What is the best asset allocation for someone either retired or on the verge of being retired?

Also, just how much money do YOU think a person needs in order to retire?

Thanks,

AM

>> What is the best asset allocation for someone either retired or on the verge of being retired? <<

The answer varies greatly based on individual circumstances. How much money do you have in the portfolio, and how much of it do you need? Do you want to let most of it compound to pass to heirs, or do you intend to use most of it yourself? What's your tolerance for risk and volatility?

Some people who don't need much (if any) of their retirement savings, who can tolerate risk and intend to pass the wealth onto their children can probably put 80% into stocks without batting an eye. Others in more cautious and conservative circumstances may want to vary from, say, 0-60% stocks depending on a number of factors.

As a starting point, I'd like to see people put about 5 years of needed income into "safe stuff" that has very little volatility -- cash, CD ladders, maybe ultrashort bonds. Another 5-10 years worth of withdrawals can go toward things like dividend stocks, REITs and other somewhat riskier investments which throw off a lot of income. Everything above that can often be put into a diversified stock portfolio or stock mutual fund with little risk, since you'd be "playing" with money you won't need for at least 10-15 years. Again, this is just my preference and it's about how I think a typical retirement investor should go.

#29

AM you may be asking the wrong question -- I suggest the more important question is "How much money can I get from my current retirement nest egg without running out of money?" -- Technically you need to say how long you expect to live on the money --

But if you basically want to be certain of not running out of money and being able to increase for the official, government cost of living increases (the CPI) -- the answer is in the range of 4.0 to 4.5% -- So if you have $400,000 --- you can expect to withdraw $16,000 to $18,000 in the first year -- and increase with the CPI. In order to make this work you need to invest about 60% of your money in something like and Index fund and 40% in bonds/CDs.

There is a whole lot of information on this at:

http://tinyurl.com/2ev63

Gordon
Atlanta

What is the best asset allocation for someone either retired or on the verge of being retired?

Here's the answer!

http://www.retireearlyhomepage.com/accum1.html


Also, just how much money do YOU think a person needs in order to retire?

Depends on where you want to live, and what sort of life-style you want to lead.

I actually figured it out when I first came to Motley Fool. I entered 5 years of our expenses in Quicken and looked at them to see what I wanted to change. Then I estimated our tax burden and added that in. We needed $2,000,000, but we live in an expensive area. And I don't remember if that included college and weddings for the kids or not.

I'm currently figuring it out again.

Vickifool

What is the best asset allocation for someone either retired or on the verge of being retired?

Have you seen Sue Stevens' article in Morningstar - "Model Portfolios for Retirees"?

http://news.morningstar.com/article/article.asp?id=103823&_QSBPA=Y&rsection=after1


Also, just how much money do YOU think a person needs in order to retire?

There's only one answer to that question..."It depends"!

Regards,
Bill

The idea of some kind of fixed asset allocation makes no sense.

A good trader looks at the areas that are doing well and stays in those areas so long as the trend continues. If nothing is doing well, then it is time to be short, using some of the ProFunds "short" funds.

At this point, the major action is in the emerging markets, which is where I have most of my wife's money. In my own account, I am trading U. S. stocks and some ADRs, notably TTM, an Indian company which has done very well. One of Cramer's picks. For a longer-term thing, I am holding BMD, aggregates and Canadian oil sands.

I am not particularly proud of my record at this time, since I have just been learning how to trade stocks. Still,

September 1, 2003 value of my IRA: $1,127,248.87
Money taken out at different times: $310,000.00
Current value as of today's close: $1,169,131.50

If I were doing mutual funds at this time, and had the freedom to buy the following (my wife's 403b account is limited to Fidelity funds), this is what I would be holding:

75%
ANGLX
MEMEX
UMEMX
PSPFX
FBRVX
USCOX
VALUX
25% UAPIX/UCPIX, depending on market timing, as a hedge.

Of course, in an account over $500,000 I would probably add some additional funds.

But of course these funds have to be monitored closely.

>> The idea of some kind of fixed asset allocation makes no sense. <<

Of course not. We all know most retirees who are concerned about the size and volatility of their portfolios are eager to become active traders and market timers.

#29

Also, just how much money do YOU think a person needs in order to retire?

