Despite having been burned a few times by not having bonds in funds for relatively short-term needs, such as college tuition, I can't see the logic of even a small bond percentage for someone 15 to 30 years from retirement, regardless of expert opinion. It may make one feel better to see something go up in a declining portfolio, but the gains should occur in equities.
So far, SS seems to remain the third rail, even for the Tea Party representatives, for those within 10 years of retirement, so it represents a "bond" holding for them.
I do think the portfolio could or should contain dividend funds or a "value" tilt. If you can live on your SS income and cash savings for several years, you might get by with dividend aristocrats instead of bonds even near retirement, but I do have some bond funds since I expect to retire in 5 to 8 years. Considering the current bond market, I'm not even sure that makes sense. Hope Grundlach and Gross pull me through.

Reply to @golub1:
I guess that would depend on the index. For instance, I own PKW, an ETF which tracks the Nasdaq Buyback Achievers Index. It not only beats the S + P and the large blend category for 1, 3,and 5 years (it was started in 2007), but does it with less volatility, and a better risk adjusted profile. I consider most non-sector specific ETFs in the same camp as index mutual funds. It is my largest holding in my retirement portfolios.
Here is the M* link to its ratings and risk:
http://performance.morningstar.com/funds/etf/ratings-risk.action?t=PKW&region=USA&culture=en-US

Hi Guys,
One thing is certain in the investment marketplace: change will happen.
This latest article by Morningstar’s John Rekenthaler is a continuation of relatively new wave thinking about risks and asset allocation. Its primary departure is from the Harry Markowitz’s world of only standard deviation volatility risk to a more comprehensive, more inclusive modeling of risk into two principle timeframe risk categories: shorter-term, higher probability, volatility risk and longer-term, game changing, lower probability, catastrophic risk.
I like both John Rekenthaler and Bill Bernstein. Both investment professionals do honest, reliable research and report clearly. I trust both gentlemen.
The Rekenthaler article is a follow-up piece to one reported in the MFO postings on September 14. The submittal is titled “what do you think of this NYT piece on new-think retirement balancing?” Here is the internal Link to that posting:
http://www.mutualfundobserver.com/discussions-3/#/discussion/7866/what-do-you-think-of-this-nyt-piece-on-new-think-retirement-balancing
I posted some extended comments relative to the recent academic findings in support of the partial debonding of a portfolio’s conventional bond asset allocation. The research work was conducted by some heavyweights in the retirement planning community. For convenience, here are the two research Links that I cited:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2318961
Both these papers conclude that the bond segment of a portfolio should be reduced for longer-term investors. I suspect they advocate this position if the investor is more than a decade away from dipping into that portfolio sleeve.
Based on these findings, and a realignment of my retirement goals, I have made a minor adjustment in my portfolio towards a slightly higher percentage of equity positions.
It is difficult to abandon the beneficial philosophy of reduced volatility with a minimum sacrifice of returns that a bond component delivers. Standard deviation can be cut in half with bond holdings, and as MFOer Investor observed “The best portfolio is one that you can live with.” That of course assumes that your non-sleep deprivation portfolio satisfies your return requirements.
Also, although not the case now, marketplace history does show that there are periods when bonds generate superior returns over equities. For example, recently the Barclays Capital U.S. Aggregate Bond Index for the 10-year period from 1998 to 2008 outperformed the S&P 500 Index. Other periodic examples exist.
Bonds should never totally disappear from a balanced portfolio.
Always keep in mind that investing returns are strongly influenced by a regression-to-the-mean pull so change happens. Sleep well.
Best Regards.

FYI:
Regards,
Ted
http://money.cnn.com/2013/09/23/retirement/fidelity-lawsuit/index.html?iid=HP_LN

Reply to @VintageFreak:
While the fund is closed to new investors, since you already have a position in the fund, you should be able to open a new account in a taxable account provided that you can demonstrate you own the shares by submitting a recent statement. You need to speak with CSR for more information.
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Reply to @InformalEconomist:
"This flies in the face of what a retirement account is intended for." Yes, precisely. With many types of funds, most would be better served allowing the money to sit and grow.

