A wise old friend of mine once said "Noble prize winners and academia make the worst investors."
There is no doubt in my mind that there is no absolute "perfect" portfolio. It's up to each of us to find one that we are comfortable with. The best advice I can give is not to constantly shift strategies and try to stick with one approach for the long term AND do not rely solely on past performance to forecast future returns.
I do believe that 90+% of investors are best off investing in globally diversified stock and bond index funds, however, like I said above I'm not one of them in today's environment. There will be a day again when the risk reward is more attractive for buy hold rebalance.
On a side note, I'm on the board of our pension plan committee at work and was successful in eliminating all active funds for our plan participants. We now offer a plan consisting of: total US stock index, total international stock index, total US bond index, total international bond index and Short Term high quality bond fund. Very, very simple and effective plan. One chooses their allocation % to stocks and bonds between US and foreign. Low costs and well diversified using 4 funds. This approach gives the average investor the best chance of a successful retirement. However, outside of work is not for this investor!
If someone forced me to select one strategy for the long term and never change it....begrudgingly I'd suggest Harry Browne's portfolio of 4 equal parts: gold, stocks, treasuries and cash

Hi Guys,
I want to especially thank the MFO members who took precious time to craft a reply to my post. I deeply appreciation the extra effort needed. The replies demonstrate a fine diversity of viewpoints necessary to explore some of the subtleties of the topic, and our sensitivities to it. That’s good. Thank you all.
You all know that I’m a pure amateur in financial planning matters. I have never earned a dime selling investment advice or forecasts. I only participate actively on this website, and primarily focus on mathematical subjects.
I’m motivated to do so by my general observation that many US citizens, including financial counselors, are relatively numerically challenged. This observation is not only in regards to sophisticated mathematical methods, but disappointingly to simple arithmetic operations. For example, many do not exploit statistical base-rate data when making investment decisions even when that data is readily accessible.
That deficiency alone could do major damage to a portfolio. My postings and references are mostly designed and selected to address and to reduce that defect.
“Remember, O Stranger, arithmetic is the first of the sciences, and the mother of safety.” I culled that quote from John Bogle’s most recent book. He referenced Supreme Court Justice Brandeis who purportedly quoted Sophocles. I hate complexity.
The long and incomplete list of “experts” that I cited in my original post all concede that a few money managers have the skill set, the resources, and the intangible talent to beat the market. The difficulty is to identify these fortunate souls in a timely manner. Bogle’s analogy is the finding of a needle in a haystack. He concludes that that is too daunting a task. His flippant recommendation is to buy the haystack.
As I read your comments, I reviewed my original post. Even the “experts” on my Index proponent list are not always so expert; they too are not immune to mistakes, and some of these are really gross errors. I was reminded of one such error by Peter Lynch that must be close to shattering records in that category. It’s a lesson learning good story.
It’s often called “The 7 % Fiasco”. In a 1995 Worth Magazine article, Lynch claimed it is perfectly safe to withdraw 7 % annually from a retirement portfolio that is 100 % committed to equities. The absurdity of that claim was immediately challenged by Scott Burns, then of the Dallas Morning News, after completing irrefutable research. To his credit, Lynch quickly acknowledged his error and rescinded the article.
The original article could have done considerable retirement planning damage if not corrected. I was doing Monte Carlo drawdown simulations during that timeframe and was getting acceptable withdrawal rates in the 4 % annual range. By the way, add Scott Burns to my list of passive Index supporters.
I suspect we all fall victim to what the behavioral wizards call Confirmation bias. We more or less screen and sort information in a manner that reinforces our existing investment philosophy. It is very hard to resist this bias. Like one of my favorite Paul Simon songs “The Boxer” says: “A man hears what he wants to hear, and disregards the rest.” I think most of us recognize that there is no single way, no magic formula, to engage and profit from the markets.
What works to make the individual investor comfortable is right for that person. It seems that David Snowball operates this website with freedom of opinion as a guiding principle. We and our portfolios will prosper from that go-anywhere, open-minded freedom. Thank you David.
Controversy and debate is good. It generates better investment decisions. In doing so, please focus on the merits and shortcomings of the various arguments, not on any perceived personal traits of those making their cases.
Personally, I welcome opinion deviances while critically examining the substance of the supporting analysis, not its presentation style. I believe most of you guys do the same.
I suspect far too many among us invest far too much time in seeking an imaginary miracle money man. This financial miracle master will have the uncommon wisdom to correctly gauge the worldwide economic environment, be able to project the differential performance advantages between fixed income and equity market holdings, properly project critical market tipping points, assemble a portfolio that generates market-equivalent rewards while avoiding any market meltdowns, and can accomplish these Herculean tasks without incurring any major cost leakage impacts. Wow!
Such an investment superman is an unrealistic myth. A century of searching the records and scores of academic studies fail to discover more than a handful of these financial heroes, none of which were pre-identified for such extraordinary performance before the fact.
This is an overwhelming mission impossible assignment. Now, if pigs could fly ……
In closing, my number One takeaway from this exchange is that grand illusions die hard.
As a dedicated and informed group, we generally feel that both technical market timing and stock picking are almost fictional art forms, at least from a reliability and persistency perspective. We recognize that these active management techniques work sometimes, but also fail in a costly manner at other times. Yet we still pursue the golden dream of excess returns.
I suppose we all share some animal spirit genes. Hope is eternal and often conquers logic.
Good luck everybody.
Best Wishes.

