No one knows since Retiree A is changing their risk profile by not rebalancing. A major recovery, A is ahead since they own a larger percentage of stock. A major decline, and they are behind.So, not to derail my own thread, but let's put a little twist on this "spend cash in a market downturn" strategy. Rather than equities with a cash buffer, let's say you have two retirees:
Retiree A: Starts with a portfolio of 60% VTSAX total US stock and 40% VBTLX total US bond. Annual (or monthly) withdrawals are taken from whichever part is above it's allocation (please assume they do not remain balanced at 60/40 over time). So, this retiree can avoid selling stocks during a big downtown, but does not rebalance so does not buy equities at low prices during such a downtown.
Retiree B: Holds only Vanguard Balanced VBIAX (60/40). Withdrawals have to come from this one fund, of course, and it rebalances itself.
Which one will come out ahead?
You can say that Retiree A has more choices of which funds to liquidate and when to rebalance.
WoodSpinner
Statistics: Posted by WoodSpinner — Fri Sep 06, 2024 9:18 pm — Replies 98 — Views 8613