Do this exercise and let us know how it affect your retirement investment.
Line item budget for 5 years
- pension
- social security
- dividends
= amount to withdraw from investments (or deposit). Put 1 year of this in a money market account, the remainder in an interest bearing low risk investment.
This does 2 things
1 - when your investments are positive you can withdraw years 6,7... and deposit.
2 - when your investments are negative (market downturn) you have 5 years you don't have withdraw any money.

I sold this fund about four years ago due to concerns about rising interest rates. Silly me! This retiree could fashion a fairly simple "all weather, total return retirement portfolio" I would be comfortable with by combining VWIAX with BERIX, FPACX, SGENX, and RPHYX (those 4 are in my present portfolio). RPHYX would hold enough to see me through about 15 months of planned withdrawals. My brokerage account always also has at least enough cash to take care of my next planned quarterly withdrawal.

Oh goody. We've gone from the four food groups (a 1-dimensional representation) to a food pyramid (2-dimensional). In investing, from stocks/bonds/cash (1-dimensional) to style boxes (2-dimensional). Now let's go to 3D; can HD be far behind?
Seriously, what M* is talking about is nothing new. It looks like they're just seeing a market opportunity, since robo-advisors seem to have made paying for advice (good or bad) more fashionable.
Don't invest your 401(k) in company stock? Enron? WorldCom? Hello? On the other hand, there are tax benefits for doing so (net unrealized appreciation). How do you balance these factors?
Don't invest in your company industry (the example given was real estate for a realtor). Sure, and thousands of articles have been written on this. During the dot com bubble, I was in a tech company where the HR person told me that people were pouring money into American Century Ultra (TWCUX). That was the closest we had to a tech fund.
On the other hand, isn't the adage (attributed to Peter Lynch) "invest in what you know"? Again, a balancing act.
So M* may get into the financial planning business, piggybacking on a couple of trends - robo advisors and big data. Sounds hot, sounds now. (IMHO there really is potential here, but one has to be skeptical about the timing, for something that could have been done years ago, but less easily marketed.)

JABAX is another fine choice, albeit a bit more conservative than VWELX. I've held the latter for nearly 20 years and it's the anchor of my entire portfolio.

Thanks Dex. Very instructive. Wonder how long you've operated on this budget? Ours is set up a little differently and has not failed us over the 20+ years since we developed it.
Three areas:
1. Anticipated Income (for the year)
2. Recurring monthly expenses*(X12)
3. Major itemized expenses
*For #2 we throw in a monthly sum called "pocket money." Covers everything we don't care to log every time we buy it: gas, food, entertainment, incidental purchases, etc. Would drive you nuts trying to log such frequent small outlays.
#3 is a list of things that are large, but paid-out less frequently. Includes vacations, heating fuel, clothing, taxes, home improvements, auto repair, etc. Also a few K in an emergency or reserve fund. I keep a separate page in the budget book for each of these major areas and faithfully record every expenditure. Amounts allocated to some areas, like auto repair, are best-guess estimates.
We maintain an ongoing fund for area #3 by dividing the total amount by 12 and making monthly deposits in that amount into a separate checking account. Wouldn't have to be a separate account. One could work that out on paper. But, running a separate account for those major outlays is much easier.
Probably sounds confusing as hell. Evolves over time and really becomes simple. :)

I do concur that a fund of funds investment, if you have one, is best started in a retirement account. I was not aware that a fund of funds cannot pass along losses to the investor. That pretty much nails using the IRA, Roth IRA or 401k.

At best, the Wiki statement that "A fund of fund ... cannot use [capital] losses" is extremely misleading, at worst, flat out wrong.
Any registered investment company (whether fund of funds or fund of individual securities) cannot distribute capital losses. But it is allowed to carry losses forward to later years, where it may use those losses to offset gains. If memory serves, funds are only allowed to carry forward losses ten years, as opposed to individual taxpayers who can carry forward cap losses indefinitely.
Nothing special about fund of funds here.
In fact, the boggleheads Wiki says just this: Vanguard's Target Retirement Funds' ''rebalancing can result in the realization of capital losses and the creation of tax loss carryforwards in the funds. The existence of loss carryforwards has historically resulted in minimal long-term capital gains distributions."
Vanguard Target Retirement Funds (2005-2025) tax distributions (boggleheads)
So whom do you care to believe: the boggleheads' Wiki, or the boggleheads' Wiki?

Wouldn't give up my younger years (oh the good times) for anything, EXCEPT if I knew then What I know now about investing, I could have retired a very wealthy YOUNG man, instead I retired 60ish with all the money I will ever need...OH Well.....
Maybe carefree young AND financial secure retirement is still the way to go..seems to be working...