OK - to stick my neck out I'll say between 22 and 25 times your annual income would be in the right ballpark. Or perhaps more correctly would be about 25 times your expected annual retirement expenditures (with the expenditures including taxes).

Here's the math. Let X be your income before retirement. And let's assume that you save 15% of your income each year. (You can change this assumption later if you'd like.) Finally, let's use a withdrawal rate of 4%. That's the percentage of your retirement nest egg that you will withdraw each year - and my best recollection of the oft-discussed SWD. Again, you can adjust this as you see fit.

Since we assumed you're saving 15% of your income, you are spending 85% of it on something. And once you retire, we'll assume you stop adding to your retirement savings. So you really only need 85% of your pre-retirement income to live on. If we let Y be the retirement nest egg needed, we've got:
.85X = .04Y or Y = 21.25X.
Your retirement savings would be 21.25 times your annual income. I rounded that to 22 times.

If you are a better saver and put away 25% of your income, you'll only need to save about 19 times your annual income. And if you emulate some of the FIRE stories you read and save 40% of your income, you only need to accumulate 15 times your annual income.

Yes, this is oversimplified and far too analytical. It doesn't give any consideration to changes in lifestyle. But at least its one tool to use to start estimating what you need to accumulate.

--Peter

ptheland:

<<<Also, just how much money do YOU think a person needs in order to retire?>>>

"OK - to stick my neck out I'll say between 22 and 25 times your annual income would be in the right ballpark. Or perhaps more correctly would be about 25 times your expected annual retirement expenditures (with the expenditures including taxes).

Here's the math. Let X be your income before retirement. And let's assume that you save 15% of your income each year. (You can change this assumption later if you'd like.) Finally, let's use a withdrawal rate of 4%. That's the percentage of your retirement nest egg that you will withdraw each year - and my best recollection of the oft-discussed SWD. Again, you can adjust this as you see fit.

Since we assumed you're saving 15% of your income, you are spending 85% of it on something. And once you retire, we'll assume you stop adding to your retirement savings. So you really only need 85% of your pre-retirement income to live on. If we let Y be the retirement nest egg needed, we've got:
.85X = .04Y or Y = 21.25X.
Your retirement savings would be 21.25 times your annual income. I rounded that to 22 times.

If you are a better saver and put away 25% of your income, you'll only need to save about 19 times your annual income. And if you emulate some of the FIRE stories you read and save 40% of your income, you only need to accumulate 15 times your annual income.

Yes, this is oversimplified and far too analytical. It doesn't give any consideration to changes in lifestyle. But at least its one tool to use to start estimating what you need to accumulate."

I will attempt to simply and say

Amount Needed to Retire = 25*(Necessary Retirement Income - Other Sources of Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses

Other Retirement Income = non-portfolio expected income, like any defined benefit pensions, social security (subject to whatever assumptions about longevity), annuities, etc.

25 = reciprocal of 4%; if you believe that the SWR will be lower, than the multipler would be higher, but would still be the reciprocal of your expected SWR

Regards, JAFO

>> Amount Needed to Retire = 25*(Necessary Retirement Income - Other Sources of Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses

Other Retirement Income = non-portfolio expected income, like any defined benefit pensions, social security (subject to whatever assumptions about longevity), annuities, etc.

25 = reciprocal of 4%; if you believe that the SWR will be lower, than the multipler would be higher, but would still be the reciprocal of your expected SWR <<

Closer, but this still assumes that all your other sources of income keep pace with inflation. Social Security does (in theory, anyway), but most non-government pensions don't. So in that case, your personal investments have to provide an income stream that makes up for the lack of inflation protection in most private defined-benefit plans. In that case, the multiplier may need to be in the neighborhood of 28 to 30, depending on your expectations for inflation and remaining life expectancy.

Of course, that's mostly moot for Generation X and their descendants, most of whom won't have a pension.

#29 (who is actually vested for a puny pension with a previous employer, to the tune of $250 a month at age 55 or $620 a month at age 65, which will buy one gallon of gas by then)

Since we assumed you're saving 15% of your income, you are spending 85% of it on something. And once you retire, we'll assume you stop adding to your retirement savings. So you really only need 85% of your pre-retirement income to live on. If we let Y be the retirement nest egg needed, we've got:
.85X = .04Y or Y = 21.25X.

