The Ideal Stock/Bond Allocation Based on Your Age
HTML-код
- Опубликовано: 19 май 2024
- In this video, we'll look at a simple formula to help investors determine the stock and bond allocation percentages based on their age. Sponsor: go.robberger.com/new-retireme...
Vanguard Model Portfolio Returns: investor.vanguard.com/investo...
Bengen's 1994 Paper: kyestates.com/wp-content/uplo...
Bengen's 1996 Paper: www.simonemariotti.com/downloa...
0:00 - The Ideal Stock/Bond Allocation Based On Your Age
4:57 - Conservative Stock/Bond Allocation
6:37 - Moderate Stock/Bond Allocation
7:41 - Aggressive Stock/Bond Allocation
8:39 - Summary
11:42 - Portfolio Visualizer
16:05 - Q&A
16:58 - Buying the whole S&P 500
17:58 - And if you're over 70
18:41 - 4 Pillars of Investing book
19:20 - Bengen not following his own advice
20:29 - Expected return of BND
22:15 - Cash Bucket
22:36 - Open a taxable account or increase 401K contributions for retirement
24:15 - Railroad Tier 2 pension
25:39 - FIRE
28:01 - Particular type of bond purchases
29:00 - Holding a higher percentage of stock in retirement
29:47 - International bonds
30:36 - FZROX/SCHB
32:12 - Bond/Stock allocation accounted for pre or post-tax?
34:39 - Financial Freedom
------------
Investing Tools
------------
My Book (Retire Before Mom and Dad): amzn.to/2MsRJ9B
Personal Capital (Investment Tracking, Retirement Planning): go.robberger.com/personal-cap...
New Retirement (Retirement Planner): go.robberger.com/new-retireme...
Stock Rover: go.robberger.com/stock-rover/...
M1 Finance $30 Bonus (IRA & Taxable Accounts): go.robberger.com/m1finance-bo...
------------
Credit Cards & Banks
------------
My Favorite Credit Cards: www.allcards.com/best-credit-...
My Favorite Online Banks: www.allcards.com/best-online-...
------------
Popular Videos
------------
1️⃣ How to Create a 3-Fund Portfolio: • How to Create a 3 Fund...
2️⃣ How I Manage 28 Accounts in One App: • How I Manage 28 Financ...
3️⃣ 7-Step Financial Checkup: • A 7-Step Annual Financ...
#assetallocation #investing #robberger
ABOUT ME
While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
LET'S CONNECT
RUclips: / @rob_berger
Facebook: / financialfreedomguy
Twitter: / robert_a_berger
DISCLAIMER: I am not a financial adviser. These videos are for educational purposes only. Investing of any kind involves risk. Your investment and other financial decisions are solely your responsibility. It is imperative that you conduct your own research and seek professional advice as necessary. I am merely sharing my opinions.
AFFILIATE DISCLOSURE: Some of the links on this channel are affiliate links, meaning at no cost to you I earn a commission if you click through and make a purchase and/or subscribe. However, I only recommend products or services that (1) I believe in and (2) would recommend to my own mom.
So you’re a podcaster and editor. Got it.
I pulled the show from January where Rob shared his portfolio. He walks the talk.
I thought I could do better than my adviser, but in the long hall, there was very little difference. I enjoy watching the market, and sometimes I ask my adviser what he thinks, and it keeps me busy. Great video !!!
I love your videos, consistently informative, a fresh perspective, exceptionally well prepared, I find them enormously helpful. Thank you so much!!!!
This is terrific, thanks for your time and expertise. This is the first time I have watched a live event like this really enjoyed it.
Rob my only comment to add to your analysis is that when you are adding money into the market volatility is your friend. The higher standard deviation of the all stock portfolio is advantageous for dollar cost averaging!
you have amazing videos! I need to call financial advisor on Monday, and get rid of him after listening to all your videos. Much appreciated!
Thank you for specific, data backed and actionable advice.
Just repeating my thanks, and appreciation for the extra live show Q+A content
You've helped me a great deal, including your audiobook.
Thank you for another informative video.
I'm not surprised at the people here claiming that high (90% or more) stock allocations are definitely the way to go. However, how many actually stuck to that during the great recession and lost say $250,000 without deciding to sell stock holdings? It's a lot easier to say what you'll do than the reality when you're faced with big losses.
