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Guest Joel L Frank

Asset Allocation In Retirement

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Guest Joel L Frank

There is a rule of thumb that says one should use his/her age when deciding the percent of holdings that should be invested in bonds. Example: the retiree is 70 so 70 percent is invested in bonds and 30 percent in equities. This rule is best for those that do not have a fixed income pension. A fixed income pension can be thought of as having a bond portfolio equal to 10 times the annual pension. Assume one has a $60,000 pension---this can be thought of as having $600,000 in bonds.

 

Having said that, the 70/30 split will be much too risk averse for our 70 year old retiree. In such cases the retiree would be better off in having a 60/40 split in favor of equities.

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Joel, what do you think for the retiree who does have a pension? Should that serve as the "bond--conservative" portion and then go with a 100% equity portion?

 

Edd

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Guest Joel L Frank

Joel, what do you think for the retiree who does have a pension? Should that serve as the "bond--conservative" portion and then go with a 100% equity portion?

 

Edd

Yes, in my view that is fine; provided you have given stop loss orders to your broker for each stock you own. With stock mutual funds you have to sell your position by yourself.

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Thank you, Joel. So from your thinking, I as a teacher retiring in 5-8 years with a state teacher pension, should save only equities in my 403b and 457 plans? You post frequently and seem knowledgeable, so your opinion would be appreciated. I have always felt that I might be uncomfortable in 2030, for example, at losing a large portion in a big bubble recession (2000, 2008). Over the long run, the equity portion should come back, of course. For my wife and I, our teacher pensions will be the main retirement funding that we will have, and the 403b is more icing on the cake--which I want to see survive, and not have to rebuild every 8 years or so. No one can predict the future, understood.

 

Just planning and curious as to others thoughts and strategies. My retired friend has a very different view from what Tony described above.

 

Thanks,

Edd

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Guest Joel L Frank

 

 

 

Yes, in my view that is fine; provided you have given stop loss orders to your broker for each stock you own. With stock mutual funds you have to sell your position by yourself at the price your b/d would have executed the order if mutual funds were allowed to take stop loss orders.

 

Joel, what do you think for the retiree who does have a pension? Should that serve as the "bond--conservative" portion and then go with a 100% equity portion?

 

Edd

=======================================================================================

Edd,

Thank you, Joel. So from your thinking, I as a teacher retiring in 5-8 years with a state teacher pension, should save only equities in my 403b and 457 plans? You post frequently and seem knowledgeable, so your opinion would be appreciated. I have always felt that I might be uncomfortable in 2030, for example, at losing a large portion in a big bubble recession (2000, 2008). Over the long run, the equity portion should come back, of course. For my wife and I, our teacher pensions will be the main retirement funding that we will have, and the 403b is more icing on the cake--which I want to see survive, and not have to rebuild every 8 years or so. No one can predict the future, understood.

 

Just planning and curious as to others thoughts and strategies. My retired friend has a very different view from what Tony described above.

 

Thanks,

Edd

===================================================================

 

edd,

 

Based on your latest response I am not, at all, sure you understand the important caveat I made.

 

Joel

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