No. of Recommendations: 2
100% stock is for people more than a decade from retirement. As you close in on your retirement date, you'll want a larger portion of your portfolio in cash and fixed income. The "safe retirement withdrawal" studies suggest as much as 40% in fixed income.
"Never bet on the end of the world, It only happens once."
That's what the 4% rule protects against. The end of the world.
The Baby Boomer cohort is the first cohort that realistically had the circumstance where they could largely invest in stocks for retirement.
If you retire with enough income from pensions, Social Security (times two for couples), and perhaps some dividends to cover your living expenses then you don't need much -- if any -- fixed income allocation. Certainly not as high as 40%.
At some point in age, you are more-or-less investing for your heirs, your children, and not so much for you. Of course, that only applies if you have children.
In 2006 we retired 100% in stocks. Over the last 4-5 years I've transitioned to quite a bit allocation to income-related ETFs and CEFs. But nowhere near 40%. Not with an eye to asset allocation, more because I could get a very attractive dividend. Probably 6% average, up to 10% for a few rare cases. Even some in FDIC banks paying 4%-5% in CDs or just high-yield savings. (Raisin.com is a good source.)
When this downturn bottoms, I expect I'll sell a bunch of those and load up on good stocks that got dragged down. Just look at what MSFT and AMZN have done long term, even with those 50% and 70% drawdowns.
Nothing like having money earning 5% when your mortgage rate is 2.25%.