As long as you do not sell during downturns, and actually are willing to buy stocks during downturns, then this portfolio works great. If you cannot stomach that, then it is not for you.
…and you don’t actually lose any money in a downturn unless you sell. If you hold, then its only on paper: if you actually buy, which I do, then you are very well positioned.
I'm shocked by the number of comments advocating 100% stocks. I have to think these people have never been through a crash or unemployment.
@@Gr8thxAlot I'm with you!
@@Gr8thxAlotIndeed. When a major stock crash happens, everything looks gloomy. Week after week you see the value of your stock portfolio goes down by a significant amount. And there is nothing telling you: wait it will get better soon! This is not also the short term massive drops that hurt the most. It is the week after week going down for 2 or 3 years...
thank you for the video. like always very informative and I have found value!
I like both your life and pre-recorded videos.
Great video, Thanks Rob
Far more important than age, is financial position! How much do you have, and how much do you need. If I have a $2 million portfolio, and need very little above SS and say a small pension, why would I have 50% in bonds at age 65? If I ever had a financial advisor tell me what I needed, based on some predetermined theory, I'd throw them out of the office! I want a plan based on ME!
Why would you need an advisor anyway? It sounds like you know the answer (very little to none, for your situation)!
Exactly.
Using an age based formula ignores:
How much do you already have in your portfolio?
What amount will you need to meet basic expenses?
How much additional do you want to spend on non-essential activities such as charitable activities, travel, hobbies, etc.?
How much do want to leave in your estate?
What is your risk tolerance?
What longevity factors need to be considered?
My plan is to put enough into a moderate conservative portfolio of 50% stocks, 40% bonds, and 10% cash equivalents to cover basic expenses through age 100, and the rest goes into the stock market.
And hope that the government won’t steal my money when they run out of dough.
Fully agree, this is really based on your risk profile, in which age in only one variable.
@@brucehazen8982several reasons to require, or at least use an advisor. I rolled my own from 2001 through 2020. Then some life events happened in our 40’s to some friends and had my wife and I talking. We decided we should have an advisor. Not because we need one, or require one, but we are now approaching the age where shit happens. And if shit happens to either one of us, we know there is someone with a level head we can talk money with.
“Financial advisor “ lol 😂
Thank you so much, Rob, for your wonderful channel. This one is great as always!
I dont think many people follow their own advice. I tell people to buy and hold a s&p 500 index fund, yet I do stock picks within the s&p 500 because I find it fun. Though incredibly stressful. When family asks me to invest their money with mine, I always refuse because I view what I do one step above gambling. I have a 401k that I dont ever touch.
Always wondered about this.
I really like this format!!
Thank you Rob!
Slight twist on allocation: As you age should you shift stock allocation more toward Value? Less volatility than Growth. I am 72 and at 60/40 (stocks/bonds) but pushing more stocks into Value (70/30).
Does make the portfolio slightly more conservative without tilting from stocks to bonds.
Outstanding study published several years ago by David Blanchette regarding retirement asset allocation in relation to income, % guaranteed income, and bequests.
I'm attempting to find an ideal time allocation between this @Rob Berger page and your other @DoughRoller page. Don't know why they aren't linked or included in the opposing channels. I also don't really understand the difference between the two, other than you are wearing just your Classic T in @DR and your Classic T is under your Untuckit button up @RB; although, up until a year ago, you also just wore your Classic T on this page, too. So, what is the ideal time allocation based on the content of both vlogs?
Chris Pedersen with the Merriman Foundation recently did a presentation where he showed that from 1928-2022 in spite of a 2% higher CAGR in stocks alone, a higher 30 yr SWR could be obtained with 50/50 S/T bonds & stocks vs 100% stocks. Respectively, the CAGR was 4.4% vs 6.4%, the SWR was 3.9 vs 3.0% and the max drawdown was -53% and -83%. This seems counterintuitive. Can you explain?
I think these % are basically fun to compare your portfolio to and talk about. It really depends on how much $ is in your portfolio. Warren Buffets 5% in bonds may not be = to another person's 100% in bonds. Rob, I really like the way you take time to present and explain this information. Bonds are a tool just like CD's, pension, rental money or a side hustle. If your watching these videos and thinking about how they apply, you're so far ahead of your neighbors up and down your street. 🤑 (We retired at 53 and loving it) ~ 10% in bonds.