Yes, this is oversimplified and far too analytical. It doesn't give any consideration to changes in lifestyle. But at least its one tool to use to start estimating what you need to accumulate.

I guess I'm even analytical, because I would further assume that you will no longer be paying the 6.2% SS and 1.45% Medicare taxes (assuming you are a W2 employee earning less than the SS max). So I would adjust the formula to be:

(.85 - .062 - .0145)X = .04 Y, which becomes .7735 X = .04 Y or Y = 19.34 X

So an estimate of 20 times your income, assuming you are saving 15%, may be more appropriate.

Fools who have significant capital gain, dividend or self-employment income, or who make over the SS limit will need to adjust based on their individual circumstances, and this analysis still doesn't account for changes in your lifestyle, such as having a paid off mortgage, wanting to travel more, increased medical costs, etc.

AJ

Have you seen Sue Stevens' article in Morningstar - "Model Portfolios for Retirees"?

http://news.morningstar.com/article/article.asp?id=103823&_QSBPA=Y&rsection=after1


Also, just how much money do YOU think a person needs in order to retire?

There's only one answer to that question..."It depends"!

I was going to say what Bill did, "It depends". How long do you need for the money to last? (Or how old are you?) How much are your expenses? And how large is your nest egg? These can force siome decisions (or not).

The morningstar article overlooks all of that. Focuses on things like "conservative", "aggressive". Seems only a partial answer.

I start by suggesting very liquid assets for five years worth of expenses. Then at least another five years worth in conservative CD's or Bond-type investments, depending on your situation and taste. The rest should be in a growth portfolio. Only you can define what you mean by "growth" (But it should not be defined as High-flier risky stocks line the NAS.) It should include a mix of asset classes, includint REITs.

Am I following my own advice? Not completely. Still working on step one, actually. I have SS and a small pension as a base, and income from our American Legacy Annuity (a variable - mutual fund based). Then I am taking income from my REITs. This amounts to a good bit of our income needs, but we still need income, so I am setting up a stream from some of the mutuals. Now to set up the cash accounts. I actually had a year's worth in Vanguard's MM acount, but then I got our tax bill, along with the Roth IRA's for us both and the Missus's SEP IRA. And estimated taxes for 2006. Poot. 8^( Sorta cleaned out the till.

cliff

The idea of some kind of fixed asset allocation makes no sense. <<

Of course not. We all know most retirees who are concerned about the size and volatility of their portfolios are eager to become active traders and market timers.

What we all should know is that if you have paid attention to your investments you do trade actively (at least with individual stocks) and time the market.

It does not matter what you want, ziggy. What matters is how to make money.

People who want to retire, and in particular retire early, need to learn how to evaluate different investments, and how to move between different vehicles to make money.

It is possible, of course, to accumulate a decent portfolio of you deprive yourself, live on very little money, and just do the stupid thing like put your money in an index fund. Then you can do the 4% thing. If you have $1 million, you get to live on $40,000. Not my idea of a good life.

Well, maybe the people on this board are just too stupid or, by now, too senile, to learn anything about investing profitably. Certainly, this board has provided no decent advice on making money in the market.

ziggy29:

<<<<Amount Needed to Retire = 25*(Necessary Retirement Income - Other Sources of Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses

Other Retirement Income = non-portfolio expected income, like any defined benefit pensions, social security (subject to whatever assumptions about longevity), annuities, etc.

25 = reciprocal of 4%; if you believe that the SWR will be lower, than the multipler would be higher, but would still be the reciprocal of your expected SWR>>>

"Closer, but this still assumes that all your other sources of income keep pace with inflation."

Sort of. If you want to be conservative jsut assume zero other income and use Amount Needed to Retire = N*(Necessary Retirement Income), where

Necessary Retirment Income = annual expenses (including income taxes) plus savings for capital expenses,

N = reciprocal of your expected SWR,

and other income is gravy, to be saved and invested>>>

"Social Security does (in theory, anyway), but most non-government pensions don't. So in that case, your personal investments have to provide an income stream that makes up for the lack of inflation protection in most private defined-benefit plans."

Agreed. Annuities, however, can be plain or inflation adjusted. Persoally, I view the capital expense category as a cover for that inflation adjustment issue, too. But it is easier to calculate if you assume a lifespan and an expected inflation rate - and figure how much additional income you need to set aside each year in the early years to cover the later years.