I have spent the better part of my investing life as a promoter of passive investing and disciple of Gene Fama and DFA. While their research is certainly not without merit, I have come over the years to realize that the premise that markets are efficient is nonsense. Do you truly believe that investors make rational decisions based on the facts presented at all times? Indexing implies that prices should be adjusted so that the expected return of any stock should be the same. Do you believe that? Gene Fama doesn't believe it either which is why he recommnends a value/small cap tilt . If markets are efficient than why does a value premium exist? Fama says he doesn't know why. I think I do. Because markets aren't efficient. Gene Fama once told advisors that he only claims that his approach will work over an investment lifetime. Are you willing to wait your investment lifetime to see if he's right? I asked Gene Fama one time how he can say markets are efficient if tech stocks were trading at multiples in the hundreds and companies without revenue or assets were valued higher than established companies in the same industry? He said that you could have shorted them any time 3 years prior to the crash on the assumption that they were overvalued, and you would have incurred large losses. I told him I meant they could have just been sold. I wasn't referring to betting against them. If you had just sold them you would have been better off. No response for that.
So I pose the question does one believe that markets are efficient or is the entire premise flawed? Or should one overlook these flaws and adopt a passive approach, because it is still likely to beat an active approach? I think ultimately one has define who they want to be as an investor. Do you want to target relative or absolute returns. If you are happy with relative returns and style box investing, perhaps you will be better off with a passive approach. I am no longer content with relative return victories. If the market is down 40% again at some point (a real possibility) I am not going to be satisfied that I am down 30%. Passive strategies are great in up markets because they produce positive returns. When I believe the wind is at our back and stocks and bonds are cheap again I will be happy to re-adopt a passive approach.
Further, style box, or relative return investing does not account for the notion that you could be entirely removed from an asset class, or invested in another. For example. let's say a large cap growth fund was down 5% when the market was down 2%. But at the same time, high yield bonds produced a return of +6%. Were you better off becuase you only lost 2% vs. 5%, or worse off because you missed out on +6%. A passive investor would argue that this is proof you can't beat the market. I would argue that you missed an opportunity.
One more thing I would like to point out is the definition of risk. Do you define risk in terms of volitility or loss of capital? I believe most individuals define risk as a loss of capital. They should also define it as a loss of purchasing power, but that is not easily comprehended by the typical investor. Let's say you invested with a concentrated stock manager that modestly trailed the index after 10 years, but didn't lose money in any year while the market had some significant down years. Without knowing the future, would you be more comfortable knowing that your manager was managing your downside even if it cost you modest returns in the end? It's like buying a put option on your index portfolio. Is it worth the cost of insurance to know your downside is limited? I would think most investors would say that the risk protection and peace of mind is worth the cost of a modest reduction in returns. And don't ever forget what happened in Japan (market down 75% after 20 years) or the US for 20 years after 1929. It can happen again I am pretty sure Gene Fama will not be writing you a check to cover your losses if it does.
There is certainly more than one way to succeed as an investor. Your decisions become more significant each year that passes. The number gets bigger and there is one less year to accumulate assets. If you were closer to retirement I would strongly suggest you abandon the passive, static allocation approach. However, if you are young enough one could justify the approach as long as you are willing to stick with it through all market conditions. I am at a position in my life that I am far more comfortable with the active approach. I think there are going to be some excellent opportunites with great risk/reward trade-offs in the years ahead and I want to protect my capital to take advantage if and when they do arise. The current market and economic imbalances are great. In economics, imbalances must be corrected. It can be gradual or abrupt (like 2008) but they must correct. I am not predicting a market crash, but the risks are elevated due these imbalances. 60/40 portfolios will not hold up well in that environment (especially with the risk of rising interest rates)!
Now let's consider investing from a macro context...Enormous debt pile, record low interest rates, taxes that almost certainly will rise, and demographic headwinds and you start to see that the conditions we have become so accustomed the past several decades will be difficult to duplicate. Anything is possible but so many things would have to go right that beta returns has become a low probability outcome. Personally, I want the deck to be stacked in my favor before I make a 60/40 bet. That does not currently appear to be the case. This is especially true for risk sensitive investors and those with short-intermediate time horizons.

