100% equities

[Atretes1]

I am 48 for reference and will retire with a 6 figure State pension at 56. I live in a LCOL area. I keep all my savings (ROTH IRA, 457 and HSA) 100% equities beside keeping a fair amount of cash in my savings for buying rental properties. I will likely be 100% equities in retirement also. I can depend on my pension and rental income to live. I have most of my retirement funds in ROTH investments due to my pension placing me in a higher tax bracket. I also am throwing more money in my taxable Brokerage for fun money if I want it between 56 and 59.5. Anyone else have a pension and keeping their asset allocation a little more risky?

[Jluke]

Somewhere in boglehead land is a table of risk based on asset allocation.

from memory a 100% equity portfolio didn’t do much better than a portfolio that was 70:30. So the added risk wasn’t worth it, but I think that depends on your perspective.

I believe that is based on past performance.

i am same age, will get some kind of pension (it might be 2k/month if I don’t take a lump sum), social security and my investments are around 75:25 or so. No rental
income.

[Atretes1]

Somewhere in boglehead land is a table of risk based on asset allocation.

from memory a 100% equity portfolio didn’t do much better than a portfolio that was 70:30. So the added risk wasn’t worth it, but I think that depends on your perspective.

I believe that is based on past performance.

i am same age, will get some kind of pension (it might be 2k/month if I don’t take a lump sum), social security and my investments are around 75:25 or so. No rental
income.

Yeah, I have seen that before. I am trying to find it again for reference but no luck yet. I may eventually change my allocation later but I am happy with it so far. I've been through all the up and downs starting since 2004.

[srblanco7]

Not sure if the file I uploaded will show - but I grabbed it from Vanguard (ote that Vanguard has it depicted is bonds/equities rather than equities/bonds). Graphic shows range of returns for varying portfolios since 1926 as well as average annual return.

What the graphic does not depict is the Sharpe ratio for risk adjusted returns - where I believe 70/30 is viewed as superior to 100% equities. In addition, I believe the long term performance of the 70/30 portfolio could be marginally improved with rebalancing (sell high, buy low).

That being said, if you have no need to access the money for living expenses, I think the asset allocation can be aligned with whatever volatility you can stomach. Perhaps the brokerage "fun money" would be at a different AA than the Roth given that you've identified a window of time where you'd like access (noting that there are potential/likely tax implications to holding bonds in a brokerage account).

[Atretes1]

Not sure if the file I uploaded will show - but I grabbed it from Vanguard (ote that Vanguard has it depicted is bonds/equities rather than equities/bonds). Graphic shows range of returns for varying portfolios since 1926 as well as average annual return.

What the graphic does not depict is the Sharpe ratio for risk adjusted returns - where I believe 70/30 is viewed as superior to 100% equities. In addition, I believe the long term performance of the 70/30 portfolio could be marginally improved with rebalancing (sell high, buy low).

That being said, if you have no need to access the money for living expenses, I think the asset allocation can be aligned with whatever volatility you can stomach. Perhaps the brokerage "fun money" would be at a different AA than the Roth given that you've identified a window of time where you'd like access (noting that there are potential/likely tax implications to holding bonds in a brokerage account).

Thanks for this. 70/30 does look like a sweet spot. Right now my taxable brokerage is all VTI (Vanguard Total Stock). My pension at 56 will pay me 125% of my base pay. Basically, retirement will just be like me working. I may change my thinking later but its worked for me so far. If there is a market crash at retirement I wont cash anything out.

[EasyMoney00]

If all of your expenses are covered, I don't see why you wouldn't want to be all in on equities. I plan on be close to 100/0 with cash of course for a long time. If we have a huge cushion I can't foresee ourselves changing.

People will argue about a huge drop in the market. Again, your pension has you covered plus some. I guess the next argument would be the state would go bankrupt and no more money. And on and on and on. At that point, just send in the drones. Lets get this over with.

[Jluke]

I don’t think anyone can truly be 100% equities by the text book definition.

