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https://www.investopedia.com/economist-advises-inv...

He advises 100% stock during your working years since your paycheck and future Social Security benefit represent a large fixed income allocation. As you close in on retirement, you want to add some fixed income -- perhaps as much as a 60/40 stock/fixed income allocation.

There's also a downloadable spreadsheet if you want to calculate the number for your situation.

intercst

Yup it figures a tenured Yale professor (and various tenured professors from similar elite academic institutions) would post "advice" like this.

"stock market is uncorrelated with your employment income"

Really?

I guess so if you're a tenured Ivy League professor. Nice Fat paycheck, nice pension, gold plated health care, maybe subsidized housing, a network of alumni and emeriti to provide lucrative consultantships and corporate and foundation board positions, etc. etc. etc.

It's just dumb for most people.

Lots of people's employment income was "correlated" with the stock market during the GFC, wasn't it?

This guy's just a dumbass with a nice pedigree and severely infected with selection bias.

Oh you do have to read quite far down in the article until you get this from Choi:

"However, he cautioned that the worksheet should not be treated as investment advice but rather as a thought exercise."

Right. It's not investment advice. It's mental masturbation by someone who is so intellectually bankrupt he doesn't even stand behind his own non-"recommendations."

It's all rainbows and unicorn farts, Prof. Choi.

How would you advise people to invest for retirement differently than Prof. Choi?

He advises 100% stock during your working years since your paycheck and future Social Security benefit represent a large fixed income allocation.

This, along with a healthy emergency fund of 6 months expenses, is exactly what we did. And sure, working for a very cyclical industry, there were some breath holding times when we were not sure about our jobs for months at a time, but felt because we were such consummate LBYMers, we could deal with it.

As you close in on retirement, you want to add some fixed income -- perhaps as much as a 60/40 stock/fixed income allocation.

Nope. We have deferred SS until 70/max retirement age for DH/me. That and RMDs at 73 are going to add to our taxable income in a serious way. If anything, we are eliminating as much income that is out of our control taxwise, to prepare for the serious increase in taxes at 70. No fixed income for us, unless we decide to hold it in a TIRA.

IP

Well, I'm not a retirement advisor. In fact, neither is Dr. Choi, and he admits that later on in his article.

But, the general principle should be to avoid bad left tails, i.e., try to structure your portfolio in such a way that you avoid catastrophic or potentially catastrophic outcomes.

E.g. unrecoverable sequence of returns risks in the first 5-10 years of retirement from which your portfolio can't recover.

This generally means you need some asset or asset classes uncorrelated or only weakly correlated with the global equities markets.

For American-based investors, the starting point is short or intermediate term nominal or inflation protected treasuries or treasury funds. Because I feel that sticky inflation is a greater risk than a deflationary recession--which history shows Congress and the Fed will probably act to stimulate our way out of it as quickly as possible--and I am retired, I lean heavily towards short and intermediate TIPS funds held in a pretax IRA, although I still hold some nominals of similar duration.

Other than that, broad based global equities such as VT. All debt has been paid off.

This also implies that portfolio growth to the upside will be potentially limited compare to someone who holds 100% equities or other high number. I feel 60/40 is about right for me, although for various reasons right now it's closer to 55/45 (I'm letting it ride.)

Being fully insured is also part and parcel of the plan. Living in a nice middle class area but not super fancy is part of the plan. That's kind of who we are anyway LOL.

One thing that I don't see very often, if ever, is whether people evaluate the marginal utility of X number of extra dollars in return they hope to generate by being 100% equities. For us, the marginal utility of accumulating extra dollars beyond what we already have is fairly confined. That doesn't mean we have "a lot" compared to others here, I'm sure that's not the case. We just bought a couple of new appliances to replace the old worn out stove and fridge. Now what we got are a basic GE stove and Fridgidaire top freezer model. Nothing fancy, just basic stuff. We could supposedly have bought fancier models 3x or 4x more expensive but for us they would have had negative marginal utility.

Since this is anonymous I can tell you exactly what the plan for us is: We want a "safe floor" consisting of our basic needs in inflation protected assets. Our combined social security should be around $60k even after a 25% slash due to the well known SS funding issues. We have about $1,000,000 in short and intermediate TIPs funds and I bonds, and about $400,000 in intermediate investment grade nominal bond funds. This should be enough to generate $30-40k in inflation adjusted income for a 30 year period which is our projected retirement period (we are in mid 60's so this will take us to mid 90s). So let's say conservative that's $90k in inflation adjusted dollars for the next 30 years. That's enough to cover our basic needs and then some. It won't cover major home renovations, a new car, or some other unforseen issue. But if the market takes a dump for 10 or 15 years we should be perfectly OK. Then of course we also have about an equal amount in global equity index funds to provide us with growth, aspirational spending, or leave to our children.