This is definitely not a portfolio that I would choose for myself and I do have 20+ years to retirement.
In particular, I think you are light on the equity side. You are trying to cover that using balanced/asset allocators. But, most of your stock allocation is large caps and your international coverage is lacking broad international both large and small caps. Personally I would get rid of your tactical allocation sleeve. You are likely to get disappointing results at the time you expect them to protect you.
You are waiting for Shiller P/E to drop to 10s to invest. It is possible you will be stuck waiting for it for a long time. People sat the whole bull market. It is a poor timing indicator for the day. It is a hugely lagging indicator. Good luck.
Try to construct a more conventional portfolio, be patient and avoid gimmicky funds at least keep such funds to a small percentage of your portfolio.
Keep Calm
And
Invest!

Another Income/Bond Discussion Mostly Closed End Ideas for Retirement Income. Note :Enhanced Usually Means Leverage
http://seekingalpha.com/article/1670822-multi-sector-bond-funds-for-enhanced-retirement-income?source=feed

Hi Heather. Although I think you are set up too conservatively for a +20 year time frame, I think your portfolio is constructed pretty well. And the reason I believe that is that it looks very similar to the way I set mine up. Very similar. We have different names for our categories, but we have the same desire to use proven active management with flexible investment styles. But of course, I am only 2 1/2 years to retirement (hopefully).
You have categories called global asset allocators and tactile long/short. I just lump that together and call it balanced and alternative strategies. But it's similar in that we want good managers to have a lot of investment flexibility, geographically and with asset allocation.
You, 55% in:
WABIX, FPACX, SGENX, GHUIX, AQMIX
me, 40% in
FPACX, FAAFX, MACSX, PAUIX, RGHVX
Then we have your more conventional equity/bond mix.
you 50/50 mix, YAFFX, SFGIX / DBLTX, OSTIX, TTRZX, FPNIX
me 60/40 mix, YAFFX, ARIVX, GPGOX, OAKIX, ODVYX / MWTRX, LSBRX, PRWBX, FGBRX
I will say, I keep ~10% out of this "core" part of the portfolio to move around with the hopes of adding alpha. Not sure I really do.
So, can't argue with your portfolio structure, but, I'll give my 2cents on other stuff. I don't know much about some of your flexible allocation funds, but I do think you have way to much allocated to them. I can see where you are coming from - trying to reduce volatility, but 55% of the portfolio? I'd knock that back to maybe 30% with FPACX, WABIX and one other. I might then go with 50% in stock funds and 20% in bond funds. There are some real good capital-preservation equity managers listed on this sight to chose from - or even index funds to fill some of the large cap equity portion. Re-evaluate in 10 years and bring it closer to a 60:40 or 50:50 mix down the road if you like.
Anyway, I like what you did and I guess you have to go with your gut on risk versus reward. But keep in mind, like others have said, volatility is not the same as risk over a long investment horizon (by the way, I do equate volatility to risk for shorter horizons).
Good luck and nice job.

