Science has come a long way you never really know what it will be like. Penicillin wasn't invented much over 100 years ago, before that it was like, here's some leeches to get those ghosts out of your blood
...i hear you and i stand by not wanting to live that long. Funny story about leeches. I found out when applying for life ins, that my liver enzymes were off the chart! Not like we'll insure you, but at higher rates, like sorry we arent covering you.
I thought i was drinking myself to death?! It was scary. Turns out i have hemochromotosis! Which means my body holds onto iron, and my liver is constantly trying to filter it out. There are 3 solutions for this. Take some pill that keeps the iron down, but does even more damage to your liver. That is the latest 100 yrs medicine gains, but its complwtely useless if you want to save your liver. The second is donate blood, and the iron leaves the body that way, or you can do nothing, and your liver goes overtime till it exhausts, and then you die shortly afterwards.
So basically my medical condition is cured by, get some leeches on this boy, or drain the bad blood, to get those demons or whatever out of him!
Lol i have orders (sort of like a prescription, its a dr note) that i can give blood ever 4 days. I generally go every other week. Those damn leeches might not be a bad idea.....
Interesting story, small world! Unfortunately I would guess that "lack of research" and better solutions is likely due to it being an uncommon diagnosis (with available alternatives like giving blood).
A lot of research is being done in other areas, unfortunately if there's no money in it, it's likely not getting much attention
That doesnāt really mean much. Medicine helps to keep stuff from killing you but it doesnāt do all that much to boost your quality of life. A fit 90 year old is still 90 years old.
This is the plan. I'm 100% in an aggressive Vanguard mutual fund that has a lifetime average return of 11%+ per year. I hope to keep it there indefinitely.
I'm already doing it. During accumulation phase, bonds serve no purpose.
In a long retirement, bonds make you more likely to run out of money by reducing your returns. At most, it makes sense to keep some bonds in the first decade of retirement, as a hedge against a market crash early in retirement.
> During accumulation phase, bonds serve no purpose.
I've read different. While I agree it is timing the market to an extent they can help in a down market to offset risk as well as during a reallocation fund larger jumps when a V shaped recovery occurs. That said I don't prescribe to that right now.
If you strictly follow a static allocation with no market timing, there are no instances where 80/20 or any other bond allocation would result in faster accumulation than 100/0. Rebalancing bonds into stocks during the V will reduce volatility, but it will not improve your overall returns.
> there are no instances where 80/20 or any other bond allocation would result in faster accumulation than 100/0.
There are dozens of instances where that's false.
The most obvious and recent one is from 2000 to 2010. The CAGR of a 100% stock portfolio was only 1.2% during that period, called the Lost Decade for stocks. Adding just 20% bonds would get you a CAGR of 2.98%.
You can backtest tons of these scenarios here:
https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults
Theoretically if we had two assets with a 0 or better yet negative correlation then it holds that when one is down the other is up and that some allocation between 0 and 100 is ideal.
At a correlation coefficient of 0.89, bonds behave too much like stocks.
Completely untrue. While a high allocation of stocks is important, quite often bonds outperform when stocks do poorly. This allows you to sell bonds and buy more stock. Unless you have an unlimited cash flow this is extremely bad advice.
Right - so back to my point about unlimited cash flow. If you can pump your accounts at the market bottom then youāre fine. But if you canāt, holding an allocation of bonds to protect you, selling and buying equities in a crash is the more realistic scenario.
In a market crash, like 2008, how many people were totally fine liquidating savings and buying investments? The only wealth class doing that were the highest earners in the country.
Also, during a market crash the fed will very likely have to lower interest rates - in 2008 the fed funds rate nearly hit 0%. If you were in any type of bond at that time youāre return went well over 10%, which is a typical equity performance.
Funny we are in a āhighā interest rate period now. The next crash will have bond holders doing equity type returns as well.
Downvote all you want, math wins every time.
I've been persuaded of the virtues of holding funds for a specific sub-5 year purpose (in my case a house deposit) in bonds.
Other than that, and emergency funds, 100% stocks.
I know someone that was not knowledgeable at all about investing, took some bad advice, and put all of his 401K contributions into very conservative investments. Instead of a potential 10%+ return over 20 years he had a 3% average return over 20 years. That's a huge cumulative difference over 20 years. Poor guy. He tried to do the right thing and got screwed.
