# What's the best asset allocation for my age?



## oldmontana (Dec 28, 2019)

https://money.cnn.com/retirement/guide/investing_basics.moneymag/index7.htm
The old rule of thumb used to be that you should subtract your age from 100 - and that's the percentage of your portfolio that you should keep in stocks. For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks.

However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age. That's because if you need to make your money last longer, you'll need the extra growth that stocks can provide.

To find the right asset allocation for you, go to our asset allocation calculator.

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asset allocation calculator.  did not work for me.

I think that if you have enough in cash, CD's, etc. to live on for two years you should be 90% in stock reguardless of your age.

Thoughts?


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## mathjak107 (Dec 29, 2019)

there really is no right allocation by age at any age .

the first question is who are you investing for ?   is it to support yourself ?  just fun money ?  or legacy money for heirs ? in which case you are investing for them not you .

what is your pucker factor ?    are you going to run and bail out at even 30%  equities ?

one of the biggest questions is what kind of ride do i want ?   there are conventional portfolio's of stocks and bonds which really are a bet on prosperity and low rates . they can be pretty volatile even at lower equity levels .  the typical 60/40 falls in this group .

.there are all weather portfolios that strive to make money in prosperity , recession, depression , high inflation , etc ... they give up some gains in bull markets but can make money in down markets too .... so there is a choice in how smooth the ride is as well as do i want more gains in a bull or do i want to spread the gains out over the cycle so i don't take a hit in  the other parts of the cycle .

did you want a comprehensive portfolio with a guaranteed income flow  from an spia  , your own investing , and tax free life insurance  for your spouse ? tax free life insurance to a spouse filing single when one days can be a huge plus  as well as the steady income of the spia when both are alive , while your own investing keeps you growing . .

you need to look at the ratio of discretionary to non discretionary spending you have . no matter how much money you have , if just about all of it is ear marked for  non discretionary expenses   then there may be little to cut back on if need be if we have an extended bear market , so you may want to go a lot more conservative then you might otherwise because you have little slack in the plan .

as you see age is the least of the factors , in fact it is hardly a factor at all for the most part .

as usual when they try to give simple answers to complex questions they are likely the wrong answers .

cash buffers are another thing . research shows there is no difference holding years of cash vs just rebalancing stocks and bonds ... the extra weight of cash in up markets   hurts you compared to keeping little cash and rebalancing when needed . it is bonds that get sold in down markets .

cash buffers are really mental masturbation rather then helpful .  but i do use them  for mental comfort myself .

not that i am advocating it but 100% equities and no cash buckets have worked as well as a 50/50 allocation through retirement .

yep all we fear about spending in down markets has not mattered at all since the up years which are 2/3's of the time are so much greater they easily pay for the down years .

50/50 has a 95% success rate out to 30 years at 4% .. 100% equities is 93% .. but going out longer than 30 years 100 equities has actually done better and failed less times than 50/50.

because your allocation is highly personalized to you and not your age  , wall street likes to stay away from really identifying your needs and goals so they push age as an easy catchall - one size fits all ...the reality is one size fits few


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## mathjak107 (Dec 29, 2019)

as  famed researcher michael kitces says  about cash buckets .

*Executive Summary*
As baby boomers continue into their retirement transition, two portfolio-based strategies are increasingly popular to generate retirement income: the systematic withdrawal strategy, and the bucket strategy. While the former is still the most common approach, the latter has become increasingly popular lately, viewed in part as a strategy to help work around difficult and volatile market environments. Yet while the two strategies approach portfolio construction very differently, the reality is that bucket strategies actually produce asset allocations almost exactly the same as systematic withdrawal strategies; their often-purported differences amount to little more than a mirage! Nonetheless, bucket strategies might actually still be a superior strategy, not because of the differences in portfolio construction, but due to the ways that the client psychologically connects with and understands the strategy!


https://www.kitces.com/blog/are-retirement-bucket-strategies-an-asset-allocation-mirage/


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## retiredtraveler (Dec 29, 2019)

oldmontana said:


> https://money.cnn.com/retirement/guide/investing_basics.moneymag/index7.htm
> The old rule of thumb used to be that you should subtract your age from 100 - and that's the percentage of your portfolio that you should keep in stocks. For example, if you're 30, you should keep 70% of your portfolio in stocks. If you're 70, you should keep 30% of your portfolio in stocks.
> 
> However, with Americans living longer and longer, many financial planners are now recommending that the rule should be closer to 110 or 120 minus your age. That's because if you need to make your money last longer, you'll need the extra growth that stocks can provide.
> ...