Reply to @BobC:
You raised lots of questions/issues. I hope I can keep some of them straight:
- There seems to be an implicit assumption that the hypothetical investor being addressed doesn't have enough money/earnings to max out all the options.
If one can max out, then Roths tend to become somewhat more attractive (whether in a 401k or in an IRA), because they allow one to contribute a greater after-tax value. For example suppose the limit were say $10K, and one were in a 25% bracket now and in retirement. Then contributing the max, $10K, to a deductible plan would be worth $7.5K in after tax dollars, while contributing $10K to a Roth would be worth $10K in after tax dollars.
The ordering becomes much more important if one cannot max out all options.
Though the 401K contribution limit is higher than the IRA limit, if you're not maxing out everything the higher 401K limit is not a reason to start there first (especially w/o match). If you contribute first to the IRA and max it out, you can then contribute to the 401(k) with extra money.
- Roth 401(k) plan feature. Do most plans now really offer this? I would expect most new plans to offer it, but for existing plans to offer it the plan administrator would have to produce new docs (easy) and the plan sponsor (employer) would have to adopt those docs. Given how many people seem to be complaining that employers don't want to make any changes to improve plans, getting them to move on anything (even this simple) might not be a sure thing.
For example, after nearly a decade, Fidelity still does not offer a Roth option for its individual (solo) 401K(s) - some things do take eons to change.
- Even if you contribute post tax to a 401(k) (i.e. use the Roth option), all employer contributions including matching funds go in pre-tax. One should keep this in mind when allocating between Roth and traditional vehicles.
- Decent investment choices - may not be necessary, depending upon the state of the company and your career expectations. If you expect to be at the company for only a few years and then move on (or retire), it might still be worth participating. If :
-- you get a match, certainly up to that amount (assuming immediate vesting); or
-- you're maxing out elsewhere - you get more money into sheltered accounts ( and you'll be able to get it out of the 401K fairly quickly); or
-- the company is very young/small. Then it's quite possible that it will change plans as it grows into something real. Also, it's a lot easier to push a small company into changing its plan.
- Bob only touched the surface on factors to consider. I won't add to the list, they're virtually endless.

Reply to @AKAFlack: Of course it was a serious question: I was wondering why you had not talked about the great flexibility and drawdown discipline (often enforced by reality, of course) that retirees over the late 70s and into their 80s and 90s exhibit. I meant doing the work with or for, say, one's elderly parents. Perhaps you did and I missed it; I shall try to study your opus here before asking you further questions. 70 is not anyone's cutoff for 'really elderly', even if you're an instructor in this area. I will try to find your 'simple longterm exit strategy' and see how it plans for whatever. Same with Joe and his aspirational plans for Murphy. Thanks finally for diction correction; of course one preps for asteroids, or can, bearing in mind I naturally meant asteroid hit, in the usual idiom. Retirement going okay so far, thanks, owing to decades of savings and equity-fund investing. Don't know how the future will go, which is why I am here, studying away, thinking, etc.

13 funds, Heather, is a bit beyond what I'd want to bother taking the time to track and "babysit." Can you get this portfolio down to 8 or 9 funds? Spread out your money TOO much and you end up just diluting your profits. KISS it. Simplify:
EXAMPLE:
1. Domestic CORE, maybe a good balanced fund like MAPOX, mentioned above.
2. Domestic small-cap (MSCFX? From the same shop: Mairs and Power)....Or TRP PRSVX.
3. Domestic BONDS--- nothing longer than intermediate-term. DODIX, DBLTX. DLFNX.
(keep your bond stake small for several more years. You have 20+ years to retirement. You want this animal to GROW. Make sure, when the mutual funds offer you the choice to take pay-outs or to RE-INVEST them, that you do the LATTER!)
4. INTERNATIONAL, global: MAPIX, SFGIX (mentioned above, in your own note) and TBGVX.
5. World bonds: MAINX.
6. A small stake in EM bonds. No more than 3% or so of your total. Right now would be a perfect moment to buy-in because they are so depressed: PREMX, FNMIX.
You can't hope to cover EVERY base. Later on you can get more complicated with various "sleeves." Make it more complicated than it needs to be and you end up chasing your own tail. -----"Max."

