Author Topic: Post Retired, getting older and more conservative?  (Read 5836 times)

blue_green_sparks

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Post Retired, getting older and more conservative?
« on: February 27, 2020, 06:15:02 AM »
Late last year I lost my nerve as it dawned on me that Social Security and Pension were only about 5 years away. I have a portfolio about 35X greater than our yearly spend...so I decided that 3 or 4% fixed is fine (most of our funds went to brokered cds , bank cds and fixed cd annuity ladders, some downside buffered S/P 500 ETFs and cash). We are in our mid/late 50's. Prior to that I was pretty much ALL in index equities.

Black Swan events never made me flinch, until now. Feel a bit like a poker player who wraps their arms around a pile of chips and just goes home. I am uneasy that now I mistrust the very strategy that got me here. However a $500K hit would have me thinking about going back to work. My stomach tightens up at the very thought.

Do you older retired folks still keep the lion share in equities? I often wonder how many older FIRE-EE's are quietly hoarding in safe havens like my chicken butt and how many are staying the PRE-FIRE coarse?  The buying might be good now and I have cash.

Financial.Velociraptor

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Re: Post Retired, getting older and more conservative?
« Reply #1 on: February 27, 2020, 06:45:34 AM »
I keep a target of 65% in fixed income, preferred, and hybrid securities.

Fishindude

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Re: Post Retired, getting older and more conservative?
« Reply #2 on: February 27, 2020, 06:55:41 AM »
I'm 60, retired a couple years ago.   About 60% of our liquid funds are in pretty safe stuff; savings, CD's, etc. but the remainder is invested in the market, shooting for some decent growth.
Heck, my dad is 89 and still in great health.   Need to keep some of this money working, as we might need it for another 30 years or more.

Dicey

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Re: Post Retired, getting older and more conservative?
« Reply #3 on: February 27, 2020, 07:04:25 AM »
It sounds like we're about the same age. I am having the opposite feeling. There are a lot of things that act like bonds, but aren't called bonds.

- Our HCOLA house is paid for.
- We have rental properties.
- We have a huge cash position, because we like to flip houses when we find the right deal, every couple of years or so.
- DH will have a Defined Benefit Pension coming in a year or two.
- His pension includes a stipend for healthcare and the ability to stay on the company's extremely generous health plan.
- We will both have Social Security.

All of these things create a pretty stable cushion. Therefore, I'm thinking we need to increase our exposure to equities. We like supporting causes we care about. The bond-like things will cover all of our living expenses. I'm totally okay with taking steps that might allow us to be even more generous in the future.

In hindsight, I wish I'd had this revelation years ago.

G-dog

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Re: Post Retired, getting older and more conservative?
« Reply #4 on: February 27, 2020, 07:15:57 AM »
My pension and SS are my bonds, I have some cash, but I am all in equities.  I am 4.5 years post-FIRE, and will turn 60 yo this year.

The current dip is a good chance for me to put $ in my HSA and/or Roth.

American GenX

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Re: Post Retired, getting older and more conservative?
« Reply #5 on: February 27, 2020, 08:13:57 AM »
After I hit 50, I moved from 80% to 42% equities over the last year and a half.  Hopefully, I'll FIRE in 2021.

SwordGuy

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Re: Post Retired, getting older and more conservative?
« Reply #6 on: February 27, 2020, 02:09:19 PM »
We have 4 different sources for our income:

1) Social Security (and maybe a very tiny pension in a few years).
2) Rental house income.
3) Rental farm income.
4) Stocks/Bonds.

The first 3 should cover our normal expenses once we sell our old house this year.  (Bought a new one and moved in last month.)

We're planning on switching more of the bonds to stocks once a recession hits and stocks drop a lot.    If that doesn't happen in the next 2 years we'll dollar-cost-average the switch over.

The first 3 act as our more secure income sources.

deborah

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Re: Post Retired, getting older and more conservative?
« Reply #7 on: February 29, 2020, 02:18:23 AM »
In my country, average life expectancy is 84 for a woman. That's a long time - even for someone your age.

biggrey

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Re: Post Retired, getting older and more conservative?
« Reply #8 on: February 29, 2020, 11:05:04 AM »
Late last year I lost my nerve as it dawned on me that Social Security and Pension were only about 5 years away. I have a portfolio about 35X greater than our yearly spend...so I decided that 3 or 4% fixed is fine (most of our funds went to brokered cds , bank cds and fixed cd annuity ladders, some downside buffered S/P 500 ETFs and cash). We are in our mid/late 50's. Prior to that I was pretty much ALL in index equities.