I have cash savings
I have real estate
Maybe you own precious metals - physical or on paper
bitcoin or other crypto

if you choose to only look at your investment accounts, then possibly

[disneysteve]

I don’t think anyone can truly be 100% equities by the text book definition.

I have cash savings
I have real estate
Maybe you own precious metals - physical or on paper
bitcoin or other crypto

if you choose to only look at your investment accounts, then possibly

Exactly. I hate when people say, "I'm 100% equities besides my money market and CDs and rental properties." That's not how math works. 100% means everything, not just part of everything. If you have a 6-month EF in a high yield savings account, you're not 100% equity.

All of that said, I agree that 100% equity gives you no significant benefit over 90/10 or 80/20 or even 70/30 based on the stats and you'll see far less volatility with at least some of your portfolio allocated to fixed income. Even if you don't need the money, I think a more balanced portfolio is better all around.

[Atretes1]

Exactly. I hate when people say, "I'm 100% equities besides my money market and CDs and rental properties." That's not how math works. 100% means everything, not just part of everything. If you have a 6-month EF in a high yield savings account, you're not 100% equity.

All of that said, I agree that 100% equity gives you no significant benefit over 90/10 or 80/20 or even 70/30 based on the stats and you'll see far less volatility with at least some of your portfolio allocated to fixed income. Even if you don't need the money, I think a more balanced portfolio is better all around.

I did specifically say in my post that that my 457, HSA and ROTH were 100% equities and that I keep a fair amount of cash for buying rental properties. I also said I would be relying on rental income in retirement. While 100% of my retirement savings are currently equities. No where in my post did I say 100% of my net worth was 100% equities.

[disneysteve]

I did specifically say in my post that that my 457, HSA and ROTH were 100% equities and that I keep a fair amount of cash for buying rental properties. I also said I would be relying on rental income in retirement. While 100% of my retirement savings are currently equities. No where in my post did I say 100% of my net worth was 100% equities.

Sorry, that was a general comment. Not about you specifically. That said, what percentage of your entire portfolio is actually equities. That could really change the responses here. Saying certain accounts are 100% equities really doesn’t tell us much without knowing the big picture. We have numerous accounts that are 100% equity but our overall portfolio is 60/40.

[Atretes1]

Sorry, that was a general comment. Not about you specifically. That said, what percentage of your entire portfolio is actually equities. That could really change the responses here. Saying certain accounts are 100% equities really doesn’t tell us much without knowing the big picture. We have numerous accounts that are 100% equity but our overall portfolio is 60/40.

OK. I ran some quick numbers. My debt left to pay off my rentals is 39% of my appraised amounts of my properties. My personal home is owned free and clear. I figure my pension cash value in my net worth statement. When I retire and start drawing from the pension I will remove the cash value of the pension from my net worth statement.

Real Estate (Rentals)	45.73%
Real Estate (Personal home)	7.80%
IRA, 457, HSA (100% Equities)	27.50%
HSA savings (CASH)	0.15%
Pension (locked cash value)	8.40%
Taxable brokerage (100% Equities)	4.00%
Cash to buy rentals/Emergency Cash	3.60%
Crypto	0.15%
Vehicles	2.58%
Total	99.9%

[kork13]

Atretes, I'm in a similar situation. I'm <4 years out from being retirement eligible with a military pension ... and DW already has a smaller military pension as well. If I hit the button the day I'm eligible (both age 42), we'll have ~$90k/yr guaranteed (and at least $25k of that is tax-free), so long as we both keep breathing. Meanwhile, we're living comfortably on roughly $70k/yr expenses.

With that knowledge, I'm extremely comfortable with keeping our market investments set to a 90/10 AA, plus a rental home & some higher-risk RELP investments. The healthy pensions cover all of our living expenses without a problem, so all of our investments are basically gravy ... fun money. Even being "retirees" in our early 40s, longevity of the money isn't a concern because we're not reliant on it. That fact gives us the freedom to take higher risks.

