What's your retirement asset allocation percentages?

[Zaxon]

What's your planned break down between Australian stocks, international stocks, corporate bonds, treasuries, property, lending products, cash, etc, on the day you retire. If you've already retired, tell us what your percentages were at the time you retired.

For instance: 60% international shares / 30% corporate bonds / 10% cash.

Also, explain why you've decided on that allocation, and what are you trying to achieve?

 

[InsvestoBoy]

25% envelope each stocks, long duration Government bonds, cash and gold.

The composition of each envelope changes over time depending on short term (~1Y) momentum, volatility, value, correlation, etc. Right now, all in my benchmarks due to time constraints so holding 25% each of VAS, GSBE47, AUD and gold.

https://www.investopedia.com/terms/p/permanent-portfolio.asp

 

[Zaxon]

25% envelope each stocks, long duration Government bonds, cash and gold.
The composition of each envelope changes over time depending on short term (~1Y) momentum, volatility, value, correlation, etc.

The Permanent Portfolio certainly has a logic: don't try to time the market. Keep diversified across asset classes. I didn't read anything about changing envelopes in that link. Is that your own adaption?

 

[Zaxon]

My planned asset allocation for retirement will be 90% stocks / 10% cash/bonds.

My approach is to realize that when I retire, I'll still live for another 30+ years. Long investment horizons are what stocks are designed for.

In the last 10 years of my life (or so), then I'll possibly convert everything into cash or bonds.

 

[Klogg]

100% stocks if I can find things that are attractive enough

 

[Zaxon]

100% stocks if I can find things that are attractive enough

OK. Similar to me then. And what's your reasoning behind that?

 

[Klogg]

OK. Similar to me then. And what's your reasoning behind that?

Better return long term. On average you will do far better than other asset classes

 

[sptrawler]

60% shares(Aust), 30% cash, 10% property. 60%in super 40% outside super.
I will be reducing the cash by purchasing more LIC's/ETF's.
The reason behind my decision, I guess I'm conservative and it was hard fought accumulating it so scared to death of losing it.
But my investment confidence is improving, mainly do to the positive interaction and information/knowledge I'm gaining on ASF.

 

[Zaxon]

60% shares(Aust), 30% cash, 10% property. 60%in super 40% outside super.
The reason behind my decision, I guess I'm conservative and it was hard fought accumulating it so scared to death of losing it.

It's actually not that conservative. The "cliche" is 60% stocks / 40% bonds, so your allocation seems on par with that. Is that direct property as in residential rental?

 

[sptrawler]

It's actually not that conservative. The "cliche" is 60% stocks / 40% bonds, so your allocation seems on par with that. Is that direct property as in residential rental?

Yes it is, I didn't want to be in position where I have no exposure to property, so I bought it with the intention of using it as a holiday home. If I need extra income, it is an ideal airbnb proposition, close to entertainment, water, services i.e don't require a vehicle.

 

[So_Cynical]

What's your retirement asset allocation percentages? good question and something that i need to give some consideration, i reckon that
the yield across all assets has to be above inflation and at least slightly above the prevailing deposit rate. somewhare between 3 and 4%

 

[Zaxon]

What's your retirement asset allocation percentages? good question and something that i need to give some consideration, i reckon that
the yield across all assets has to be above inflation and at least slightly above the prevailing deposit rate. somewhare between 3 and 4%

I think it comes down to how you view retirement. For some people, it's still an investment growth stage. For others, it's purely drawdown, where they retire with 100% enough to cover the rest of their life, and do nothing to risk that amount. Then, it's just matching inflation. Where do you fall on that spectrum of thinking?

 

[sptrawler]

I think it comes down to how you view retirement. For some people, it's still an investment growth stage. For others, it's purely drawdown, where they retire with 100% enough to cover the rest of their life, and do nothing to risk that amount. Then, it's just matching inflation. Where do you fall on that spectrum of thinking?

From my perspective, it comes down to how lavish a lifestyle the individual wants, which dictates the amount required.
It is a very individual thing, what some find is an adequate income, others would think was a small income and vise versa.
As I have said before, I am quite surprised how much less we spend post retirement, the moneysmart calculator suggests around $60k/pa for a couple to have comfortable retirement.
I have found that is pretty close for me, if we want a bigger holiday, I find $70k is heaps.
So you need to earn enough to generate that income, if you want to index it to maintain the capital, then you need to earn enough to re invest to cover inflation and unexpected costs and or loses etc.
Just my take on it.