Black Swan events never made me flinch, until now. Feel a bit like a poker player who wraps their arms around a pile of chips and just goes home. I am uneasy that now I mistrust the very strategy that got me here. However a $500K hit would have me thinking about going back to work. My stomach tightens up at the very thought.

Do you older retired folks still keep the lion share in equities? I often wonder how many older FIRE-EE's are quietly hoarding in safe havens like my chicken butt and how many are staying the PRE-FIRE coarse?  The buying might be good now and I have cash.

It's a fair question for sure.  I just took the $500K "hit" you describe, this week.  But there are at least four key things that matter for me here:

1. I've been at this for 30 years and I've hardened my ability to stay the course.  This is necessary when you have some or considerable wealth and you want it to last forever.  The more you have and the more difficult to replace, the "sicker" the feeling is likely to be.  You gotta be somewhat tough in the face of that.

2. In terms of equities (about 45-50% of our wealth) I still own the same percentage shares of the businesses I chose to own on Feb 21, when the markets closed looking just fine.  That they temporarily appear to be less valuable is interesting and unfortunate but totally outside my control. I can only control "me" by not reacting or overreacting.

3. I have several large investment categories working to create my total net worth, not just equities.  Nothing or very little happened in the other categories.  I'm sure this reduced any emotional knee jerk response I might have otherwise had to this type of melt scenario.  I have a lot to lose and a lot of people that depend on me.  I can't afford knee-jerk anything.

4. I chose to retire entirely on the passive net incomes produced by the wealth, without liquidation or the need to make choices about things to sell.  I traded tax optimization for risk management, and accepted the fact I would need a big nest egg.  It was a good trade, for me.  It's not for everyone but the net of it is that it is a sleep-better plan that works.

YMMV of course.

Cassie

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Re: Post Retired, getting older and more conservative?
« Reply #9 on: March 01, 2020, 11:04:00 AM »
At 65 most our money is safe.

blue_green_sparks

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Re: Post Retired, getting older and more conservative?
« Reply #10 on: March 18, 2020, 08:24:19 PM »
Wow...a lot has happened since I started this thread. I ran across a thread on another forum called....
Once you’ve won, stop playing the game.
The quote is attributed to financial author William J. Bernstein. Basically an advocate for wealth preservation when retired.
https://player.fm/series/the-long-view-2506692/william-bernstein-if-youve-won-the-game-stop-playing
https://esimoney.com/youve-won-game-stop-playing/

« Last Edit: March 18, 2020, 08:28:09 PM by blue_green_sparks »

Greystache

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Re: Post Retired, getting older and more conservative?
« Reply #11 on: March 19, 2020, 09:08:08 AM »
I retired 5 years ago at the age of 55.  I have always been a conservative investor. When I retired my AA was 60-40.  My attitude did change in retirement.  I never cared much about corrections or bear markets when I had a fire hose of income to invest.  Now that I am retired I am much more focused on limiting the down side.  I changed my AA to 50-50 about two years ago because I felt that equities were over valued and also because I felt like I no longer understood how the economy was working. The permanent low interest rates, the ever increasing budget deficits, the lack of inflation, etc. did not make sense to me and I have always believed that I should not invest in things that I don't understand. Now that the price of equities have dropped by 30%, I have started to buy in small increments. I still don't pretend to understand how this strange new economy works, but at least the prices are beginning to make sense.

soccerluvof4

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Re: Post Retired, getting older and more conservative?
« Reply #12 on: March 20, 2020, 03:20:41 AM »
I retired 5 years ago at 50 on a 60/40 Portfolio. Back in early December I had to Liquidate some stocks to pay cash for a house and when I sold the previous house I did not put the money back in the market which I am slowly starting to put back in now. Presently I am at 46.80 Stocks, 30.10 Bonds , and 22.10 in Cash. As of now my plan is to live off cash and put other cash to work as the market deteriorates as I think this will make things fine in the long run.

Body Surfer

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Re: Post Retired, getting older and more conservative?
« Reply #13 on: March 21, 2020, 09:40:58 AM »
We are age 59. I am retiring in late May. We are approximately 33/67 (cash). We have pensions to help as well. Recently dropped from 45/55 as we may need cash for a move to a new locale.

