Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Support MFO
Donate through PayPal
Is it smart to for retirees to get out of the stock market entirely?
There are many different kind of investors, with many different investing objectives, so the answer to that question varies with each investor. "Smart" is only relative to whether the individual investor is successful at meeting their personal portfolio objectives. One of the "smartest" and well known investors, I have run across on investing forums was "capecod" who use to post on the M* forums. He was a retired professional bond investor, who only invested in bond CEFs, ETFs, and OEFs. When asked about equities, he would state that they were "too speculative" for him, and he preferred to invest, using his professional trading experience, in bonds. Was he "smart"? Everyone I know, who followed "capecod" think he was one of smartest investors they knew! That said, I am not "smart" enough to use his investing system, and my investing objectives are different than capecods, so I use a system I fully understand, that meets my "preservation of principal" portfolio objectives, and that includes very little in equities.
Men got to know his limitations. — Quote from Clint Eastwood in Dirty Harry
I would trust the experience from reputable brokerages such as T. Rowe Price et al than that of a single investor regardless of his or her professional experience.
Everyone is different. The "bucket" approach has alot of followers, although it is hard to track down M* Christine Benz's original articles anymore.
Still, from a purely intellectual basis, it makes sense to set up priorities
1) Money to live on. The amount you keep in cash depends on how much you want to be able to spend and how necessary it is, but it's purpose to to keep you from selling equities at a market bottom.
Then you have to decide how long the bottom will last. Using the longest bear market since my college years, 3/24/2000, it took seven years for the SP500 to recover.
1/11/1973 to 7/16/1980 was 7.5 years.
So I think five years may not be enough, although if interest rates were higher, you could count on replenishing this account with dividends and interest.
Anyone who has ever invested in FI CEFs or knows of their inherent volatility understands that they carry a risk level commensurate with stocks.
Dick and other LT M* FI CEF Forum posters provided me (and many others) with a paint-by-numbers strategy for making profitable FI CEF trades. I traded them for about 2-3 years under their guidance with very good success, but ceased trading them after one too many violent, out-of-left-field price movement shocks to my system.
100% bond OEF Investors seem more than capable of justifying TO THEMSELVES that their strategy is a worthy one. Using Dick as an example though is one of the more creative ones, but does little to convince me that what they're doing remotely resembles "smart" investing.
stillers: "100% bond OEF Investors seem more than capable of justifying TO THEMSELVES that their strategy is a worthy one. Using Dick as an example though is one of the more creative ones, but does little to convince me that what they're doing remotely resembles "smart" investing."
No one on this thread, including me, are attempting to "convince" you of anything. You are an individual investor, who has your own idea of what is "smart", but the point in using capecod in this discussion about "should equity exposure decrease in retirement" is simply that he does not use equities in his retirement investing. He has stated many times that he avoids equities because he considers them "too speculative". There are many different ways to be a successful investor in retirement, whether you use equities or not. Retired investors vary tremendously from one retiree to another, they have many varied goals and objectives as a retiree, and what is appropriate for one retiree my not be appropriate for another retiree.
I don't understand why this is considered a "silly question, silly answer". It's a question that I've asked myself many, many times over the last couple of years as I've watched the equity market continually rack up gains.
Regardless of the beginning post topic; you've been here long enough to understand that a great deal of knowledge may be learned and digested from from the follow-up posts by members, yes?
What stillers said. OP --- silly question, silly answer, rich-enough couple writes in ... why? Mattress sale? Otherwise clickbait --- nobody learns anything new, only confirmation of whatever.
I had to think about this - and I read YouTube comments, they are all cryptic - at best. Anyway, could this be real? They are 100% stocks & they are considering going to 0% stocks, 0% bonds & zero annuities. All Peter the Planner can offer is: “ Talk to a licensed professional about your options. But yes, you can absolutely stop subjecting your nest egg to investment markets.”
My response would be something along the lines of - taxable or tax deferred? If taxable, minimize taxes to the extent possible while getting to 50/50 or 50/25/25. And yes, 100/0/0 is making all of us anxious (and we don’t even know you). But you could have a large chunk in Puritan or Wellington. And then a chunk in FADMX or some equivalent bond fund. Between the 2 of you, you might need 10+ years of assisted living at $70k+ /year so don’t think you’ll never need that money. All caveats apply.