41. Have 105% in stock. Bonds are kinda tempting now though.
Love the show! but I watched after the fact still good. I like the shorter Q&A at the end.
Cool looking keyboard - which brand/model is it?
Rob, what do you think of Ishares Ibonds ETFs, or Bullet bond etfs for someone close to 70? Thanks!
Can we actually email you our questions? Yours are the best lessons I’ve found.
Hi Rob, watching the replay. Thanks for covering this topic.
Like the live shows Rob! Waiting every two weeks for your Monday show is too long! Keep up the great work!
I just retired. I will turn 58 soon. I am 50% stocks and 50% money market, CD, T bills. All are earning 5% for the foreseeable short term future.
A dash of Rob for the afternoon to keep you awake!
Hi Rob, additional factors for this decision - total assets, and spending. Two example cases: (1) Warren Buffett mentions 90/10 allocation for his heir. (2) Jack Bogle mentioned that he was at 50/50 at age ~85. Hypothetically, if a person like Buffett has 100M (so 10M in Bonds), and also a frugal lifestyle.... the 10M in bonds could last a long time. It's not clear to me why a person like Jack Bogle felt the need to have 50% of his assets in bonds at age 85. I tend to think about it conceptually like this: (A) spending for next 10 years: 50 to 100% in bonds. (B) years 11 to 20: 30 to 60% in bonds. (C) years 21 to 30: 20 to 40%, (D). years 31+ : 20 to 30%. Then these (averages) could be added together for the total allocation. (75+45+30+25)/4 = 43%. IF, a person in this example, is not planning to spend 50% of overall assets (e.g. leaving them to children), then this 50% could be ~90 in stock. So 50% is invested at 57/43, and 50% is invested at 90/10. thoughts ?
I am at 80/20 until 60+ .. however I am split between bonds (BND) vs Dividend (SCHD) for fixed income investment. it will be great to get your point of view
SCHD is an equity position, not fixed income.
Bond allocation calculations in old age are determined by your personal level of risk. So whether you add to bonds isn't a matter of wants. It's a matter of needs.
For example, if your nest egg is barely enough to pay the bills, then volitility risk is high and more bonds makes sense. If your nest egg is larger, such that you can pay the bills by withdrawing 2% every year, then volitility risk is very low for you, and bonds make no sense.
You are assuming that dividend yield is not drastically pruned and that stock markets don't take a 10 year plunge. Very few people can live solely off dividends in that scenario, unless their returns from dividends pay at least twice their expenses. People forget how the market can go bad for 10 years. Some bonds make sense for probably 99% of investors in retirement.
@@kevinwoolley7960 Dividends are insignificant. When a company pays dividends, their free cash flow is reduced, and the share price is lowered accordingly. Plus dividends require short term gains tax (much of the time) so worse than selling stocks (and paying LT cap gains tax) to cover bills.
I am considering a market plunge. That's why whose with small next eggs need bonds to overcome a 5 year downturn. Markets don't go bad for 10 years without the bond market also suffering. Large next eggs don't have that kind of risk, so can withstand a long term market downturn.
(I have very few dividend stocks, and no bonds, and am 67.)
@RobBerger Should you have allocation split at each brokerage or each asset location type (taxable, IRA and Roth)?
My original retirement plan was to retire at 62, work part-time, and save money. However, high prices for everything have severely affected my plan. I'm concerned if people who went through the 2008 financial crisis had an easier time than I am having now. The stock market is worrying me as my income has decreased, and I fear I won't have enough savings for retirement since I can't contribute as much as before.
consider financial planning.
It makes more sense to have your Roth IRA 100% stocks and put the bonds in pre-tax. The growth will be in the Roth where you will not pay tax on the gains if you follow the rules.
Ok Bobby good job
Go Bucks!
Here's a different perspective. We are in our late 80's and have been living off our investments for 30 years. We recently moved into independent living and are selling our house. We expect to receive about $1M to invest. After setting aside about six month expenses, what stock to bond ratio would be the best for us? We discovered you about two weeks ago and have been viewing many of your videos. We like your presentation style and depth of your presentation.
