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How big must your nest egg be?

Finally, if you reach your particular savings goal, Mr. Bernstein recommends that the bulk of your portfolio should be invested in relatively safe holdings, such as bonds, Treasury inflation-protected securities and inflation-adjusted immediate annuities. Think about it this way, he suggests: If you have saved and invested well, it’s possible you have “won” the game; you have built the nest egg you need. And if that’s the case, stop playing. In other words, start reducing the risk in your savings.


  • @Bobpa & MFO Members: That's exactly what I have done !
  • Same here.
  • @OJ, you are truly low-equity now?
  • edited February 2019
    Down to about 1%. At 80 and with potential health issues, I am not optimistic about the time-frame likely needed to hunker down through the next downturn and then back up the other side. My wife has no interest in the financial affairs, other than appreciating not having to worry about them. If I do last long enough to survive the next downturn, I'm well positioned to quickly reinvest as things start to move up again.
  • Huh, nearly the complete opposite from Mr. Buffett. Interesting. At the moment I'm roughly 65-35 equities to PIMCO bond funds. All of my equities are invested in dividend aristocrats (companies who have raised their dividends consecutively for 25 years or more) or those who almost make the cut. I think I'll stay where I am.
  • Howdy folks,

    "I resemble that remark."

    That said, it's a dynamic that we get used to.

    and so it goes,


  • @OJ,
    dig it, roger, sorry to hear of possible woes, but you are therefore doing all the right things, to my mind
  • edited February 2019
    @Mark- Yeah. Well, if I had the depth of resource structure that Mr. Buffett has, I'd go with his plan too. By resource structure, I don't mean the actual value of the holdings- I mean the expert financial information and manipulation resources which Mr. Buffet, his wife, and estate have access to.
  • @OJ I remember you posted recently your allocation 40-40-20. Now you say 1% equity. Please elaborate.
  • OJ - folks keep bringing that up (Buffett's resources). Maybe it's a valid point and maybe it isn't. You see I don't believe that he built that wealth using much more than equities and cash on hand. Granted he's scored some big payoffs holding debt for companies here and there but it's nowhere near a mainstay in his portfolio. For the most part he got to where he is following his own advice and I highly doubt that he would leave Astrid any other way. Knowing what I think I know about her lifestyle she'll have no worries.

    Now, my portfolio would constitute the tip of a needle in his haystack. My investing acumen similarly. However, my house and truck are paid for and my monthly bills are more than adequately covered by the monthly income pouring into my account rain or shine. I just don't trust bond income alone and I have no stomach for annuities of any sort. That's just me.
  • @DavidV: I'm sorry, but I'm not sure what posting you are referring to. I took a quick look at recent posts on the subject, and came up with-

    • December, 2018: "Being 80, I've done more than tinker around the edges- I've eliminated a few weak sisters entirely, and reduced all of our other funds to approximately 2k each. This will maintain easy access to those funds in the future, when the time comes (and it will, if I'm still around.)"

    • November, 2018: "@Ted: Interesting that you have made that decision at this point in time. I've been very close to the same decision, and now I'm thinking that I'll follow you on this. The next market cycle is certainly not going to be upwards, and given our ages, we may not be well positioned to ride the next one through to the next bull. Additionally, my wife has no interest in any of this, except of course that she likes being able to maintain our living standard. Given the survival odds, probably better to now transition into a plain vanilla situation to the extent possible."
  • @Mark- Yep, we're also pretty close to your situation. Everything paid for, and with pension incomes, we don't really need income from equity investments, and don't want exposure to a sudden downturn in equity values. We just think that we're getting too old to confidently expect to ride out another inevitable down/up cycle. In the past we've done well at various times with bond income, either direct or through bond funds, but with the current interest rate situation that avenue isn't promising.