 

[Zaxon]

From my perspective, it comes down to how lavish a lifestyle the individual wants, which dictates the amount required.

For sure.

So you need to earn enough to generate that income, if you want to index it to maintain the capital, then you need to earn enough to re invest to cover inflation and unexpected costs and or loses etc.

With the low interest rates in HISAs and TDs, that pushes people up the risk curve a bit to maintain the needed return. Thats fine if you've used to investing. Not so fine if you're 70 and learning to invest for the first time.

One of my concerns, particularly as we age, is the spiralling medical costs. We're not as bad here as is the US, but if you see a few specialists, have a few scans, they don't come cheap. In addition, I suspect less will be covered by the government as time goes on. It sounds like an area where cutbacks would occur, given the massive aging population we're starting to have.

 

[So_Cynical]

I think it comes down to how you view retirement. For some people, it's still an investment growth stage. For others, it's purely drawdown, where they retire with 100% enough to cover the rest of their life, and do nothing to risk that amount. Then, it's just matching inflation. Where do you fall on that spectrum of thinking?

Yes your right, depends on how old you are, health, lifestyle expectation, and your net worth. I need capital growth, nothing spectacular but certainly some growth.
My thinking is to be drawing down about 3.7% annually and growing the pot by 5 or 6% not an outrageous expectation.

 

[sptrawler]

For sure.

With the low interest rates in HISAs and TDs, that pushes people up the risk curve a bit to maintain the needed return. Thats fine if you've used to investing. Not so fine if you're 70 and learning to invest for the first time.

One of my concerns, particularly as we age, is the spiralling medical costs. We're not as bad here as is the US, but if you see a few specialists, have a few scans, they don't come cheap. In addition, I suspect less will be covered by the government as time goes on. It sounds like an area where cutbacks would occur, given the massive aging population we're starting to have.

Again that boils back to how much money you have, if you have $5m it isnt a problem, if you have $100K it is a major issue.
So the reality is, work out how much you want to spend, then work out how you will fund it.
If you have no chance of funding it from, personal savings and investment, work out a plan B, which probably involves welfare.
If you are an astute investor, work out the best way to structure it, to mitigate political risk.

If you are mega wealthy like VC, well it doesnt matter you have heaps more than you need anyway and the World is your play pen.

It is different strokes, for different folks.

 

[Zaxon]

I read about a guy who retired with 100% cash, and had no intention of even keeping up with inflation. He'd done his math, and he was content that he could leave it all the bank, and still have plenty for the rest of his life.

 

[Value Collector]

My super is 100% stocks, it’s just 50/50 split between asx200 index and the world index.

My personal portfolio is heavily in stocks, but with some property, p2p lending and some cash.

I don’t have any fixed ratio, I want to own as much stock as I can, but have a little property portfolio as a store of capital away from sharemarket that just compounds earnings back into itself (clearing debt, probably a new purchase every 10 years or so), and some p2p lending for similar reasons as property.

I hold enough cash to fund a year or so of spending + a tax reserve + options float and cash waiting for investment.

 

[Value Collector]

I read about a guy who retired with 100% cash, and had no intention of even keeping up with inflation. He'd done his math, and he was content that he could leave it all the bank, and still have plenty for the rest of his life.

I personally know some one that thought they could live off the interest forever of a lump sum the got when they sold a rental property in the 70’s for $4000.

They are now dead, but as of 2015 they still had the $4000 Term Deposit, as you can imagine, it didn’t keep up with inflation.

If they had kept the rental property, and just put 25% of the rent back into maintenance, they would have done a lot better.

 

[Zaxon]

I personally know some one that thought they could live off the interest forever of a lump sum the got when they sold a rental property in the 70’s for $4000.

They are now dead, but as of 2015 they still had the $4000 Term Deposit, as you can imagine, it didn’t keep up with inflation.

Oh yeah. It's a very brave person (or a very old person) that ignores inflation.

With the 4% Safe Withdrawal Rate, according to the guy who "invented" it, William Bengen, the biggest risk isn't market volatility, which is what you'll see 90% of posts about when discussing the SWR. He says the biggest risk, based on his math, is if we enter another period of high inflation.