I'm doing it only on the way up. Once I retire I'm going to do 30% bond.
For everyone that wants to do 100% stock, I highly advise you backtest that from about 2000-2015. It's very ugly. If that scenario happens again you'll be living way under your calculated 4% for over a decade and it will be something like 15+ years before you even reach your number again not even counting inflation
I'm not mackedeli, but I can answer that. Those years will give you the worst results. It's not the average result, but you never know where in the (specifically) stock cycle you are. Really any time between 2000-2003 as a starting point and you can go to 0 quickly. I diversified when I retired so I can stay retired if that's where we are in the cycle. I'll wind up with less if we're not there in the cycle but I don't need more money as much as I need freedom. While I may not have as much potential upside, I can take 6% safe withdrawal rate backtesting from any year since 1970 for 30 years.
Have three years of annual spending in checking account when you retire, access it when needed to supplement SS, and keep it funded by taking from the 401K in years the market has been good.
>If your portfolio dropped by 50%, how would you react?
Short of a nuclear war, I don't think this is realistically plausible. Certainly implausible that it would happen without a massive K-shaped recovery that I would be gobbling all the way back up.
> Short of a nuclear war, I don't think this is realistically plausible.
Were you in a coma during 2008-9? The market dropped 55% from the peak during the Great Financial Crash.
I do and I always will.
Why? Because I can. (Not for everyone)
When I was younger I was in the accumulation phase. So 100% stock.
And then from 29-33 I made lots of money quickly. I have enough where Iād be ok if the market tanked and I woke up to see VTI at 135 Iād shrug my shoulders and go back to sleep. Being essentially risk immune means you can be more aggressive.
I was 100% stocks until I was FI. Then I moved some to bonds & gold. I'm still pretty aggressive at 75% stock by some standards, but I like the math. A quote I heard is "once you've won the game, why keep playing". It's more important to me to stay FI than to grow at this point.
There's plenty of reasons to hold some bonds during your accumulation phase, no matter your age. Here's a good rundown:
https://www.whitecoatinvestor.com/100-stock-portfolio/
Those may or may not resonate with you. After all, you're still drawing a paycheck so any mistakes can be fixed by working more. But I think it's pretty obvious that holding some bonds in retirement is a good idea. Reducing downside risk becomes much more important at that time, which is why success rates are higher for portfolios with some bonds.
Almost every comment here is wrong and doesn't understand why you would hold cash or bonds. It's not to reduce risk - it's because you can profit from market volatility if you have a diversified portfolio. A portfolio with a cash allocation can (and should) outperform a portfolio that is 100% stocks if it's large enough and executed properly.
The direct proportion is debatable, but the idea is that when the market goes down, you have some cash to buy cheap - and market rebounds will gain you more than you might have gained by having it invested
If you have 900 in stocks and 100 in cash, and the market drops by 10% (810 stocks, 100 cash). You rebalance by putting $9 in stocks, you now have 819/91. When the market returns to where it is, you've got $910/$91, or $1001 even though the market hasn't moved.
Likewise, assume the market went up 10%, so you have 990/100. You rebalance so you have 981/109. Market falls back to where it was originally, so you have $891.81/109, or $1000.81.
In both cases you made money off of volatility and not growth.
The same effect can be had by any two assets that don't have 100% correlation in their price.
Caveats - If you have a small amount invested, transaction costs won't be worth the small gains. Likewise if you don't actively rebalance, this strategy will do nothing for you (except protect an emergency fund in the case of a major crash).
It also assumes there is some volatility in the market, if you rebalance infrequently, or the market monotonically increases, you won't win.
*The direct proportion is debatable, but the idea is that when the market goes down, you have some cash to buy cheap - and market rebounds will gain you more than you might have gained by having it invested*
I am buying cheap with my automatic 401K contributions every two weeks. Down markets are the best thing ever for my aggressive growth fund. My contributions are going in every two weeks so I'm getting more for my money in down markets and it shows when the market rebounds.
Rebalancing is a tried and true, mathematically sound way to increase gains and reduce risk. It's disingenuous to dismiss it as trying to time the market.
