3 ms·

no one that needs to rely on their investments for their actual retirement still has them in equities. theres a reason target date funds automatically adjust as

no one that needs to rely on their investments for their actual retirement still has them in equities. theres a reason target date funds automatically adjust asset allocation as it nears its target date. you should be in majority bonds and cds well before your actual retirement date.

jandrewrogers 2mo ago
That is an overly conservative approach that sacrifices a lot of growth for not much more safety. It also exposes you to inflation risk, which is a significant concern these days. Most people in actual retirement I know do something like keep ~2 years of cash in short-term treasuries and everything else in equities. That gives you a lot of buffer to time-shift equity drawdown, which is the main risk with equities, while retaining almost all of the benefit of equities. Simple and relatively robust.
- anthonypasq 2mo ago
  i dont think you want to ever be in a position where you arent making money and your net worth could drop 50% in a year. but hey, if you want the risk go for it i guess.
  - jandrewrogers 2mo ago
    It literally doesn't matter if drops 50% in a year. That is a paper loss and you have years worth of cash you can spend while waiting for it to recover. If you panic-sell at the bottom of that market then that's on you. It isn't necessary in order to pay the bills. What you propose takes on a huge amount of inflation risk. How are you hedging that risk? A guaranteed yield doesn't mean you aren't getting poorer. Obsessing over one type of risk and ignoring another isn't rational. Reducing variance of net worth has a very high cost. Over-indexing on that singular property, particularly when most people can afford some variability, is a recipe for relative impoverishment.
    - anthonypasq 2mo ago
      > That is a paper loss and you have years worth of cash you can spend while waiting for it to recover. not if you're 80 dude...
      - reverius42 2mo ago
        Retiring at 80 requires very different financial planning than retiring at 65.

jandrewrogers 2mo ago

That is an overly conservative approach that sacrifices a lot of growth for not much more safety. It also exposes you to inflation risk, which is a significant concern these days. Most people in actual retirement I know do something like keep ~2 years of cash in short-term treasuries and everything else in equities. That gives you a lot of buffer to time-shift equity drawdown, which is the main risk with equities, while retaining almost all of the benefit of equities. Simple and relatively robust.

anthonypasq 2mo ago
i dont think you want to ever be in a position where you arent making money and your net worth could drop 50% in a year. but hey, if you want the risk go for it i guess.
- jandrewrogers 2mo ago
  It literally doesn't matter if drops 50% in a year. That is a paper loss and you have years worth of cash you can spend while waiting for it to recover. If you panic-sell at the bottom of that market then that's on you. It isn't necessary in order to pay the bills. What you propose takes on a huge amount of inflation risk. How are you hedging that risk? A guaranteed yield doesn't mean you aren't getting poorer. Obsessing over one type of risk and ignoring another isn't rational. Reducing variance of net worth has a very high cost. Over-indexing on that singular property, particularly when most people can afford some variability, is a recipe for relative impoverishment.
  - anthonypasq 2mo ago
    > That is a paper loss and you have years worth of cash you can spend while waiting for it to recover. not if you're 80 dude...
    - reverius42 2mo ago
      Retiring at 80 requires very different financial planning than retiring at 65.