    No interest in annuities, either. I've never been overly impressed with annuities being backed by the full faith and credit of Ed's Super Annuity & Payday Loan Company. So for the moment at least we're just going to attempt to stay even with inflation, or at least as close as we can get.
  • The answer is about 25 times your annual expenses at retirement. Mr. Bernstein is wrong for decades, if you listen to him, chances you will never retire, especially if you invest in Treasury inflation-protected securities and inflation-adjusted immediate annuities. You must own some stocks and you can do so much better long term with Multisector funds. Investing in TIPS? really? TIPS made just 1.43% annually in the last 5 years, even BND is a better choice. I have been commenting about him for years on Morningstar.
  • The answer is actually "it's different for everybody." There is no formula.
  • edited February 2019
    At 72 it’s quicker to tell my doc what still works right than what doesn’t.:)

    I’ve shared my modest approach enough times in the past. Suffice it to say: I enjoy the game and feel some limited market exposure provides an extra modicum of “insurance” - just in case I live too long.
  • @OJ Sorry, it was my mistake. It was actually Old_Skeet))
  • When’s the last time somebody said: I invest so that I can protect my hard earned assets against future inflation?
  • Some recent writing (not that this is news to most here) is that it does NOT need to be 25x cashflow,

    more like 22x

    IOW a ~4.5% SWR
  • edited February 2019
    Just a point of clarification:

    The author cited in the linked article is William J. Bernstein. From Wikipedia: “William J. Bernstein (born 1948) is an American financial theorist and neurologist. His research is in the field of modern portfolio theory and he has published books for individual investors who wish to manage their own equity portfolios. He lives in Portland, Oregon. His bestselling books include The Birth of Plenty and A Splendid Exchange”.

    I at first incorrectly assumed the reference was to Richard Bernstein who has been around the block a few times at some of the big N.Y. investment banks and who appeared occasionally on Louis Rukeyser’s legendary Wall Street Week. Here’s a CNBC blurb on Richard Bernstein:

    Don’t know anything about William. Richard, however, wasn’t the sharpest blade in Rukeyser’s otherwise highly respected tool box. If he told me turn right I’d probably turn left.
  • edited February 2019
    @DavidV- no problem- thanks for the clarification.

    Before he got old he was just "Skeet". After he got old I told him that I had the lock on the "Old" title. He should have listened to me. :)
  • edited February 2019
    Ernie Harwell used to say: “Ya gotta dance with the one that brung ya“. That’s kinda how I feel about tossing out an old investment plan that has served me well over the years - and one with which I’m intimately familiar.

    Toss the old gal out the door and retreat 100% to cd s and TIPS? I’d go nuts from boredom if nothing else. Sure, you gradually reduce risk as you age and as circumstances change. But I’ve never viewed investing as an all in vs an all out proposition anyway.

    If one accepts that proposition, many of the risk assessments Price and others perform in designing and marketing lower risk multi-asset funds for risk averse investors (TMSRX, RPSIX, TRRIX a few cases in point), go out the door.
  • and 'A Man's Got to Know His Limitations' -Mr. Eastwood or it's important to know when to hold em and know when to fold em.
  • edited February 2019
    Bobpa said:

    and 'A Man's Got to Know His Limitations' -Mr. Eastwood or it's important to know when to hold em and know when to fold em.

    Of course. I wouldn’t presume to advise others of any age how they should invest - or even whether to invest at all.

    I’ve skimmed through your linked article several times and don’t see anything compelling enough to convince me to start doing something different than what I’ve been doing. And I suspect others had a similar reaction. You don’t just fall out of bed one morning (or pick up an article) and suddenly decide you’ve gotten too old to invest. It’s more of a process. First time I’ve heard of William Bernstein. I’d rather take my cue from those giants I’ve known for a while - like Buffett or the late John Bogle and John Templeton.

    While some here have recently pulled back their market exposure or stopped investing altogether, from my perspective these decisions were long considered and previously shared. Their reasons have already been made known. So hats off to them. I’m sure for each it’s a proper decision.