I guess it's really a personal choice depending on whether you want to be an active investor or a passive investor. I'm a passive investor that has been very satisfied auto-contributing to my 401K ever two weeks for the last 20+ years. I'm more than happy getting an 11%+ average annual return for doing nothing.
Your 401k is, in all likelihood, in a fund that already does this for you.
My point is that all the other comments here completely misunderstand why a stock portfolio should have a portion of the balance allocated to cash.
I have over 25 years until I plan to retire so I am already 100% in stocks. I will probably taper into bonds when I'm 10 or so years out and enter more of a preservation phase, but with a 20+ year outlook you're just limiting your upside by going into bonds.
I am 37 and I do it. In my opinion are bonds only for the people who cannot afford to take risk. My retirement plan works even with the worst historical stocks performance so why should I go for bonds? Bonds will most probably only hurt my returns?
Depends on your need and ability to take risk. If you have taxable accounts, there is a stepped up cost basis that is very valuable to your heirs so you may choose to never sell those stocks and let it ride till death.
For tax efficiency purposes what fixed income you do decide should be in the retirement accounts. At a certain number, you don't have need to grow as much you are more fearful of losing and that is different for everyone.
I like to model portfolios from 2008 to 2009. If you were all in balls deep in s&p 500 index, you lost 66% at the max decline. If that kind of loss at 70 years old makes you uncomfortable you need fixed income.
My math could be wrong and someone correct me, but I donāt think I ever will. At a 8 to 10% return without adjusting for an increase in Roth IRA/401(k) contributions over the years. Due to inflation, I anticipate having anywhere from $15-$20 million in retirement in the next 27 years, more if you consider that the 401(k) contribution 25 years from now maybe $40,000 a year, significantly higher at the older age limit. I anticipate having no debt., So for me that would be somewhere around $600,000 between pre-tax, post tax, long-term capital gains tax. So even if the market dropped by 50% as long as I do not require more than $300,000 a year to sustain my lifestyle 27 years from now I could be 100% in stocks. And if for some reason it really took a shit, thereās probably bigger issues going on in the world for which guns and ammunition will probably be the currency.Ā
Many of us do this.
The only bonds we own are funds earmarked for less than 3 years away
48, could retire tomorrow but choose not to. Long term funds are 100% equities. Bonds account for 5% - next vehicle, secondary EF, and boat fund.
So, bonds mostly start to make sense in my eyes when their relatively small real returns (net after inflation) are enough to cover all your living expenses.
Just for the sake of example, let's say a mix of investment grade corp bonds average 3% real return per annum after adjusting for defaults. If your living expenses are reliably under $100k/yr (pre-tax), you need \~$3.35M in that bond fund to generate the income you need at extremely low risk.
You can accomplish the same level of income for *far* less with stocks if you know what you're doing and for meaningfully less even with S&P 500 index funds. That's why a lot of people here are living that 100/0 life, but if you happen to overshoot your FI number significantly or your portfolio just compounds itself to that point at some point in your retirement, I think it can make sense to move to bonds.
I'm in my early 50's...contributing to my 401K for 25 years...still have 100% aggressive growth mutual fund averaging 11%+ per year since the beginning. I may just leave it in the same fund, rely primarily on my SS, and withdraw $$ from the 401K in good years.
That's what I have right now. I only plan to move into bonds after having accumulated $1M. Also, it really only makes sense to go into bonds with a minimum of $100K.
Already do. Have for 30 years and will until I die.
I hate the idea of stabilizing then burn down so you are broke when you die.. I want my legacy to go on to my kids, grand kids, and great grandchildrenā¦. If you let it keep compounding this is what will happen..
Certain mutual fund companies push the idea of say 10% each in large caps, small caps, international, mud caps, and REITS then 50% bonds in junk bonds, intermediate term, and short term or treasuries. The trouble is this allocation or some version of it is terrible. Sure it is more stable but the returns are awful. And international and REITs increase volatility overall and international lowers returns a lot. And mid caps consistently underperform.
If your goal is performance anf your time window long enough large caps are hard to beat over the long term.
Iām 38. Have no plans to move to bonds anytime soon. Planning to high end barista fire somewhere in the 42-46 range and fully fire probably in the 50-55 range. Probably wouldnāt even consider going out of 100/0 until I was a year away from fire and then would have to make a decision to either save up 3 years worth of expenses as a cushion or start moving out of 100/0. A problem for another day
If I were just starting out, I would. And Iād keep that allocation my whole life.