I'm totally out of stocks, and have been. Yeah, I missed all the huge market gains. But I'm a believer in the Suze Orman idea that if the market tanks, it could be years to recover. At almost age 70, I don't have years to recover. We have eveything in bond funds, largely junk bond funds, that give us a steady income, regardless of the price. Mathjak would probably disagree with that strategy, but we've been with this mix of junk bond and more conservative bond funds for over 10 years getting an 7-8% (+ -) total return on them all this time. We're fine with that.


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## mathjak107 (Dec 29, 2019)

retiredtraveler said:


> I'm totally out of stocks, and have been. Yeah, I missed all the huge market gains. But I'm a believer in the Suze Orman idea that if the market tanks, it could be years to recover. At almost age 70, I don't have years to recover. We have eveything in bond funds, largely junk bond funds, that give us a steady income, regardless of the price. Mathjak would probably disagree with that strategy, but we've been with this mix of junk bond and more conservative bond funds for over 10 years getting an 7-8% (+ -) total return on them all this time. We're fine with that.


i like more diversification , but junk bonds are a lower risk  alternative to stocks .. but like stocks they will get beat up in a recession and offer little bond like qualities ...

i use an all weather portfolio myself that makes money up or down .... plus another income oriented portfolio .. both work fine for us and offer lots of REAL  diversification instead of just betting on prosperity and low rates


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## OneEyedDiva (Dec 30, 2019)

mathjak107 said:


> as  famed researcher michael kitces says  about cash buckets .
> 
> *Executive Summary*
> As baby boomers continue into their retirement transition, two portfolio-based strategies are increasingly popular to generate retirement income: the systematic withdrawal strategy, and the bucket strategy. While the former is still the most common approach, the latter has become increasingly popular lately, viewed in part as a strategy to help work around difficult and volatile market environments. Yet while the two strategies approach portfolio construction very differently, the reality is that bucket strategies actually produce asset allocations almost exactly the same as systematic withdrawal strategies; their often-purported differences amount to little more than a mirage! Nonetheless, bucket strategies might actually still be a superior strategy, not because of the differences in portfolio construction, but due to the ways that the client psychologically connects with and understands the strategy!
> ...


Interesting reasoning for why the bucket strategy may be better. Do you use one of the strategies (eg: 3 or 4% rule, bucket method) or just wing it?


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## OneEyedDiva (Dec 30, 2019)

I read that now financial "experts" have changed that to subtract your age from 120 to find the percentage one should keep in stocks and that investors should keep more in equities because we have longer life spans.  But for the most part, I agree with what Mathjak replied.


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## mathjak107 (Dec 30, 2019)

OneEyedDiva said:


> Interesting reasoning for why the bucket strategy may be better. Do you use one of the strategies (eg: 3 or 4% rule, bucket method) or just wing it?


I use the bob cyatt 95/5 method for taking withdrawals...it is simple and dynamic ....

each year this week we look at our balance ...we set as goal  posts 4% of the actual balance..

if markets are down  you take the higher of. 4% of the balance or just 5% less then the prior year..

it rewards you in up years yet let’s you still pay bills in downs years without big cuts .

odds are even with a cut you are still higher than the traditional 4% draw would have left you


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## mathjak107 (Dec 30, 2019)

OneEyedDiva said:


> Interesting reasoning for why the bucket strategy may be better. Do you use one of the strategies (eg: 3 or 4% rule, bucket method) or just wing it?


