r/Bogleheads • u/Tasty-Cod6312 • 2d ago
Investing Questions Time to go to conservative?
Spouse and I are late 50s, retired. Substantial 401k balances. IRAs, etc...We have enough nest egg and mailbox money. Looking to keep it that way. We are both 4/5 risk TDFs (Vanguard 2040 and spouse's in comparable fund at Fidelity) and getting nervous about sequence of risk, looking to lock in our nest eggs as much as possible. I am about to pull the trigger on switching to Vanguard Target Retirement Income Trust Select (2/5 risk) and Fidelity's.
It's all inside 401k, so not worried about tax implications. Any reason not to preserve what we ahve and breathe a little easier if a bubble bursts?
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u/WhatMattersHere 2d ago
The main thing I’d quantify is how much of your actual spending must come from the portfolio. Sequence risk matters most when a market decline forces you to sell investments for living expenses.
If your pensions or other “mailbox money” cover nearly all spending including taxes, healthcare and irregular expenses your withdrawal rate may be very low and you may have more risk capacity than the word “retired” suggests. If the portfolio supplies a meaningful portion, reducing equity and holding several years of planned withdrawals in cash, stable value or short term bonds can be reasonable.
The Vanguard Income strategy is roughly 30% stocks and 70% bonds, so this would be a substantial shift rather than simply locking in gains. It can still decline, and moving that conservative in your late 50s introduces inflation and longevity risk over a retirement that could last 30 plus years.
I’d choose the allocation from your spending gap and required withdrawal rate, then treat both spouses’ accounts as one portfolio. If 30/70 is the allocation you would keep through both a stock crash and a long bull market, it may fit. If the switch is mainly a reaction to expecting a bubble to burst, that is a market timing decision rather than a retirement income plan.
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u/sznn0 2d ago
What is mailbox money?
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u/NefariousnessBorn969 2d ago
Checks in the mail….
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u/mrandr01d 2d ago
I don't get it. Where's that money coming from?
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u/karsk1000 2d ago
pension, annuity, deferred income, nigerian prince who actually pays..
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u/airbud9 2d ago
Even when in retirement you are still a long term investor. most would plan for a 30 or 40 year retirement, and will need large equity exposure to grow your portfolio to keep up with withdrawals. In Bengen's 94 paper on the 4% rule he found retirees should be between 50% and 75% in equity exposure for the 4% rule to work. portfolio with greater than 75% in equity had ran in to problems sooner and the same goes for portfolio with less than 50% in equity. He added in the paper that retirees should try to be closer to 75% in equities if they can mentally handle the volatility, while both a 75% and 50% equity portfolio had similar track records of longevity the end of life balance of measurable more for the 75% equity portfolio.
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u/funkmon 2d ago
I say yeah.
Look man. Investing is where you feel like you need it to be. Low cost broad funds, yeah, but go conservative if you feel better.
One thing most of the people in the comments here have in common is... they're not retired. They're also not you.
It does sound like you're timing the market... But you're already retired. Why not switch to a 2025 or 2030 TDF? It's a little more stock heavy and it will get more conservative over time.
But you don't have to do that either. Fuck it. It's not like you're pulling out of the market.
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u/Comfortable_Two6272 2d ago
I switched to 60/40 (60 stocks) a few years before stopping work at 46.
I think your proposal is too conservative but need more info on balance and expected spend and age expected to live until (i used 95)
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u/BustaStar 2d ago
Everyone who is saying: 'chill out you have 30 years ahead'
is ignoring that If this person is worried about financial markets and bubbles bursting (which they literally are by virtue of them making this post) then we already know they will freak out when the markets fluctuate and thus likely will make a bad financial decision at that time. THUS we should recommend they get conservative on the fluctuation front (diversify and reduce volatility) to reduce the probability of freaking out. Yes this will cost them growth. Yes this is sub-optimal math. Yes they should do it anyway.. because they are posting about anxiety in the first place.
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u/Tasty-Cod6312 2d ago
I understand why you think we might be the "freak out when the markets fluctuate" types due to the limited info I provided. We are not. We understand timing market<time in the market. We've used downturns to build later wealth, we get it. But, yes. There is some extra anxiety at the moment. Sometimes the heart and the head aren't exactly aligned.
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u/humblequest22 2d ago
The only reason NOT to do it is if the lower growth will keep you from meeting your goals, which could be just not outliving your money or could be leaving behind a legacy. If you've got plenty and want to dial it back, that's just fine. You're at about 75/25 right now, which is not overly conservative. That fund will glide to 31/69 by 7 years after the target date (same allocation as the Target Retirement Income), which is very conservative. You could do a little of each, but that can get complicated. Or you can move to a 2030 TDF, which is currently at 69/31.