MKinVA

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Re: Post Retired, getting older and more conservative?
« Reply #14 on: March 24, 2020, 04:47:14 PM »
Also age 60, retired 3 years, 70/20/10 equities, bonds, cash. I too took a big hit this month. But, the cash is enough for the next three years in addition to my pension. So I will ride it out. At the start of the year, I was contemplating slowly increasing my cash but turning off the reinvestment option on my account. I procrastinated and so here we are. It wouldn't have made much of a difference in just the couple of months except I might have felt better.

jim555

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Re: Post Retired, getting older and more conservative?
« Reply #15 on: March 26, 2020, 01:46:15 AM »
If you won the game take the chips and leave the casino.

davisgang90

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Re: Post Retired, getting older and more conservative?
« Reply #16 on: April 20, 2020, 04:27:31 AM »
My pension and SS are my bonds, I have some cash, but I am all in equities.  I am 4.5 years post-FIRE, and will turn 60 yo this year.

The current dip is a good chance for me to put $ in my HSA and/or Roth.

This is me as well except, I'm already FIREd, so not investing anymore.

I've got a military pension and VA disability payments that act as my bond investments, so my retirement accounts are all equities. I offset this risk by keeping my next 2 years of withdrawals via Roth conversion in cash (2-3% withdrawal rate).

dude

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Re: Post Retired, getting older and more conservative?
« Reply #17 on: April 23, 2020, 06:32:55 AM »
I'm fortunate to have a very good pension, way more than enough for a "real Mustachian" to retire on forever, but I like to travel a lot, so I want a little more than just rock bottom Mustachian income. I retired last May with $827k in my 401k. Around October, I took a withdrawal ($22k) to supplement my pension for the next year and to buy a van I'm converting to a camper. My initial plan, back a couple years ago, was to stay 60/40 in the market for life, but I changed that plan after reading a lot of Michael Kitces's stuff, in particular about a "rising equity glide path" approach to retirement money. More or less, it says you go super low equity exposure in the early years of retirement, then after a few years, you gradually ramp up equity exposure to your desire AA. This helps to mitigate the risk of a negative sequence of returns. This was especially enticing to me because I was retiring after an historical 11-year bull run -- so I was super wary of a monster correction coinciding with my retirement. I gotta say, I'm quite happy with the way things turned out. I certainly didn't, nor couldn't, have foreseen the Black Swan event that is this global pandemic, but I'm still sitting on $812k, and goddamn that feels good.

blue_green_sparks

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Re: Post Retired, getting older and more conservative?
« Reply #18 on: April 23, 2020, 06:13:22 PM »
I'm fortunate to have a very good pension, way more than enough for a "real Mustachian" to retire on forever, but I like to travel a lot, so I want a little more than just rock bottom Mustachian income. I retired last May with $827k in my 401k. Around October, I took a withdrawal ($22k) to supplement my pension for the next year and to buy a van I'm converting to a camper. My initial plan, back a couple years ago, was to stay 60/40 in the market for life, but I changed that plan after reading a lot of Michael Kitces's stuff, in particular about a "rising equity glide path" approach to retirement money. More or less, it says you go super low equity exposure in the early years of retirement, then after a few years, you gradually ramp up equity exposure to your desire AA. This helps to mitigate the risk of a negative sequence of returns. This was especially enticing to me because I was retiring after an historical 11-year bull run -- so I was super wary of a monster correction coinciding with my retirement. I gotta say, I'm quite happy with the way things turned out. I certainly didn't, nor couldn't, have foreseen the Black Swan event that is this global pandemic, but I'm still sitting on $812k, and goddamn that feels good.

Yes, that is my plan as well....I have a very safe AA of 20/80 now while in my "bridge" years and as my entitlements kick-in I can gradually return to 60/40. Being age 59.5 this tax year I can also set my income to be the minimum that qualifies for an ACA health plan.

Body Surfer

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Re: Post Retired, getting older and more conservative?
« Reply #19 on: May 01, 2020, 09:35:54 AM »
I'm fortunate to have a very good pension, way more than enough for a "real Mustachian" to retire on forever, but I like to travel a lot, so I want a little more than just rock bottom Mustachian income. I retired last May with $827k in my 401k. Around October, I took a withdrawal ($22k) to supplement my pension for the next year and to buy a van I'm converting to a camper. My initial plan, back a couple years ago, was to stay 60/40 in the market for life, but I changed that plan after reading a lot of Michael Kitces's stuff, in particular about a "rising equity glide path" approach to retirement money. More or less, it says you go super low equity exposure in the early years of retirement, then after a few years, you gradually ramp up equity exposure to your desire AA. This helps to mitigate the risk of a negative sequence of returns. This was especially enticing to me because I was retiring after an historical 11-year bull run -- so I was super wary of a monster correction coinciding with my retirement. I gotta say, I'm quite happy with the way things turned out. I certainly didn't, nor couldn't, have foreseen the Black Swan event that is this global pandemic, but I'm still sitting on $812k, and goddamn that feels good.