Some in the Boglehead community will impute a bond-like equivalent value for a pension, and incorporate that figure to consider an effective AA based on that notional amount. So if I call our combined pensions are worth roughly $2.5M, and we've got $2M in the market at 90/10 + $500k in RE (which is my stated goal for 2028), we're effectively more comparable to an AA of 35% stocks, 10% RE, 55% bonds ... which would otherwise be very conservative, but honestly reflects our feeling toward investment risk alot closer than one might otherwise expect just looking at our invested assets.

[Atretes1]

Atretes, I'm in a similar situation. I'm <4 years out from being retirement eligible with a military pension ... and DW already has a smaller military pension as well. If I hit the button the day I'm eligible (both age 42), we'll have ~$90k/yr guaranteed (and at least $25k of that is tax-free), so long as we both keep breathing. Meanwhile, we're living comfortably on roughly $70k/yr expenses.

With that knowledge, I'm extremely comfortable with keeping our market investments set to a 90/10 AA, plus a rental home & some higher-risk RELP investments. The healthy pensions cover all of our living expenses without a problem, so all of our investments are basically gravy ... fun money. Even being "retirees" in our early 40s, longevity of the money isn't a concern because we're not reliant on it. That fact gives us the freedom to take higher risks.

Some in the Boglehead community will impute a bond-like equivalent value for a pension, and incorporate that figure to consider an effective AA based on that notional amount. So if I call our combined pensions are worth roughly $2.5M, and we've got $2M in the market at 90/10 + $500k in RE (which is my stated goal for 2028), we're effectively more comparable to an AA of 35% stocks, 10% RE, 55% bonds ... which would otherwise be very conservative, but honestly reflects our feeling toward investment risk alot closer than one might otherwise expect just looking at our invested assets.

There is no going back but I wish I had went into the military to be out earlier. I can go at 56 in 7.5 years and will have 30 years into a State Pension when I retire.

[disneysteve]

OK. I ran some quick numbers. My debt left to pay off my rentals is 39% of my appraised amounts of my properties. My personal home is owned free and clear. I figure my pension cash value in my net worth statement. When I retire and start drawing from the pension I will remove the cash value of the pension from my net worth statement.

I was talking about portfolio allocation, not net worth, but still, this chart shows that you're nowhere near 100% equities. You have a big chunk of your money in investment real estate. I don't know what "locked cash value" of the pension means but you've got at least some money allocated to cash also. I see nothing wrong with this allocation given that the pension and rental income covers your needs. I still think adding some fixed income would smooth the ride without significantly altering the return but if you're okay with the volatility, go for it.

[LivingAlmostLarge]

Atretes, I'm in a similar situation. I'm <4 years out from being retirement eligible with a military pension ... and DW already has a smaller military pension as well. If I hit the button the day I'm eligible (both age 42), we'll have ~$90k/yr guaranteed (and at least $25k of that is tax-free), so long as we both keep breathing. Meanwhile, we're living comfortably on roughly $70k/yr expenses.

With that knowledge, I'm extremely comfortable with keeping our market investments set to a 90/10 AA, plus a rental home & some higher-risk RELP investments. The healthy pensions cover all of our living expenses without a problem, so all of our investments are basically gravy ... fun money. Even being "retirees" in our early 40s, longevity of the money isn't a concern because we're not reliant on it. That fact gives us the freedom to take higher risks.

Some in the Boglehead community will impute a bond-like equivalent value for a pension, and incorporate that figure to consider an effective AA based on that notional amount. So if I call our combined pensions are worth roughly $2.5M, and we've got $2M in the market at 90/10 + $500k in RE (which is my stated goal for 2028), we're effectively more comparable to an AA of 35% stocks, 10% RE, 55% bonds ... which would otherwise be very conservative, but honestly reflects our feeling toward investment risk alot closer than one might otherwise expect just looking at our invested assets.

Can I ask something stupid? Do most people not get the pensions from the military? Do most not make it 20 years?