Unless you've allowed the proponents of this advice to subtract 115 from your IQ, you should be able to tell that something is wrong here. Why should your age determine how much risk you can take?
The most striking thing about Graham's discussion of how to allocate your assets between stocks and bonds is that he never mentions the word "age."
The Intelligent Investor: Revised Edition: Page 102
Exactly what I say. Age is a factor, but you financial position is far more important. If I don't need money, or very little, from my portfolio, why would I have a lot of bonds?
Stocks can go down 30 40 50 % in one year. So a 50% stock loss takes a 100% get back to even so getting back to even at a normal portfolio return could take 1o years to get back to even. So what would a 50% loss do to the retirement plans of a 59 year old, for example? The 1929 stock crash took until 1954 for the market to break even. Age does matter a lot because it sometimes takes a long time to recover from major down turns for those who are older.
Stocks and bonds perform the same regardless of the age of the owner!
Not sure that I agree with you Rob on 90/10 vs 100% stocks with many years to retirement. It's all about when access to the money is assumed, but the research clearly shows that all stocks returns more than 90/10 long term, but with higher volatility as you mentioned.
The biggest benefit I see to a 90/10 portfolio even in your starting years is your ability to rebalance to stocks during downturns. A 100% allocation does not provide this benefit. The key to this working is to rebalance during market swings. If you do not rebalance and just let it ride the waves, then 100% approach will perform better.
@@clsanchez77 That isn't exactly true. Vanguard studies show that rebalanced portfolios of 90/10, 80/20, and so forth produce less returns than 100% stocks long term. Rebalancing is assumed for all of the allocation models. I'm not saying a 90/10 is bad since it does have the advantage of less volatility, but the data shows it will produce lower investment returns as a result. That's why John Bogle said not to worry about rebalancing unless you want to maintain a given risk allocation. It's a balance between higher returns and risk. If you don't need the money for several years, 100% stocks will produce higher returns than any other allocations.
I'm sure Rob's numbers are correct but I don't agree with the basis of this analysis. I graduated college in 1993 and started investing and my stocks got crushed in 2000, 2008 and 2020 - thankfully, i didn't follow the stock and bond ratio that most advisors push. Instead I chose 25% stocks, 25% cash, 25% Real Estate and 25% Munis and after dollar cost averaging every single year across 3 of the 4 categories (I own the real estate out right), I've never had a negative year of returns. Real Estate has done a ton of the heavy lifting but recently cash has been a major contributor to returns. I'm just saying that there are more than just stocks and bonds to round out a successful portfolio...
Well done.
What is the name of bond you can choose in. 401
Would it make sense to temporary move from BND to cash bonds begin to rebound??
👍I❤links.
Rob, any thoughts on international bond funds like BNDX being part of the bond mix? I'm at 20 BND and 10 BNDX for my "moderate" growth portfolio. I'm not a huge fan, but was advised to take a similar diverse bond allocation.
A factor not mentioned - your portfolio mix might be impacted by how much you need to draw from your retirement investments.
So for example if most or all of your base spending needs are covered by Social Security + a Pension/Annuity/Rental Properties, your retirement funds might be only for special purchases like buying cars/special trips, etc… In this case going more aggressive might be OK since it is largely for your heirs.
[Edit: hah, at 25 minutes, this scenario!]
Excellent comment. It seems this logic would also apply if you have a lot of money in investments and could easily ride out a long bear market when stocks are down by using other investments, assuming you have plenty of money. I prefer to be a little more aggressive than these conservative models.
I am in this scenario. However, I don't trust that my pension will always be there. They have failed, and can fail in the future. The principal amount I've put in over the years is protected, but that's about it. Not saying it's a likely scenario, but a possible one, so I invest like I don't have a pension. I don't even factor it in,
The historical data Bengen used included high bond returns. This, alone, calls all the other calculations into question.
I'm 67 and have never held bonds for this reason. Instead of bond, with returns that don't keep up with inflation, I'm in real estate. 60% real estate, 40% stocks. I don't plan to change this allocation, ever. I was 100% stocks until I was 55.