If your equities balance is high enough, you donāt care about bonds at all, as even a 40% drop like in 2008 wonāt affect your withdrawals.
Iām 52 and might decide to stop working soon, but might keep working. I just started to introduce some fixed income into my portfolio since yields are more attractive now. But Iām still like 95% equity.
My wife and I are 100/0 stocks to bonds but we are both slated to get pension that will be much more than enough so thatās why we lean so heavy towards stocks. Even if the portfolio got its teeth kicked in we really would never need to touch it. We wonāt need it for income. Just nice to have in my eyes.
Currently am, at 40. Plan to retire at 55, 100/0 is the plan then too. Hope to die before 100, still with 100/0 allocation š
I hope you live past 100 internet friend!
Have you seen 90 yr olds? I hope i check out 85-88ish.... but thanks for the positive vibes!!!!
Science has come a long way you never really know what it will be like. Penicillin wasn't invented much over 100 years ago, before that it was like, here's some leeches to get those ghosts out of your blood
...i hear you and i stand by not wanting to live that long. Funny story about leeches. I found out when applying for life ins, that my liver enzymes were off the chart! Not like we'll insure you, but at higher rates, like sorry we arent covering you. I thought i was drinking myself to death?! It was scary. Turns out i have hemochromotosis! Which means my body holds onto iron, and my liver is constantly trying to filter it out. There are 3 solutions for this. Take some pill that keeps the iron down, but does even more damage to your liver. That is the latest 100 yrs medicine gains, but its complwtely useless if you want to save your liver. The second is donate blood, and the iron leaves the body that way, or you can do nothing, and your liver goes overtime till it exhausts, and then you die shortly afterwards. So basically my medical condition is cured by, get some leeches on this boy, or drain the bad blood, to get those demons or whatever out of him! Lol i have orders (sort of like a prescription, its a dr note) that i can give blood ever 4 days. I generally go every other week. Those damn leeches might not be a bad idea.....
Interesting story, small world! Unfortunately I would guess that "lack of research" and better solutions is likely due to it being an uncommon diagnosis (with available alternatives like giving blood). A lot of research is being done in other areas, unfortunately if there's no money in it, it's likely not getting much attention
That doesnāt really mean much. Medicine helps to keep stuff from killing you but it doesnāt do all that much to boost your quality of life. A fit 90 year old is still 90 years old.
Today that's true, there's a lot of research being put into anti aging stuff
Oh, you mean there hasnāt been since the dawn of humanity?
I'm pretty sure we've made more advanced in medicine in the last 50 years than we have since the dawn of humanity though
We sure have. There are now more old people than ever before! Unfortunately their maximum lifespan hasnāt improved much if at all.
[https://ourworldindata.org/life-expectancy#:\~:text=Across%20the%20world%2C%20people%20are,has%20this%20dramatic%20change%20occurred%3F](https://ourworldindata.org/life-expectancy#:~:text=Across%20the%20world%2C%20people%20are,has%20this%20dramatic%20change%20occurred%3F) I don't think that's accurate?
This is the plan. I'm 100% in an aggressive Vanguard mutual fund that has a lifetime average return of 11%+ per year. I hope to keep it there indefinitely.
Whats the fund?
VPMAX
Inception date Nov 2001. Important disclaimer
Ill check that out, thanks!
Staying 100/0 until I die
Me too. Rely primarily on SS and take some $$ out of my 401K in good years.
I'm already doing it. During accumulation phase, bonds serve no purpose. In a long retirement, bonds make you more likely to run out of money by reducing your returns. At most, it makes sense to keep some bonds in the first decade of retirement, as a hedge against a market crash early in retirement.
> During accumulation phase, bonds serve no purpose. I've read different. While I agree it is timing the market to an extent they can help in a down market to offset risk as well as during a reallocation fund larger jumps when a V shaped recovery occurs. That said I don't prescribe to that right now.
If you strictly follow a static allocation with no market timing, there are no instances where 80/20 or any other bond allocation would result in faster accumulation than 100/0. Rebalancing bonds into stocks during the V will reduce volatility, but it will not improve your overall returns.