Only a handful of people working for my employer are over the age of 55. But I've learned that there is always an option!
Nobody on this board is aware of this fact, but I was born and spent my first 12 years of life living in Bangkok, Thailand as my father was the S.E. Asia GM for a large multinational and was based in Bangkok . I speak, read and write fluent Thai, which my parents say I learned before I learned English. My Mandarin isn't bad either, although I haven't used it for over 10 years... @JohnChisum ~ I reckon that you live in Manila? Been there many times and always enjoyed the musical abilities of the Pinoys, as well as their penchant for having fun!
Retirement for this young PopTart is a few decades off, but my wife and I reckon that we could retire to Thailand (probably Chiang Mai as Bangkok is a more expensive city) and enjoy the same quality of life (if not better) as in the USA for a much cheaper cost. Foreigners aren't allowed to own property in Thailand, but condos are available for purchase (after alot of haggling of course!). My wife and I figure on roughly $1000/mo. in expenses as we live cheaply. But nobody really knows what costs will be like 18+ years from now...
Will we actually retire to Chiang Mai? As I mentioned earlier, retirement is still a long ways off as we're raising two young children and have 18 years before we could obtain a Thai "retirement" visa at the age of 50. It's a dream for now, but retiring overseas, especially to a cheaper country which one knows well and likes, is an option to the bygone era of the "American dream".
Peace.

Best Wishes for wise decision making.

Those are all good suggestions. I'd say another step most people forget is doing a basic line item budget and project it into the future. Then determine if their investment profile and assets can support that level of spending.
A second, item is cash flow. The Monte Carlo simulators are good but with understanding cash flow and implementing it properly you can reduce investment risk even more - e.g. budget minus dividend/interest income = $ to or from investments. And you can put several years of estimated spending into low risk investments.
I thought I would be spending $40,000 after taxes. As you can see I'm spending less.
Also, with a projected line item budget you can adjust it annually for changes.

My investment in Vanguard Wellington began almost 30 years ago. Can't find many better and steadier performers.

I could not agree more or think of a better steward of my money than Wellington Management Company.
Mona

Hi Guys,
Wow!
When I first started thinking in terms of an early retirement, I was approaching 60. Thinking and planning for a mid-50s retirement was never in my playbook. Congratulations if you want and can execute that major league feat.
Every case is highly personal, and therefore singularly different.
In my case, my earning and saving career only started after completing graduate school and doing some military service. I was 30 before mustering out of the Army. At that time, my wife and I packed our entire belongings in an old Chevy and headed for California with the back seat still partially empty. No way could we manage retirement in just a little North of 20 years.
But that’s our story, and I’m sure each of you have your own compelling versions. For you younger folks, retirement will be a life changing event, and warrants careful and painful study before a decision is made. I say painful because of the many component uncertainties that feed that decision process.
One tool that addresses some of these uncertainties is Monte Carlo simulators. Monte Carlo analyses were specifically designed to assess risk probabilities under uncertain environments. During World War II, they played a significant role in the development of nuclear weapons. Within the last 2 decades, Monte Carlo simulations have been developed to facilitate retirement planning. These simulators are now readily accessible for all to exploit.
All the large mutual fund outfits offer this tool: Vanguard, Fidelity, T Rowe Price and others provide versions of differing complexity and differing input requirements. They all do yeomen work. I suggest you do a web search using Monte Carlo retirement planning as key words. You can choose your own poison from a long list of options.
One of my favorites is found at the MoneyChimp site. It is certainly not the most eloquent nor is it the most comprehensive option. But it is likely the easiest to input with instantaneous outputs from 1000 randomly selected cases. Here is the Link:
http://www.moneychimp.com/articles/volatility/montecarlo.htm
One of the benefits from these simulators is that what-if scenarios are quickly input and evaluated. Portfolio survival probabilities as a function of retirement time is the graphic output.
Test how significant the anticipated retirement length is to the portfolio survival likelihoods. Check out sensitivity to savings rate. Examine the survival impacts of guesstimated portfolio annual returns and their volatility by inputting various levels for each parameter. All of these sensitivity studies can be completed in quick time.
All Monte Carlo analyses only output probabilities. They don’t predict the future. That’s the nature of future uncertainties. But they provide the user with a feeling for the robustness of his plans and provide guidelines for more attractive options. Please give this working tool a try.
By the way, Monte Carlo simulators might also help retirees to make better informed portfolio asset allocation and drawdown decisions. None of this is perfect, but in the investment universe, nothing is ever perfect.
Best Wishes for wise decision making.

It is a shame that you didn't enjoy your younger years. I try not to tell myself, "just wait until retirement", but I do try to make the most of the present.

OK, maybe I exaggerated a tad. But my 20s did suck. I was a lost and aimless person that lived in abject poverty. But the 1980s were among my best living in the Sierras with sunny days almost 365 days a year. Still, I was the poster boy for "not living in the present" since all I did was focus on the future and retirement. I am just thankful and very blessed that mindset worked so that now I can enjoy the "precious present" as much as I do.