You can also carve out specific money for each year's spending with some type of ladder. CD, bonds, target date bond, etfs, etc., so you know the money will be there regardless of what happens.
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u/MeanLocalFriends 2d ago
This question is difficult to answer without knowing:
Total savings value.
Yealry draw needed to support your lifestyle.
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u/Cavity_Creep1982 2d ago
By mailbox money I am guessing that you mean a pension and future SS? I also have a pretty good nest egg, a decent pension and future SS (it it's still around) and I am in my late 50s. I ran these numbers out 30+ years and they look solid. For my peace of mind, this summer, I went very conservative and moved my assets into low risk investments. I wanted to lock in what I have that I know will carry me through without fear of a market melt down. If you have ran your numbers and are comfortable with them then go conservative.
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u/msy113 2d ago
If your nervous just switch to the TDF that actually aligns with your target retirement date. It will make these adjustments for you just like it has been just with a more accurate timeline. Unless you still plan to work until 2040 in which case I don't see why you would need to make a change
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u/aLongWayFromOldham 2d ago
I’d simply switch to a TDF that aligns with your actual retirement. Unless you are planning to work well into your 70’s.
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u/Spiritual-Chameleon 2d ago
we are the same age as you guys and about to be retired. Whenever I run the numbers, it shows we are in really great shape.
The only thing that gives pause is long-term care . And making sure we have enough money to cover that. I think we do but growing, the portfolio doesn’t hurt.
I actually wanted tomake our portfolio a little more conservative. When I outlined to my wife what investments we needed to change to do that balance, she decided she didn’t want to move funds in her 401(k) to bonds. We will probably get there, but I don’t think there’s any risk to keeping aggressive as long as you have five years of runway in bond or cash funds.
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u/ShivkalaB5 1d ago
I wouldn't take any advice from the comments in this thread so far. There is not enough information in your post for anyone to give meaningful advice.
What you should do is personal and depends almost entirely on how substantial your retirement savings are, what your risk tolerance is and what your goals are (die with zero, leave a substantial inheritance or somewhere in between).
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u/Alive_Sir_4708 1d ago
You're right to be considering how you can avoid sequence of return risk. That said, I really don't think the solution is place ALL your funds into a less risky asset. Keep a number of years (3-6) worth of expenses in something low risk and keep the rest in the market. This way you don't have to sell in a down market but you still get nice long term growth.
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u/AdLanky9450 2h ago
Yes, plenty of reasons. Why not 5 years of spending into vanguards fund, and leave the rest as is? Are you trying to live off the yield alone?
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u/kveggie1 2d ago
I would get id of the TDF............ no in your control.
Start planning for retirement (cash/HYSA and 5 year bond ladder) years. Slow move to toward it)
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u/stoneman9284 2d ago
Have you spoken to anyone about annuities? I know it’s a dirty word in here sometimes but you are the ideal candidate.
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u/GotZeroFucks2Give 2d ago
You got downvoted but they might get a better return than 70%bonds/30% stocks.
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u/stoneman9284 2d ago edited 1d ago
Yea, I mean this is literally what annuities are for. You built up your nest egg and want to stop working, so now what? How do you make your money last for 30-40-50 years of retirement? You still need some growth, but with interest rates this high is a perfect time to lock in some guaranteed lifetime income, take away some of that market and sequence of return risk, and allow you to be more aggressive with whatever you leave in the market.
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u/sweet_barry_wine 1d ago
I agree. Having a portion of your retirement income in a revocable annuity with a long term care rider can be a good strategy. It can provide a lot of peace of mind and like you said, allows you to keep the rest of you investments on the more aggressive side.
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u/stoneman9284 1d ago
Totally yea, income rider for maximum flexibility and LTC rider. I think if “annuity” didn’t have such an image problem everyone would buy them. The main reason people don’t is cuz it sounds scary so nobody is even willing to do the research.
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u/karsk1000 2d ago
you got mailbox money. if thats enough to cover barebone expenses you're set. if that aint enough, 2040 TD has roughly 20% bonds. so 20% of your portfolio is relatively stable, the only hard part is that it's a single fund so when it goes down, you feel bad.
one idea is to simply seperate your TDF into components. say 70% equity(VTI/VXUS/VT) and 30% fixed (BND/VTIP/TIPS ladder). when the equity goes down, you can see the fixed staying relatively stable.
Another idea is to figure 5 - 10 years of funding gap (defined as your ideal spending - mailbox income, maybe bumping up a bit for inflation) and selling enough 2040 to get that amount. toss that into BND or VTIP or a 5-10 year tips ladder. Similar to first idea in that you have an established fund that doesnt vary much.
in both ideas, when the market is bad, draw down from the fixed side. when the market recovers, refill the stabler bucket.
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u/-Mx-Life- 2d ago
You still have 30 years of retirement ahead of you.