This also assumes that inflation will be evenly felt by all person and not felt more directly by the retired in the personal categories in which their consumption outpaces the standard used in calculating the CPI. Given the rising insurance and medical costs, including prescription drugs, the personal inflation rate for the retired could be significantly higher than the general CPI rate.

"#29 (who is actually vested for a puny pension with a previous employer, to the tune of $250 a month at age 55 or $620 a month at age 65, which will buy one gallon of gas by then)"

Sounds about like the pension in which I am vested. I generally tend to ignore it in my planning and figure it will be a slush fund that covers errors and inflation matters.

Regards, JAFO

>> Well, maybe the people on this board are just too stupid or, by now, too senile, to learn anything about investing profitably. Certainly, this board has provided no decent advice on making money in the market. <<

See, this goes back to what I've said before.

Not everyone is trying to *maximize* their expected nest egg come time to retire.

Some of us are trying to make just enough to likely make it, consistent with reducing the chance of falling short. In other words, the goal may be to figure out what you think you need, and *minimizing* the chances of not getting there. If all you need is 6-8% per year to get there, why take big risks?

And not everyone has a decadent, opulent lifestyle. Some retirees are perfectly happy making $40,000 a year. My parents haven't made much more than that in retirement; between pensions, Social Security, interest on savings and the RMD from Dad's IRAs, they took in about $45,000 last year. (I know this because Dad died in November and I did the taxes for my mom this year.) But they had simple tastes and they did just fine. They would have been fine on $30-35K. They were not struggling in the least; they had everything they needed and most of what they wanted.

I'm not saying people should set the bar that low. But if people have simple tastes and live simply, they don't NEED to take excessive risks to be able to bring in $100K a year.

You seem to think everyone's financial plan should be to do whatever they can to maximize potential wealth. But many people are risk-averse enough that all they want to do is minimize the chance of falling short, and I think suggesting active trading and/or market-timing for them is a mistake if they only need a rate of return that the market historically has been able to provide. Even if your suggestions would maximize their wealth in the average case (which I question), it adds more risk of losing principal.

Different people. Differenct circumstances. Different goals. Most of us recognize that and say "it depends." You, on the other hand, do little more than push market timing on everyone as a one-size-fits-all.

#29

#29 (who is actually vested for a puny pension with a previous employer, to the tune of $250 a month at age 55 or $620 a month at age 65, which will buy one gallon of gas by then)



Ha! This sounds like the pension that AngelSpouse will be getting from a former employer --- er....if....they don't renege like other companies have done. We figure it will buy a sack of groceries. Maybe.

AM

It is possible, of course, to accumulate a decent portfolio of you deprive yourself, live on very little money, and just do the stupid thing like put your money in an index fund. Then you can do the 4% thing. If you have $1 million, you get to live on $40,000. Not my idea of a good life.



I know single women paying mortgages and raising children on less than $40K - gross. I think maybe your idea of a "good life" needs adjusting. You don't have to be rich to have a good life.


Well, maybe the people on this board are just too stupid or, by now, too senile, to learn anything about investing profitably. Certainly, this board has provided no decent advice on making money in the market.



I know that I'm new to this board, but I really don't think calling the people here stupid is a very "smart" thing to do. This board is, I assume, peopled by folks who are near (or have already reached) retirement. Why on earth would they want to trade away their savings on the market? And making use of an index fund is not stupid. You need an attitude adjustment, methinks.

AM
...just sayin'

Man-o-man. only $1,000,000 saved/invester, or only $45k/year for retirement I must be from another planet. I plan on retiring, in todays dollars, on $30k/year. Dat's my current life-style!

TB

Man-o-man. only $1,000,000 saved/invester, or only $45k/year for retirement I must be from another planet. I plan on retiring, in todays dollars, on $30k/year. Dat's my current life-style!

TB



Good for you, TB.
You give me hope that the human race hasn't completely fallen into the slough of greed and "I wants".

Of course.... a lot depends on WHERE you live, too.
I can't imagine anyone living in California on such a retirement -- but maybe it's possible. Much easier in Alabama. :o)

AM

"Man-o-man. only $1,000,000 saved/invester, or only $45k/year for retirement I must be from another planet. I plan on retiring, in todays dollars, on $30k/year. Dat's my current life-style!

