stock market went down much more than the ST bond fund in 2022.

bill
Topic Author
Vivbet
Posts: 107
Joined: Sun May 21, 2023 4:49 pm

Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

billfromct wrote: Thu Jun 08, 2023 1:15 am
Vivbet wrote: Wed Jun 07, 2023 10:21 pm
billfromct wrote: Wed Jun 07, 2023 6:25 pm When I left my job at age 69, I wanted 10 years of my annual salary (my last full year of salary) in fixed income in my rollover IRA to ensure I could ride out any correction or bear market & not pull required minimum distributions (RMDs) from my decreased value stock allocation. That turned out to be a 65% stock/35% fixed income allocation.

Now my fixed income allocation in my rollover IRA covers about 7-8 years of RMDs so I feel pretty confident I won’t need to sell stocks that are down to fund my RMDs.

Although I am not exactly at the 60%/40% allocation, I’m close enough & it works for me.

bill
[/quote
Hi Bill, you bring up a lot of good points. I knew RMDs were lurking around the corner, but haven’t really given it much thought. I guess this means I need to plan to transition IRA funds out of stocks just to meet the RMD - even just fixed income in general may not cut it because bond funds can go down quite a bit too. Ugh, this gets very complicated. So I may need to leave money in cash or very short term fixed income just to cover RMDs? Would you be able to share kind of fixed income you used? Thanks again!
My rollover IRA fixed income allocation is about 40% short term & 60% intermediate term bond funds. I think the ST bond fund lost about 5% in 2022 & the IT bond fund lost about 14% in 2022. Since I did my 2022 RMD in January 2022, I beat the 2022 ST term bond fund loss.

I have Vanguard automatically take my RMD out of the ST bond fund early each January in order to "get it out of the way" so if something should happen to me, my kids won't have to worry about it. The RMD goes directly into my taxable brokerage account settlement fund then I can transfer money to my checking account or write checks (over $250) from my settlement fund (I established settlement fund check writing when I moved to the brokerage account format).

I adjust my stock/fixed income assert allocation when it gets 5% out of wack. In January 2022 I moved some money from my stock allocation to my ST bond fund to bring my bond allocation back in line. Sometimes I would rather be lucky than smart as the stock market went down much more than the ST bond fund in 2022.

bill
Thank you for sharing your very well thought out RMD plan with me, Bill! I appreciate it!
Topic Author
Vivbet
Posts: 107
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Re: How has 60/40 worked out in retirement ?

Post by Vivbet »

steadyosmosis wrote: Thu Jun 08, 2023 6:50 am
Vivbet wrote: Wed Jun 07, 2023 11:04 pm
steadyosmosis wrote: Wed Jun 07, 2023 6:33 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Thanks for the feedback - glad to hear it’s working for you! I noticed in your signature that you keep 100% of your taxable account in equities and then rebalance to your tax deferred account. I’m wondering if you could elaborate on how that’s going and also if you ever have any liquidity concerns in the case of a bear market? As an oversimplified example, let’s say you had 200k and wanted a 50/50 allocation. So with this strategy, you’d keep 100k in equities in taxable and 100k in your in your IRA. Then the market goes down 50% and you need to take 50k out for expense. Now you have 0 in your taxable account and 100 k in cash in your IRA. You rebalance that to 50/50 in your IRA, but the problem is you have no money left in your taxable account. Whereas if you started with 100k in cash in taxable, you could just take the 50k out and still have 50 k of cash left there, and 50 k in the equities. Of course, in the real world you’d probably never end up with 0 in your taxable account, but you’d have less resources in your taxable account to rely on - just wondering if that’s ever been a concern. Thank you!
Asset location seems to be working just as well as asset allocation is working.
No liquidity concerns.
If taxable account gets to zero, I will then begin to spend from Roth contributions.
That’s an overall brilliant plan then! The piece I was missing was about the Roth IRA backing up your taxable account. Would you mind sharing what kind of investments you have in your Roth then? Are they fairly stable and liquid then? Sadly, we do not have much in our Roth, but I am still curious about your strategy. Thank you!
steadyosmosis
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Re: How has 60/40 worked out in retirement ?

