The third study makes me feel better about things. Today is literally my first day in retirement. Leading up to today, I have found myself making my portfolio more and more conservative. I have 7 years to bridge between now and starting social security, medicare and an income annuity. Given current yields of 5%+, is really helpful in being conservative starting retirement. It also makes me feel I am removing sequence of returns risk, by having what I need to live on for my bridge years not in the market.
Congratulations!! You made it!! And yes, this study 3 makes me feel better as well. I am planning to retire in a couple months, and I have to bridge some years. Considering taking SocSec at 62 now. I will see what NewRetirement tells me first though.
The Tree books he flash up on the screen for the Second study were: The good life by Robert Wadinger Aging Well by George E Vaillant MD Triumphs of Experience by George E Vaillant MD
The traditional retirement planning seems to rely on all income sources starting at the same time but for us that have saved enough that we can retire before starting social security or pension income what should be the asset allocation during this period of maximum draw on the portfolio. I know the retirement tools can model the cash flows but I don't know of any tool that recommends changes in asset allocation over time like the reverse glide path.
Great topics as usual ! Would love to see studies on asset allocation based on historical means.. such as more in bond-income allocation when rates are above or well above historical norms vrs the opposite.. buying 30 yr t bill in Sept 1981 at 15% would have been genius. Love the reverse glidepath idea.. especially if waiting for age 70 SS and maybe have a qlac in place as another spigot of income to turn on. In retirement now and I try to psyche myself by telling myself that my stock portfolio isn't mine, its my kids.. and the timeframe for returns on it is based on my kids ages, not mine. If it comes true.. then they get the bonus of step up in basis and it has acted like a Roth when it wasn't .
Still have to take RMDs! Of course only an issue with a large portfolio, as with portfolios of less than say $750k or so your RMDs are modest and can just be used for spending. We are spending down portfolio to get me to 70(wife took early). That strategy will mean $7000/mo of SS income in todays dollars. That more than covers our needs. Additional money is for optional extra fun. Also have a QLAC for the widow. So then, yes at age 70 plan on more aggressive investments and the “rising equity approach”. Now at 64/66 we are more like 30% stocks, and a littleBitcoin. The rest in “cash’’ CDs and bond ladders, and gold. We have no debt, and our portfolio is enough to meet our needs. Don’t see any reason to take a bunch of risk, but will take more once the base income is in place. Never understood the idea of taking a 10% risk of losing half of my wealth in stocks and blowing up a comfortable plan, when we have “won the game”. If I had a $4million portfolio, would just stay at the standard 60/40, since I could afford to lose a huge chunk and be fine. But, sitting at less than $2 million a 50% crash early on would really cause problems, as I want to pull close to $500k to get to 70. Nice to see some more nuanced approaches!
Strategy 3 isn't clear. I understand the principle, but you didn't explain that green and red graph. For example could someone start with 60% Bonds and 40% stocks and then increase to 20% Bonds and 80% stocks? Presumably that would need to be implemented in a bucket strategy where by the bonds are providing a medium term buffer to the portfolio?
You have to look at the risk over time from an initial cost basis starting point…I agree with the presentation from my years of investing that stocks average return do become less risky overtime. If you look at just look at a short time horizon the risk might appear and is possibly higher but over time it becomes less risky due to long term appreciation from cost basis and compounding effect especially if you reinvest the dividends.
As sequence of return risk decreases, the overall risk of stocks to your portfolio also decreases. Then stocks start increasing your retirement success as they become a buffer against longevity risk So yes, stocks go from risky at the beginning of retirement to necessary the farther you go into your retirement timespan, aka less risky
The third study makes me feel better about things. Today is literally my first day in retirement. Leading up to today, I have found myself making my portfolio more and more conservative. I have 7 years to bridge between now and starting social security, medicare and an income annuity. Given current yields of 5%+, is really helpful in being conservative starting retirement. It also makes me feel I am removing sequence of returns risk, by having what I need to live on for my bridge years not in the market.