Hi Guys,
I want to thank the MFO members who took a timeout to read about my enthusiasm for the Flexible Retirement Planner. I have been a Monte Carlo cheerleader for decades ever since my military days when participating in war games planning exercises.
An especial thank you to those MFO members who contributed additional Links and opinions. Good decision making demands open and fair debate that exposes all options.
Monte Carlo analysis is a relatively modern statistical methods addition. It is rooted in the uncertainties associated with the development of the atomic bomb in the 1940s. John von Neumann and Stanislaw Ulam are usually credited with pioneering formulations.
Monte Carlo analysis has penetrated many military, industrial, and scientific disciplines. It actually received financial planning attention rather late in its brief history. Today, anyone seeking this planning tool for that purpose has the luxury of many excellent choices. It’s good to have choices.
I retired in 1994. In the early 1990s I searched without success for such a tool. Not finding one, I programmed my own retirement Monte Carlo code. Somehow (I don’t recall the source), I became aware that Nobel Laureate Bill Sharpe was also working in this arena. I contacted him for advice and he responded with first-aid suggestions several times.
A little later, Professor Sharpe became a founding father of Financial Engines. Financial Engines is powered by an excellent Monte Carlo code. It went public in 1996. Since that introduction, it has developed working relationships with the big three mutual fund houses (Fidelity, Vanguard, T. Rowe Price) as well as powerhouse financial institutions like JP Morgan and Northern Trust. The tool has been extensively tested and is constantly being improved in terms of options and basic modeling.
Be alert that these codes use different ways to estimate future returns. Of course, they all use a random selection approach. Some programs use actual returns from the markets and randomly select from that database. Others use statistical mean, standard deviation, and correlation coefficient models when drawing from the returns grab-bag. The referenced Flexible Retirement Planner deploys this approach, but it allows its users several alternate options.
In my code, I too chose the statistical model method. Even in the 1990s, I was a little skeptical and unhappy with the model since it did not include the shocking outlier years (before Taleb dubbed these events Black Swans). The beauty of Monte Carlo modeling is that these outliers can be easily incorporated into the analysis with the addition of a few subroutines. I made the necessary changes using past “Black Days” data to guide the statistics and including some multiplier factors to exaggerate the impact.
The inclusion of these disastrous days did degrade portfolio survival probabilities, but only at the margins. Given the uncertainty of the events, their infrequency, and the ad hoc way I modeled these rare events, I finally discounted that segment of the analysis in my retirement decision. I interpreted the outlier outcomes as noise.
Monte Carlo codes as part of the retirement planning toolbox have been accessible since 1996. Monte Carlo procedures were initially challenged by advisors who were a little short on a mathematical and/or scientific background. Most of these reluctant advisors were finally converted given the power and success of the tool. I will not name names, but many respected financial institutions were participants in this eureka story. Monte Carlo based tools are now universally applied in the retirement planning industry.
I encourage you to join the parade. In the end, you might not embrace the output, but it can do no harm because the final decision is always yours to make. It’s good to be King.
Best Wishes.

Frankly, I think you can take the entire "second category" and eliminate it. I have been underwhelmed by all of these "tactial allocation" "alternative investment" and long-short funds, with the possible exception of Marketfield (MFLDX). They invariably:
1. give mediocre to poor performance over an entire market cycle.
2. have ridiculously high expense ratios which, when compounded over several decades ---
which is what you are talking about prior to your intended retirement date ---- become
quite substantial.
3. underperform several of the best balanced (MAPOX, OAKBX, etc.) and go-anywhere/do
anything" funds (FPACX) without substantially changing the volatility of one's portfolio.
And I agree with MikeM: you are making things unduly complicated and micromanaging
your portfolio without a clear-cut reason or realistic anticipated result.

Hi Heather. I remember you posting a while back on this portfolio. What I think I remember was your dedication and hard work to create what you thought was best for you. So, if you are happy with this then that's whats important.
But since you asked, in my opinion, if this is a retirement account with a 20+ year target, you may be way to conservative "and complicated". Most of the funds you chose seem to be top-notch, at least right now. Time will tell if those alternative funds like PAUIX and AQMIX pan out. Maybe they could have a sleep well affect - if you are 5 years from retirement. I would be concerned having so many bond funds myself. 40% in bonds along with the "flexible" and "alternative" funds you think you need are also heavy in bonds themselves! Not sure why OSTIX and TTRZX wouldn't be a suitable combination on their own.
Another thing that jumps out is I don't see any small cap fund exposure. Or much straight stock funds at all for that matter. Why not use index funds for some or most of your equity exposure and maybe a couple managed funds for possible alpha - or conserving principle as you hope. I guess I'll stop there. You asked so I spoke. This might be an okay allocation for a 55 year old, but again, way to complicated and conservative for 20+ years out IM<HO. Over 20 years, the portfolio allocation will be what drives 90% of your returns, not the funds you choose. And over 20 years the short term volatility of equity won't mean much either.
But, as always, if this feels right for you, go with it. Obviously know one knows you better then yourself. And obviously you put a lot of work into this. I do notice you took PRPFX out of the equation.