    Perhaps @Bobpa you have already decided to move everything into “safe” investments like govt-insured bank deposits. TIPS, or T-Bills and are looking here for some vindication? Actually - there’s no such thing as a totally safe investment. While it’s a different kind of risk, cash investments are at the mercy of inflation, capable of ravaging their buying power over time.

  • Couple mills if get good div 6%annual would love comfy life styles w wifey
  • Hi Guys,

    Risk is difficult to define. It means different things to different folks, and is likely very dynamic, changing dramatically for an individual over time. That's one major reason why a never ending debate is a likely outcome when discussing asset allocations.

    No single answer exists. That's true even for an individual investor whose timeframes and feelings are dynamic. It can be a challenging exercise to select and being comfortable with a portfolio's asset allocation.

    The good news is that tools exist on the Internet that can provide some meat-to-the-bones of any such challenging task. Specific numbers can yield some guidelines. Here is a Link to a tool that is provided on the Portfolio Visualizer website. I have Linked to it on early posts.

    This tool allows a user to test input portfolios for performance over actual timeframes. A user can compare his performance against a large number of expert standards. The impact of various withdrawal rates can be explored. Numerous assumptions can be examined. The primary shortfall of this analysis is that it is based on past performance. Things change.

    However, this tool is easy to use and is super fast. I recommend you give it a test run. You might even learn something. Good luck to all.

    Best Wishes

  • edited February 2019
    JoJo26 said:

    The answer is actually "it's different for everybody." There is no formula.

    Couldn’t agree more. Some have no REI since everything is covered by SS and pensions. My REI is 45 years and I am about to turn 72. That tells me I need to obsess more about spending my nest egg instead of more accumulation. But old habits are hard to break. Even more so since in early January there was a buy signal I have seen but 4 times since 1960.

  • edited February 2019
    @MJG - Thanks for the link. I feared it was some MonteCarlo sim - but it isn’t.:) Let’s folks imput different allocations to many different classes of equities, bonds, cash etc. and see how they performed over specified time frames. Should be of interest to many.

    If possible, some of us “seniors“ should by now be able to do our own back-testing. I ditched my fee-based 403B “advisor” (skimming 4+% off contributions) in ‘95. Switched to TRP and took charge. I’ve got some rough recollections of my investment history from ‘95-‘98. After ‘98, when I retired, I began keeping detailed records. I know how I was invested each year and what the % of gain or loss was. The plan changes little - but I’m aware of when allocation changes (mostly age-related) occurred. That’s my back-testing - detailed records spanning nearly a quarter century.

    I know what my IRAs were worth in ‘98. I also know I’ve now withdrawn considerably more dollars over those years than the beginning balance. And I know that I currently have nearly double the amount invested that I started with. (Withdrawals didn’t begin until 5-7 years into retirement.) Over the first 7-8 years investments compounded at around 7% yearly - but less in recent years. Except for 2008 when I lost 20% (followed by +28% the next year), I can’t recall another down year of more than 5 or 6%. I don’t consider these returns very good relative to others. I’ve always been very risk averse.

    Of course, a dollar today isn’t worth what it was in ‘98. Assuming a 50% decrease in purchasing power over those 21 years, I’m at about where I was when I retired. One source estimates inflation averaging slightly above 3% over a 20 year time-frame with prices roughly doubling over that time. (Can’t vouch for its accuracy.)

    Maybe what I’m saying here relates mostly to the value of keeping good records. No attempt to tout returns. As I said, many will have done much better. (I’m in envy of a number of others on the board. :) )


    * Footnote - Being conservatively positioned allows me to remain 100% invested all the time in a wide variety of fund types, including a modicum of cash. Mention that because many maintain multi-year cash reserves separate from their “investments” and exclude that cash when calculating returns. May result in apples-to-oranges comparisons.
  • So how many years of post-SS cashflow do others have in cash or bonds?
    And of that, what percentage is cash or equivalent and the rest in bondy things (PONAX or whatever)?
  • another interesting datapoint about lower SWR probabilities in a time of high p/e; from a place I do not know:

    (appears to conform with a kitces piece bee posted a year ago )
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