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AS ANOTHER YEAR draws to a close, I sometimes wish I could slow time down. As I grow older, it feels like life is moving way too fast. Maybe the reason is that I’m enjoying life more. I’ve always felt my life has gotten better as I’ve grown older.
Even though we’re having to deal with the fallout from COVID-19, I like my life. I wouldn’t want to turn back the clock and be young again. I enjoy being 70. It’s a good age to be if you have your health and financial independence.
My wife and I are at a time in our lives where we finally have the freedom to do the things we want to do. Both of our families are doing well. They don’t need us as caregivers or babysitters. It’s our turn to live our lives the way we want to.
It’s an opportunity that comes once in a lifetime for many people. We’re determined to take full advantage of it. I’m not going to jeopardize it in any way. That’s why I have an investment portfolio of 40% stocks, 55% bonds and 5% cash. Some may argue a portfolio like that is too conservative. But I’m thinking that you only need to reach financial freedom once. Why risk losing it?
I get that inflation is a major threat to our financial security. But an investment portfolio like ours should have enough stocks to ward off that threat. According to Vanguard Group’s asset allocation models, a portfolio with a similar mix of stocks and bonds had an average annual return of 8.2% from 1926 to 2020. Even if returns are somewhat lower going forward, we should be just fine.
At this point, I feel our most valuable commodity isn’t our stocks and bonds, but our health. That’s what I worry about. Without our health, we wouldn’t have the freedom to do the things we want to do.
All are great points to keep in mind. One insight I got in the last year from a book on decumulation is about the oft-cited stock market average return since 1926. None of us is retired for 94 years, and there have been some pretty lousy 30-40 year windows between 1926 and now (take a look at what happened to retiree’s who started drawing down their portfolios in 1969). Something to keep in mind when determining your asset allocation and safe withdrawal rate.
In any case, sounds like you won the game – congrats to you. May you and your wife enjoy a happy and healthy 2022!!
As any pundit, FA or RIA will advise, it depends! It depends on your health (no. 1), it depends on your spouses age, number of children, and grandchildren. Do you want to spend all or most your money in retirement or leave a legacy to your spouse, kids and grandkids? People are living longer, healthier, so you need to invest for at least a 25 years in retirement. I de-risk my portfolios as I determine from time-to-time, never have 100% invested (cash is an asset) and I have the three bucket system. If I miss out on a big move not being 100% invested, so be it. The goal is to “preserve” your capital and earn a reasonable return, unless you are a multi-millionaire, i.e., more than $10 MM then it doesn’t matter. And I do not believe in Financial Advisors/Broker Dealers or Registered Investment Advisors. They are all just asset gatherers, because just look at how they pay themselves. They get paid whether you make money or not, since they get paid ever quarter like clockwork. Unless they are giving tax, estate and financial planning advice as part of their “fees” then it is not worth the price, to me. What a business and even Uncle Warren Buffett has stated that he would put his own wife in an index S&P 500 fund (ETFs for me). Is he just pandering to his followers or for real? Don’t believe me, here’s the quote: “One bequest provides that cash will be delivered to a trustee for my wife’s benefit,” Buffett wrote. “My advice to the trustee could not be more simple: Put 10% of the cash in short-term government bonds and 90% in a very low-cost S&P 500 index fund.” (He suggested Vanguard, by the way.)
https://money.usnews.com/investing/funds/articles/can-index-funds-replace-an-advisor
Dennis, I have the identical asset allocation as you. Sometimes I think I am too conservative. I am 67, and my wife is 62. But I agree with Bernstein when he says why continue to play the game when you have won. I believe 40% stocks will get us to where we need to go, and I have cash should the market tank. I think Buffet said you will see who’s not wearing trunks when the tide goes out. I prefer to swim with trunks. Thanks for your article.
As Bernstein once wrote, why keep playing when you’ve already won the game? To realize when you have “won”, you must know what game you are playing. Is it to amass the largest portfolio possible, or, is it to amass enough? I think you chose the latter, which is wise.
Excellent……thanks again for another insightful message. I agree with your AA position. As we near our senior years, we have more time behind us than we have in front of us…. IMHO, being a bit on the conservative side is a wise choice; trying to win the game twice might be a bit too risky. Happy holidays to you and your family!
Merry Christmas and a Happy and healthy New Years.
Excellent! Thank you