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If you were me, age 82 living on a pension and Social Security with both qualified and brokerage account investments evenly split and with the goal of leaving as much as possible to our children…
how would you allocate your investments?
I have 55% in domestic stock mutual funds, but including 20% in one stock. 4% foreign stocks, 27% bonds and 14% in short term cash.
None of this is the result of a grand strategy. It is the result of 401k investment options and trying to match them in a rollover IRA and just picking a few mutual funds, mostly index funds.
Most of the bonds are municipal funds of different duration. In recent months I have cut back some reinvesting to build more cash. I just had a shaky feeling about the markets, but probably not logical.
The bond fund interest and the individual stock dividends are intended to provide an additional income stream, if needed, to cope with inflation in the future or to provide income for Connie (age 86) as a survivor when pension income and SS will be less.
I make no claim to being a astute investor, especially one who puts research and effort into investing.
What would you do differently?
How are a portfolio and a bar of soap similar? The more you touch it the smaller it gets.
If you’re happy with how your portfolio has performed don’t mess with it. I believe that sticking with a plan will always yield better results than continuously tweaking it.
That being said since you are looking for feedback. I would start with evaluating the intended purpose of each dollar. It seems that your pension & SS are covering your basic needs. I will have a similar situation and plan to treat that “guaranteed income” as the stable/conservative/bond portion allowing me to limit my use of cash-like investments on the rest of my portfolio. So, I think your 41% allocation to stable investments could serve you and future generations better if it/more of it, were invested in equities.
For equity investments, I have loosely followed the 10-equity class diversification strategy espoused by Paul Merriman. It’s not very exciting (in good markets or bad), because it successfully diversifies your portfolio: growth and value, big and small & domestically and internationally, but it does move steadily up and to the right over time.
If you earmark specific dollars that you intend to leave to future generations, invest those like they should for a longer time line in low cost, well diversified equity funds.
As the investment timeline increases the risk associated with equities decreases and risk associated with bonds increases.
Whatever changes you decide to make (if any) just make sure they allow you to sleep well at night.
“If you earmark specific dollars that you intend to leave to future generations, invest those like they should for a longer time line in low cost, well diversified equity funds.”
This is not directed towards Richard, but in general.
As I have written before for the past several years I have been in the process of converting all of my wife’s traditional IRA (about 1/3 of our retirement assets) to a Roth. This way I will only have to take RMDs from my traditional. As a result my traditional is more conservative in order to meet our overall allocation. My traditional is, and hopefully will be the only fund tapped to supplement our Social Security income, and my small pension.
My wife’s Roth is invested 100% in Vanguard Total World ETF (VT) as hopefully this portion of our portfolio will never be touched and thus both grow and be inherited tax free. Under current tax law, always subject to change, our children can also wait to tap these funds for an additional 10 years after we are gone for further tax free growth. If my wife lives to approximately the same age as her mother did (103), and my children wait 10 years after our passing that could result in a total of more than 45 years of tax free growth.
Well said 👍