Bond market has changed since last quarter of 2022. TIPS (treasury inflation protected securities) now pays near 2% a year OVER the government's measured inflation rate, and no risk of loss as long as future inflation is above 2%. Current rates for government agencies like Federal Farm Credit Bureau or Federal Home Loan Bank pay over 6.1% a year for 10 year notes
@@quantn573 Yes, but rare over a 30 year retirement span. In retirement, you can't hold bonds long-term if you need the money to pay bills. Before retirement, there's no need to sell, but you're also less susceptible to damage due to market downturns, so can use the extra stock market gains (over bond gains) to build a larger next egg.
I prefer to adjust my allocation based on how expensive the stock market is. I recommend taking your expected AVERAGE age during your retirement years and subtract your current age, then divide by the P/E ratio of the overall stock market. For example, let's say you are 55 years old, you plan to retire at 65 and expect to die at 85. Let's also assume the P/E ratio of stocks is about 20. Then average age during retirement is 75 less current age of 55, equals 20 years divided by the P/E ratio of 20 equals 100% in stocks. If the P/E ratio was 25 then 80% in stocks. What this equation is doing is trying to match the duration of your investment horizon to the expected duration of your investments. It's quick and dirty, but it works and keeps you out of trouble. Just my two cents to add to the conversation.
This is where I wonder if a little bit of market timing comes into play also. Rather than de-risking the portfolio at a set timetable of say every year or 5 years, try to move into bonds when you’re not in a bear market atmosphere, otherwise I feel like you’re selling your equities at their lows. I’m 33 and trying to determine my stock allocation and trying to do a set glide path of increasing bonds every 5 years, but it may not be as plain vanilla as that.
Would you recommend buying your bonds? Or would you recommend buying bond index funds?
I retired in 2015 with 70/ 25/5. As stocks have appreciated, my bonds( laddered muni portfolio) have drifted to 18%. I don’t plan on rebalancing. Total portfolio up about 70%, hoping for a doubling by the time I’m 70 in 2025
I just retired this year at 60 years of age. I also ended up with this same allocation. The decision not to rebalance is interesting though. I'm guessing if bonds had outperformed stocks, then you would have rebalanced?
@@srconrad Yes I would have. I inherited a bond portfolio the year that I retired that skewed me from 15% to 25% bonds. I’m guessing that I’ll settle at 12-15% for the duration
auric: As your cash runs down, do you sell bonds or stock? Or, do your maturing bonds provide 100% of the cash you need?
@@howardfriedman7077 Dividends from my taxable equities are distributing about 1.5%. My munis are 2.5-3.5%. Enough for all expenses.
Social security in 2.5 years at age 70. RMDs at 73, then I’ll return to dividend reinvestment of my taxable accounts.
the math chages big time over that same time 2000-2023 if you put 500$ a month in to a 110,000 diferance. I have been investing for a 25 years and i just cant get myself to buy bonds i use a dividend ETF to add some incom and stubluty i have 25 more years to work so i hope that works over the long hall. HAHA thank you for an amazing vide
If your good with money , then your allocation should be 100% stocks. For money you need to spend money market accounts , savings accounts and checking accounts are what you should be using. If your good with money you shouldn’t “need” to touch your stocks for many years. Reminds me of a real estate billionaire , he stated “we only buy we never sell”.
You don't want to be in your 50's, have long term unemployment, and have a stock crash at the same time. If that happens with 100% equities, you're going to be forced to sell at the absolute worst time. There are many people that got in this situation that ended up having to postpone retirement and take crappy jobs.
Bonds would help cushion the blow and ride out the storm.
@@Gr8thxAlot You should get good with money , then you will not need to sell stocks. Being good with money means you have excess cash.
When calculating percentage invested in stocks and percentage invested in bonds, do you consider other investments like real estate, or owning your own home in those types of calculations? Would that change things if you retired with a home that was paid for? What would the percentage recommendation of stocks versus bonds be then? Would it be the same? Thanks!
Good question.
I’m thinking the percentages would change in accordance to the person’s scenario.
More risk more reward...buy FDGRX or Vanguard Growth Company...I like a ETF VGT...do NOT panic sell on the dips....hold😊
Rob - What do think about adding money market funds to the mix since they're now over 5%?
At 5% return, over the past 3 years you would have lost 3% to inflation (18% under the current administration). While 5% feels nice compared to the sub 1% that money markets were offering in the past, if it is smaller than inflation it’s not much of an investment. Better than putting it under the mattress.