A useful reminder, though unfortunately it won't reach or be read by those who need it the most.
I can think of various scenarios in which accounts appear to be idle, such as job loss and no contributions for a period of time.
This flies in the face of what a retirement account is intended for.
Most of the fund companies through which I hold an account directly have sent such a notice, though have not stressed it.

Hi Guys,
If you don’t know, I have some skills and experience that contribute to my qualifications in assessing Monte Carlo-based retirement analyses. I have reviewed much of the literature, have done countless specific analyses, and have even written a Monte Carlo code when not many existed. So, this is not a casual posting; it has a serious purpose.
The NY Times article that reviewed the Pfau and Kitces study did a respectable job at summarizing the researcher’s basic findings. But, like any broad-brush evaluation aimed at a general readership, it is not necessarily nuanced or complete. A study of this magnitude deserves special attention since an interpretation of its discoveries can be very personal. Also, the authors are heavyweights in the retirement arena; these researchers speak with authority.
Therefore, my first recommendation is that you not be satisfied with a reasonable review, but that you go directly to the source. The referenced document is not mathematical, is a breezy read, has specific recommendations, contains useful charts that summarize all its findings, and is only19 pages long. Here is a Link to this fine Monte Carlo research paper:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2324930
The study itself is comprehensive, but it is simultaneously limited in scope because it only partially deals with the complex continuum of retirement issues. For example, retirement planning must address both the accumulation and the distribution phases of an overall retirement strategy. The referenced study only focuses on the distribution portion of retirement.
The study examines the survival prospects of a retirement portfolio under the commonly accepted 4 % and 5 % annual withdrawal schedules (adjusted for inflation) for three representative market rewards scenarios. Not shockingly, the postulated returns scenarios are a primary determinant force in any portfolio survival study. The three reasonable postulated scenarios are: one developed by Harold Evensky for professional financial planning purposes, another calibrated to the current low interest rate environment, and a third that reflects historical equity and bond returns.
The major distinction in the Pfau and Kitces work is that the equity/bond asset allocation mix is not held constant during the retirement period; 121 equity glide-pathways are defined and evaluated. Monte Carlo analyses randomly selects the portfolio’s returns annually for each of 10,000 cases considered for each equity glide-path. A 30-year retirement lifecycle is documented.
In some instances, the retirement portfolio is favored with positive returns in its early years; in other instances, the reverse is randomly selected and the portfolio suffers initial erosive market drawdowns. Portfolio survival is definitely dependent upon both the magnitude and the order of these future projected returns.
For a more complete assessment of the entire retirement planning process, I recommend you visit another research paper. The paper is authored by Javier Estrada, another financial research wizard; his paper is titled “Rethinking Risk”. Here is a Link to the compact 23 page study:
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2318961
Estrada examined returns data from 19 countries over a 110 year timeframe. He makes the case for a heavier commitment to equity positions during the accumulation phase of retirement planning, even just before the retirement date. He observes that “ In fact, stocks have both a higher upside potential and a more limited downside potential
than bonds, even when tail risks strike.” He’s writing here about Black Swan low probability events late in the lifecycle period.
In his conclusion section, Estrada writes “ … it is clear that stocks are more volatile than bonds, but it is far from clear that they are riskier than bonds for the type of investor considered here. This is because, even when tail risks strike, stocks enable investors to accumulate more wealth by the end of the holding period than bonds. Hence, in what sense are stocks riskier than bonds for a long‐term investor that focuses on the endgame?”
In essence, the Pfau & Kitces Monte Carlo studies, and the Estrada empirical assembly and analysis of market data dovetail to fit an emerging picture. These researchers are advocating for more aggressive portfolios with a higher fraction of equity holdings. However, Pfau & Kitces endorse a U-shaped percentage equity holding profile that features more fixed income products immediately after the retirement date.
Their study is soundly constructed, but its numerical findings are not overwhelming. That’s why you need to examine the results for yourself. It is likely that some of the reported trends are within the uncertainty (the noise) of the calculations. Basically, the study documents marginal benefits, small gains in survival likelihoods.
In many instances, the reported portfolio survival probabilities are at totally unacceptable survival rates. That is especially true for the Evensky model returns and today’s low fixed income returns forecasts. From my viewpoint, the only actionable portfolio equity glide-path scenario is that coupled to the historical market returns. That’s a rude awakening.
Referring to the Pfau & Kitces figures, their analyses show portfolio survival rates above the 90 % likelihood mark only for historical-like annual return rates. That might also be interpreted as a clue that a 4 % withdrawal rate is unacceptable if current, muted market conditions hold for the next decade or so.
There is a lot to be learned from the two referenced studies. Please take advantage of them. I believe that although they offer interesting and new insights, they do not make overwhelmingly compelling arguments. If I do decide to act on them, it will be very incremental in character.
Nobody sees the future market returns with clarity, so conservative retirement approaches and planning are always the order of the day.
I hope these references are helpful in that regard.
Best Wishes.

