My advisor is more conservative than I am, which is a good thing. When I almost FIRE’d in December 2020, I moved from 80/20 (at age 40) to 60/40. I ultimately decided not to FIRE, and I now plan to continue my career until full retirement age (49 in 2029). Upon returning to work, I did not, however, revert to an 80/20 portfolio. I am keeping this AA. Is it conservative? That depends on your perspective. My advisor won’t make plans projecting anything better than 2% real growth moving forward. And that’s why I hired him.
What do I believe myself? I am pessimistic about the future in a way I never was in the past. I don’t see this coming generation of Americans living in a society that is anywhere near as prosperous or economically-fair as the one I grew up in. I believe our best days are behind us. Of course, America is a still a net exporter of trends, technology, culture, etc., and I don’t mean that I see that reality ending soon, but I really doubt we’re ever again going to have a situation like the 1950’s that people seem to love to pine about nowadays -- where a high-school-educated worker could be a home owner and could support a family of five on a single income.
Yes, the past few years have changed my outlook. I honestly believe that tougher times lie ahead. Perhaps much tougher. I already see signs of it. I see people around me expressing things I never remember hearing as a child… but I do remember reading about in the lived experiences of past generations of Americans – things like feelings of envy and resentment over access to quality meat, for example. I have literally recently heard someone express envy toward someone else because that other person had regular access to good cuts of meat.
To be clear, the crises of the past several years have exacerbated and accelerated these trends, but I think the writing has been on the wall since I was a child.
I remember, as a child in the 1980’s, how foreign and incomprehensible early 20th century cartoons were to me – in terms of societal norms. There was a real cultural gap that needed to be overcome in order for the cartoons to make sense to me. For example, I remember an early 20th century cartoon depicting a person’s house with the whole neighborhood lined up outside of his door, with the caption “He roasted a goose!” That cartoon made absolutely no sense to me until someone explained it: if you had a goose to roast at that time, it meant you were very rich or experiencing abundance, and since most people couldn’t eat goose regularly, they would show up in a queue if they heard you were roasting one. I thought that was preposterous. You see, I remember stores practically giving frozen turkeys away when I was a kid. I remember families where every household roasted a turkey for Thanksgiving just because they thought they had to, even though everyone ate at grandma’s. So entire birds got thrown away. I remember my own family throwing away pounds of turkey because even the dogs and cats got sick of it after a while.
Well… as a 40-something-year-old in the 2020’s, the situations depicted in those early 20th century cartoons are no longer preposterous to me. In fact, I believe we are hurtling backwards toward those times. I personally know of several families that changed their holiday meat choices due to cost last year. Granted, 2020 and 2021 were exceptional, but again, I don’t think it’s a flash in the pan phenomenon. In the probably-not-too-distant future, you are going to hear people bragging about being able to eat turkey and steak. I think mid-21st century kids will be able to laugh at many of those early 20th century cartoons without needing the cultural translation that us late 20th century kids needed… because their world will be more similar to the robber baron era than to the world I grew up in. I might be too pessimistic in this regard, but that’s all a longwinded way to say that I see value in a 60/40 portfolio. It has the ingredients for growth, but also a portion of mitigating fixed income to weather ups and downs when I am drawing down.
My feelings about the future notwithstanding, what really matter are my risk profile and my goals. I will receive a federal pension upon retirement that will likely provide half or more of my income needs. A lot of people consider the pension as a part of one’s fixed income position because it plays a similar role: to provide regular, steady income as safely as possible. Does that mean I could go 100% stocks… and consider my portfolio a 50/50 portfolio? And since I will be retiring at 49, that means I potentially have a 40-year retirement (or perhaps even longer, although I doubt it). All the more reason to go with 100% stocks, right? I will need the growth potential.
Or will I? I have a federal pension waiting in the wings, which will kick in on the day I retire. Isn’t that an invitation to assume less risk? If my pension really can provide half or more of my income needs in retirement -- and I have enough in my portfolios to provide the other half – would it then be wiser for me to focus on wealth preservation rather than growth potential, especially given my pessimism regarding the future? Should I not, then, focus on making my investments more conservative because I do not need to assume the additional risk? Maybe 50/50 is better… maybe 40/60 is even better!
I am going to lean conservative because I am bearish on the future and feeling as risk averse as I have ever been, understanding that a portfolio must provide growth potential during a long retirement (unless one is a HNWI with eight figures in the bank or something like that). This is a matter of my values, my goals, my risk profile, and what I believe about the world around me (and what will happen to that world in the future). I write that while noting that some, such as my advisor -- who are even more bearish and risk-averse than I -- would call my 60/40 portfolio (with the federal pension locked and loaded) to be unnecessarily risky. I understand that this MMM crowd skews a little more “exuberant,” as they say, and probably views my portfolio as risk-averse. May the gods smile on all of us.
As for how many accounts I have, I have two: a TSP account and a Vanguard account. About 10% of my portfolio is in a Roth IRA, about 40% in taxable, and about 50% in TSP. 100% of my funds are in low-cost index funds (with the exception of my checking and savings accounts, which are in cash). I do not necessarily have all the same funds in different accounts, but I consider my entire portfolio across both accounts as a single entity, the AA of which currently stands at about 60/40.
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