What if you have a fixed perpetuity. My wife is a teacher and she is going to collect pretty fat pension. To me this is a fixed income so do I take that into account?
Maybe the formula for taxable is higher in equity because bonds tend to generate more ongoing taxable events?
Are there any studies that compare an investor with a fixed asset allocation vs. glide path?
How does retiring early impact this?
BND has a 10 year 2.5% cagr. I’ve heard there’s better ways to go bondS just don’t know it.
Rob,
Right now I've got VOO, VOE and VBR for my stock portion. This is just historically how it happened, I had a "brilliant" idea to tilt to smal cap & VALUE when I initially formed my portfolio.
Should I get rid of these and just get VTI?
I wanted to do that but hesitating because I don't understand the tax consequences... They are up like 50% vs. my cost basis. Thanks!
Not sure of the amount of time you have had your money invested? Have you utilized the portfolio analyzer? Like you I am looking for the best return without a big downside.
Try an total return etf backtest of 50% VIG and VYM rebalanced once a year and test it against VTI you might be surprised at the risk vs.reward
@@robc8468 back-testing by design uses historical data. The Fed has kept fed fund rate near zero over 10 years. The rate over the next 10 years is unlikely to be near zero again. It is true that "past performance is not indicative of future returns"
Rob, I don’t understand your bond/stock comparison chart. You chose US Stock Market and US Bond Market. What does that mean? Which investments do those involve?
I ran the comparison between Vanguard Total Bond Market Index (VBMFX) vs Vanguard Total Stock Market Index (VTSMX) and SPY (etf) S&P 500. I chose SPY, because it’s history reaches into the 1990s as well. The stock funds have crushed the bonds since 1995. They came close for two brief periods, early 2003 and early 2009. The $10,000, from 1994 to today, grew to $34,797 for bonds, $170,797 total market and $176,141 for the S&P 500. Even with volatility, and except for a few months in early 2009, your investment would always have been worth more in stocks. Less volatility doesn’t trump the actual value of the investment.
@12:20: If you're not taking out money, volatility doesn't matter. Overall gains, do. And from your chart, stocks will likely give you twice the money in retirement than bonds. Why hold bonds until the risk of a downturn becomes important? When you're 40, there's virtually no chance bonds help you, if you're planning on retiring at 65-ish.
What about your sanity? Imagine you turned 45 in 2001 with a 100% stock portfolio and watched bonds outperform stocks until you were 58..
Think about it
@@rajvo7406 Okay, let's think about it:
Starting with 1M in 2000, stocks would be ahead by 2006, so you were only "at risk" for 6 years, and you'd be ahead 4.12M today. Stocks are the clear winner by a huge margin.
Let's check the 2008 crash, to see how the past two major declines turned out:
Starting with 1M in 2007, stocks would be ahead by 2012, so you were only "at risk" for 5 years, and you'd be 3.26M ahead today.
So, if you're not selling within 5 years, you're millions of $ ahead by sticking with the S&P 500.
Btw, I was 100% in stocks in 2001 and 2008, and I'm better off than if I had let emotions ruin my portfolio. Short of a crystal ball, stocks are the best ROI available. I retired in 2010.
If you're retiring within 5 years or so, then volatility is important, and it's increasingly important as your time horizon diminishes. That's why I prefaced my comment with "if you're not taking out money".
@@rajvo7406 " ...45 in 2001 with a 100% stock portfolio and watched bonds outperform stocks until you were 58."
Bonds didn't outperform Stocks from 2001 to 2014. If you started with 1M in 2001, then at 58, you'd have 2.04M with a 100% stock portfolio but only 1.24M with a 100% Bond portfolio.
By being "safe", you would have been behind 800k over those 13 years.
If you're not retiring soon, then the fiscally best option is 100% stocks, assuming you put the money in the market and just leave it there. If you can't control your emotions (and sell when the market is down), then Bonds could ave you from yourself. But if you understand how the market works, you realize there are ups and downs, but staying the course wins in the end.
Another interesting stat is that if you put $100 in stocks and $100 in bonds in 1928, you'd have 787M in your stock account and 2K in your Bond account today.