I don't understand why this is considered a "silly question, silly answer". It's a question that I've asked myself many, many times over the last couple of years as I've watched the equity market continually rack up gains.
OJ,
You have seriously asked if you should bail 100%? Okay.
Are you in their circumstance?
In any case, their not-question was even worse.
retired ... pension .., house paid off ... income greatly exceeds ... expenses. ... gotten to a point [where] we want to be done with stock market investing altogether. ... don't want bonds ... annuities ... just want to be done. Are we being foolish?
There is only one answer then, and we should take them at their word and assume they are serious, and have the mattress ready. (The first answer before this is to the only posed question, which is yes, but they have already said they are clear about that, meaning they do wish to be foolish.)
The answer is to do something asap with all these unwanted moneys, meaning give them away. Charity, kids, gov entity local or elsewhere,
Imagine being in this predicament and writing into a site or authority or newspaper.
Regardless of the beginning post topic; you've been here long enough to understand that a great deal of knowledge may be learned and digested from from the follow-up posts by members, yes?
I too have way more than enough money. What should I do?
Am I asking a silly question in a silly way?
Sure, I will wait and see what msf and LB and DS and Chas think the puhlenty rich-enough couple who write in to wring their hands in public should do.
Setting aside the question of whether the OP is asking a question worthy of our consideration, I get the sense that the person is tired of making decisions about his family’s finances. If so, I think the whole enchilada ought to be turned over to a financial advisor who could propose a hands-off portfolio, akin to a blind trust, taking the worry and decision making out of the hands of a person who wants to relax in the twilight years. I would not want to do that myself, but I have thought it would be the best arrangement for my wife if I go first, and I have told our advisor that.
By looking at the fee schedule, one could add this thread to the one above ! Does anyone monitoring MFO use VG's services mentioned above & if so are you satisfied ? Stay cool, Derf
So it's clear it's chiefly a mental health thing for some --- instead of deciding anything, you can (have to only) talk with someone and be done. If you can diy and leave alone with a clear head and low enough anxiety to get through the day, obviously the biggest if of all, you could do FZROX at zero ER and FXNAX at 0.025% 50-50 and then try and forget all about it.
If someone has an income from pensions and SS which more than meets living expenses, and also a substantial amount of savings, then the main question would seem to concern the ongoing degradation of the savings component from inflation.
So then the real issue becomes a choice between investing those savings in an attempt to beat inflation, thus incurring the very real risk of losing (at least for a period of time), a substantial part of those savings to a market downturn, or accepting the slow-but sure decrease in the savings due to inflation.
Since it is not possible to predict when the downturn will occur, or for how long it may last, this becomes a very real issue for someone in this position.
FZROX (Fidelity Total Market Index Fund) might be a fine way to simply ride the general fortunes of the investment markets without necessity for ongoing attentive management, but neither FZROX nor any other index will confer immunity if (when) the markets finally start on the inevitable downslide.
I have no insight into the motivations of the persons mentioned in the OP. However, those motivations do not render the question invalid, by a long shot.
I actually think the author of the article’s advice is sensible on the whole, but I also think talking about funds and ETFs is very different from analyzing an individual family’s financial goals and figuring out what their specific financial plan or strategy should be. Pensions for instance can be structured very differently depending on the company/government plan and the employees’ election. Some pension payouts for instance continue after the death of the employee. Some don’t. Some plans are healthier financially as well. Also, it isn’t just the financial situation of the couple involved that is a concern often but of their children. This is why financial planning makes sense in the first place. The best plans are as customized to an individual’s specific situation as possible. That level of specificity is difficult if not impossible to address in an article or on this board.
Comments
Should Equity Exposure Decrease In Retirement, Or Is A Rising Equity Glidepath Actually Better?
should-equity-exposure-decrease-in-retirement-or-is-a-rising-equity-glidepath-actually-better
Men got to know his limitations.
— Quote from Clint Eastwood in Dirty Harry
I would trust the experience from reputable brokerages such as T. Rowe Price et al than that of a single investor regardless of his or her professional experience.
