Last edited Sun Aug 11, 2019, 02:23 PM - Edit history (5)
and finds that high stock to bond allocations have the highest survival rates (last "n" years) under various withdrawal scenarios, where n ranges from 20 on up. The June 2019 issue looked at scenarios with at n = 35, 40,45, ..., 60 years.
For 5% and above withdrawal rates, the 100% stock allocation had the highest likelihood of survival (the other allocations were 75% stock, 60% stocks, 50% stocks, 40% stocks, 25% stocks, and 0% stocks, with the remainder being in bonds in all cases.
About 2 or 3 times a year it seems, a wide variety of other authors have been reporting on their simulations, with their own variations, like varying the allocations in different "glide paths" but the end results have all been pretty much the same -- your chance of your portfolio running out is lowest with high equity allocations.
Yes, the market is way up from the 2009 market bottom, but not all that crazy up from 2000 or 2007 for example.
There have been people here have been posting ever since about 2011 or so that the bull market was coming to an end. That stocks were overvalued, blah blah, that the Plunge Protection Team is the only thing keeping it going, and they can't keep it going indefinitely.
Timing the market is about impossible. Time in the market works far better than most efforts to time the market.
I tried timing the market. After the big run-up in stocks in the 1980's and into the 90's, all the "smart" people were saying this has been the greatest bull market in history (the 1987 mini-crash was only about 2 years before new highs were reached), and the bull is tired and blah blah. I was one of the "smart" people that reduced my stock allocation in the early 1990's. And missed the huge run-up of most of the 90's (well, I kept 25% or so in stocks, fortunately, but would have been much better of course with 100% ).
The valuable lesson in that experience being that there's no sure way of knowing when the bull market has peaked, or how long a secular bullmarket will last (discounting short-term pullbacks). I'm sure if someone knows, Warren Buffett would pay him or her to have lunch.
Also, bond returns suck right now, quite a lot lower than the average for the 2000-2018 period. I'm really supposed to start gnashing my teeth and flailing my breasts and go invest in 3-4% long bonds (and face interest rate risk) or 2-3% intermediate bonds? Really? WHY??
I was retired before, during, and after the housing bubble crash with no income (until 2017) other than from my investments, and have done just fine, thank you, with portfolio value well above what it was at the pre-housing bubble peak in 2007.
If I was worried about the very worst case, I would never leave the house.
Rather, I go with the allocation that is most likely to survive the longest, and that is 100% equity allocation for high (5% and up) withdrawal rates, and high stock to bond allocations (but not 100%) for lower withdrawal rates.
I'm in the lower withdrawal rate part of the spectrum, actually probably adding rather than withdrawing to my savings/investments thanks to Social Security and an annuity kicking in.
But I'm concerned that I will some day become a "high withdrawal rate" person. Fidelity estimates, for example, that a couple, both reaching age 65 in 2018 will need $280,000 over their lifetimes for OUT-OF-POCKET medical expenses ( https://www.cnbc.com/2018/04/27/how-to-plan-for-higher-health-care-costs-in-retirement.html ). They are both on Medicare, so this is medical costs above and beyond those paid for by Medicare.
Nor does the $280,000 include long-term care (e.g. nursing homes, assisted living facilities), and it doesn't include most dental, eye, or hearing care.
Details about my asset allocation are at https://www.democraticunderground.com/?com=view_post&forum=1121&pid=1692
More on my reasoning for stocks (besides the asset allocation simulations) is splattered all over the recent "How Different Generations Think About Investing" https://www.democraticunderground.com/11211641
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