This was good food for thought. At 54 and with an aim to retire next spring, my overall AA remains 93/7 (from a 90/10 planned). I've been fairly comfortable with this allocation, but of course as we all know, stock market has been on a largely upward trend for the past 15 years which helps. That said, I was heavily invested in equities in the 2000's dotcom bust, the 2008 great recession, the 2020 covid crash, and this year's tariffs plunge in April -- in none of these situations did I sell or was ever tempted to sell. It certainly wasn't a comfortable feeling, particularly the '20 and '25 plunges -- simply because I had more assets built up at that point, and of course the more you have the more you have to lose. But there were no issues sleeping well at night, it was more a case of active monitoring -- unlike many, I prefer to watch as things goes down (and same thing when markets go up), because I find it comforting somehow to know the reality of the situation. Not knowing is more stressful.Mathematically, the scenario from OP can probably work. But psychologically/emotionally? Only the person who owns the portfolio can know. If that $2.2M is worth $1.3M a year or two from now, will they be able to handle it? No panic selling? No worry or anxiety attacks that prevent them from enjoying retired life?
For someone who is just going into retirement and plans a SWR of anything above 2.5%, I would never (I know, never say never...) recommend less than 20% in bonds and a full year's worth of non-discretionary expenses in cash (or equivalents). It mitigates SORR, even if you potentially give up a bit of market gains.
Everyone always says, "don't time the market." But the fact is that when we choose to retire (that is, to stop our normal income stream), we are absolutely making a decision that happens to coincide with a very specific time for the market. If the market stays strong shortly before retirement and immediately after retirement, then 100% equities will look brilliant. But if the market falls, and if the retiree is very new to drawing down their portfolio (which at 100% equities will mean selling equities when they are down), I have to think that almost anyone is going to get nervous as to the decision they've made. With a bit of a bond/cash cushion, you can simply spend down the cash/bond allocation first. It will feel a lot better emotionally, even if it doesn't make a difference mathematically.
I personally think that a near 100% equity allocation is ideal until a few years (2-5 years) before retirement. And I think that a near 100% equity allocation is also ideal after the retiree is drawing SS or some other guaranteed fixed income. But for someone in their early 50s (contemplating retirement or newly-retired), I would suggest that keeping the 20% (minimum) bond allocation plus a year's worth of your non-discretionary expenses in cash is a good idea for at least 5-6 years. After the initial 5-6 years into retirement, the SORR is all but mitigated, at which point I'd just let the equity allocation grow without rebalancing (i.e. glide back toward near 100% equity). This is essentially the "bond tent" concept, although I think of it more as a "bond plateau", since the peak bond allocation is held flat for 5-6 years before it starts falling again.
As always, everyone's circumstances are different. Tailor the plan to the individual (emotionally) and to the situation (mathematically) as required.
Further, during both the '20 and '25 plunges, I did wind up purchasing additional batches of VTI above/beyond what I normally do, viewing things as on sale. Naturally, these batches have ridden the turnaround/upswing and have done a good job of boosting the overall nest egg.
Most of the slight disquiet I feel in the background stems from seeing so many on this board advise strongly against 100% equities (or even 90/10 as I am) -- I've read these (many) threads all the way through, oftentimes re-reading to absorb the various stances and perspectives, particularly as they pertain to SORR. I'm starting to wonder if I have a bit of a "reverse loss aversion", where not being invested in equities and forgoing gains bothers me more than losses associated with market downturns. Don't really know the answer to that one.
I plan to post a ~10-year update with current state as it compares to where things were in 2015, and pose the question in more detail about whether it's a mistake to remain 90/10 at this juncture -- particularly given that I'm potentially maybe 1 year out from retirement, rather than the 2-5 years out you reference above. Broad brushstrokes, at single-no-kids and 54 y/o I'm tentatively targeting $120k/yr in retirement and would like that to represent a ~3.25% WR. This largely points to needing ~$3.7M in investable assets (ie, not counting paid-off house) - a cutoff to which I'm quite close. But is 90/10 and ~3.25% too risky for what is hoped to be a nearly 45-year retirement? It's an open question.
As always, it comes down to planned -- and unplanned -- expenses after leaving the ratrace.... and how flexible that spending can be. Will leave those details to the 10-yr update/portfolio review post, but just wanted to note that your take on there being logic/value around shifting to a minimum 80/20 (or even 70/30) for the final year+ leading up to, as well as the first five or so years of, retirement seems quite logical to me. If making that sort of transition, I'd want to hammer it out so that it makes sense as a standalone plan for AA according to my IPS, rather than being influenced by thinking along the lines of "stocks are at alltime highs and overvalued, time to pull back?" questions I've seen posted here a number of times.
-rw
Statistics: Posted by rakish_weasel — Thu Sep 18, 2025 1:06 pm — Replies 64 — Views 4169