Post by steadyosmosis »

Vivbet wrote: Thu Jun 08, 2023 10:53 am
steadyosmosis wrote: Thu Jun 08, 2023 6:50 am
Vivbet wrote: Wed Jun 07, 2023 11:04 pm
steadyosmosis wrote: Wed Jun 07, 2023 6:33 pm
Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Working fine so far, and no regrets with stock percentage.
Thanks for the feedback - glad to hear it’s working for you! I noticed in your signature that you keep 100% of your taxable account in equities and then rebalance to your tax deferred account. I’m wondering if you could elaborate on how that’s going and also if you ever have any liquidity concerns in the case of a bear market? As an oversimplified example, let’s say you had 200k and wanted a 50/50 allocation. So with this strategy, you’d keep 100k in equities in taxable and 100k in your in your IRA. Then the market goes down 50% and you need to take 50k out for expense. Now you have 0 in your taxable account and 100 k in cash in your IRA. You rebalance that to 50/50 in your IRA, but the problem is you have no money left in your taxable account. Whereas if you started with 100k in cash in taxable, you could just take the 50k out and still have 50 k of cash left there, and 50 k in the equities. Of course, in the real world you’d probably never end up with 0 in your taxable account, but you’d have less resources in your taxable account to rely on - just wondering if that’s ever been a concern. Thank you!
Asset location seems to be working just as well as asset allocation is working.
No liquidity concerns.
If taxable account gets to zero, I will then begin to spend from Roth contributions.
That’s an overall brilliant plan then! The piece I was missing was about the Roth IRA backing up your taxable account. Would you mind sharing what kind of investments you have in your Roth then? Are they fairly stable and liquid then? Sadly, we do not have much in our Roth, but I am still curious about your strategy. Thank you!
As shown in my signature line, Roth IRA (RIRA) is ~100% equities (SCHB and SCHF).
Age<59.5. Early-retired. AA ~55/45. Taxable account, Roth IRA, HSA...all are 100% equities. 100% of fixed income is in tIRA. I spend from taxable and re-balance in tIRA.
GaryA505
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Location: New Mexico

Re: How has 60/40 worked out in retirement ?

Post by GaryA505 »

While 100% stock can provide higher returns, 60/40 can provide some valuable "insurance" against unexpected events. I present to you, two 1999 retirees both with $1M in assets and both using 5% withdrawal rates. Retiree #1 is 100% stock and retiree #2 is 60/40. In Feb 2020, retiree #1 was broke and retiree #2 still had almost a half million dollars. Now, I admit that this is a special case and doesn't happen very often, but isn't that what insurance is for?

https://www.portfoliovisualizer.com/bac ... tion2_2=40
Get most of it right and don't make any big mistakes. All else being equal, simpler is better. Simple is as simple does.
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HomerJ
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Re: How has 60/40 worked out in retirement ?

Post by HomerJ »

Vivbet wrote: Wed Jun 07, 2023 10:25 pm You’re right - bonds do generally provide a slight real return - just not what I think of as growth.
Vivbet... what's your retirement situation.

Is this money for living or just investing?

I mean, are all your expenses covered by SS and/or pensions or something?

Because, yes, over the long run, a total stock index fund will probably, almost certainly, grow more than the total bond index fund.

But that's over the long run. And if you are retired, and need to PULL money from your retirement accounts, some of your money doesn't have the long run.

Some of your money may be needed in the short-run. And bonds or money-markets or CDs is safer in the short-run.

That's it.

That's why most of us have a good chunk in bonds/cash/money-markets/CDs at retirement.

If you, personally, are not pulling any of this money any time soon or ever, then you could go 100% stocks. Otherwise, something in bonds/cash is a good idea.
"The best tools available to us are shovels, not scalpels. Don't get carried away." - vanBogle59
CookieDough
Posts: 217
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Re: How has 60/40 worked out in retirement ?

