Author Topic: Dealing with assets in retirement  (Read 1415 times)


  • 5 O'Clock Shadow
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Dealing with assets in retirement
« on: March 07, 2019, 05:11:20 PM »
So congrats on reaching retirement. You have assets that may last long enough that you probably won’t be forced into an undesirable job for cash flow.

So now that you are retired, how are you going to allocate those assets between tax deferred and taxable accounts?  How are you going to diversify the investments within those accounts? I am considering the following method of deciding how to allocate my non real estate resources.

I know my incomes and expenses this year, and have approximated how they may change over the next few years. Together they define an income shortfall that will need to be withdrawn from the stock/bond/cash portfolio each year.

For the taxable accounts, the process I am considering is to keep an amount equal to the next ‘four’ years of shortfall relatively safe- in a CD ladder, short term US government bond funds, and even cash. The remainder will be placed entirely in stock index funds.  (There is a separate thread as to how to distribute stock funds among 2,3, 4, 5, or more index funds- an issue ignored here.) All ‘shortfalls’ will be taken from the safe investments in these taxable accounts.

Similarly, tax deferred accounts will have ‘four’ years of required minimum distributions (yes, I’m old enough that I must take distributions,) invested in ‘safe’ bond funds with the remainder also placed in stock funds. The safe bond fund value will be the source of the distributions.

Once every ‘average’ year, the safe shortfall is replenished by converting the more volatile stock funds into the depleted, safer, venues. If we find ourselves in the middle of a recession, the shortfall does not get replenished until the recovery has restored the stock fund values. This is typically less than ‘four’ years. The cash flow will not require selling off stock funds at recession prices. (The estimated ‘four’ year duration for a recession is fairly conservative, and is also an issue for another thread.)

Some professional advice I have received is to keep a percentage equal to your age safely invested in bonds, the rest in stock. A 70 year old like myself would accordingly keep 30% in stock and 70% in bonds. The withdrawal could be done from  whichever asset needs to be reduced over the year to achieve the desired stock/bond ratio.

Another investment house advises keeping the stock/bond ratio at 50/50. The asset class that performed best during the previous year would be reduced to again achieve the 50/50 ratio.

These seem so arbitrary. Rather than concerning about a fixed ratio, have near term disbursements placed to in ‘safe’ assets and the rest allowed to grow/fall with the stock market. Thanks for any  critique to the method. And my apologies if this is in another thread. A link to it would be appreciated too.


Car Jack

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Re: Dealing with assets in retirement
« Reply #1 on: March 08, 2019, 06:47:51 AM »
Be careful with "rules of thumb".  They're great for a clueless 22 year old who just graduated college, started his first job and can't even spell "401k".  For you, I'd expect that you understand your own risk tolerance, asset level, spending level and how your overall portfolio stands.  I think a couple examples might help.....

Say you spend $50k per year and have $5M in investments.  Clearly, you have "won the game" and you have zero need for growth that stocks can give you.  So to go 100% bond and stable value like CDs, savings bonds and bank accounts would be perfectly reasonable.  You would never have to worry that you're going to run out of money or lose due to a market crash. might look at that and say that you can put $2.5M in these safe investments and put the other $2.5M into stocks with the intent to grow the money for heirs.

On the other end of the fence, if you've got $1M, then you don't have the excess that could go to zero and it would not matter.  You could go either of 2 ways. You could decide you can't lose money because you don't have the extra to lose.  100% bonds and safe investments.  Or you could decide that you can weather some market variations, keep some number of years safe (like you talk about) and put the rest in the market, hoping that any crash recovers in those 4 years you've got safe money for. 


  • Magnum Stache
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Re: Dealing with assets in retirement
« Reply #2 on: March 08, 2019, 07:01:45 AM »
You've given this a lot of thought, good job!   I've never been such a detailed planner, basic strategy has been to accumulate a whole lot and live pretty reasonably.
I know the common thought is to slide your stock investments into safer stuff such as bonds as you retire, however I don't think that is necessary when you first retire considering you may have 30+ years of life left.   I'm going to keep that stuff working in higher risk / higher return stuff for a while.

For guaranteed safe income, I purchased farm ground over the years and cash rent it.   Return percentages aren't the best, but it's as close to guaranteed year in year out income as you're going to get, very easy to manage, and the only expense to hold it is taxes.   It's also likely to appreciate in value and can be sold pretty quickly if necessary.


  • 5 O'Clock Shadow
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Re: Dealing with assets in retirement
« Reply #3 on: March 08, 2019, 09:09:22 AM »
I strongly like real estate as a way to diversify too. Though this is no place for assets you may need in the short term.

I also have about 50% of assets in real estate - it started as an accident, but a fortunate one. Although real estate bubbles are VERY real in many parts of the country, in University towns, there seems to be a steady and growing need for student rentals. Add a dynamic federal facility or 2 and the housing demand becomes very constant. During the 2008 housing bubble, Boulder CO, was flat or even down a percent or 2 for 5 years. Since 1997 though the annual appreciation was 7% last I looked. That is the property appreciations. The appreciation of your investment, say 20%, is considerably more, not to mention the rental income. That said, it is not a very liquid asset. The nearby town of Longmont, CO during had flat prices for a dozen years after the dot com bubble and thru the 2008 recession.   

For my part, the rental income and the sale of those properties at some future point, allow deferred accounts to remain untouched.