Re-assessing my 401k portfolio mix / diversification and was wondering what others are considering (those that are approaching and/or are in retirement). Uncertain times and not sure what to do exactly.

Specifically, how much of the portfolio are you putting into bonds until we get some clarity in macro trends? What types of bonds / bond funds? What expense rates?

This year could be a good year for equity. Or could be a significant downturn. I don't know who to believe. But I'm conservative and planning to guard against a significant erosion in equities (ie - thinking about shifting a material amount of equity into bonds). Thinking is that I may lose out on some equity gains if things go well but won't lose nearly as much (I hope at least) if things quickly go south.

But not sure and wondering what you guys at retirement are thinking.

You are going to get a lot of anti bond replies, Trust me.

I am not one of them. We are in the retirement window and have a 40/60 mix.

A 401k portfolio is one aspect of ones wealth. Your home, other real estate, cash, insurance, etc. And should be viewed as such.

If you talk with whoever you have. Ie: Schwab, Vanguard, Fidelity, etc. They can help you figure out the Bond mix that can do what you want them to do.

https://www.investopedia.com/a...allocation-sound.asp

I know this is Buffett's 90/10 but about half way down there is a study that shows all the splits and there failure rates. Take a look and see if one of those splits appeals to you. Hray

quote:

Originally posted by konata88:
I don't know who to believe.

Predictions are really hard. Especially about the future.

That said, if you are looking to buy a bond fund, look up the symbol BND. It's better than most, considering things like expense ratio, etc.

Thanks guys.

Interesting failure rate data. I don't disagree with the long term perspective. And I'm not trying to beat the market.

I guess the one thing that I'm trying to address in the short term is the opinion that the market will crash this year (some WSJ article I read about a week ago). I know everything is somewhat speculative but the person seemed reasonably respected and the logic sounded plausible.

So, while I may take a more aggressive stance long term, not sure what to do about the short term knowing that the market may crash this year. If it does crash, then I could shift funds back into equity.

Sometimes, I wish I just got a pension so I wouldn't have to stress of this. I know it could be a good stress but still....

I'm one of those who don't have any interest in bonds.

I'm in retirement now, almost exactly two years in. I'm 65. My belief...and maybe not traditional or "acceptable" to some advisors, but I prefer strong dividend growth stocks, paying a current decent dividend with an earnings that can easily cover the dividend. Often these companies also buy back shares which adds a lot to shareholder value.

Although past performance can't be used to predict the future, take a look at Dividend Kings, Aristocrats and Contenders.

Many say the market will still get 10% this year….I am 20 years from retirement so all equity as I can deal with the ups and downs. Also, as pointed out dividend stocks funds can be good places to retreat to as well. Finally, when you retire you don’t need all your money near term bonds, so it’s a good idea to keep a majority in equity. Trying to time the market or beat the market is a fools errand.

Worrying about what the market may or may not do vs figuring out what you want to accomplish is a recipe for failure.

You will be money ahead figuring out what you want to do and stick to it.

My worst performing investment in the last 2 years is VIPSX, a TIPS fund. Herein is the lesson. Avoid bond FUNDS.

Funds are not the same as the underlying securities. Funds are also the other millions of people invested in that fund. Interest rates go up, bonds go down. People bail out of funds, the fund sells assets at a loss to cash out the quitters, and we all take the loss!

I now own a substantial portion of my portfolio in directly purchased federal bonds. I will keep them to maturity, so I don't care what their value does in the interim. I am harvesting the dividends. I happen to be in T-Bills 3 month to 12 month maturity. There are other good choices such as i-bonds, TIPS, and long term government bonds.

My opinion is avoid bond FUNDS. Buy bonds through your broker or direct from the government if you want income. Bonds are not for trading imho, they are to be held to maturity for stability and income.

For capital gains or trading, use stocks.

quote:

Originally posted by hray:
https://www.investopedia.com/a...allocation-sound.asp

I know this is Buffett's 90/10 but about half way down there is a study that shows all the splits and there failure rates. Take a look and see if one of those splits appeals to you. Hray

Interesting article.

But you also have to keep in mind that these are nuances and factors at play behind the scenes here, that a straight numbers evaluation doesn't capture.