Buckets are not better ... just rebalancing a traditional equity / bond portfolio works best to raise cash ..... buckets are better mentally for people since we like compartmentalization


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## OneEyedDiva (Dec 30, 2019)

mathjak107 said:


> Buckets are not better ... just rebalancing a traditional equity / bond portfolio works best to raise cash ..... buckets are better mentally for people since we like compartmentalization


Well they are *perceived* to be better for the reason the article stated.


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## mathjak107 (Dec 30, 2019)

OneEyedDiva said:


> Well they are *perceived* to be better for the reason the article stated.


Mentally yes , as a financial move -no.  .. 
Rebalancing works better without the weight of so much cash ... some buckets go up to 7 years cash .


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## oldmontana (Dec 30, 2019)

mathjak107 said:


> there really is no right allocation by age at any age .
> 
> the first question is who are you investing for ?   is it to support yourself ?  just fun money ?  or legacy money for heirs ? in which case you are investing for them not you .
> 
> ...



Yes, one size fits few.

Everyone has different situations and age is a factor as are many things.


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## mathjak107 (Dec 30, 2019)

Age alone is one of the smallest factors . The problem is Wall Street made it one of the biggest if not the only factor


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## Floridatennisplayer (Dec 30, 2019)

I‘m 64.  Asset allocation is now 38/62.  Fortunate to have a zero withdrawal rate.  Enough in the equities game for fun, but I’m done chasing big gains.  No longer have the emotions to handle a 50% portfolio loss and the time frame to recover my position.  So I resist the urge to jump in deeper.  Just not worth it at this point in life.

Waiting on one of my stock holdings to get a buy out from a larger pharmaceutical company.  Then I’ll drop to a 25/75 position.


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## Butterfly (Dec 31, 2019)

mathjak107 said:


> there really is no right allocation by age at any age .
> 
> the first question is who are you investing for ?   is it to support yourself ?  just fun money ?  or legacy money for heirs ? in which case you are investing for them not you .
> 
> ...



I like your term "pucker factor."  It certainly clearly expresses the emotional response involved!


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## mathjak107 (Dec 31, 2019)

well what we think we can stand and what we feel when it is our money on the line are very different


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## fmdog44 (Jan 3, 2020)

Index funds like the S & P 500. Whatever else you invest in don't ever get out of the 500. With technology being the present and future I would stick some in the Nasdaq as well. "Buy it and forget it."


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## mathjak107 (Jan 4, 2020)

fmdog44 said:


> Index funds like the S & P 500. Whatever else you invest in don't ever get out of the 500. With technology being the present and future I would stick some in the Nasdaq as well. "Buy it and forget it."


be very careful with  the s&p 500 and nasdaq ....  the fang stocks make up 20% of the entire s&p 500 index which is weighted by market capitalization ..35% of the nasdaq is dominated by the  same stocks ...  i fail to see the purpose of having so much of the outcome determined by just 6 stocks .

  you can easily be way over weighted by just 4 stocks of those 6  controlling your entire outcome .

i think it is far better to go with the s&p 500 , then use an extended market fund .. that is all the other 3000 stocks or so less the s&p 500 stocks

here are the percentages of fang in the nasdaq. a whooping 35% in just 4 stocks .


1Apple IncAAPL11.3972Microsoft CorpMSFT10.7333Amazon.com IncAMZN8.2054Facebook IncFB4.432


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## mathjak107 (Jan 4, 2020)

I will take the above a step further . be careful you know what index funds and etf's actually hold and don't go by name .

voo is the s&p 500 ---- vo is  vanguards mid cap etf and vb is vanguards small cap index

VOO vs. VO = 229 overlapping stocks (45% of VOO's holdings, 67% of VO's holdings) <-- this is pretty bad
VO vs. VB = 20 overlapping stocks (6% of VO's holdings, 1% of VB's holdings) <-- not bad
VOO vs. VB = 28 overlapping stocks (6% of VOO's holdings, 2% of VB's holdings) <-- not bad, but strange

on the other hand i-shares etf's

IVV vs. IJH = 0 overlapping constituents
IJH vs. IJR = 0 overlapping constituents
IVV vs. IJR = 0 overlapping constituents


one of the best combo's is an s&p 500 fund and then season to taste with an extended market fund ..that is all the stocks in the wilshire less the s&p 500 stocks . that would be as an example voo and vxf etf's with vanguard

that is how you stop the overlap very simply .

whay you want to avoid is the over weighting of the fang stocks which can wipe out any diversification in stock holdings from all the other holdings .


