What is your equity percentage?

[Deleted]

Over the last couple of months my wife and I met with two financial advisor firms for the purpose of finding out how they would manage our money.  We didn’t intend to use them but rather wanted to learn their process and methodology.  Of particular interest to us was their recommendation regarding asset allocation.  Both financial advisors recommended 75% equities for us not because we need growth but rather because we want leave money for our grandchildren......hopefully to help pay college tuitions, etc.  There are also a couple charitable organizations that are dear to us that we want to support financially.  Prior to meeting with them, we had considered somewhere between 65% - 80% equities as our comfort range in retirement.  So 75% is in our range.  We are wondering what other posters on this forum are comfortable with regarding their equity percentage in retirement and why.  Very interested in reading what others have to share.  Thanks to everyone...

[yogibearbull]

There is no universal answer. 

Answers would depend on personal circumstances, goals, risk tolerance. Your 65-80% equity range may be fine for you.

I keep my effective-equity in 40-60% range in retirement.

BTW, if you haven't done this already, consider state 529s for grandkids and donor-advised funds [DAFs] for charitable purposes.

[Deleted]

Mine is 80% equities, recently down from 100%. Why? Still accumulating, 20% is ample to fund many years of retirement and have other sources of income, along with subsidized healthcare.  Age - 58.

[Mustang]

I intend to keep mine between 75% and 50%. Right now its around 65%.

Edit: I'm 71 and my wife if a young 64.  I picked my equity percentage based upon the research of Bengen, Trinity, and others.  Cash at the local bank and other investments such as an insurance annuity and real estate (home) are not included but both can be tapped for cash if necessary.  If they were included I would be below 50% equity but I don't know how to include annuities and reverse mortgages in such calculations.

[stats]

Currently, 53%. We started retirement 10 years ago with 65% to 70%. In our retirement we have only sold equities to increase cash needs. I think we will be adding 3% to 4% to our equity position

Stats

[Deleted]

Mine 86% equity, 10% cash, 4% bonds. Age 52

[chang]

I find these numbers interesting ... and higher than I expected. But that's because I am guessing about people's ages without actually knowing. Adding your age would be helpful (even though it is only one factor of many).

I know the old maxim "own your age in bonds" is considered obsolete, but I believe its replacement "own your age minus 10 in bonds" has some currency.

I'm 58 with around 53% equity ... hence 47% bonds.

[chang]

I have a British colleague in London I've worked with for 18 years. He's my age, and has worked for the same major London financial services firm since he graduated college. He runs a department, and while I don't know his salary or net worth, they have no children so I am assuming he has got a decent number of millions socked away.

We don't discuss investing very often, mainly because he's never shown a great deal of interest in it. I asked him recently whether he owns much company stock, and he said "nah - too risky."

Just another point of view. Maybe more typical of Europeans than Americans? (Norbert?) I don't know. He does own several properties in London, so obviously he has taken a different road to Dublin.

[Deleted]

Excellent point, Admin /chang........I should have included my age. I’m 65 and my wife will always be young and beautiful. 😀. Waffle posted her/his allocation, but I don’t think Waffle is retired based on prior posts.

[jcserc]

Although I am not retired (43 years old), I am also struggling with the same question. I currently maintain a 70% equity allocation but have considered for a while bumping it to 75%.

[hondo]

I am 83, my wife is 82. We are about 32% in equities. To be fair, I should say that we have not used our investments for living expense, but live off of our pensions so far. Having a pension can make a great deal of difference in how one sets their allocation.

Just another point of view.

[johntaylor]

From my regular portfolio, the equity percentage (65) is easy to state. However, that is higher if ya consider passive stakes in two small business endeavors.

[Chahta]

I am around 45%. But effective equities are lower. I want to get up to 50% once I get a good entry point. I suppose I am timing but will rebalance at next correction.

I like own your age less 20 in bonds. 😊

I suspect the adage about percent of bonds is aimed at LT, core, ST, muni and treasury bonds. I doubt it refers to MS or hi-yield etc.

[galeno]

We keep 40-60% of port in our one FTSE all world equity ETF.

Right now it's 46%.

[Chahta]

Mar 22, 2021 14:39:12 GMT yogibearbull said:

There is no universal answer. 

Answers would depend on personal circumstances, goals, risk tolerance. Your 65-80% equity range may be fine for you.

I keep my effective-equity in 40-60% range in retirement.

BTW, if you haven't done this already, consider state 529s for grandkids and donor-advised funds [DAFs] for charitable purposes.

I realize this thread is about equity AA (sorry st6), but YBB, I consider you one of the more informed investors/posters here. What does your bond AA consist of? I struggle with that while the bond world is not doing well now. I try to have the long view and trust bonds will recover like equities do. I see such high bond AA (low equity AA) here and wonder. Thanks.

[yogibearbull]

Mar 23, 2021 22:43:02 GMT Chahta said:

Mar 22, 2021 14:39:12 GMT yogibearbull said:

There is no universal answer. 