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Counterintuitive, yes. Logical, entirely.
I really need to see if anyone convincingly rebuts this. If you are underfunded for retirement and have to take risks, this isn't your aproach; but, for adequately funded individuals, it makes sense. It didn't address the duration of the bond funds, so far as I could tell.
I'll keep more cash than I had planned, or use ultra-short bond funds, but it convinced me to be very careful with equity investments, since I'm within 5 years of retirement (and I hope I'd have been careful anyway). This is a bit difficult for me with the new funds suggested each month.
It does clash with the advice of others, including Bogle, who suggest a higher equity percentage, using Social Security as the bond component of one's investments. I'd have been happier if they'd overtly incorporated Social Security in their calculations. Since I don't have time to do the Monte Carlo calculations, I hope they are correct.

Yikes - Need to read this thing at least twice to understand where they're going. This "new theory" turns traditional retirement investing (as practiced by target date funds) on its head. In other words, the proponents would increase stock allocations as one ages. I guess the following sums up the "logic" here:
"... if the market performs poorly later, say in the second half of retirement, the damage to the portfolio is far less severe because the money had several decent years first. In other words, the sequence of your returns matters, especially in retirement. “If you have a bad sequence of returns early in retirement, you would have a lower stock allocation when you are most vulnerable to losses."
Not perhaps as qualified to comment on this as some others better versed in statistics. But, I'd observe (wryly) that the market did in fact tumble - off 50+% - just as the first wave of boomers reached retirement age. Ironic - huh? Still, It's not entirely clear that this new approach would have solved much. If followed, these people would have had less in equities at the time of the crash. That's true. But, they'd now be increasing their allocation to equities during a period of record high stock valuations.
I suspect the authors' computations are skewed favorably in their direction by the bizarre "once in a century" bond market we just experienced. Of course, retires would have made out like bandits had they been mostly in longer bonds in 2007. They could have then ridden the bond bull right up until 2013, sidestepping some of the early carnage in stocks. But, it's dangerous to tailor a plan based on recent market performance. Markets always have a way of confounding even the best laid plans. The plan under review seems peculiarly fashioned to fight the last war, as we humans are so often prone to do. Yes, history does repeat. Unfortunately, it does so only in very random order and in no great haste. So. if you already have a long range plan, don't throw it out the window in favor of this new theory. If you don't currently have a plan, look elsewhere for guidance.
No - This isn't an endorsement of target date funds, which have their own problems. There's creative ground in between to exploit without acquiescing to either of these extremes. Yet - if push came to shove, I'd say the target date people have it "more right" than do the proponents of this new theory. As always, MHO

Reply to @Desota: I'm not disrespecting anyone. I'm simply saying making claims you don't have to suffer consequences off shouldn't be made. If I knew Birinyi had substantial assets, say 60% of his net worth in S&P 500, I would put him on a pedestal. Idle predictions should not be made.
I also need to point out that calling bottom when market has lost 50% of its value is not genius. It is calculated risk for making predictions coming through. If he had made call in 2009 in 5 years S&P would hit 2000, then THAT would be something. OBummer and the fed is going to pull out all stops to make sure market keeps rising into 2015. Making this prediction now is another calculated risk.
Finally, when market goes to 2100, please give me credit. 66% of my retirement account is in equities. I'm making the call putting my money where my mouth is.