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## Lethe200 (Jan 6, 2020)

There is no simple easy answer, since so much depends not only on your own circumstances but also your risk profile.

Most of our income is from a pension, with my SocSec adding a modest amount and a 3.5% distribution from our portfolio. The last is strictly discretionary spending - which came in handy with $10K of house expenses just before the holidays, LOL. 

We will have some unusual expenses in 2020 so our tax position will shift. Our CFP firm has moved us to a 50/50 portfolio for the time being.


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## mathjak107 (Jan 6, 2020)

Now there is someone who gets it


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## street (Jan 6, 2020)

75/15/10 no pension but live from SS and the 10%.  I have no plans on using the 90% and if all works it will be a legacy fund.
As far as AA like the great advice you already got is you need it to fit you.  If you don't need it to live/expenses then I would risk having a high equity percentage.  You will need to weather all storms in down years and time will reward you greatly if you don't sell. 
Good luck.


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## oldmontana (Jan 6, 2020)

street said:


> 75/15/10 no pension but live from SS and the 10%.  I have no plans on using the 90% and if all works it will be a legacy fund.
> As far as AA like the great advice you already got is you need it to fit you.  If you don't need it to live/expenses then I would risk having a high equity percentage.  You will need to weather all storms in down years and time will reward you greatly if you don't sell.
> Good luck.


That sounds like a good plan.  

If you do not need money in the next few years why not take risk?


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## mathjak107 (Jan 7, 2020)

even a 50/50 mix has more then a decade of bonds and cash  for spending near term ... so allocations need to be made based on goals  , pucker factor and needs ,  not  age ... even pucker factor should be low on the list since studies show that those who are gun shy are gun shy at any allocation in a down market .  they just have lower trigger points so the best thing is if one is so skittish they should have a third party manage things and introduce another level between themselves  and the sell button .

personally i cant see working , investing and saving my entire life only to have such a low draw rate that i don't need the money i worked for ...

if our budget was suddenly doubled we would enjoy every penny and find a use for the money that we enjoy .


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## street (Jan 7, 2020)

Spending money just to spend money isn't in my DNA.  We spend money on everything we need or want so I couldn't imagine spending double the money just to spend.  Just not me but not condemning anyone that does.  Just saying.


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## oldmontana (Jan 7, 2020)

street said:


> Spending money just to spend money isn't in my DNA.  We spend money on everything we need or want so I couldn't imagine spending double the money just to spend.  Just not me but not condemning anyone that does.  Just saying.


Spending money just to spend money. I agree.  But I enjoy giving money every month to four on my favorite  charities..


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## mathjak107 (Jan 7, 2020)

I guarantee you if I gave everyone here 50k with the stipulation that it must be spent and enjoyed just about everybody would find a way to enjoy it ....if I did it for a few years you would be chompin at the bit waiting for it ....eventually that would just become your lifestyle


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## street (Jan 7, 2020)

oldmontana said:


> Spending money just to spend money. I agree. But I enjoy giving money every month to four on my favorite charities..


Absolutely charity giving is a big part of my life also.   As far as spending to spend on earthly things just to spend, no I'm to frugal for that.


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## oldmontana (Jan 7, 2020)

mathjak107 said:


> I guarantee you if I gave everyone here 50k with the stipulation that it must be spent and enjoyed just about everybody would find a way to enjoy it ....if I did it for a few years you would be chompin at the bit waiting for it ....eventually that would just become your lifestyle


"...if I did it for a few years you would be chompin at the bit waiting for it"

You can't speak for me!


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## mathjak107 (Jan 8, 2020)

oldmontana said:


> "...if I did it for a few years you would be chompin at the bit waiting for it"
> 
> You can't speak for me!


did you read what i said .... I SAID JUST ABOUT EVERYBODY ....  NOT YOU


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