Great vid Rob. I am and in year two of retirement at age 61. I think I will drift towards this guidance.
@Rob Berger signed up for New Retirement and it’s great however I noticed the program never asks about your asset allocation, only optimistic and pessimistic expected returns, whether it’s in a tax-free or taxable account. Unless by linking your accounts they can somehow have direct access to information from your brokerage, I wonder how they can make projections unless it’s just simple math. Great stuff as usual!
It's just simple math for the estimates. What do you anticipate your returns to be in each of those various accounts, put that in (on the paid version) and it runs the math out for you. I think their monte carlo simulations will flex it based on deviations possible for the markets.
Bengen’s paper was published in 1996. Has anyone run the numbers again in 2024 to see if the recommendations need to be adjusted?
To what extent does Stock/bond allocation depend on the size of a portfolio vs spending need? Assume you need only 2% from your portfolio wouldn't it make sense to allocate more to stocks when aiming to maximize your end of life estate ?
Rob…I have that issue. Do you remember when ROM The SpaceKnight fought Powerman and Iron Fist?
Great video but I think your net worth could somehow play into your allocation. Should someone with a net worth of $10 million be allocating the same as someone with a net worth of $300K?
Many good sources I’ve read and listened to say yes. However tax efficiency is key. A good accountant is a valuable investment unless you pay an advisor who offers this.
Of course not! If you have $10M in assets, consider putting enough to cover 3 years expenses in low risk funds or banks, and other rest in a Total Stock Market Index, preferably in a Roth account. If you have $300K, allocation formulae, taking account of income and expenses, makes more sense.
Could you please talk a little more on ETFs munis and duration, especially when over 75 and 32 % tax bracket. Suggestions with taxable accounts. Are intermediates too risky. I’m 60/40 as.
Screw it, I’m doing 100% S&P500 until I reach my FI number and then I’ll allocate it like this video😊
Take a shot every time rob mentions bill bengen
Need a second bottle.
Rob, excellent video. - - - I have a couple concerns. I'd like to hear your thoughts about.
#1 - I am troubled to think that a person would go into retirement (age 65?) holding 50% (or more) of his portfolio in stocks. A 65 year old person can't invest for long term as he could die almost anytime and probably doesn't have a family member who could/would manage the portfolio after he dies.
#2 - Starting in the mid-1980s and contining for about 30 years, virtually every brokerage / investment advisor was promoting an asset allocation of 60% in stocks and 40% in bonds, or some variation thereof. It all worked out pretty well, as it was a declining interest rate environment and bond values largely rose. - - - However, we have been in a rising interest rate environment for 12-18 months. It seem like an investor needs to take the interest rate environment into account when it comes to asset allocation. However, your video shows no sympathy for that view.
What about other considerations like other streams of income in retirement (rentals, etc.)
Hi Rob, if bonds are supposed to be the safe portion, why invest in intermediate or corporate at all? Why not just have your safe portion of the portfolio in a short term treasury bond fund like VSBSX. And just have the risk assets be total market index funds. Thanks, I really appreciate your insights.
Return.
I’m not sure, but perhaps to add more diversification to your portfolio.
So, please, can anyone tell me what is the problem with not buying bonds but instead buying annuities, if you want more security? I never was a fan of bonds.
I'm 51 and still sticking to 90/10. Guess that makes me aggressive.
Yet there are a few high profile men like Kyosaki and Schiff who claim gold and silver need to be at 10% hedge as well. Not sure what their angle is if im not buying from them.
How would you consider Stock/Bond allocations, if one is not dependent and will never be dependent on income from stock/bond investment , since individual has other income like pension or other income.
Good question.
Most would argue for an 80% stock allocation, or higher in that situation.
I roll with 90/10 because those funds will not need to be tapped for at least 10 years. Our pension covers day to day expenses.
Your question is exactly why what he is saying is flawed! Every person's plan is different, and AGE is not the main factor in determinig your portfolio mix!
Nobody knows the future and even if 'now' your thinking is you won't be dependent on income b/c of a pension, you could stay at 100% stock..or 80/20-90/10 range or use 150 and subtract age?..There are more factors but he's using the number just as a general guide for your portfolio mix. Everybody is different and that's why one can see this as flawed.