Hi TB

I must be from the same planet ;-) $30K is right about what I live on and do just fine. No mortgage and no expensive hobbies...

Not much sympathy for those who need to spend lavishly to enjoy life...

Take care and God bless your journey.

Ken

I must be from the same planet ;-) $30K is right about what I live on and do just fine. No mortgage and no expensive hobbies...



Argh! The mortgage!
That's another big question for me.
Do we pay it off? Or keep it?
Hard to make more than 5.9% on any income producing investments these days. What to do.... what to do.....?

AM

"I can't imagine anyone living in California on such a retirement -- but maybe it's possible. Much easier in Alabama. :o)"

Hi AM,

Funny you should mention California ;-) I live in Silicon Valley... My largest gas & electric bill this winter was $112, doesn't get cold enough to kill me even if I left the heater off and I don't require air conditioning to make it through the summer, I have ceiling fans so G & A runs around $70 in the summer... Most costs outside of housing aren't all that bad.

All the best to you,

Ken("As Tim McGraw sings, "I hope you get the chance to live like you were dying.")

"Do we pay it off? Or keep it?"

HI AM,

Well, for me it was a no brainer... bought in Dec '82 and paid it off by Aug '92... Lived a "bit" below my means before it was the thing to do. I lived like too many folks up until then, pay check to paycheck... When I sent in the final payment it was like a weight lifted off my back. Now that's just the way it worked for me and I haven't had one moments regret ;-) I didn't need to upgrade my standard of living... bigger this, bigger that...

I bought this place when I was 41 and had just enough money to pay off $2K in CC debt to get an automatic approval on my VA loan. Raises went into the mortgage and what later became my 401K. Paid off my car loan and put that on the mortgage, but then back then the rate was 11% so I felt that was a good return on my money. I went to part time work in '97 and fully retired this January...

If I waited until I had a million I'd still be workin'. We don't know if we'll be able to do anything physically later on, or heck, if we'll even wake up tomorrow!

Regards, Ken http://photos.yahoo.com/lv2dance

#29 (who is actually vested for a puny pension with a previous employer, to the tune of $250 a month at age 55 or $620 a month at age 65, which will buy one gallon of gas by then)

__________________*,*_________________

Ya, but will you need the gas?

Angel,

Welcome to the board. I hope that some of the posts don't drive you away. Seems a lot of pent up frustration with opposing views leads down that name calling road.

And of course - now I am going to post some of my opposing views!



What is the best asset allocation for someone either retired or on the verge of being retired?

The best allocation depends on several factors, some of which can be known at the time of investing - or the time of retirement, such as:

What are the goals, dreams of the individual/couple retiring? How much money will that take? How much will they need? Then how much do they have? - How much will be filled through SS/ Pensions etc.
-That will leave what they need to take out of the retirement account.

Then, with the amount they have and given current yields, and historical returns, what allocation would give them the money they need - within the RISK TOLERANCE of the retirees.

From this you can decide the best "theoretical" allocation.

There are three reasons to invest in bonds:
If the person has some risk adversion. Bonds will decrease the "volatility" but usually at the cost of some returns.
If the bonds will provide the return they need, then why risk more than you need. IF the bonds get to a point taht rival the hsitorical returns of other asset classes, why not load up on more bonds?
If the people are happy with bonds. Always an investing decision.

Given these three things (and the level of each) you determine how much of your portfolio to put into bonds. There are many studies out there that show different equity/bond allocations, but most of them only use the two asset classes and are not very diversified. ie they use the S&P500 and US Treasuries - two of my least favorite investment tools. From these studies, the show that "historically" about ~4% can be taken out and the retirement portfolio balance will last 30 years - but this is given the absolute worst (recent) history has. And this has the two assets I mentioned. So using that, many folks come up with 25 times the amount you will be spending.

This 4% is really only a first year estimate and is a reasonable target. Although if you include several other asset classes, real estate, precious metals, foreign and high yield debt and diversify to more equities than the S&P500, a portfolio can actually survive history with over 5% inflation adjusted withdrawal rate. You would then need about 20 times the annual amount you plan to spend from the account.