Curious as to your equity glide path AA? We are now 7/93- retiring this month

Buffaloski Boris

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Re: Post Retired, getting older and more conservative?
« Reply #20 on: June 05, 2020, 12:29:49 PM »
It sounds like we're about the same age. I am having the opposite feeling. There are a lot of things that act like bonds, but aren't called bonds.

- Our HCOLA house is paid for.
- We have rental properties.
- We have a huge cash position, because we like to flip houses when we find the right deal, every couple of years or so.
- DH will have a Defined Benefit Pension coming in a year or two.
- His pension includes a stipend for healthcare and the ability to stay on the company's extremely generous health plan.
- We will both have Social Security.

All of these things create a pretty stable cushion. Therefore, I'm thinking we need to increase our exposure to equities. We like supporting causes we care about. The bond-like things will cover all of our living expenses. I'm totally okay with taking steps that might allow us to be even more generous in the future.

In hindsight, I wish I'd had this revelation years ago.

Yeah, that’s what they call “experience.”  Better known as the sum total of all your learnable mistakes!

Fishindude

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Re: Post Retired, getting older and more conservative?
« Reply #21 on: June 05, 2020, 01:03:38 PM »
Do you older retired folks still keep the lion share in equities? I often wonder how many older FIRE-EE's are quietly hoarding in safe havens like my chicken butt and how many are staying the PRE-FIRE coarse?  The buying might be good now and I have cash.

We carry no debt, are not using SS or any type of pension income.  Living off our investments, a small drawdown on the IRA which is in play in the markets, and cash savings.

Only about 25% of our net worth is tied up in mutual funds / stocks.
40% Is real estate, much of which spits out some annual income.
About 8% Is partial ownership of a company we have great faith in which also spits out pretty decent income.
The balance is CD's, cash and misc personal assets.

We really need to put some of our cash to work, but at least it hasn't lost ground like our stuff in the market has over the last several months.


Dicey

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Re: Post Retired, getting older and more conservative?
« Reply #22 on: June 05, 2020, 03:53:47 PM »
It sounds like we're about the same age. I am having the opposite feeling. There are a lot of things that act like bonds, but aren't called bonds.

- Our HCOLA house is paid for.
- We have rental properties.
- We have a huge cash position, because we like to flip houses when we find the right deal, every couple of years or so.
- DH will have a Defined Benefit Pension coming in a year or two.
- His pension includes a stipend for healthcare and the ability to stay on the company's extremely generous health plan.
- We will both have Social Security.

All of these things create a pretty stable cushion. Therefore, I'm thinking we need to increase our exposure to equities. We like supporting causes we care about. The bond-like things will cover all of our living expenses. I'm totally okay with taking steps that might allow us to be even more generous in the future.

In hindsight, I wish I'd had this revelation years ago.

Yeah, that’s what they call “experience.”  Better known as the sum total of all your learnable mistakes!
Yeah...no. I don't thing any of this list is a "mistake". It's just different thinking than conventional wisdom, or what is commonly taught in Finance 101. For example, I had a sweet 5/1 ARM. At 4.5 years, I refi'd to a fixed rate mortgage, 'cuz conventional wisdom. The index it was tied to was so good that I would have been way ahead to just keep floating along, but who knew what the markets were going to do?

I really think it's just a different way of looking at things.

blue_green_sparks

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Re: Post Retired, getting older and more conservative?
« Reply #23 on: June 06, 2020, 07:33:37 AM »
I just learned that because I was born in the year 1960, my SS benefits will take a substantial hit...they calculate your payment using a very unfair method based on annual medium income of taxpayers in the year you turn 60. My pension will partially offset that loss, however I will be likely increasing my equity allocation from 20% to 30 or 40%. This is still conservative enough, I guess. I am practically forced into a stock market that proceeds in an irrational manner because it is currently the only game on the table, LOL. My conservative portfolio has yielded over 5% YTD, so no complaints. I did complain to my representatives in Congress, however not expecting any help with the SS methods.

