OK, Boomer

[ochotona]

(Bloomberg) -- Hey, baby boomers: lay off the stocks.

That’s the message from Fidelity Investments in its third-quarter retirement report. Boomers, or the generation born between 1944 and 1964, have been riding a 10-year bull market into retirement, steadily upping bets on stocks to boost 401(k) returns and exposing them to unnecessary risk.

More than a third of the generation had crossed over Fidelity’s recommended allocation to stocks, which is 70% for those 10 years from retirement. Almost one-tenth of boomers were entirely in equities during the quarter, running the risk of serious losses in a market meltdown.

[dualstow]

I thought was was going to be a left-eating-itself post.

[mathjak107]

in practice though , we don't know we won the game until we die . don't forget even the 4% safe withdrawal rate has failed and ended before 30 years , with zero balance left , 5% of the 119 30 year cycles to date . so i dont buy into Bernstein' s winning the game saying . in fact if you doubled our retirement income it still would not cover all the things on our wish list now that we are in the last down of our lives.

so i really have no idea what " winning the game is even supposed to mean " , it just sounds catchy .

we have lots of sayings in the financial world that sound great but mean very little

[dualstow]

I would define winning the game as firmly believing that I have enough capital to easily live off my investments.
You might be technically, right, mathjak, as there is always the chance of unforeseen disasters. However, I would enjoy the present as long as it lasts.

[mathjak107]

so do we . we are retired for 4 years now and after drawing 6 figures a year while delaying ss we are are way higher today then the day we retired . but i would never say i won the game in any respect other than we are where we are today .

we still want as a big a cushion as possible for the unknown , we still need to invest and we still count on favorable sequences taking place .

i don't call that winning in any way as far as no longer needing to have assets at risk in something

[dualstow]

There are a lot of b’heads who agree with you. They seem not to like the term ‘win’ or even ‘game’.
To each his own.

[mathjak107]

in my opinion , Bernstein's statement about winning the game makes it sound like there is some magic number where we can just get rid of any asset with risk and sit back and live on cd's , annuities and t-bills .

unless you want to make very inefficient use of your money by drawing a very low rate there is not going to be a time we can do that ...

while 4% is a pretty conservative draw rate and left you with more than you started with 90% of all those cycles you still risk failure in fixed income only .

in practice we use bob clyatts 95/5 method of draw .. it is dynamic and sets our goal posts each year based on actual balance with some rules . , as i said we can easily exceed what we should spend with our bucket list. so we need goal posts to stay within . .

[dualstow]

in my opinion , Bernstein's statement about winning the game makes it sound like there is some magic number where we can just get rid of any asset with risk and sit back and live on cd's , annuities and t-bills .

unless you want to make very inefficient use of your money by drawing a very low rate there is not going to be a time we can do that ...

I don't expect to reach that level of wealth (especially if Liz Warren wins), but I would happily invest inefficiently and live deliciously if I had enough t-bills.

[mathjak107]

it all depends what you want from retirement . I spent a life time investing , taking risks , saving and doing without at times , so we can live better in retirement then we did when our efforts had to go towards raising a family …

thankfully luck , my skills , and motivation all coincided and met and left us in pretty good shape . but no way would I go to T-bills for an income , not here in nyc where we live .

i spent my life at 100% equities and now need 40% as an allocation so that is about as much winning the game as i would say we have done

[dualstow]

thankfully luck , my skills , and motivation all coincided and met and left us in pretty good shape .

You won't know that until you die.

[mathjak107]

Exactly ,which is why I say there is no “ won “ the game.

But for now we are in pretty healthy shape since we are retired 4-1/2 years now , have 4-1/2 less years of life left and are hundreds of thousands of dollars higher then the day we retired

[dualstow]

But for now we are in pretty healthy shape--

-ah, tut-tut. Careful now.

[mathjak107]

What could possibly go wrong Ha ha

[dualstow]

[yankees60]

I would define winning the game as firmly believing that I have enough capital to easily live off my investments.
You might be technically, right, mathjak, as there is always the chance of unforeseen disasters. However, I would enjoy the present as long as it lasts.

That phrase of Bernstein's struck a chord within me, and I agree with your interpretation. The only major variable I see (for me) is IF there are some major medical advances that would NOT be covered by insurance or Medicare and. therefore, could only be obtained by those who directly pay for it. That is the Wild Card.

Vinny

[ochotona]

To me, "if you've won the game stop playing" means don't be 70%-100% into equities when closer than 10 years to retirement, or in retirement. Take it back down to 40% Golden Butterfly, 30% Desert, 25% Permanent.

Boomers are anchored psychologically on the Reagan years. The returns have been good since 2009, so they've forgotten the equities disaster which was 2000-2009. They expect they won't get whacked again because they forever inhabit the nostalgic Golden 1980s realm of Magical Reaganism.

‘You've got to ask yourself one question. Do I feel lucky? Well, do ya, punk?’

[mathjak107]

Remember though ,Bernstein’s view changes with the weather

Last time I read his book he believed in annuities and fixed income to create a liability matching portfolio and only extra money above that level went in to risk assets ....so he may not mean just reducing equities....

