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>"40% short term bonds (which underperform long term bonds) This is not true. What if you are buying during an inverted yield curve? Do you think buying long

>"40% short term bonds (which underperform long term bonds) This is not true. What if you are buying during an inverted yield curve? Do you think buying long bonds, today, with rising rates on the horizon, would do better than rolling short bonds? The real mistake in the article is assuming there's some "safe" allocation ratio(60/40 or 40/60!). There are periods (like now with bonds, or stocks in summer 2000) where buying certain assets are a recipe for disaster. But we do anyway. People are going to have to become far more financially literate about their financial futures. >There are no massive events that wipe out returns. We've had two in the past 13 years. There is no need to "assume" those things away when planning long term. For example, equities have recovered their value plus more since the 2008 plunge. The people who lose are the people who sell into the panic (or those who happened to be retiring right at that moment, bad luck). But volatility happens. If you held on, you're back on track.

mathattack 13y ago
On bonds, I'm not sure actually. I am generally short term bearish on the asset class, but I'm not a pro, and I tend to be bearish on most asset classes. Bill Gross wrote about it recently. (http://www.pimco.com/EN/Insights/Pages/Bond-Wars.aspx http://www.pimco.com/EN/Insights/Pages/Bond-Wars.aspx) Over most time horizons, when the yield curve isn't inverted, the longer bonds due perform better, but not necessarily enough to justify the volatility. In terms of equities - I agree, you should hold them. In general equity investments should be "Buy and hold for a long long time". That said, if you look at the past 20 years, there were many 5-10 year periods where you would be down or flat. If you are assuming a fixed retirement date, there are a lot of bad years to retire. http://finance.yahoo.com/echarts?s=SPY+Interactive#symbol=spy;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; http://finance.yahoo.com/echarts?s=SPY+Interactive#symbol=sp... I believe that it's much safer to assume we may have to keep working while we keep saving and waiting for asset values to return.
- onebaddude 13y ago
  >"but I'm not a pro" Me neither. I'm trying to put my money where my mouth is and learn as much as possible. Otherwise, I'll be a broke "retiree" like everyone else! >"Bill Gross wrote about it recently" Gross is an interesting dude, and you can't take away from his success. But his fund could be in trouble if we see a "too fast" rise in rates. He likes to talk his book. >"we may have to keep working" This, on many levels. To keep this in the spirit of HN, I think there are going to be some interesting opportunities in the financial education/boomer retirement help space.
skorgu 13y ago
I am not a financial advisor and this is not financial advice. The underlying assumption in retirement planning is that your investment mix is supposed to change as you get closer to retirement. If you invest 60/40 at age 30 and you're still in that same 60/40 mix at age 60 you're taking a huge risk. The closer to retirement you get the more you shift out of risky equities and into safer, lower-returning investments. Risk at age 20-something is not the same as risk at age 60-something.
- onebaddude 13y ago
  >The closer to retirement you get the more you shift out of risky equities and into safer, lower-returning investments. Which is the same nonsense that people have been spewing for years, in articles just like this. It's wrong. "Bonds" aren't inherently less risky than equity. This will become apparent when interest rates rise, and people who piled into bonds at historically low yields get hammered. Like the article says, and is being discussed throughout this thread, if you want to make enough money to retire following rules like this, you're going to have to sock away far more than is realistic for 90% of Americans. The only answer is to learn as much finance as you can, which also isn't realistic for 90% of Americans. It's a tough situation.
  - skorgu 13y ago
    I'm not really sure what you mean. If I have $100 in treasuries is there anything but a US gov't default that will prevent me from getting my whatever yield?

mathattack 13y ago

On bonds, I'm not sure actually. I am generally short term bearish on the asset class, but I'm not a pro, and I tend to be bearish on most asset classes. Bill Gross wrote about it recently. (http://www.pimco.com/EN/Insights/Pages/Bond-Wars.aspx http://www.pimco.com/EN/Insights/Pages/Bond-Wars.aspx) Over most time horizons, when the yield curve isn't inverted, the longer bonds due perform better, but not necessarily enough to justify the volatility. In terms of equities - I agree, you should hold them. In general equity investments should be "Buy and hold for a long long time". That said, if you look at the past 20 years, there were many 5-10 year periods where you would be down or flat. If you are assuming a fixed retirement date, there are a lot of bad years to retire. http://finance.yahoo.com/echarts?s=SPY+Interactive#symbol=spy;range=my;compare=;indicator=volume;charttype=area;crosshair=on;ohlcvalues=0;logscale=off;source=undefined; http://finance.yahoo.com/echarts?s=SPY+Interactive#symbol=sp... I believe that it's much safer to assume we may have to keep working while we keep saving and waiting for asset values to return.

onebaddude 13y ago
>"but I'm not a pro" Me neither. I'm trying to put my money where my mouth is and learn as much as possible. Otherwise, I'll be a broke "retiree" like everyone else! >"Bill Gross wrote about it recently" Gross is an interesting dude, and you can't take away from his success. But his fund could be in trouble if we see a "too fast" rise in rates. He likes to talk his book. >"we may have to keep working" This, on many levels. To keep this in the spirit of HN, I think there are going to be some interesting opportunities in the financial education/boomer retirement help space.

skorgu 13y ago

I am not a financial advisor and this is not financial advice. The underlying assumption in retirement planning is that your investment mix is supposed to change as you get closer to retirement. If you invest 60/40 at age 30 and you're still in that same 60/40 mix at age 60 you're taking a huge risk. The closer to retirement you get the more you shift out of risky equities and into safer, lower-returning investments. Risk at age 20-something is not the same as risk at age 60-something.

onebaddude 13y ago
>The closer to retirement you get the more you shift out of risky equities and into safer, lower-returning investments. Which is the same nonsense that people have been spewing for years, in articles just like this. It's wrong. "Bonds" aren't inherently less risky than equity. This will become apparent when interest rates rise, and people who piled into bonds at historically low yields get hammered. Like the article says, and is being discussed throughout this thread, if you want to make enough money to retire following rules like this, you're going to have to sock away far more than is realistic for 90% of Americans. The only answer is to learn as much finance as you can, which also isn't realistic for 90% of Americans. It's a tough situation.
- skorgu 13y ago
  I'm not really sure what you mean. If I have $100 in treasuries is there anything but a US gov't default that will prevent me from getting my whatever yield?