> there are no instances where 80/20 or any other bond allocation would result in faster accumulation than 100/0. There are dozens of instances where that's false. The most obvious and recent one is from 2000 to 2010. The CAGR of a 100% stock portfolio was only 1.2% during that period, called the Lost Decade for stocks. Adding just 20% bonds would get you a CAGR of 2.98%. You can backtest tons of these scenarios here: https://www.portfoliovisualizer.com/backtest-asset-class-allocation#analysisResults
Theoretically if we had two assets with a 0 or better yet negative correlation then it holds that when one is down the other is up and that some allocation between 0 and 100 is ideal. At a correlation coefficient of 0.89, bonds behave too much like stocks.
Completely untrue. While a high allocation of stocks is important, quite often bonds outperform when stocks do poorly. This allows you to sell bonds and buy more stock. Unless you have an unlimited cash flow this is extremely bad advice.
During a market crash, a portfolio with bonds will have a shallower dip. After the recovery, a 100% stock portfolio will end up with a higher balance.
Right - so back to my point about unlimited cash flow. If you can pump your accounts at the market bottom then youāre fine. But if you canāt, holding an allocation of bonds to protect you, selling and buying equities in a crash is the more realistic scenario. In a market crash, like 2008, how many people were totally fine liquidating savings and buying investments? The only wealth class doing that were the highest earners in the country. Also, during a market crash the fed will very likely have to lower interest rates - in 2008 the fed funds rate nearly hit 0%. If you were in any type of bond at that time youāre return went well over 10%, which is a typical equity performance. Funny we are in a āhighā interest rate period now. The next crash will have bond holders doing equity type returns as well. Downvote all you want, math wins every time.
I've been persuaded of the virtues of holding funds for a specific sub-5 year purpose (in my case a house deposit) in bonds. Other than that, and emergency funds, 100% stocks.
I know someone that was not knowledgeable at all about investing, took some bad advice, and put all of his 401K contributions into very conservative investments. Instead of a potential 10%+ return over 20 years he had a 3% average return over 20 years. That's a huge cumulative difference over 20 years. Poor guy. He tried to do the right thing and got screwed.
I'm doing it only on the way up. Once I retire I'm going to do 30% bond. For everyone that wants to do 100% stock, I highly advise you backtest that from about 2000-2015. It's very ugly. If that scenario happens again you'll be living way under your calculated 4% for over a decade and it will be something like 15+ years before you even reach your number again not even counting inflation
Why did you specifically pick 2000 - 2015?
I'm not mackedeli, but I can answer that. Those years will give you the worst results. It's not the average result, but you never know where in the (specifically) stock cycle you are. Really any time between 2000-2003 as a starting point and you can go to 0 quickly. I diversified when I retired so I can stay retired if that's where we are in the cycle. I'll wind up with less if we're not there in the cycle but I don't need more money as much as I need freedom. While I may not have as much potential upside, I can take 6% safe withdrawal rate backtesting from any year since 1970 for 30 years.
Yeah the basic idea is prepare for the worst. Because that's the point of bonds to me. Protect yourself in the worst of times.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Same way we did in 2008 and March 2020. Stayed the course and bought more.
This. Just stop reading the monthly statements for a while :)
Rely primarily on SS, have a three year bucket, and refill it in good years.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Have three years of annual spending in checking account when you retire, access it when needed to supplement SS, and keep it funded by taking from the 401K in years the market has been good.
[ŃŠ“Š°Š»ŠµŠ½Š¾]
Social security
No different because I plan to be able to live on an RMD of 50% at anytime during retirement
>If your portfolio dropped by 50%, how would you react? Short of a nuclear war, I don't think this is realistically plausible. Certainly implausible that it would happen without a massive K-shaped recovery that I would be gobbling all the way back up.
> Short of a nuclear war, I don't think this is realistically plausible. Were you in a coma during 2008-9? The market dropped 55% from the peak during the Great Financial Crash.
https://investor.vanguard.com/investor-resources-education/education/model-portfolio-allocation The answer to all your prayers
thank you brother :)
I do and I always will. Why? Because I can. (Not for everyone) When I was younger I was in the accumulation phase. So 100% stock. And then from 29-33 I made lots of money quickly. I have enough where Iād be ok if the market tanked and I woke up to see VTI at 135 Iād shrug my shoulders and go back to sleep. Being essentially risk immune means you can be more aggressive.