Quite frankly I stopped heeding anything he said many years ago ....

The truth is I found I never won the game ..I just find a more comfortable level to keep playing.. I like our lifestyle, I like spending what we do and I like living where I do ..it takes a certain level of income and a certain amount of risk assets to sustain it with a high level of success rate

[jacksonm2]

Almost one-tenth of boomers were entirely in equities during the quarter, running the risk of serious losses in a market meltdown.

I'm guessing those are the ones who need to make risky investments because they hadn't saved enough and are now trying to catch up. If that's only 10% of boomers it doesn't sound so bad to me.

[mathjak107]

Almost one-tenth of boomers were entirely in equities during the quarter, running the risk of serious losses in a market meltdown.

I'm guessing those are the ones who need to make risky investments because they hadn't saved enough and are now trying to catch up. If that's only 10% of boomers it doesn't sound so bad to me.

they may also have pensions that cover their living expenses and for all purposes the pay check never stopped ...I know a lot of retirees who have nice pensions and are investing for legacy money for heirs. Others don’t draw much off of their portfolios because of other income sources and they run 70% equities or higher and they can since it is not lived off of

[jacksonm2]

Almost one-tenth of boomers were entirely in equities during the quarter, running the risk of serious losses in a market meltdown.

I'm guessing those are the ones who need to make risky investments because they hadn't saved enough and are now trying to catch up. If that's only 10% of boomers it doesn't sound so bad to me.

they may also have pensions that cover their living expenses and for all purposes the pay check never stopped ...I know a lot of retirees who have nice pensions and are investing for legacy money for heirs. Others don’t draw much off of their portfolios because of other income sources and they run 70% equities or higher and they can since it is not lived off of

Right. I always put this kind of story about how baby boomers are in dire straits approaching retirement in the category of "lies, damn lies, and statistics". I'm sure there are plenty who are dumber than dirt when it comes to investing and saving but probably no more than any other generation.

[yankees60]

Remember though ,Bernstein’s view changes with the weather

Last time I read his book he believed in annuities and fixed income to create a liability matching portfolio and only extra money above that level went in to risk assets ....so he may not mean just reducing equities....

Quite frankly I stopped heeding anything he said many years ago ....

The truth is I found I never won the game ..I just find a more comfortable level to keep playing.. I like our lifestyle, I like spending what we do and I like living where I do ..it takes a certain level of income and a certain amount of risk assets to sustain it with a high level of success rate

I put William Bernstein up there with the all-time great investing writers. Definitely top 5. I was never struck with his changing views. Can you cite them?

And, if one has an established lifestyle with established expenses he is saying you have won the game if you are practically guaranteed to never outspend what you have provided you reduce your risk taking. What is the point of taking risks when the upside is getting yet more than you'll never need while the downside is ending up with not enough.

Vinny

[I Shrugged]

If you have a good bit of wealth, it's hard to think of putting it into t-bills and easing onto some kind of glide path. The PP is good for this. It's still safe, but it grows over time. Why not grow it? Eventually charities and future Shruggeds might benefit.

[yankees60]

If you have a good bit of wealth, it's hard to think of putting it into t-bills and easing onto some kind of glide path. The PP is good for this. It's still safe, but it grows over time. Why not grow it? Eventually charities and future Shruggeds might benefit.

I do think the Permanent Portfolio is not only an excellent portfolio for many different circumstances but, particularly, for after you have "won the game". You will not lose the game after you thought you'd won it and you will still achieve some growth.

Vinny

[mathjak107]

we still don't know how conservative the pp will end up being going forward .

as i mentioned a few times , the last 40 years have only had rates falling except for what i call speed bumps along the way . i have been an investor for more than 30 years and rates as a trend have only fallen ... you could ski down the rate chart .

back in the 1970's investing was not what it is today with computer algorithms , we had no 401k's and most small investors were not investors at all . in fact our parents were great depression children and most hated the thought of investing as we know it . so any comparison to the 70's is really no comparison to today .

so rising rates as a trend may be the kryptonite to the pp today .

as you see now , those days all assets move together when rates spike , holy cow can the pp be volatile . with gold and treasuries having 1 and 2% rises and falls the pp may be a portfolio geared for low rate trends and actually more volatile then conventional mixes with greater sequence risk when things get to correlated and the trend eventually heads up again towards historical norms in the 5-6% range .

so the jury is still out on the pp in my opinion going forward as being a very conservative retirement portfolio , once rates reverse their 40 year trend as far as more or less conservative . it may actually be less conservative then a wellesley income .

so i just consider my pp when i use it , just another portfolio like i do my growth and income model as far as risk modeling in our retirement .. i don't consider it at this point any lower in risk or volatility then i do my growth and income portfolio

[I Shrugged]

I agree that it's not hard to construct scenarios where the PP doesn't hold up. But it affords more protection than many alternatives. I used to enjoy trying to invest actively. Then I realized that after taxes it really didn't beat passive investing. (I'm mostly taxable.) And the PP is the best passive scheme I can find.