Author Topic: When do you update your IPS?  (Read 524 times)

FIRE 20/20

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When do you update your IPS?
« on: December 05, 2020, 12:43:02 PM »
I have both a general and specific question.  For those of you who have an IPS (either written or not), when and how do you update it?  I've followed mine for more than a decade, but now that I've FIREd I'm not sure it's appropriate any longer.  However, I'm also aware that one of the primary reasons for having an IPS is so you make investment decisions when things are stable and you're thinking clearly.  In other words, you want to set up rules so that when markets crash or when the Top Is In tm you don't do something stupid. 

However, I find myself in a position where I'm not sure my IPS is correct for me now that I'm in the drawdown phase.  I can add details if anyone needs them but in short, I oversaved.  I am currently 44 years old with approximately 37x my annual expenses (2.7% withdrawal rate) invested and there's plenty of fat to cut in those expenses.  In addition, I expect Social Security and a pension to more than cover my expenses at age 65.  If both the pension and S.S. only pay out 70% of their expected payouts at that time, my expenses will be fully met without touching my investments, although the pension will not adjust for inflation once I start taking it. 

My old IPS was pretty short and basically just had me pumping 100% into an S&P 500 fund until about a year before hitting 25x, at which point I moved to 60/40 with a plan to use a rising equities glidepath post-FIRE.  Since I worked OMY and with the growth in the markets since I FIREd I ended up with more than I need.  I can't tell if I'm getting paranoid about the markets right now or if it makes sense for me to make an adjustment since I'm now in a position I didn't foresee when I created my initial IPS.

One last thing - I made it through nearly 25 years including the dot com bust, the 2008/2009 collapse, and the other blips we've seen since 1998 without deviating from my IPS.  I firmly believe in picking an IPS and sticking with it, which is why my worry now is concerning. 

So the general question - when do you update your IPS?
My specific question - Should I update my IPS now, and given what I've posted do you have any suggestions for a new one?

Any and all comments appreciated!

Paul der Krake

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Re: When do you update your IPS?
« Reply #1 on: December 05, 2020, 02:57:36 PM »
I purposely chose a middle-of-the-road asset allocation that I could probably live with forever. As a result, I've never been tempted to change it.




Steeze

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Re: When do you update your IPS?
« Reply #2 on: December 05, 2020, 07:14:24 PM »
I think it makes sense to update the IPS if you have a major life event, such as FIRE, or when you take SS / pension.

The way I look at excess money (above 25x) - I would choose an allocation for the 25x portion of the money that feels safe, like 60/40. Then go 100% equities with the rest. Probably won’t need any of that “extra” so might as well let it ride.

Same logic for when your pension & SS are covering all your expenses, no need to be conservative with your investments at that point.

Congratulations!

mistymoney

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Re: When do you update your IPS?
« Reply #3 on: December 06, 2020, 12:05:31 PM »
I think it makes sense to update the IPS if you have a major life event, such as FIRE, or when you take SS / pension.

The way I look at excess money (above 25x) - I would choose an allocation for the 25x portion of the money that feels safe, like 60/40. Then go 100% equities with the rest. Probably won’t need any of that “extra” so might as well let it ride.

Same logic for when your pension & SS are covering all your expenses, no need to be conservative with your investments at that point.

Congratulations!

so wise yet so simple!

ctuser1

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Re: When do you update your IPS?
« Reply #4 on: December 06, 2020, 12:26:47 PM »
1. Once my assets take me past lean-FI (I'm 70% there).
2. Once my assets take me past fat-FI.
3. When I am actually contemplating retirement.

After #1, I will think about it, but not sure if I will update the IPS.
After #2, I will likely update it, and may want to make my portfolio less aggressive.
After #3, I will update the IPS and most likely switch to a much less aggressive asset allocation.

Because I am in no hurry to reach #3, I can take the higher risk (with potentially higher return) approach with my investment portfolio. It will be nice to reach the goals soon. However, I'll work another 2 or 3 decades anyway, so I don't quite care if there is a downturn and the portfolio takes a temporary hit.

If you have different goals then your approach should be different.