Retirement Allocation Question for Someone Close to Retirment

Investing
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I am 64 and have an account at Morgan Stanley that contains the majority of my retirement funds.

Currently the allocation is approximately:

  • 79% equities
  • 12% bonds
  • 6% cash
  • 2% commodities

I also have a couple of precious metals SDIRA’s.

I am more of a conservative/risk averse investor and don’t have a whole lot of faith in the stock market (as opposed to my financial advisor) and am wondering, since I am getting closer to retirement and don’t have a lot time to make up for any losses, if it might be a better idea to get into something a little less risky/more conservative..

My investment objectives and risk tolerance are shown on my profile at Morgan Stanley as aggressive which I don’t think align with my objects and when I mentioned this to my financial advisor said that my current allocation was more on the moderate end of that spectrum.

Thanks in advance..

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79% equities at age 64 is aggressive IMHO. Can you rebalance while the current stock market is near all-time highs?

All depends upon whether you’ve reached critical mass too in terms of net asset worth. If you plan to live off of 4% annual withdrawal rate from your investments and need $100,000 a year, you’d need $2.5 million net holdings, for example.

Vanguard offers good mutual funds like VBIAX that are 60% stocks and 40% bonds. There are also the target date funds: Vanguard Target Retirement Funds | Vanguard

If it was me and I had critical mass in savings, given how the market is enamored with 7 stocks heavily influencing indices, I’d dial back the amount of stock percentage holdings to be no more than I could stomach in the event of a 30% market sell-off. If I had 100% of my investments in stocks, I could be potentially looking at a 30% haircut. If my investments were 50% stocks, a 30% sell-off would reduce the account value (on the stock side) by 15%, etc.

There will be inflation and stocks help with that so holding some investments in stocks is very plausible. Also, maybe going to a high cash and/or treasuries percentage holding initially and dollar cost averaging into stocks in the ensuing years would be one strategy to consider. If you have heirs, leaving them a stock portfolio is not a bad thing to do if they would hold the stocks for an indeterminate number of years, btw.

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Thank you for your reply..

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Vanguard has a forum called “Bogleheads” where people discuss allocations, various funds/ETFs, etc. Lots of information and experience there.

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Thank you!

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Oh my, too many equities. And what kind of equities really matters.

If you are truly conservative / risk averse you should cut the 79% literally in half. I’ve done a ton of retirement simulations on Fidelity’s tool and Flexible Retirement Planner, and going from a 60/40 to a 40/60 portfolio makes surprisingly little difference as far as portfolio withdrawal rates goes.

The more equities you have, the more the emotions of your kids will be tweaked… they will either love you for passing on such a huge estate to them, or they will hate you for moving in with them. You add more variability and the cone of uncertainty gets larger.

If you have 40% equities, maybe 20% US and 20% foreign (VXUS or VEU). I am really allergic to US market cap weighted large cap choices like SPY, VOO, SWPPX, SCHX, IVV, FXAIX,… I chose the Schwab Fundamental index ETFs like FNDX. Still allocates to Tech and AI, it’s just more selective as to which companies and in what amounts based on economic facts on the ground. It’s not so obscenely overweighted tech. 40% Tech in an ETF is NOT diversified, it’s a concentrated bet on an overvalued sector.

I agree with you on the gold, I bought gold during 2015-2018, haven’t bought any since, and it has been a wonderful portfolio diversifier.

Christine Benz of Morningstar suggests this kind of bucket approach:

The Bucket Approach to Retirement Allocation | Morningstar

I literally think you could ditch your expensive advisor and go to a Bogleheads 3 or 4 ETF approach at Schwab or Fidelity, and be richer and happier. Keep the gold IRAs but only if they are large enough to justify the fees. If you’re paying 0.50% per year or more, I’d sell the gold (inside the IRA) and do a direct IRA transfer to a brokerage IRA, and just buy the same amount of IAUM. That’s what I did, I got tired of my external gold IRA. I sold it off as gold with brushing $4400 just before the correction started. It’s still in cash. I have plenty of other gold.

HECK… how about ONE ETF… iShares AOM (40/60) or AOR (60/40), or both so you get an even 50-50 split of stocks and bonds. These bonds have US and International in them, large caps, small caps, the whole spectrum.

Here is what John Bogle said about a stock bond split of 50-50.

“I’m about 50 percent stocks and 50 percent bonds and I spend half my time worrying about why I have so much in stocks and the other half worrying about why I have so little in stocks.”