Reply to @BobC: I agree with BobC.
I think you should work backwards. Determine cash flow needs in retirement, subtract the cash flow due SS and look at your portfolio to see if you can meet the cash flow needs with it and what risk level you might have to assume for it and see portfolio survival rate thru Monte Carlo simulation is acceptable. If the situation is not looking good one might have to delay retirement, take part time Job in Retirement or reduce costs and maybe if those are not possible downgrade expected life style.

Reply to @Old_Joe: Now I'm getting it (duh:-) Thanks for all the time. I think some good has been accomplished. Come to think, although 100% of our investments are earmarked for "retirement" at our ages, I do view somewhat differently (1) the traditional IRA, (2) the Roth and (3) the non-sheltered portions. (In reality, however, the three normally run pretty close together.)
Agree with you - to advise mom & pop investors currently in retirement to throw all their cash into risky assets and count SS as their "bond" or "fixed income" portion is bunk. It's also not characteristic Bogle. As someone else infers, first time the markets experience a sharp drop they'll dump & run ... and at the worst possible time.
Bogle's fine - but not a Saint. Not sure what his "gig" is nowadays. ... Google him and he's everywhere. Is he garnering income from his appearances? Book sales? Who knows? If Ted or anyone else comes across that M* Interview in its whole & "linkable" entirety, maybe we'll get a look at just what he really said.
Regards

Reply to @hank: Your thought re the differentiation between "investment" and retirement" portfolios centered around Investor's observation that he didn't believe that our portfolio was adequately configured to assure inflation protection, because of the ultra-high (at the moment) cash component. And he was right.
In discussing that however, I pointed out that as things look now we do not anticipate needing to draw down that portfolio for living expenses. Investor responded that in that case it really shouldn't be considered as a "retirement" portfolio, but rather as an "investment" portfolio (held while we are retired, it's true), and that indeed a different calculus might apply: If there is no strong need to bolster return for living expense, perhaps a lower risk/return is OK.
Over the years I've become aware that seemingly no two people on Fund Alarm or MFO seem to calculate their "portfolio" in exactly the same manner. And that's quite understandable, as probably no two of us are looking at exactly identical situations, and after all this is an informal forum- not held to commonly accepted accounting standards, thank goodness.
And you're quite right re the cash or cash equivalent allocations causing a great deal of head scratching. If you keep a bundle aside for living expenses in case of disaster or extraordinary expense, is that part of your portfolio or not? Is RPHYX a cash or bond allocation?
This is why comparisons of "portfolios" in this informal MFO environment really isn't possible. And that's not really a big deal either. My original growl re the word "portfolio" as used in this thread was simply because it was being used as if it were a commonly accepted definition here, and I just don't see that it is.
From your link above: "Bogle has a great point: use your Social Security income for the fixed-income portion of your portfolio, and allocate the rest to stocks (and precious metals, obviously)." What total bunk! A pension isn't "fixed income"? Nor rental property? Nor annuity income? Nor trust income? And do any of those deserve to be considered a part of a "portfolio"? I don't think so, and neither does the Investopedia definition.
All of these conveniently unmentioned factors are exactly why I prefer to look at the whole thing as in "keep it simple", above.
Take care- OJ

Reply to @Old_Joe: It's healthy to grumble! I took yours more as dismay at the lack of focus In the whole thread - and I'd heartily agree with that assessment. Wasn't aware of the differentiation you and Investor make between investment portfolio and retirement portfolio. I'm afraid I tend to view all as "one and the same". "Different strokes ......" as they say. Whatever works.
I am, however, sometimes frustrated by the term "cash" which gets thrown around quite a bit. Most of us, I suspect, have "enhanced" our definition quite a bit by dipping into riskier assets with cash-like characteristics. So one guy's reported "40% cash" position may look quite a bit different from someone else's 40% cash stake. "Bond" too is a term open to different interpretations. Some think only in terms of AA or higher quality. Others include junk and EM as part of their bond position. That's one hell of a difference in risk-reward characteristics and also how they'll behave under different conditions.
I've spent an hour trying to uncover a M* interview Bogle did recently. All leads failed - perhaps because I'm not a registered M* user. But, apparently, he left the impression Social Security should suffice as most people's "bond" holdings - so we should now plow most everything we hold that's liquid into the stock market. I do fear the ol boy's beginning to lose it! Those 1% bond yields may have driven him over the edge. The Boggleheads are going nuts on their board over his comments.
Here's the best short snippit I could dig up on his recent remark. Not the transcript (which I'd really like to read) http://www.wcvarones.com/2013/06/john-bogle-social-security-is-new-fixed.html