For example, someone with barely enough money (or not quite enough money) to retire likely wouldn't choose to take the larger relative risk of a high stock exposure, out of fear of one moderate drop wiping out their meager funds. They'd probably attempt to go with the ultra-conservative 40/60 or 30/70 to try and play it as safe as possible. But because they're right there on the knife's edge of having enough money to retire, they're more likely to fail anyway. Thus the folks that go with 30/70 may be the ones more likely to fail to begin with, pushing up the failure rate percentage of a 30/70 split.

So did they fail because they went with 30/70, or did they go with 30/70 because they were more likely to fail to start with?


Vice versa, the average retiree almost certainly wouldn't take the risk of a 90/10 split with huge stock exposure. Mostly just those who have plenty of spare retirement money and who could truly afford a big drop in stock value would choose that allocation in active retirement, thus artificially deflating that allocation's failure rate. Most of them weren't going to fail anyway, no matter their allocation.

For example, Buffet's personal portfolio (not just the ~$350 Billion he manages for Berkshire Hathaway) is worth several hundred billion dollars. So his instructions to his widow to do a 90/10 split after he dies wouldn't necessarily apply for every retiree. Buffet's widow could afford a 90/10 split (or even a 100/0 split), and even in years that are really down she'd still be just fine. Hell, she could afford to go -99%, and still be plenty wealthy with several billion dollars left.

I get what your saying and that study is based off of $1000 investment with 4% withdraw annually then increased for inflation over 30 years. Nobody is retiring on that LOL. It was more to show the failure rate of that $1000 and to maybe help someone decide on a equity/bond split. I'm in a different boat and I do not have bonds in my portfolio and don't plan on having them. I plan on having about 3 years worth of annual withdraws in cash/money management fund and the rest in equity's/ S&P fund and small caps. Re balance when times are good and let it ride when not. I am not a financial adviser and my wife and I are 4 years away from retirement. Hray

Edit to add I would be making withdraws from the cash/ money management fund not the equity's.

My general thought is about a 40% stock 60% other (bonds, metals) is a good mix for this year, which I think is going to be extremely volatile and overall bad. If Trump is looking to be an easy winner well before the election it could spur a market rally, so I will be paying attention by August and possibly diving more into stocks then. I think now is a good time to keep several years of expenses in cash equivalent investments. Money market, short term bonds, etc., aside from the overall investment mix. In good times I would reduce that to a year of expenses.

I am 63, my wife 60, we've been retired 2 years. 15% of our total net worth is in investments, 85% is home equity. We are selling the house to harvest most of that equity into investments, and the remainder we'll pay cash for our next home. So, we aren't in a usual (or even desirable!) configuration right now. Covid insanity knocked us unexpectedly into retirement.

We all have our base assumptions upon which we build our finances. Looking at history we can make some assumptions or guesses about the future. Historically, Presidential election years are generally up. Also historically, when a market goes down it tends to be somewhat consistently, but when it rises it tends to do it in jumps. That is, there are just a handful of days (usually early in the overall bull run) that have outstanding gains. If you miss those days you miss much of the overall rise. We are all aware of the insane federal debt and other negative economic factors. Diversification is good. Dollar cost averaging is powerful.

As a retiree, I am more interested in lower volatility than higher risk. Yes there is a long term component, assuming we live 20+ years in retirement.

I think 2024 is likely to be pretty bad for the economy and many stocks. And, I think federal bond rates will fall some. Right now I would not dive big into stocks. My plan is to hold cash (money market) and dollar cost average into some stock index funds from the spring through the summer, assuming the stock market is going to drop in the first half of this year.

I would rather hold money market cash or t-bills than take the risk of diving into more stocks right now.

I do like good dividend stocks because of both the income and the lower volatility they generally have. SCHD is a good (and very large) high dividend stock fund. It ticks the boxes for lower volatility, generates income, and good diversification. I think something like this is a really good choice for a retiree. Adding other index funds aids diversification, e.g. S&P500 and NASDAQ. These are the types of funds I am in and will use for our stock positions.

For bonds, I currently like T-Bills for their shorter duration. I buy them directly through my Schwab account (very easy). I have bond ladders of different durations to keep the cash flow moving so I can harvest profits monthly.