The reason I call the 4% a target is because, if you have returns of 15%, then you could take out at least 10% and still have a better chance of you portfolio lasting 29 years than in the historical testing.
Not suggesting you always take out the full returns, but just to note, if 4% is the worst maybe you are not getting the worst and you should be able to enjoy your retirement!!

DrTarr

I can understand why Ken and many other folks pay off the mortgage. The mental relief and the "freedom" they feel is probably a wonderful feeling. I will never know as I plan on having a mortgage well after Tim McGraw quits singing. It just seems to me the little bit extra I can squeeze out is nice.

DrTarr
Who as a financial advisor, would probably say do as I say, not as I do!

"The mental relief and the "freedom" they feel is probably a wonderful feeling."

Hi DrTarr,

Yup ;-) But that's my temperament and so I don't proclaim everyone should do the same... I just relate my story so others can consider it for themselves.

Good to see ya around.

Take care, Ken

I know that I'm new to this board, but I really don't think calling the people here stupid is a very "smart" thing to do. This board is, I assume, peopled by folks who are near (or have already reached) retirement. Why on earth would they want to trade away their savings on the market? And making use of an index fund is not stupid. You need an attitude adjustment, methinks.

AM

Joel thinks everyone should time the market like he does. Anyone too stupid (lazy, busy, inept) to time the market is beneath contempt.

I notice he is not yet retired. I am. I don't time the market. I also have an income well over $40K per year. Actually, much more.

cliff
... I used to time the market. Didn't do as well as Joel. But at that time the timing cube hadn't been invented.

Paid off my car loan and put that on the mortgage, but then back then the rate was 11% so I felt that was a good return on my money. I went to part time work in '97 and fully retired this January...

If I waited until I had a million I'd still be workin'. We don't know if we'll be able to do anything physically later on, or heck, if we'll even wake up tomorrow!



That's the truth. :o)
And... if my mortgage was 11% I'd be paying it off tomorrow!
But with less than 6% (and deductible, too) it's hard to decide.

AM

This 4% is really only a first year estimate and is a reasonable target. Although if you include several other asset classes, real estate, precious metals, foreign and high yield debt and diversify to more equities than the S&P500, a portfolio can actually survive history with over 5% inflation adjusted withdrawal rate. You would then need about 20 times the annual amount you plan to spend from the account.

The reason I call the 4% a target is because, if you have returns of 15%, then you could take out at least 10% and still have a better chance of you portfolio lasting 29 years than in the historical testing.
Not suggesting you always take out the full returns, but just to note, if 4% is the worst maybe you are not getting the worst and you should be able to enjoy your retirement!!

DrTarr





Interesting post.
Thank you.
And thanks for the welcome.
Much appreciated.

AM

I notice he is not yet retired. I am. I don't time the market. I also have an income well over $40K per year. Actually, much more.



MUCH more?
And you keep telling me that U B Pore.
Sheesh. Cliff, you are a hoot! ;o)

AM

"But with less than 6% (and deductible, too) it's hard to decide."

Hi AM,

Well, for me, in the beginning I was paying $800 a month in interest and getting $300 back tax wise... out $500.. After it was paid off I paid $300 more in taxes and put $500 in my pocket... Right or wrong, that helped me keep motivated ;-)

I'm sure you'll decide what's best for you.

Regards, Ken

By the way....
Beautiful woodworking, Ken.

AM

"Beautiful woodworking"

Thanks AM,

I took it up when I quit working full time... something I wouldn't have pursued while on a full time job. I find I use some of the same talent/skills as I did as a technician and engineer... just in a different medium :-)

Regards, Ken

Please, Joelxwill (message 50901), why don't you enlighten those of us who are "just too stupid or, by now, too senile" with some 'decent' advice on making money in the market. For sure we all want/need many more $$$$$$ and are looking for a really quick fix before we all croak.

By the way, how old are you?

I know that I'm new to this board, but I really don't think calling the people here stupid is a very "smart" thing to do. This board is, I assume, peopled by folks who are near (or have already reached) retirement. Why on earth would they want to trade away their savings on the market? And making use of an index fund is not stupid. You need an attitude adjustment, methinks.

joelxwil even criticizes the methods used by Warren Buffett, arguably the greatest investor who has ever lived. I try to ignore him, but it is difficult to stay quiet when he continually gives novice investors poor advice while insulting everyone's methods.

