Why Retirees Need a Balanced Portfolio

#Morningstar #AssetAllocationinRetirement #RetirementPlanning

The right retirement asset allocation can help retirees enlarge their lifetime withdrawals.

00:00 Must-Know Number Two: Maintain a Balanced Portfolio
01:40 Higher Yields Point Toward Value of Balance
03:00 Stock Returns Are Higher but More Variable
03:40 Bucket Approach Provides Balance
06:43 Sample In-Retirement Bucket Portfolios
8:18 But Buckets 1 and 2 Carry a Substantial Opportunity Cost

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Tags
retirement planning, retirement, early retirement, retirement investing, bucket strategy for retirement income, christine benz bucket strategy, how to build a retirement portfolio, asset allocation, asset allocation in retirement

[minafakhri]

I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement in 3 years.

[jecny]

I'm not retired but probably not far off. When I get there, I expect to keep around three years anticipated living expenses in cash (mostly) with a smallish reserve in gold. The rest will be in a two-fund portfolio with VWIAX as my core position (65-75%) and VT making up the balance. The dividends will be set to auto reinvest. As of right now I plan to limit my expenditures (less emergencies) to roughly what I am getting in dividend payments plus maybe 1% if needed. This will be drawn from the cash. Rebalancing will occur as necessary with an eye on not letting my cash reserves drop below two years of expected living expenses.

[mikeflair]

100% stocks for me. I retired in 2012, not long after the great recession. The market has been straight up (maybe a little bumpy) but the sequence of returns is double digits upward. I have funded my retirement, and I have grown my balance at the same time. FOMO USA Stocks for me.

[jasonjstdr]

100% in S&P 500 index fund with 3 years income in cash, so if market crashes, you can wait for 3 years before selling stocks.

[Jeanrussio]

There is no cookie cutter answer to your question. Nobody likes debt, especially in retirement but paying off a mortgage @ 4% APR vs long term investment potential is generally not the best option. All depends on your personal situation of course.

[mark-madison]

Excellent video, with great commentary and portfolio strategies. Thank you !!

[gnoekus]

Thank you so much Madam Benz! Learning and benefiting so much. Hugs.

[jimgrant]

Ms. Benz uses the table of numbers that first appears at the 1:44 time mark in the video to substantiate her recommendation that a balanced portfolio is best. I scan down the each column in the table and conclude, yes, she may be right, but the differences in a column are insignificant. - - - Length of retirement is a far, far, more important factor.

[george]

At 2:47 what are the annual expected returns by asset class? The figures shown seem nonsensical.
Also, 19.06, 15.81, 20.60 and 24.71 appear twice. What's the probability these figures are accurate?

[johnbarnhart]

Christine always provides great info. However, the chart of 1 year std deviation at the 3 minute mark of the video seems irrelevant. How about 5 or 10 or 20 yr data on returns, std deviations, etc. as that is more relevant to retirees ? Note the 3-10 yr holding period for Bucket 2 (bonds) described at the 4 minute mark.

[jdavis]

The chart shown at 3:00 is absolutely incorrect. Per the chart Treasury bills yield 20.6 %. In what alternate universe are you investing in?

Over the past 20 years the largest bond ETF in the world (ticker BND) has delivered an annual return (after inflation) of 0.45 %. Add higher taxes associated with bond earnings compared to equities and you are probably losing money.

When a financial research company makes mathematical errors I lose confidence and respect in their abilities. I expect more of Morningstar.

[youarehere]

If you have a stream of income coming in monthly, annuity, pension, rental income, ss, etc. You can take more risk, if not, plan accordingly.

[firmsoil]

Nice presentation, thanks. Social Security looks absent.

[bobdrawbaugh]

But, in retirement Harold didn’t take his on advice. In a recent interview he stated he’s in 70% cash and 30% stocks. He must have not had confidence in his on research. It’s a little different when it’s your money.

[celestialfix]

Could Christine sometime explain to us how we can convert our other income from SS, annuities, pensions into “synthetic bond” values that could count as part of the fixed income allocation? Do we need Wade Pfau to tell us how to do that?

[ArthurDentZaphodBeeb]

'Data as of 2019'.

So you 'forgot' 2022 which was the worst year in bond history? That has to (dramatically?) affect results. We just witnessed a 40 year bull market for bonds, so this old data is highly skewed to favor bonds. For that reason, I avoided bonds like the plague, fully expecting bonds to be crushed when interest rates rose from absurdly-low levels.

If long rates rise (think 6% might pique my interest) I'd be interested as I do expect inflation (and rates) to moderate somewhat, so might get some appreciation as well as yield. That said, the market doesn't think inflation is sticky and long bonds aren't offering enough yield to be interesting, so I'll likely remain all-equities plus about 1-2 yrs cash (in short term treasuries) that can be deployed in bear markets (like 2022).

[redchevy]

Still Waiting to see a chart of the returns of the Bucket strategy compared to holding Vanguard's Wellington or any balanced mutual fund over time.

[amerqazi]

Does the 3 bucket portfolio apply to the retirement portion or non-retirement portion of the entire portfolio?

[Steve_SEC]

Why not VUSXX in bucket 1, especially for those in a high tax bracket

[payroll]

Judging by the graphs at 2.47 Morning Star needs to ban the long lunches.😀