Buffaloski Boris

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Re: Post Retired, getting older and more conservative?
« Reply #24 on: June 06, 2020, 07:44:06 AM »
I just learned that because I was born in the year 1960, my SS benefits will take a substantial hit...they calculate your payment using a very unfair method based on annual medium income of taxpayers in the year you turn 60. My pension will partially offset that loss, however I will be likely increasing my equity allocation from 20% to 30 or 40%. This is still conservative enough, I guess. I am practically forced into a stock market that proceeds in an irrational manner because it is currently the only game on the table, LOL. My conservative portfolio has yielded over 5% YTD, so no complaints. I did complain to my representatives in Congress, however not expecting any help with the SS methods.

Wow.  Someone who is even more conservative on their stock allocation than I am.  Cool.

Just a thought: lots of other markets than the US.  Here is my favorite link to compare international markets using common valuation ratios.

https://www.starcapital.de/en/research/stock-market-valuation/

JGS1980

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Re: Post Retired, getting older and more conservative?
« Reply #25 on: June 06, 2020, 08:55:53 AM »
I just learned that because I was born in the year 1960, my SS benefits will take a substantial hit...they calculate your payment using a very unfair method based on annual medium income of taxpayers in the year you turn 60. My pension will partially offset that loss, however I will be likely increasing my equity allocation from 20% to 30 or 40%. This is still conservative enough, I guess. I am practically forced into a stock market that proceeds in an irrational manner because it is currently the only game on the table, LOL. My conservative portfolio has yielded over 5% YTD, so no complaints. I did complain to my representatives in Congress, however not expecting any help with the SS methods.

Why not buy a SPIA? Basically buying a pension. Guaranteed income like SS. Conservative, unlikely to keep up with stock markets in the long run, but VERY safe.

https://www.immediateannuities.com/a/guarantee-your-retirement.html?gclid=EAIaIQobChMIspzS5Ljt6QIVl4vICh1lSwmOEAAYASAAEgKpWPD_BwE

blue_green_sparks

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Re: Post Retired, getting older and more conservative?
« Reply #26 on: June 06, 2020, 10:42:17 AM »
Thanks for the ideas Buffaloski Boris and JGS1980, looking into them. Those annuity rates are pretty decent, and yes equity valuation for many international markets seems alot more reasonable.

SugarMountain

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Re: Post Retired, getting older and more conservative?
« Reply #27 on: August 08, 2020, 03:22:05 PM »
Coincidentally, right around the original post in this thread, I was looking at our portfolio while planning to retire this summer and started thinking about what kind of correction by July would it take for me to not retire?  10% I was fine. 20% and I'd be fine, although a little bummed. 30% and I'd be really nervous and probably end up with OMY.  I realized that only having 5% in bonds was probably not a good idea.  I ended up moving 20% of my portfolio from stocks to bonds.  Felt pretty smart a couple of weeks later when the market crashed.  I thought about moving it back when the DOW hit 18k, but didn't.  I'm fine with it.

Ultimately, I FIREd last week.  I do plan to spend some time really looking at our portfolio and make sure I'm comfortable with our allocations.  Right now we're approximately 50% equities, 25% bonds, 15% real estate (non primary), and 10% cash.  We're a little cash heavy, but given where things are I'm fine with that.  I actually think opportunities will abound when the pandemic is over for commercial real estate and possible small businesses.

bmjohnson35

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Re: Post Retired, getting older and more conservative?
« Reply #28 on: August 13, 2020, 08:56:37 PM »

FIRED earlier this year at 50 yrs old.  We are presently 80% equity funds and 20% Bond funds....both indexes.  We keep around 3 yrs of income in cash as well. Online mortality calculators estimate that I will live to around 90.  That means that my investments and future income streams may need to cover 40 yrs or more. Historically, the stock market is the better place to have your money over the long haul.  Will I keep the same ratio in 10-15 yrs........who knows.  Generally speaking, I do think people become more conservative as they get older.

BJ
   

Buffaloski Boris

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Re: Post Retired, getting older and more conservative?
« Reply #29 on: August 13, 2020, 09:50:17 PM »
ERN has a lot of studies on what the sweet spot is for minimizing SORR. Ironically, it seems to be starting out with a majority stocks but not all and gradually increasing that percentage on a set schedule. Kind of the opposite of what most people do.