Hi msf,
Thank you again for "being on top of things" to help us sort out the facts.
As you would have read in this thread, a portion of this discussion found the words for "drawdown", meaning investment portfolio downside loss limits and RMD becoming intermixed. I replied to this confusion from my wording and initial misunderstanding of Bob C's. reply.
As you note, too; RMD may not be monies that are needed, but the IRS rules/regs will cause this event. I am 5 years away from the RMD, and have looked at the numbers; which indicate about a 3.7% RMD the first year and the rate moves slightly upward each year, going forward. Hopefully, this house will not have a "real" need for the monies; but perhaps we will be able to stimulate the Michigan economy with "cash injections". :)
---SS: Another complex area of retirement that deserves an indepth review from those nearing retirement age. Thank you for your information about this area.
---State taxes/Roth conversions. The new MI pension tax is a strange duck of legislation, that is targeted towards the main cluster age of the baby boomers. These tax dollars (it is argued) are to be used as an offset to lost tax revenue from a change in the MI business tax. I suspect that the magical spreadsheet calculations are tailored to look nice going forward; but MI is 20 years too late for attracting major business projects. MI did have a fairly attractive climate for pension taxes, but this is now impaired.
The couple noted in this thread will likely further investigate Roth conversions. That will be a topic for them and a tax professional to sort, among other estate matters.
---Medicare. Thank you for the notation regarding the Medicare Advantage plans. I'll have to check, but I am recalling that these plans have restrictions as to an individual not being able to use their doctor of choice, etc.
Lastly, these issues and areas are complex; but can be sorted to the greatest available benefit. And yes, there will be some luck (health, accidents, investment returns, etc.) involved, eh?
msf, thank you again.
Take care of you and yours,
Catch

Great Reading. Not much specificlly on bonds. Deals with: (1) Money market fund reform, (2) Retirement funding mess, (3) Expected returns going forward, (4) Spitzer and previous fund scandals, (5) Concentration in the fund industry, (6) and, as usual, fund expenses.
I disagree a bit on point #3. I don't view 8% annual return for a large well-managed pension fund as an unreasonable expectation over multi-decade periods going forward. He seems to infer that 5-7% is more likely,
My favorite exchange from the interview:
Phillips: " ... When I look at some of the firms out there, I see more of your DNA in a place like T. Rowe Price or American Funds than I do in some of the upstart, very specialized or leveraged index funds. What would your counsel be to someone: Would you rather have them buy a lower-cost actively managed fund than a high-cost index fund?
-
Bogle: I guess the answer to that, since I believe that cost is the single most important factor, is absolutely yes, provided the [active fund] had reasonable diversification."

I'm coming late to the party (this thread), and it's been a very interesting read. Let me offer a few(?) tangential observations on pensions, IRAs, SS:
RMDs - people tend to think that these are drawdowns. They are only tax events, not investment events. You can take distributions in kind, of course owing taxes but otherwise not changing your investment positions. So I find it better to think of RMDs strictly in terms of forseeable future tax liabilities and not money that needs to be spent. (That is, RMDs simply move investment from traditional IRAs to taxable accounts; the rule of thumb about spending down from taxable accounts first still applies.)
SS: Catch wrote that the couple would "take a chance" on both people surviving to age 70. Once they both hit 70, they begin drawing SS and start reducing the amount they've put at risk by deferring their benefits, but they are still at risk of "losing" some money. The break even point is around age 81-82 (generally true regardless of what age you start benefits). So you "win" only if both spouses live to age 81 or so.
One can push out that break even point a bit by having one spouse (the lower earner) start benefits at full retirement age (FRA), while the higher earner simultaneouslyfiles and suspends. That person can then get spousal benefits (half of the other's amount) for four years, until at age 70 that person starts taking one's own benefits.
So, unless you think there's a good chance of both people living well into their 80s, it might be better to consider starting some benefits earlier. That said, I'm a strong advocate of waiting until 70, as you suggested, because that provides a form of longevity insurance (with inflation adjustments) that makes it much easier to relax without worrying about living too long.
State taxes/Roth conversions - depending on the amount in tax deferred accounts (401K rollover plus traditional IRA), one might want to gradually convert some of the money to Roths over a period of years. In Michigan (current state income tax rate 4.25%) the first $40K of income from pension/IRA is not taxed (for people born between 1/1/46 and 12/31/52). That makes it somewhat cheaper to do the conversions, especially if the pension, along with RMDs, grow to exceed this amount down the road unless the conversions are made over time. (Michigan, like the majority of states, does not tax Social Security benefits.)
On the other hand, if you're planning to leave money to charity, it's better to do it via traditional IRAs, because then the money will never get taxed.
Medicare (hey, I'm on a roll here) - look into Medicare Advantage (Medicare Part C) as an alternative to Medicare (Parts A, B, D) plus Medigap. Here's the Medicare site that will show you all the plans available (of all varieties): https://medicare.gov/find-a-plan/questions/home.aspx. A key feature of Medicare Advantage plans is that they must cap the out of pocket expenses. IMHO, that's the main virtue of Medigap plans, so Medicare Advantage seems to obviate the need for Medigap.
None of this addresses the core question: what to invest in. But I find these are all significant planning issues to consider in conjunction with the investing side.