Still, from a purely intellectual basis, it makes sense to set up priorities
1) Money to live on. The amount you keep in cash depends on how much you want to be able to spend and how necessary it is, but it's purpose to to keep you from selling equities at a market bottom.
Then you have to decide how long the bottom will last. Using the longest bear market since my college years, 3/24/2000, it took seven years for the SP500 to recover.
1/11/1973 to 7/16/1980 was 7.5 years.
So I think five years may not be enough, although if interest rates were higher, you could count on replenishing this account with dividends and interest.
2) Everything else ie equities
Dick and other LT M* FI CEF Forum posters provided me (and many others) with a paint-by-numbers strategy for making profitable FI CEF trades. I traded them for about 2-3 years under their guidance with very good success, but ceased trading them after one too many violent, out-of-left-field price movement shocks to my system.
100% bond OEF Investors seem more than capable of justifying TO THEMSELVES that their strategy is a worthy one. Using Dick as an example though is one of the more creative ones, but does little to convince me that what they're doing remotely resembles "smart" investing.
OP --- silly question, silly answer, rich-enough couple writes in ... why? Mattress sale?
Otherwise clickbait --- nobody learns anything new, only confirmation of whatever.
No one on this thread, including me, are attempting to "convince" you of anything. You are an individual investor, who has your own idea of what is "smart", but the point in using capecod in this discussion about "should equity exposure decrease in retirement" is simply that he does not use equities in his retirement investing. He has stated many times that he avoids equities because he considers them "too speculative". There are many different ways to be a successful investor in retirement, whether you use equities or not. Retired investors vary tremendously from one retiree to another, they have many varied goals and objectives as a retiree, and what is appropriate for one retiree my not be appropriate for another retiree.
Regardless of the beginning post topic; you've been here long enough to understand that a great deal of knowledge may be learned and digested from from the follow-up posts by members, yes?
My response would be something along the lines of - taxable or tax deferred?
If taxable, minimize taxes to the extent possible while getting to 50/50 or 50/25/25. And yes, 100/0/0 is making all of us anxious (and we don’t even know you). But you could have a large chunk in Puritan or Wellington. And then a chunk in FADMX or some equivalent bond fund.
Between the 2 of you, you might need 10+ years of assisted living at $70k+ /year so don’t think you’ll never need that money.
All caveats apply.
You have seriously asked if you should bail 100%? Okay.
Are you in their circumstance?
In any case, their not-question was even worse.
retired ... pension .., house paid off ... income greatly exceeds ... expenses.
... gotten to a point [where] we want to be done with stock market investing altogether. ... don't want bonds ... annuities ... just want to be done. Are we being foolish?
There is only one answer then, and we should take them at their word and assume they are serious, and have the mattress ready. (The first answer before this is to the only posed question, which is yes, but they have already said they are clear about that, meaning they do wish to be foolish.)
The answer is to do something asap with all these unwanted moneys, meaning give them away. Charity, kids, gov entity local or elsewhere,
Imagine being in this predicament and writing into a site or authority or newspaper.
A nonserious question and a nonserious answer.
Am I asking a silly question in a silly way?
Sure, I will wait and see what msf and LB and DS and Chas think the puhlenty rich-enough couple who write in to wring their hands in public should do.
wealth-management/services
Stay cool, Derf
If you can diy and leave alone with a clear head and low enough anxiety to get through the day, obviously the biggest if of all, you could do FZROX at zero ER and FXNAX at 0.025% 50-50 and then try and forget all about it.
So then the real issue becomes a choice between investing those savings in an attempt to beat inflation, thus incurring the very real risk of losing (at least for a period of time), a substantial part of those savings to a market downturn, or accepting the slow-but sure decrease in the savings due to inflation.
Since it is not possible to predict when the downturn will occur, or for how long it may last, this becomes a very real issue for someone in this position.
FZROX (Fidelity Total Market Index Fund) might be a fine way to simply ride the general fortunes of the investment markets without necessity for ongoing attentive management, but neither FZROX nor any other index will confer immunity if (when) the markets finally start on the inevitable downslide.
I have no insight into the motivations of the persons mentioned in the OP. However, those motivations do not render the question invalid, by a long shot.