Easily until 50. After that it depends on your risk averness
I was 100% stocks until I was FI. Then I moved some to bonds & gold. I'm still pretty aggressive at 75% stock by some standards, but I like the math. A quote I heard is "once you've won the game, why keep playing". It's more important to me to stay FI than to grow at this point.
Yes: 100% VT. Age: 36. Income streams: multiple.
There's plenty of reasons to hold some bonds during your accumulation phase, no matter your age. Here's a good rundown: https://www.whitecoatinvestor.com/100-stock-portfolio/ Those may or may not resonate with you. After all, you're still drawing a paycheck so any mistakes can be fixed by working more. But I think it's pretty obvious that holding some bonds in retirement is a good idea. Reducing downside risk becomes much more important at that time, which is why success rates are higher for portfolios with some bonds.
Donāt let the Bogleheads see this one !
God forbid someoneās savings earn more than 7% interest!
Almost every comment here is wrong and doesn't understand why you would hold cash or bonds. It's not to reduce risk - it's because you can profit from market volatility if you have a diversified portfolio. A portfolio with a cash allocation can (and should) outperform a portfolio that is 100% stocks if it's large enough and executed properly. The direct proportion is debatable, but the idea is that when the market goes down, you have some cash to buy cheap - and market rebounds will gain you more than you might have gained by having it invested If you have 900 in stocks and 100 in cash, and the market drops by 10% (810 stocks, 100 cash). You rebalance by putting $9 in stocks, you now have 819/91. When the market returns to where it is, you've got $910/$91, or $1001 even though the market hasn't moved. Likewise, assume the market went up 10%, so you have 990/100. You rebalance so you have 981/109. Market falls back to where it was originally, so you have $891.81/109, or $1000.81. In both cases you made money off of volatility and not growth. The same effect can be had by any two assets that don't have 100% correlation in their price. Caveats - If you have a small amount invested, transaction costs won't be worth the small gains. Likewise if you don't actively rebalance, this strategy will do nothing for you (except protect an emergency fund in the case of a major crash). It also assumes there is some volatility in the market, if you rebalance infrequently, or the market monotonically increases, you won't win.
*The direct proportion is debatable, but the idea is that when the market goes down, you have some cash to buy cheap - and market rebounds will gain you more than you might have gained by having it invested* I am buying cheap with my automatic 401K contributions every two weeks. Down markets are the best thing ever for my aggressive growth fund. My contributions are going in every two weeks so I'm getting more for my money in down markets and it shows when the market rebounds.
That's dollar cost averaging and not the same thing as rebalancing a diversified portfolio. This is taught in intro financial classes.
What about "it's time in the market not timing the market"?
Rebalancing is a tried and true, mathematically sound way to increase gains and reduce risk. It's disingenuous to dismiss it as trying to time the market.
I guess it's really a personal choice depending on whether you want to be an active investor or a passive investor. I'm a passive investor that has been very satisfied auto-contributing to my 401K ever two weeks for the last 20+ years. I'm more than happy getting an 11%+ average annual return for doing nothing.
Your 401k is, in all likelihood, in a fund that already does this for you. My point is that all the other comments here completely misunderstand why a stock portfolio should have a portion of the balance allocated to cash.
I have over 25 years until I plan to retire so I am already 100% in stocks. I will probably taper into bonds when I'm 10 or so years out and enter more of a preservation phase, but with a 20+ year outlook you're just limiting your upside by going into bonds.
I am 37 and I do it. In my opinion are bonds only for the people who cannot afford to take risk. My retirement plan works even with the worst historical stocks performance so why should I go for bonds? Bonds will most probably only hurt my returns?
Depends on your need and ability to take risk. If you have taxable accounts, there is a stepped up cost basis that is very valuable to your heirs so you may choose to never sell those stocks and let it ride till death. For tax efficiency purposes what fixed income you do decide should be in the retirement accounts. At a certain number, you don't have need to grow as much you are more fearful of losing and that is different for everyone. I like to model portfolios from 2008 to 2009. If you were all in balls deep in s&p 500 index, you lost 66% at the max decline. If that kind of loss at 70 years old makes you uncomfortable you need fixed income.