"The mental relief and the "freedom" they feel is probably a wonderful feeling."...

Yup ;-) But that's my temperament and so I don't proclaim everyone should do the same... I just relate my story so others can consider it for themselves...

You and me both. All loans paid in full, no CC, mortgage, auto.etc. It helped me weather the 2000-2002 market remarkably well. Leart a thing or two as a result of it.

FWIW, I live in Los Angeles County, CA. Goal upon retirement is to live in a rural setting. If it were not for the humidity I'd enjoy Al or the cold of VT even better than Los Angeles. Infact, I suspect my S.S. would pay for my life-style there completely.

Cheers,

TB

FWIW, I live in Los Angeles County, CA. Goal upon retirement is to live in a rural setting. If it were not for the humidity I'd enjoy Al or the cold of VT even better than Los Angeles. Infact, I suspect my S.S. would pay for my life-style there completely.

Cheers,

TB





Come up to Washington state. The place is gorgeous. The weather is wonderful. :o)

AM
....formerly lived in Alabama. Too hot. Too many bugs. You wouldn't like it.

"Infact, I suspect my S.S. would pay for my life-style there completely."

Hi TB,

SS covers all my basic costs. I enjoy spending time with my brother in Oregon but I've lived in Silicon Valley since 1950 and it's my home. Some of the things folks complain about don't have much effect on me, like the commute traffic. Probably live here for the rest on my days.

I think the South would be too humid for me. Vt is beautiful in the fall, not sure I would enjoy the winters ;-) I like the valley for it's relatively moderate temperatures. All the best where ever you decide to live in retirement.

Regards, Ken

But many people are risk-averse enough that all they want to do is minimize the chance of falling short, and I think suggesting active trading and/or market-timing for them is a mistake if they only need a rate of return that the market historically has been able to provide.

Ziggy,

I'd like to agree with you, but how can we be certain that a buy-and-hold strategy going forward will provide a rate of return after inflation comparable to the historic average?

I know single women paying mortgages and raising children on less than $40K - gross. I think maybe your idea of a "good life" needs adjusting. You don't have to be rich to have a good life.

It may have something to do with cost-of-living. Trying to get by in San Jose, CA or Fairfield County, CT is hard to do with $40k, but in many areas of the US that money would go pretty far.

"It is possible, of course, to accumulate a decent portfolio of you deprive yourself, live on very little money, and just do the stupid thing like put your money in an index fund. Then you can do the 4% thing. If you have $1 million, you get to live on $40,000. Not my idea of a good life."

Yeah, Joel, you're right.

It would be much better to be an old man glued to a computer every day trying to time the market, while telling everyone how great you are doing and putting down what younger, wealthier folks have done because it disagrees with your method, lol.

"maybe the people on this board are just too stupid or, by now, too senile"

My guess is that you are a good 20 years older than most of the millionaires on this board. Yeah, we're the ones that are senile...

jb

...Come up to Washington state. The place is gorgeous. The weather is wonderful. :o)

Thanks for the invite.

I might do that. On the east side of the mountains. Or may be some small town nestled in a valley. About 40-years ago I lived in Seattle for about a year. Too much rain.

TB

Well, maybe the people on this board are just too stupid or, by now, too senile, to learn anything about investing profitably. Certainly, this board has provided no decent advice on making money in the market.

I know this comment won't do any good, but show me the money -- in other words show me the statistics that show that speculative investing beats the reasonable comments that have been made here. If you load a six chambered gun with five bullets and pull the trigger, one time out of six someone will be very lucky, but that doesn't make him smart, or the people who won't play that game stupid.

Even the reasonable traders who post here occasionally and are helpful in their ideas would never say that. Sorry, I'm irritable this morning.

Hockeypop

People who want to retire, and in particular retire early, need to learn how to evaluate different investments, and how to move between different vehicles to make money.<?i>

It amazes me to read this stuff. If such a program existed, it would be in use by every broker on the planet. Instead, brokers rely on fleecing their clients with high fees and hidden expenses, while attaining piss poor total returns. Don't you think brokers would prefer to fleece their clients, while attaining high total returns, thus increasing the amount of their overall fees and expenses.

Great post... have to add,
When it comes to investing, it is VERY easy to confuse luck with skill.

