No. of Recommendations: 5
My comment was aimed at those who will inevitably say Buffett's wife will have so much money it doesn't matter what she invests it in.
This remains emphatically my belief.
Not so much that it doesn't matter, but that the vanilla asset allocation alternative he advocates will be adequate all by itself for the "average person". The median US household retirement savings peak at something like $200k around retirement age. $20k of cash and $180k of SPY with dividends of $2k/year doesn't go far.
The suggested portfolio certainly has the advantage that it won't go bankrupt--that's pretty much impossible for an index until the US stock exchanges close. And admittedly there is no magic asset allocation that would make the insufficiency problem go away. But simply assuming that there aren't problems doesn't work. Most importantly, anyone with lesser means has to deal with longevity risk. Probably in a proactive way with some sort of pooled scheme.
As you note, his description is a bit sketchy. He makes no mention of when his widow should decide that "terrible period in the market" and use the cash, versus selling some stock, versus living on the dividends. Without nailing down that rule, having a cash pile is pointless. Certainly the will is likely to be clearer than the interview, but then it's probably not a public service to promote a half strategy.
For mere humans, these are big issues. Potentially "oops I have to live on dog food" issues.
Advice to a trustee is very tricky...
Been struggling with this myself - what advice to leave for my trustee, who will not be an expert on investing?
Indeed. I have to rewrite mine to stop advocating any US equity holdings. Naught to do with valuation levels.
Jim