Post by CookieDough »

OP, you might want to take a look at Early Retirement Now's exhaustive series on safe withdrawal rates at different AAs:

https://earlyretirementnow.com/safe-wit ... te-series/

There's a lot to get through, and of course you don't have to read every post, but I found it helped solidify my thinking about my own AA.
SimonJester
Posts: 2500
Joined: Tue Aug 16, 2011 12:39 pm

Re: How has 60/40 worked out in retirement ?

Post by SimonJester »

CookieDough wrote: Thu Jun 08, 2023 5:15 pm OP, you might want to take a look at Early Retirement Now's exhaustive series on safe withdrawal rates at different AAs:

https://earlyretirementnow.com/safe-wit ... te-series/

There's a lot to get through, and of course you don't have to read every post, but I found it helped solidify my thinking about my own AA.
Wow what is the cliff notes version for that?

I'm 10 years from early retirement and working to get to a 70/30, currently 75/25...
I think I want to start out at 70/30 and see how it goes.
I will have a pension providing ~50% of my needed income in retirement before social security and a projected SWR of 2%.
Ive been investing for the past 26 years and I am now starting to see there is a light at the end tunnel so to speak...
"They who can give up essential liberty to obtain a little temporary safety, deserve neither liberty nor safety." - Benjamin Franklin
AlwaysLearningMore
Posts: 1934
Joined: Sun Jul 26, 2020 2:29 pm

Re: How has 60/40 worked out in retirement ?

Post by AlwaysLearningMore »

Vivbet wrote: Wed Jun 07, 2023 5:57 pm So I’m evaluating our long term allocation. We’re currently at 60/40 and it seems that that’s a good place for us in the long run. That being said, keeping 40% out of the market where it can grow seems like a lot. I was wondering how this allocation has worked out for those in retirement and if you ever have any regrets about not putting more in stocks?

Thanks!
Using Vanguard Balanced Index Fund (60/40):

PAST 10 YEARS: PORTFOLIO GROWTH AND WITHDRAWING 4% OF TOTAL ANNUALLY

Image

Image

PAST 20 YEARS: PORTFOLIO GROWTH AND WITHDRAWING 4% OF TOTAL ANNUALLY

Image

Image
Retirement is best when you have a lot to live on, and a lot to live for. * None of what I post is investment advice.* | FIRE'd July 2023
DetroitRick
Posts: 1488
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Location: SE Michigan

Re: How has 60/40 worked out in retirement ?

Post by DetroitRick »

I'm a little more aggressive at 70/30, but no, no regrets.

My main reasons:
The size of the 30% is high enough relative to my long-term spending so as to provide enough safety buffer.
There are many adjustments I am content to make should there be a long-term need - cutting spending is no big deal for me.
Volatility is not a worry I have, by any standards, as observed over my life and even looking over the last century. Enough history for me to be comfortable.
Inflation concerns will keep my bonds within a certain range, regardless.
It just seems like the "right" balance for me.

I could just as easily go to 60/40 or 75/25 without angst. 70/30 is my long-term preference, but could work with any in this range. It's all a very educated guess, as is everything in the future. I find it most important to arrive at a decision on allocation that is palatable long-term - where you don't constantly feel adjustments are needed, often at the worst time.
pasadena
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Location: PNW

Re: How has 60/40 worked out in retirement ?

Post by pasadena »

GaryA505 wrote: Thu Jun 08, 2023 11:42 am While 100% stock can provide higher returns, 60/40 can provide some valuable "insurance" against unexpected events. I present to you, two 1999 retirees both with $1M in assets and both using 5% withdrawal rates. Retiree #1 is 100% stock and retiree #2 is 60/40. In Feb 2020, retiree #1 was broke and retiree #2 still had almost a half million dollars. Now, I admit that this is a special case and doesn't happen very often, but isn't that what insurance is for?

https://www.portfoliovisualizer.com/bac ... tion2_2=40
What's interesting is that if they'd withdrawn annually instead of monthly, Retiree #1 would have had a couple more years. Likewise, if they had used TSM instead of SP500, Retiree #1 would still have $100k in May 2023.
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