All,
Simply thought I would post my thoughts on an allocation that I'm close to adopting and would greatly appreciate your thoughts and criticism?
These investments are primarily to fund our retirement which is 20+ years away. There are no immediate income needs from the portfolio nor will we need to take any withdrawals out until retirement. I am a very conservative investor so capital preservation is a priority with an objective of generating returns of inflation plus 3-4% while generating decent upside and downside capture. Targeting a beta of 0.3-0.4.
There are four main categories of the portfolio allocation.
The first consists of Global Asset Allocators. My goal here is to invest in 5 risk conscious managers with varying views and that have great investment flexibility. 40% will be allocated amongst the following:
Wells Fargo Absolute Return (GMO)- WABIX
FPA Crescent-FPACX
PIMCO All Asset All Authority- PAUIX
Ivy Asset- IVAEX
First Eagle- SGIIX
The second category consists of what I term tactical allocation and long-short. A 20% weighting will be allocated to:
Good Harbor US Tactical Core- GHUIX
AQR Managed Futures- AQMIX
Marketfield- MFLDX
The third category consists of flexible bond funds. A 40% weighting to the following:
Scout Unconstrained- SUBFX
Doubleline Total Return- DBLTX
Osterweis Strategic Income- OSTIX
Templeton Global Total Return- TTRZX
Sierra Core Retirement- SIRRX
RiverPark Strategic Income- interested in this fund after it launches
The fourth category is invested outside of my portfolio outlined above. This consists of two direct lending vehicles, Lending Club and a private placement fund that specializes in short term small business loans.
I also plan to reduce the global asset Allocators over time and invest in the following after a 15-20% market decline:
Seafarer Growth & Income- actually might consider now
Yacktman Focused
FMI International or FPA International Value
Thanks
Heather

Reply to @Old_Joe & MJG: The 3 Best Free Retirement Calculators. MJG the objection to the Flexable Retirement Planner.Com using Java is a real problem.
Regards,
Ted
http://www.caniretireyet.com/the-3-best-free-retirement-calculators/