Answers would depend on personal circumstances, goals, risk tolerance. Your 65-80% equity range may be fine for you.

I keep my effective-equity in 40-60% range in retirement.

BTW, if you haven't done this already, consider state 529s for grandkids and donor-advised funds [DAFs] for charitable purposes.

I realize this thread is about equity AA, but YBB, I consider you one of the more informed investors/posters here. What does your bond AA consist of? I struggle with that while the bond world is not doing well now. I try to have the long view and trust bonds will recover like equities do. Thanks.

I have access to 3%+ stable-value fund.

Then, I have core-plus muni [OEFs & CEFs] and taxable bond funds [OEFs], and also bonds within allocation/balanced funds [these tend to be core or core-plus]. Very limited multisector and EM bonds now; not much m-mkt either [instead rely on Ultra-ST & ST bond funds].

[jcserc]

Mar 23, 2021 15:28:12 GMT Chahta said:

I suspect the adage about percent of bonds is aimed at LT, core, ST, muni and treasury bonds. I doubt it refers to MS or hi-yield etc.

This last sentence from Chahta has really made me think...

We keep reading about different versions or "rules" for determining equity vs bond allocation based on age, but we tend to forget what type of bonds should be included if indeed the goal is to have them serve as a ballast and reduce overall portfolio volatility. I am starting to think that in order to increase my equity allocation from 70% to 75% (and even if I wanted to maintain it at 70%) I need to start looking at bonds that would more likely serve the intended purpose. I also believe that balance funds do a much better job at selecting the correct type of bond to accomplish this objective. 

[anitya]

Liz Ann Sonders from Schwab tweeted this AM that public pensions were holding 25% equities and 75% fixed income in 1980 and steadily changed to current levels of 70% equities and 30% fixed income.  What are your thoughts on this statistics as may be relevant to the discussion in the thread.

[Chahta]

Public pensions are woefully underfunded in many locations. Their attempt to recover most likely has an input to such high percentage of equities. I don't think it is a baseline amount. Personally I have given a high amount of equities thought. I never owned FI until 4 years ago just before retiring. A poster at M*, Winn, uses this approach.

[anitya]

You old timers may be able to figure out if the timing of underfunding of public pensions gels with the additional info below.

Per that Schwab info, from 1980, when their equity allocation was 25%, to 1990, in 10 years, their equity allocation doubled (changed to 50%). From 1990 to now, it changed to 70%. So, in the first 10 years, the equity allocation doubled and in the next 30 years, it only increased by another 20%(from 50 to 70%).

I was actually more interested in how did the public pension funds manage to weather the rising interest rates of late 60s and 70s holding 75% fixed income in 1980.  They too have long liabilities just like retirees.  Are investors to fear of fixed income if we too are going to see 10-15 yrs of rising interest rates, as has been suggested many times in this forum (the so called super cycles of interest rates)?  I do not have a view but am simply presenting what appears to be evidence contradicting fixed income fears.

[retiredat48]

Mar 26, 2021 5:00:30 GMT anitya said:

You old timers may be able to figure out if the timing of underfunding of public pensions gels with the additional info below.

Per that Schwab info, from 1980, when their equity allocation was 25%, to 1990, in 10 years, their equity allocation doubled (changed to 50%). From 1990 to now, it changed to 70%. So, in the first 10 years, the equity allocation doubled and in the next 30 years, it only increased by another 20%(from 50 to 70%).

I was actually more interested in how did the public pension funds manage to weather the rising interest rates of late 60s and 70s holding 75% fixed income in 1980.  They too have long liabilities just like retirees.  Are investors to fear of fixed income if we too are going to see 10-15 yrs of rising interest rates, as has been suggested many times in this forum (the so called super cycles of interest rates)?  I do not have a view but am simply presenting what appears to be evidence contradicting fixed income fears.

My bold added above.  The rising rates did not have the same major impact on funding pensions.

For example, let's say the pension funding for the future was based on 6% returns going forward.  Now, if bonds are yielding 6% you are OK, regardless of inflation.  Yes, if rates go up, bond prices decline but you recapture at maturity.  So you hold to maturity--no loss.  And you got 6% a year, so pensions stayed funded...from the bond allocation side.  (The employee was paid in inflation-depleted dollars).

However today, many pensions still have a need for 6% returns to meet future obligations.  However 1.5% to 2% yields does not cut it.  So if inflation and yields go up, a pension plan will take a price hit--unless held to maturity.  Then they can reinvest proceeds at the higher rates, helping on the pension liability side.

IOW the culprit today is low rates.  Rates stay low, pensions hurt.  Rates going higher helps solve their dilemma.  Like if we had 6% bond rates tomorrow, big hit to "mark-to-market" bond prices.  So, pensions hold bonds to maturity to regain full principal, then reinvest into 6% bonds, and they are back on track.

R48

[Chahta]

Unless they "rebalance" equity CGs back into higher yield bonds. I would if I was them.