Hey there hank: actually, wasn't growling at you but rather at how the conversations here generally tend to conflate "portfolio" with "retirement portfolio" and with (as rono points out below) "wealth portfolio".
I'm as guilty as anyone, and Investor and I have sorta agreed that in my particular case it should be regarded as an "investment portfolio" rather than a "retirement portfolio", because our actual retirement income seems to be doing fine without touching the investment side of things. I would guess that "investment portfolio" and "wealth portfolio" are synonymous, but because we don't have a standard usage here on MFO I'm not even sure of that.
How Bogle transmogrifies SS into a bond-like instrument I'm not sure, unless he is strictly looking only at hopefully dependable scheduled income, and substituting SS for equivalent bond income without regard to the actual bond value. In that case, the same rational would seem to apply to an annuity also.
The whole thing seems a bit shaky to me, since bond income may or may not keep pace with inflation, and then are we talking about holding bonds directly or through a fund, where anything can affect the intrinsic value of the holding. Pretty messy, I think, and too much room for slop to be very helpful.
Keep it simple:
1) calculate needed retirement income, adjusted for inflation
2) calculate all anticipated income, from all sources other than investments
3) subtract anticipated income (2) from needed income (1)
4) if the income meets the needed level, you can contemplate an "investment" or "wealth" portfolio.
5) if there's a shortfall, then you need to seriously work on your "retirement" portfolio. You now know the income needed from that portfolio, and can determine your equity/bond/fund distribution in an intelligent way to try and meet (and hopefully surpass) that need.
I'd close with "peace" also, per rono, but it seems to be hard to come by these days.
Regards, as always- OJ

Reply to @Old Joe : Yes - definition of terms is "Debate 101" and generally the first step in problem solving. Hmmm ... I took Joe's question to be a reference to something I recently heard John Bogle speak about. Bogle takes your annual Social Security benefits (with some yearly "COLA" figured in) and multiplies that by your life expectancy. OK - Let's say your SS will average about $20,000 a year and your life-expectancy is 20 years. Bogle than computes that into a $400,000 bond you're sitting on (20X$20,000). Now, if you're 66 years old and follow his other age-based rule (by holding 66% bonds or other fixed income at that age) than your equity investments should amount to 34% - or about $200,000. I suspect that for some here that $200,000 might well represent the better part of their accumulated retirement savings, and so would therefore question the wisdom of following Bogle's advice to the letter. But, depends on the individual.
Guess I should have been more explicit in my reply. As far as the poster goes, I offered some general observations based on having followed John Bogle a good many years. His writings were among the first I read and enjoyed on the topic of investing. Frankly, am loath to advise anyone on anything financial, believing - as I'm sure you do - the best long-range investment plans derive from within and are tailored specifically to address the circumstances and needs of the individual. Thanks for your thoughts as always :-)

Here we go again: let's not define any terms, it makes it more interesting that way. If there is a standard generally accepted definition of "portfolio", does it or does it not include assets other than financial market products?
If a standard, generally accepted definition says yes or no, then the question answers itself. If there is no standard definition, then anybody can include whatever they darned well want to, and the term "portfolio" means whatever you want it to, so essentially becomes meaningless.
FWIW, Investopedia gives the following definition:
"A grouping of financial assets such as stocks, bonds and cash equivalents, as well as their mutual, exchange-traded and closed-fund counterparts. Portfolios are held directly by investors and/or managed by financial professionals. "
If the question, as I suspect, is really "should SS be considered an asset for retirement planning purposes", I did, and believe that that is a valid approach. If you were to take a sum of cash and convert that to an annuity (which I certainly DO NOT recommend for the average investor), then that also should be included as a retirement asset for planning purposes. Likewise, a defined benefit retirement pension, if anyone still has one of those, and has confidence in the plan. Likewise income property, etc. Why would you not include any potential retirement income in your overall planning?