A note to AM, don't forget about health insurance. I currently pay almost $15K/year for Blue Shield for a family of three, but know Kaiser would be about half that. Insurance cost has doubled for me in the last five years, and I thought it outrageous then... will keep shopping around for a better deal.
Alan
Some luck, some skill, retired five years ago and never looked back.

A note to AM, don't forget about health insurance. I currently pay almost $15K/year for Blue Shield for a family of three, but know Kaiser would be about half that. Insurance cost has doubled for me in the last five years, and I thought it outrageous then... will keep shopping around for a better deal.
Alan



Yes, my health insurance (through my company where I retired - and with Blue Cross/Blue Shield) doubled last year. And this year (just this month) it went up another 10%.

It's outrageous.

AM

Great Board! (except for one individual)
BUT, is there anyone out there that is retired and would be willing to share what their investment strategy is during retirement? From what I can tell only Cliff and Alan are retired, and Cliff mentioned he is still working on his first step towards his plan, yet he's bringing in much more than 40K per year. (Must have a huge nest egg - congratulations!) I just wonder if anyone ever gets very specific with their retirement holdings.
I have many more questions, but I'll leave it at that for now.
Again, thanks for the great board, looking forward to more posts.

"From what I can tell only Cliff and Alan are retired.."

Hi Greg,

Gee, I'm wondering "(except for one individual)" is that me 'cause in my post #50961 "I went to part time work in '97 and fully retired this January..." ;-/ (added emphasis)

Anyhow... As to strategy... Hmmm, try not to spend more than I have comes to mind. I won't repeat my story as I have posted enough recently, so in a nut shell, I learned to live below my means as a start, after having lived paycheck to paycheck until I was 41. I have no where near what Cliff has and so far I'm doing all right. One thing I decided I needed was a paid off house. Again from post #50961, ".. bought in Dec '82 and paid it off by Aug '92... "

I wanted to be able to live on Social Security alone and I can do that, keep the wants simple for the most part and little or no debt.

Portfolio wise...

Bonds ~22% (most all AAA) yielding ~6%
Cash ~27%
Stocks ~51% (Holdings listed in my profile)Gold/silver related securities ~18% ( I may move more into cash soon )

Monthly investment in gym membership... keep the body fit as long as possible... may reduce medical costs down the line ;-)

Enjoy life along the way, you may not live to see a retirement day... not to be blunt about it but life is like that, step off a curb one day and a dang bus runs over you... You're feeling fine and out of the blue the doc has some bad news...

All the best in your journey.

Regards, Ken ("As Tim McGraw sings, "I hope you get the chance to live like you were dying.")

Gee, I'm wondering "(except for one individual)" is that me...

Matt, no it wasn't you I was referring to. Congratulations on your retirement.

One thing I decided I needed was a paid off house.

That's going to be the hardest part for me, I would like to stay in our current house, but will probably have to downsize. Still owe $175K on the mortgage, but it has appreciated 100% since 1999. (Phoenix area)

Thank you for the info.

I think the gym membership is a great thing. That'll probably be one of the first things I do when the time comes.

Greg

"I think the gym membership is a great thing. That'll probably be one of the first things I do when the time comes."

Hi Greg,

The sooner the better unless you are physically active by other means. I was an engineer so my level of activity on the job was on the low side. In '92 I'd been putting on some weight which I'd lost previously. I decided to join Golds. Trying to do it at home just doesn't work for me, and many others. "I'm paying for the gym and I'm going to use it" is how I look at it, a bit of an incentive ;-) I also walk pretty regularly and dance once or twice a week.

Hope you can work out staying in your home. I bought a retirement sized home since I was single and the kids long gone. Probably could have paid 50% more for a larger place but I wouldn't have had any spare funds and going from $0 was going to be a challenge as it was.

I just heard the latest numbers on folks over 55... only 25% have $250K or more for retirement... way too many are at the $10K or less and more at the $50K mark... I wonder what happens to our economy if all these folks stopped spending and just saved all their spare nickels... and what happens if they don't...

Take care.

Take care, Ken

BUT, is there anyone out there that is retired and would be willing to share what their investment strategy is during retirement?

Try the "Retired Fools" board.
http://boards.fool.com/Messages.asp?bid=112955