Author Topic: Asset allocation at age 68  (Read 5242 times)

rubybeth

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Asset allocation at age 68
« on: May 22, 2014, 09:24:03 AM »
My father is looking to rebalance his portfolio, asked me for some input, and I'm not sure what kind of asset allocation he should have. He's 68 and my mother turns 65 this year. Both of them still work part-time (my father has his own business) which won't change anytime soon, and my father has a state pension that covers their expenses and would transfer to my mother upon his death, plus both will have social security income. House was paid off long ago, no debt. I honestly have no idea how much they have in combined 401ks/IRAs/taxable investments, but for the sake of simplicity, let's say it's $800k. My father is very comfortable with stocks, my mother less so. I think they'd like to see growth, but putting it all into index funds seems risky at their ages, though they don't need the income anytime soon. I know basically nothing about bonds but could learn and try to convince him to put some portion of it there. What else do I need to know? Any books I could suggest to him to read?
« Last Edit: May 22, 2014, 09:26:27 AM by rubybeth »

warfreak2

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Re: Asset allocation at age 68
« Reply #1 on: May 22, 2014, 09:28:34 AM »
putting it all into index funds seems risky at their ages, though they don't need the income anytime soon. I know basically nothing about bonds but could learn and try to convince him to put some portion of it there.
Not all indices are stock indices. Simplest way would be to put a proportion in a bond index fund. Not sure what your parents' life expectancies are, but over 20-30 years a 25% bond allocation is safer than 100% stocks, and doesn't necessarily sacrifice much growth - sometimes bonds even beat stocks for a whole decade.

That said, with part time work, a state pension, and social security, they are in pretty good shape.
« Last Edit: May 22, 2014, 09:34:20 AM by warfreak2 »

wtjbatman

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Re: Asset allocation at age 68
« Reply #2 on: May 22, 2014, 09:42:06 AM »
putting it all into index funds seems risky at their ages, though they don't need the income anytime soon. I know basically nothing about bonds but could learn and try to convince him to put some portion of it there.
Not all indices are stock indices. Simplest way would be to put a proportion in a bond index fund. Not sure what your parents' life expectancies are, but over 20-30 years a 25% bond allocation is safer than 100% stocks, and doesn't necessarily sacrifice much growth - sometimes bonds even beat stocks for a whole decade.

That said, with part time work, a state pension, and social security, they are in pretty good shape.

Late 60's, part time work, state pension, two social security paychecks, and an 800k stash? Yeah, unless they're driving around in Maserati's, they are definitely in pretty good shape ;)

Good advice on the bond index fund.

rubybeth

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Re: Asset allocation at age 68
« Reply #3 on: May 22, 2014, 11:15:42 AM »
I'll look into the bond index fund idea, thanks! As for life expectancies, my father's dad just turned 90, and my mother's parents lived into their late 80s, so they could have 20-30 years or more ahead of them. No fancy cars, and they like to drive their used cars until they die. I know my mom would like to do more travel while she's able, so her paychecks and social security checks are going to fund some fun trips, but all in all, they live pretty simply. Good role models in every aspect of life. :)

warfreak2

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Re: Asset allocation at age 68
« Reply #4 on: May 22, 2014, 11:43:35 AM »
I'll look into the bond index fund idea, thanks! As for life expectancies, my father's dad just turned 90, and my mother's parents lived into their late 80s, so they could have 20-30 years or more ahead of them. No fancy cars, and they like to drive their used cars until they die. I know my mom would like to do more travel while she's able, so her paychecks and social security checks are going to fund some fun trips, but all in all, they live pretty simply. Good role models in every aspect of life. :)
Awesome, give them a high five from us!

soccerluvof4

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Re: Asset allocation at age 68
« Reply #5 on: May 23, 2014, 08:59:36 AM »
For what its worth I too would agree with the Bond Allocation the others suggested as well but would consider more than 25% because of there age. I would be more inclined to suggest a allocation at 40-50% with a smaller percentage of that being in international. Maybe consider and look at Vanguards VBTLX and sprinkle on some VTABX. 

TomTX

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Re: Asset allocation at age 68
« Reply #6 on: June 08, 2014, 08:17:12 PM »
For what its worth I too would agree with the Bond Allocation the others suggested as well but would consider more than 25% because of there age. I would be more inclined to suggest a allocation at 40-50% with a smaller percentage of that being in international. Maybe consider and look at Vanguards VBTLX and sprinkle on some VTABX.

Nah, the state pension and Social Security already fill up the "bond" portion of asset allocation pretty closely. No real reason to go over 25% with the rest.

AssetGrinder

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Re: Asset allocation at age 68
« Reply #7 on: June 11, 2014, 02:35:02 PM »
I would recommend 60% bonds 40% stocks

For bonds I would do a mix of government and corporate investment grade bonds

For stock i would do 25% international and 75% domestics

I would go the ETF route with low low fees being a priority if your buying index funds. Also you could go with a dividend growth stock ETF to return some of the capital for their retirement.

Good luck.

As far as advice where to get started i would just say read all that you can. Read some basic investing books to get a better overall picture. Best of luck!

milesdividendmd

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Re: Asset allocation at age 68
« Reply #8 on: June 11, 2014, 10:33:25 PM »

For what its worth I too would agree with the Bond Allocation the others suggested as well but would consider more than 25% because of there age. I would be more inclined to suggest a allocation at 40-50% with a smaller percentage of that being in international. Maybe consider and look at Vanguards VBTLX and sprinkle on some VTABX.

Nah, the state pension and Social Security already fill up the "bond" portion of asset allocation pretty closely. No real reason to go over 25% with the rest.

This is reasonable advice.

On the other hand, the other way of looking at this situation is along The lines of, "If you've already won the game, why are you still playing ?

In other words the downside of them losing a large portion of their nest egg is much worse than the upside of them making a lot of money on their nest egg.

If I were in their shoes I would probably go 50-50 bonds and equities, and when tips yields got above 2.5 % I might go up to 60% fixed income with a large proportion of that in long-term TIPS. A real 3% return is certainly nothing to sneeze at, And having that return guaranteed means you can take much bigger risks with the equity portion of your portfolio.







clifp

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Re: Asset allocation at age 68
« Reply #9 on: June 12, 2014, 01:39:40 AM »
I think is really hard to give you or them advice on what path to take if we don't know their destination.

It sounds like their current income is more than sufficient to support their life style and they are still saving a bit.. Once they collect social security (my wild ass guess is your mom would probably do well to start at 65 and your day start collecting at 70)   I suspect they'll be saving even more money until dad finally sells the business or retires.  (Is the business something that can be sold?)

If that is the case with their income, than I suspect the priorities are something like enjoy some luxuries, have  enough to to pay for Long term care (nursing home) and the rest is left to you and your siblings.  Now their priorities maybe different, put all the grand-kids through college  give a lot to a favorite charity,  travel first class, buy a boat..

I'm not in general a big fan of buckets, but in the case I think they make sense.

If say nursing homes which provide assisted care in your parents area cost say $100K then you might want to budget 2 years each or $400K . That bucket would be invested conservatively perhaps TIPs Bonds or Vanguard Wellesley fund.  But if the rest  is for you, or their grandkids, they you can investment much more aggressively like stock index funds.