Anyone read this article?

[WootWoot]

http://time.com/money/

"The Big Story"

Has anyone read this story? If so, what do you think of it?

Good advice? Bad advice?

I'm curious because the author is a "Facebook friend" of mine.

[oldmannickels]

Sounds like they have a pension that's not disclosed. If they ran the numbers and they don't care then fine.

[ysette9]

The more I think about this, the more I feel this is bad advice, if indeed it was intended as advice. The author clearly is entitled to run her financial life any way she wants. My problems with what she is doing are as follows.

If she has "enough" now to meet her needs for the rest of her life while essentially having no growth in her portfolio, that means that she has over saved by any measure that would include a reasonable (~50%) amount of stocks. Over saved means you spent more years of your life working than you needed to. This is not a win in my book.

If she was okay with 60% stock allocation yesterday, then why is that not okay today? Conversely, if she needs 0% stocks today to be comfortable with the future, that would imply that her previous allocation of 60% stocks was too high to match her true risk tolerance. It just doesn't add up.

[WootWoot]

I thought it seemed a bit simple and "too good to be true."

I too wonder if there's something undisclosed. For instance, I know that this person was formerly an attorney (giving her an opportunity to save money before leaving the field--believe me, nobody goes into library work to make money). Also, what's with the rich ex? Settlement money, perhaps?

My mom thinks CDs are a great investment, especially if they are laddered. I really don't know what to think about them, myself.

[ysette9]

CDs aren't something I've looked into because I have no need to preserve existing wealth. I am in accumulation phase and want growth. Personally I don't like how money is locked up, though laddering helps with that. As with most things, it depends on your goals. I believe things like CDs and gov bonds used to be a very reasonable place to put your money. With rates now somewhere less than inflation, you are just locking in a loss. I saw that happen with my grandmother. She retired early with lots of money through frugal living and is now close to running out. Hindsight is 20/20 and all of that, but if she had kept even a modest amount of money in stocks she would be loaded now.

[Undecided]

Over at Bogleheads.org, they're big believers in having a personal investment policy statement that reflects (among other factors) one's ability, need and willingness to take risk. I think it's unlikely that a rational IPS makes such a marked jump to decrease equities, but without know more about her portfolio and spending, who knows whether her plan makes sense for her. Maybe she figures that between her TIPS and social security, she'll have core spending covered by inflation-adjusted amounts. That she says she'd jump back into stocks if there was a crash makes me think she's just making seat-of-the-pants decisions. 

[mjr]

She's decided she's no fan of volatility.  She probably plans on spending about  $25k p.a. and plans on drawing down her cash net egg and reckons it'll last her into her 90s.

She has social security (does she not ?   I'm not from the U.S.) and some inflation protection in her TIPS.

Sounds like a conservative plan designed to exhaust her stash, albeit one with no possible upside and not much wriggle room.

[soccerluvof4]

Whatever floats her boat!

[frugledoc]

Longest excuse for trying to time the market ever!

[Radagast]

Moving a large amount of money out of the market after it has had a good long upward run, based on you having recently attained enough or slightly more, seems like a fine move. The bond allocation is about what I reckon is the closest to optimal if it was paired with stocks. She'll still be working and drawing social security. So far so good...

Based on my reading, for example https://finpage.blog/2017/03/25/investing-in-the-world-part-3/, anything and everything by Bill Bernstein, and some other playing around for example https://portfoliocharts.com/portfolio/financial-independence/, as far as I know, having less than 50% in stocks* has never resulted in a higher safe withdrawal rate over a period of 30 years or more in any country in the world in the past 100+ years**. In fact treasury bonds also have market and inflation/currency risk, so the optimal academic risk/return point has historically included about 30% stocks, and the lowest market-value fluctuation point has had about 10% stocks. Having 100% of money in bonds seems to run high reinvestment and longevity risk. I think she is taking on more risk than she should, chasing after a likely false sense of safety.


*with a 50/50 domestic/international split
**Possible exception: Japan 1989 & 1990 to 2019 & 2020?