Hi Guys,
A few days ago Catch22 posted a request for a little help in constructing a portfolio for a retiring couple. The response was huge, literally a tidal wave of informed questions and excellent suggestions. That was somewhat surprising given the fact that the profile for the retiring couple indicated that they were relatively well healed, and, for the most part, had pretty much all their ducks in proper alignment.
This was not a problematic assignment, yet the enthusiasm was infectious. Retirement planning occupies every investors planning process at least one time. It is one of the seminal events in a lifetime. The decision itself and the decision making process are stressful but necessary exercises.
Although decision making is more art then science, most retirement planning experts favor examining multiple options and doing “what if” scenario drills. That’s because the future is so uncertain. The decision to finally pull the retirement trigger is often painful. Sometimes analysis paralysis adds to the discomfort. The saving news is that there are some nice resources nearby on the Internet.
The mathematical tool that is specifically designed to address uncertain outcomes is Monte Carlo simulations.
All the major mutual fund houses acknowledge the retirement decision tipping point and the mental anguish it precipitates. They have reacted with free excellent Monte Carlo-like planning tools. That’s good.
I know, I know you’re saying” there he goes again”. That’s true. But within the last month I discovered a “better” Monte Carlo tool. I promise this is the last such posting (well at least for a few weeks).
Some investors are predisposed against statistical analyses, especially Monte Carlo techniques. It is perceived as far too mathematical, too exotic, too sophisticated. Nonsense; you need not know how to build a car to use it. There is financial risk to such ruinous behavior. The mathematics and the random selection of parameters is not conceptually complex; it is quite simple.
If that’s true you might ask, then why is the method not more commonly applied? The answer is that it is, especially since the proliferation of the home computer.
The speed of the modern computer allows the simple procedure to be executed thousands of times while a labor intensive pencil-and-paper approach could only evaluate a single scenario. The particular code that I will recommend does 10,000 random cases for each situation specified. Decision making teachers all endorse multiple option explorations over limited examinations. That’s the beauty and primary advantage of Monte Carlo simulations.
There is a large and constantly growing band of brothers who are recognizing its benefits and applying the Monte Carlo approach. It is a specifically suited tool for exploring uncertain events to estimate probabilities. The expanding field of advocates are found in the Mathematics, Physical Sciences, Computational, Engineering, Business, Financial, and Retirement Planning communities. From its limited World War II era introduction, it is now a ubiquitous tool.
In an uncertain environment, having some formal procedure to estimate the success odds of any project and its options is of paramount importance.
As behavioral researchers Belsky and Gilovich remarked: “Odds are, you don’t know what the odds are”. In some sense, investing is a form of gambling. Award winning economist Paul Samuelson cautioned that “It is not easy to get rich in Las Vegas, at Churchill Downs, or at the local Merrill Lynch office”. However, investing is not a Zero-Sum game. Odds can be tilted to favor the patient, prudent, and informed player.
The recently discovered superior Monte Carlo simulator is from Flexible Retirement Planner. Please consider exploiting this especially useful aid to the retirement decision process:
http://www.flexibleretirementplanner.com/wp/
or more directly to the simulator itself:
http://www.flexibleretirementplanner.com/wp/planner-launch-page/
It is very fast, very flexible, and very worth a visit. This particular Monte Carlo code was written by an experienced, practical, retirement specialist. The calculator’s organization clearly demonstrates the benefits of his hands-on experience.
Monte Carlo analyses are the only investment tool that yields a reasonable estimate of the odds for a successful retirement. It certainly is not perfect, but it is far better than a crystal ball. By using it to explore various retirement and investment options, a candidate retiree can adjust his plans to improve his performance.
Understand that Monte Carlo codes never guarantee 100 % accuracy. That’s impossible in an uncertain world full of unknowable Black Swan happenings.
Many industry specialists suggest that retirement be delayed until Monte Carlo simulations forecast a 95 % success likelihood. That means that there is a 5 % possibility of portfolio bankruptcy. There will always be residual risk in retirement. A parametric Monte Carlo analyses helps a candidate retiree to identify and to minimize that risk, not entirely eliminate it.
In some instances, the stock market will turn sour shortly into retirement. That is unfortunate but not fatal. Those retiring just before 2008 suffered that nightmare. No mechanical tool, no soothsayer could have forecasted that scenario. Don’t indiscriminately scapegoat the analytical tool for the Black Swan physical happening.
Please take advantage of this outstanding resource. It will be both a learning experience and an opportunity to assess your portfolio’s survival odds. Also, I suggest you do a few “what-if” exploratory cases to examine potential pitfalls and improvements. The referenced code makes that an easy chore.
Good luck guys. Some folks might even perceive running these codes as fun.
Anyway, I have fun making the Monte Carlo case. I shall now go quietly and happily into the night.
Best Regards.

Reply to @davidrmoran:
I’m sorry to hear about your forced retirement. We all desire to have some
control over such matters.
I’m comfortable with MJG’s reply and don’t wish to get into another
prolonged exchange with him. He is indeed a very bright guy and
I’ll leave it at that.
“What is to be done? What do you advise and counsel? How are you prepping
for that asteroid? Of course, since you are calling it the Age of Ruin (do you
know any really elderly retirees?), I think I know the answer.”
Sorry, I don’t know what you mean by “do you know any really elderly retirees?”
If this is a serious question, the answer is that over the course of my investment class, I’ve personally meet and discussed retirement investing with perhaps 500 “really elderly retires”, and if it helps, I mean those over the age of 70…
and many more between 60 and 70.
“What is to be done? What do you advise and counsel? How are you prepping
for that asteroid?”
I have explained my simple long-term exit strategy on this board and
Charles was gracious enough to run the numbers and
place his spreadsheet results on this board a month or so ago.
By the way, one doesn’t prep for an asteroid. If I were to think along the lines
of MJG, I would direct you to this site -
http://www.universetoday.com/36398/what-is-the-difference-between-asteroids-and-meteorites/
Best of luck with your retirement,
Flack

A short, fast and worthy read from Mr. Merriman
Paul Merriman, 12 lessons