@Old_Skeet introduce me to this fund years ago and I liked the name so I occasionally "check" this fund's "temperature" every now and then. The fund uses a fund of fund approach holding other Columbia funds in various percentages. M* reports its holding as of 2/28/15 as:

I'd like to understand it's present strategy a little better so I thought maybe others could shed some light on its portfolio management strategy. It presently is holding roughly 85% bonds and 4% cash.
Fund Mojo describe the fund this way:
"Columbia Thermostat Z Fund normally allocates at least 95% of net assets among a selected group of stock and bond mutual funds according to the current level of the S&P 500 Stock Index in relation to predetermined ranges set by the investment adviser."
Columbia Fund's Website explain the fund this way:

The fund doesn't seem very interested in the "heat" (of the S&P 500 Stock Index) right now.

That Driehaus paper is excellent. I was interested to see what fund portfolio moves managers are making to try to accommodate reduced liquidity (in addition to or instead of what David Sherman talks about), and found this in the paper:
"Here’s what we’ve done over the past several years to address our concerns about declining market liquidity:
• We continue to hold high cash balances, typically 8% to 20% of AUM, in all of our portfolios.
• When we initiate new positions in the portfolios, we’ve reduced the percentage of a bond issue that we are willing to hold. A year or two ago, we were comfortable holding up to 15% of any bond issue. Now, we prefer not to hold more than 10% of any given issue.
• We model 2-10 points of additional downside in our bear case scenarios ....
• If a bond is a large component of a major etf, we require additional risk premium to own the bond ....
• We are quicker to recognize and hedge downside volatility when liquidity declines, as compared to prior years.
• We consider equity as an investment option in the capital structure more frequently than in the past.
• Finally, we have soft closed strategies well below fund capacities to alleviate liquidity-related stress on existing positions."
The level of perceived risk would seem to depend to some degree on the macro outlook, i.e., a rates-takeoff vs. a lower-for-longer view.

@carminusa: I not clear if your already are invest in Wellington, but here are some Moderate-Allocation Funds suggested by M* If I were you I'd stick with VWELX, 8% + returns for over 86 years.
Regards,
Ted
M* 5 of Our Favorite Moderate-Allocation Funds:
http://news.morningstar.com/articlenet/article.aspx?id=693877

Hi guys (Mark & Scott),
I was off the board most of the weekend and with this I am sorry about the slow response.
You both make some good comments; however, the three year (19.9%) and five year (12.3%) performance for the fund (LPEFX) place it within the top ten percent of its category. During the past year, or so, many private equity firms have been under government review and with this the performance of private equity has somewhat waned.
I think LPEFX is a neat specialty fund to own and it has put some good money in my pocket over the past five years. During this time it has put about 33% of what I have investested back into my pocket plus I am currently carrying 49% in unrealized capital gains. It has indeed been a good cash cow. Plus there is no K-1.
And, although it might not be right for you … for me … it’s a keeper.
Old_Skeet

FYI: After 15 years the Nasdaq Composite Index has returned to its dot-com-era record, just as the bull market is looking tired.
Many money managers warn that U.S. stocks are overdue for a pullback. They are shifting money to stocks in Europe, Japan and even developing countries.
Yet some who correctly foresaw the 2000-2002 meltdown say U.S. stocks are less risky today. Their reasoning: Although stock prices are high, interest rates and inflation haven’t gotten to the levels that killed bull markets in the past.
Regards,
Ted
http://blogs.wsj.com/moneybeat/2015/04/26/why-this-old-bull-market-may-not-be-ready-to-die/tab/print/

It is a shame that you didn't enjoy your younger years. I try not to tell myself, "just wait until retirement", but I do try to make the most of the present.

My mindset was shocked by Black Monday 1987. After a year of investing into a plain stock mutual fund I saw over $2000. dwindle to about $800 overnight. What did I do? I pulled out my money and started educating myself. Within six to eight months I was back in the market, this time better diversified and I knew what to look for. I continued to read and listen to radio financial programs, including Bob Brinker. I didn't always see eye to eye with Mr Brinker but I built a foundation. I felt the tech bubble and saw the euphoria before it burst. My moves saved my portfolio a lot as I was only down about 18%. Then, years of dollar cost averaging. I learned that it is not the amount of money you earn, but the amount of money you spend that matters. Money not spent is more for investing.
I believe bleak moments in history show a path.

Hi Dex,
I made a decision to take an early pension (defined benefit) at age 51 after 27 years of service. If anything will be different for those younger than you and I it will be that defined benefits will not be a common component of retirement.
I will not qualify nor did I significantly contribute to SS. I needed to combine my "defined benefit" with a one time opportunity to buy and "extra annuity" to make my budget work. Budgeting, saving and thriftiness is what has allowed me to consider retirement at 51 and it will be that same attention to personal finances that will serve me well going forward.
I moved to a no income tax state, bought a condo in 2012 for $35K that has tripled in value in three years. I drive multiple 20-25 year old cars...that's plural. I furnished my place mainly by finding good deals on Craigslist and the like.
After 50 I started reminding my 50+ year old friends that:
"Today is our last best day...and tomorrow will be our next last best day."
In other words, If you have a desire to do something...do it today. There are no guarantees when it comes to tomorrows.
Thanks for the thread.