It’s pretty simple, do I want a 10% return or do I want a 2 1/2% return? Bonds go up, bonds go down. The only thing a bond fund can protect me from is making money.
keep them impromptu. the chat is less clogged up.
I’m 71 years old and retired, but with a part time job. I dump all my earnings in a Roth account. At 65 I had a 50/50 percent account. It is now 70/30 so I’m thinking about rebalancing. My bond allocation is about 50/50 treasuries and bond funds which seem like totally different animals. When people refer to bonds in a portfolio which are they talking about?
If you come upon some money you don't really need, should you invest it conservatively or aggressively? I can think of arguments for either approach.
If you don't need it, I would go 100% in index funds, and no funds.
Donate to a good local charity where you can see it at work helping humans incl children or animals.
Good show. Appreciate links to source data. But, …. now wondering who ghost writes your news letter based on your response to the “…Railroad Tier 2 pension…”. A link from Sundays newsletter - the Morningstar article - stated emphatically if one has a sizable (and one would assume reliable…) pension they should be considered as bond allocation give the “fixed income” nature of the payment. As I have will have a solid pension (34 yrs military and counting), that Morningstar link sent me down a three hour rabbit hole chasing references cited, then more references cited, etc. Per that published, I should never be below 90% stocks. For the record, I won’t have the stomach for that and need to consider ramification for my wife as the pension stops one millisecond after I assume room temperature. FWIW, just busting your chops about the “ghostwriting” but am surprised you didn’t at least reference that piece in your “railroad pension” answer. Love the show.
At least one nice thing about bonds is that the dividends are exempt from state income tax. High-interest savings accounts and high-interest CDs are available at the moment, but I don't keep much in any one bank, considering the problems with banks lately. I have a savings account and CDs with Cap1 online and a savings account with Amex online. My small local bank doesn't offer interest rates to speak of.
I love all the investors who have the answers but never went through a crash. The market can drop and takes 10 years to break even. At 71 I have seen people kill themself for lost in the market.
Wellington fund
I think I need to ask again because the whole bond thing confuses me. My BND etf is up .04% YTD, my VBTLX which is supposed to be the same thing is up 2.18% YTD and my I Bonds and Treasuries are u well over 5% YTD. When you say bond investments what do you mean????
Yep, a huge problem.
Supposedly Bengen was using 10yr treasuries. The word “bonds” includes about 10 different investment types from what I can gather. I have never seen a good discussion about this. Also different if you buy funds vs actual bonds held to maturity.
Hey Rob! What do you think about leveraged ETFs like UPRO or TQQQ. How much you should use it or should you use them at all for long term?
100%
Run!
Good questions😂
If you are retired, about 50/50 is a good start (Moderate allocation) and that includes T-Bills, Intermediate Bonds and your money market fund. And a mix of AVGE, FDIF, and MAGS for your equity exposure and Worldwide coverage. You can pick between MAGS and FDIF if you don't want duplicate coverage; however both of these will cover AI, with FDIF being a fund of funds ETF of "DISRUPTOR" companies in five sector ETFs in the stock market.
As the late Charlie Munger used to say, “never sell.” In doing so you avoid the cyclical issue of downturns in the market. Leaving me in a dilemma of either to sell off positions on my $600k portfolio or buying more brk.a and b on the dip?
Buy dividend paying stocks and reinvest the dividend until you need it...O MO MAIN Whirlpool CHCP Ayers capital group Verizon Whirlpool MMM Enbridge Energy Transfer 😊 etc etc
Jack Bogle was I think almost 90 and said he was 50/50. I currently, in my Roth 401k, am 60/20/10/10 which is S&P index, large cap growth index, Mid cap, then small cap index in that allocation order.
Shouldn't choose the worst possible starting date in the last 80 years (in favor of bonds) to run these examples, but point taken.
Jack Boggle founder of Vanguard had a simpler and better system in my opinion.own your age in bonds and the remainder in bonds so a newborn child baby would be 100% in stocks and a 100 year old would be 100% stocks a 50 year old would be 50%/50% a 25 year old would be 75% stocks 25% bonds a 75 year old would be 75% bonds 25% stocks ans so on . I am a bit more aggressive holding half Vanguard High yield corporate and High Yield muni bonds with a combined average yield of 5.6%