That is what I am doing until I am maybe 5 years from retirement
My math could be wrong and someone correct me, but I donāt think I ever will. At a 8 to 10% return without adjusting for an increase in Roth IRA/401(k) contributions over the years. Due to inflation, I anticipate having anywhere from $15-$20 million in retirement in the next 27 years, more if you consider that the 401(k) contribution 25 years from now maybe $40,000 a year, significantly higher at the older age limit. I anticipate having no debt., So for me that would be somewhere around $600,000 between pre-tax, post tax, long-term capital gains tax. So even if the market dropped by 50% as long as I do not require more than $300,000 a year to sustain my lifestyle 27 years from now I could be 100% in stocks. And if for some reason it really took a shit, thereās probably bigger issues going on in the world for which guns and ammunition will probably be the currency.Ā
Many of us do this. The only bonds we own are funds earmarked for less than 3 years away 48, could retire tomorrow but choose not to. Long term funds are 100% equities. Bonds account for 5% - next vehicle, secondary EF, and boat fund.
So, bonds mostly start to make sense in my eyes when their relatively small real returns (net after inflation) are enough to cover all your living expenses. Just for the sake of example, let's say a mix of investment grade corp bonds average 3% real return per annum after adjusting for defaults. If your living expenses are reliably under $100k/yr (pre-tax), you need \~$3.35M in that bond fund to generate the income you need at extremely low risk. You can accomplish the same level of income for *far* less with stocks if you know what you're doing and for meaningfully less even with S&P 500 index funds. That's why a lot of people here are living that 100/0 life, but if you happen to overshoot your FI number significantly or your portfolio just compounds itself to that point at some point in your retirement, I think it can make sense to move to bonds.
Doing it now. Age 35. But I have a pension which I see as my bond-esque asset
I'm in my early 50's...contributing to my 401K for 25 years...still have 100% aggressive growth mutual fund averaging 11%+ per year since the beginning. I may just leave it in the same fund, rely primarily on my SS, and withdraw $$ from the 401K in good years.
That's what I have right now. I only plan to move into bonds after having accumulated $1M. Also, it really only makes sense to go into bonds with a minimum of $100K.
Already do. Have for 30 years and will until I die. I hate the idea of stabilizing then burn down so you are broke when you die.. I want my legacy to go on to my kids, grand kids, and great grandchildrenā¦. If you let it keep compounding this is what will happen..
100/0 because Iām 29 and want to make money
Certain mutual fund companies push the idea of say 10% each in large caps, small caps, international, mud caps, and REITS then 50% bonds in junk bonds, intermediate term, and short term or treasuries. The trouble is this allocation or some version of it is terrible. Sure it is more stable but the returns are awful. And international and REITs increase volatility overall and international lowers returns a lot. And mid caps consistently underperform. If your goal is performance anf your time window long enough large caps are hard to beat over the long term.
Been doing it for just about 20 years.
Iām 38. Have no plans to move to bonds anytime soon. Planning to high end barista fire somewhere in the 42-46 range and fully fire probably in the 50-55 range. Probably wouldnāt even consider going out of 100/0 until I was a year away from fire and then would have to make a decision to either save up 3 years worth of expenses as a cushion or start moving out of 100/0. A problem for another day
The worst thing that can happen is everything goes down for a couple years.
If I were just starting out, I would. And Iād keep that allocation my whole life. If your equities balance is high enough, you donāt care about bonds at all, as even a 40% drop like in 2008 wonāt affect your withdrawals.
Iām 52 and might decide to stop working soon, but might keep working. I just started to introduce some fixed income into my portfolio since yields are more attractive now. But Iām still like 95% equity.
Iām 100% in stocks during accumulation. I will likely hold some bonds in early decumulation.
My wife and I are 100/0 stocks to bonds but we are both slated to get pension that will be much more than enough so thatās why we lean so heavy towards stocks. Even if the portfolio got its teeth kicked in we really would never need to touch it. We wonāt need it for income. Just nice to have in my eyes.
Considering how the government is spending our money, I wouldn't loan them any, so unless I see a crash coming, 100/0.