Some physical metals is a good hedge. PSLV and PHYS are funds that have 100% physical silver and gold in a vault, so it is the next best thing to having bars stacked in my safe at home. SLV, GLD, and some other funds are leveraged with only fractional physical metals on hand, so I am not convinced they are safe. I see metals as medium risk but a hedge against economic apocalypse.

quote:

Originally posted by hray:
I get what your saying and that study is based off of $1000 investment with 4% withdraw annually then increased for inflation over 30 years. Nobody is retiring on that LOL. It was more to show the failure rate of that $1000 and to maybe help someone decide on a equity/bond split. I'm in a different boat and I do not have bonds in my portfolio and don't plan on having them. I plan on having about 3 years worth of annual withdraws in cash/money management fund and the rest in equity's/ S&P fund and small caps. Re balance when times are good and let it ride when not. I am not a financial adviser and my wife and I are 4 years away from retirement. Hray

Edit to add I would be making withdraws from the cash/ money management fund not the equity's.

While it is impossible to know much of anything about what might happen, the 4% rule has large swings. Many people will end up with more at death than they started with, yet there are a few specific years when 4% fails because the market took a dump at just the wrong time.

I like the idea of guard rails, so if the portfolio drops a bunch then we have to reduce spending. If what was 4% last year is now 8% of what is left after a 50% market drop, I reduce my spending. But if the market only loses 10% I don't have to change spending or even worry. Conversely if the market goes up 100%, my 4% is now only 2%, so I can increase spending.

quote:

Originally posted by Fly-Sig:

quote:

Originally posted by hray:
I get what your saying and that study is based off of $1000 investment with 4% withdraw annually then increased for inflation over 30 years. Nobody is retiring on that LOL. It was more to show the failure rate of that $1000 and to maybe help someone decide on a equity/bond split. I'm in a different boat and I do not have bonds in my portfolio and don't plan on having them. I plan on having about 3 years worth of annual withdraws in cash/money management fund and the rest in equity's/ S&P fund and small caps. Re balance when times are good and let it ride when not. I am not a financial adviser and my wife and I are 4 years away from retirement. Hray

Edit to add I would be making withdraws from the cash/ money management fund not the equity's.

While it is impossible to know much of anything about what might happen, the 4% rule has large swings. Many people will end up with more at death than they started with, yet there are a few specific years when 4% fails because the market took a dump at just the wrong time.

I like the idea of guard rails, so if the portfolio drops a bunch then we have to reduce spending. If what was 4% last year is now 8% of what is left after a 50% market drop, I reduce my spending. But if the market only loses 10% I don't have to change spending or even worry. Conversely if the market goes up 100%, my 4% is now only 2%, so I can increase spending.

Your guard rails is basically how I plan on re-balancing my equity's to cash fund. That's why I want about 3 years worth of withdraws in the cash fund (withdraw fund). Hray

That sounds like a good long term conceptual strategy - don't fixate on an equity-bond ratio but rather keep enough cash value in bonds (cash) to last a period of time (3-5 years?) at desired expenditure levels w/o having to touch equity funds during downturns.

quote:

Originally posted by konata88:
That sounds like a good long term conceptual strategy - don't fixate on an equity-bond ratio but rather keep enough cash value in bonds (cash) to last a period of time (3-5 years?) at desired expenditure levels w/o having to touch equity funds during downturns.

Yep that's going to be my strategy and can be tweaked when needed for myself and my wife's 401 and 403. We will have to roll my wife's into a traditional IRA because her current through Transamerica / Baptist health system doesn't allow you to designate what found you pull from after retirement the equally sell between all funds you have for the amount you want. I Don't like that and I would suggest that those getting ready to retire check and make sure you designate what found gets sold for the amount you want. Hray

I am a big fan of ROTH accounts. The sooner you establish it the better because there is a 5 year period after being established which has a penalty for withdrawal.

6 months until I am eligible to rollover the 401k to a self-directed PM IRA. seems to be getting a lot more attention mostly as a result of all the scams using collectable etc. I'm probably at about a 70/30 mix at the moment. I can't really to do another 2008-9. SD Bullion has it's own segregated vault and once I set up the IRA, I can purchase directly to my deposit. We'll see what the next couple FQs have in store though.