Congratulations!! You made it!! And yes, this study 3 makes me feel better as well. I am planning to retire in a couple months, and I have to bridge some years. Considering taking SocSec at 62 now. I will see what NewRetirement tells me first though.
Retirement can be fun when you have something that can generate funds on a daily basics without you having to worry about expenses.
The Tree books he flash up on the screen for the Second study were:
The good life by Robert Wadinger
Aging Well by George E Vaillant MD
Triumphs of Experience by George E Vaillant MD
Thank you! Most other comments focused right back on the finance aspects of retirement and missed the non financial points 😉
How do you implement strategy #3 in the real world?
Great content!
Great retirement content. Touches all bases.
The traditional retirement planning seems to rely on all income sources starting at the same time but for us that have saved enough that we can retire before starting social security or pension income what should be the asset allocation during this period of maximum draw on the portfolio. I know the retirement tools can model the cash flows but I don't know of any tool that recommends changes in asset allocation over time like the reverse glide path.
This is great information!
Great topics as usual ! Would love to see studies on asset allocation based on historical means.. such as more in bond-income allocation when rates are above or well above historical norms vrs the opposite.. buying 30 yr t bill in Sept 1981 at 15% would have been genius. Love the reverse glidepath idea.. especially if waiting for age 70 SS and maybe have a qlac in place as another spigot of income to turn on.
In retirement now and I try to psyche myself by telling myself that my stock portfolio isn't mine, its my kids.. and the timeframe for returns on it is based on my kids ages, not mine.
If it comes true.. then they get the bonus of step up in basis and it has acted like a Roth when it wasn't .
Still have to take RMDs! Of course only an issue with a large portfolio, as with portfolios of less than say $750k or so your RMDs are modest and can just be used for spending.
We are spending down portfolio to get me to 70(wife took early). That strategy will mean $7000/mo of SS income in todays dollars. That more than covers our needs. Additional money is for optional extra fun. Also have a QLAC for the widow.
So then, yes at age 70 plan on more aggressive investments and the “rising equity approach”. Now at 64/66 we are more like 30% stocks, and a littleBitcoin. The rest in “cash’’ CDs and bond ladders, and gold. We have no debt, and our portfolio is enough to meet our needs. Don’t see any reason to take a bunch of risk, but will take more once the base income is in place.
Never understood the idea of taking a 10% risk of losing half of my wealth in stocks and blowing up a comfortable plan, when we have “won the game”. If I had a $4million portfolio, would just stay at the standard 60/40, since I could afford to lose a huge chunk and be fine. But, sitting at less than $2 million a 50% crash early on would really cause problems, as I want to pull close to $500k to get to 70.
Nice to see some more nuanced approaches!
Thanks great vid
Strategy 3 isn't clear. I understand the principle, but you didn't explain that green and red graph. For example could someone start with 60% Bonds and 40% stocks and then increase to 20% Bonds and 80% stocks? Presumably that would need to be implemented in a bucket strategy where by the bonds are providing a medium term buffer to the portfolio?
I'm alone but not very lonely, because I'm also a misanthrope :)
I don’t think stocks get less risky with time. That’s a myth.
The data disagrees. Where's the myth?
@@SafeguardWealthManagement read paper by Philippe Jorion “Long Term Risks of Global Stock Markets “
You have to look at the risk over time from an initial cost basis starting point…I agree with the presentation from my years of investing that stocks average return do become less risky overtime. If you look at just look at a short time horizon the risk might appear and is possibly higher but over time it becomes less risky due to long term appreciation from cost basis and compounding effect especially if you reinvest the dividends.
As sequence of return risk decreases, the overall risk of stocks to your portfolio also decreases. Then stocks start increasing your retirement success as they become a buffer against longevity risk
So yes, stocks go from risky at the beginning of retirement to necessary the farther you go into your retirement timespan, aka less risky