Neither of us were ever tenured college professors nor life long government employees with fat pensions and gold plated retirement plans so we come at this entire thing from maybe a different perspective than a lot of others. You'll note the experts advocating 100% equities for everyone are almost exclusively tenured academic professors or similar folks who actually never need to probably draw a single penny from their investment portfolios to be doing just fine and dandy.

In my POV, with respect to In Paradise and others similar to her, the people on these kinds of forums who proclaim loudly and confidently that they are "100% stocks forever!" are engaging in psychological or cognitive bias. They may give intellectual lip service to the notion that in theory the market could crash 50% or 60% or even more, and stay down for many years, longer than their projected life times, thus preventing a recovery in their portfolio. But they don't really believe it. They don't believe it could actually happen to themselves. They don't believe that a huge economic shock, and market crash, could ever coincide with other issues going on in their lives where they might have to withdraw large sums at the worst possible time and thus all the monte carlo simulations go out the window.

I don't know what kind of work In Paradise and her spouse do, but she herself said there were times along the way where they were very concerned about their job security. The way she sees it, not actually losing their jobs at those points doesn't mean she got lucky. It means the risk wasn't a real risk. It means she's immune or invulnerable from any kind of weird extreme black swan or even gray swan risk ever materially affecting her in such a way that maybe she would have been better off with a healthy allotment of TIPS or nominal bonds in her portfolio. That's a cognitive distortion on her part. Sure, roll the dice and 9 times out of 10 you'll probably do O.K. But none of us gets 10 runs through the monte carlo simulation, much less 10,000 like firecalc. We each only get exactly one single run through the simulation called "life." To me, I think there is at least a 20%-25% chance during a 30 year retirement of encountering a very bad unusual bear market and/or market crash and or financial crisis that's somewhat the same yet somehow different from all of the ones that came before it. And a non-zero chance our economic and government masters can't engineer a quick bounce back from it.

My point of view is I want my portfolio, and lifestyle, to survive EVEN IF the shit hits the fan. Because it will. We just don't know when or how.

And if I'm wrong, guess what? I'll make out like a bandit with the half of my portfolio (actually it's a little more than half now, general target though is 60/40) that's in global equities. That will take care of itself.

In my POV, with respect to In Paradise and others similar to her, the people on these kinds of forums who proclaim loudly and confidently that they are "100% stocks forever!" are engaging in psychological or cognitive bias. They may give intellectual lip service to the notion that in theory the market could crash 50% or 60% or even more, and stay down for many years, longer than their projected life times, thus preventing a recovery in their portfolio. But they don't really believe it. They don't believe it could actually happen to themselves. They don't believe that a huge economic shock, and market crash, could ever coincide with other issues going on in their lives where they might have to withdraw large sums at the worst possible time and thus all the monte carlo simulations go out the window.

Sorry Marco, but didn't intend to imply that we were 100% stock, just low to no bonds beyond the I bonds we bought a zillion years ago when they had a great fixed rate plus adjustable. They will need to be redeemed in a few years, never having been used to pay for our kids college costs, and represent more than a year of expenditures, many of which are discretionary. I feel that bonds for the most part don't provide enough of a premium over money markets to compensate for the potential lost opportunity cost of immediate investment. We are actually pretty heavily in cash right now, having expected a down market for some time. Looking at investing at least some of it shortly in direct indexing with tax loss harvesting. Some of that cash will also probably be used to buy more real estate, which has always been my bond proxy, though frankly right now, am also uncertain about the direction of the real estate market and like the flexibility of traveling to other places and doing mid term furnished rentals. We have seen and benefitted from multiple downdrafts in the stock market, and looking to do so again with our large cash position.

We are retired and have been since our mid to late 50-s, with the occasional contracting by DH as cool projects come up from his past employer. Even if our net worth dropped by 50%, the RMDs we have to take in 6 years and the SS we have to take in 3 will more than cover our annual expenses. It's the beauty of LBYM. We spend what we want to spend, we just don't feel the need to spend a lot, and that brings a certain freedom.

... but she herself said there were times along the way where they were very concerned about their job security. The way she sees it, not actually losing their jobs at those points doesn't mean she got lucky. It means the risk wasn't a real risk.

No, the risk was ever present, but the ability to cope with that job loss was always there too, since over the years we banked our bonuses and pay raises rather than raise our standard of living. Through LBYM we self-insured that we would be OK even with a job loss.

My point of view is I want my portfolio, and lifestyle, to survive EVEN IF the shit hits the fan. Because it will. We just don't know when or how.

Absolutely. And since we are no longer making a paycheck, and could frankly do well simply having all our assets in money market, we are less than 100% in stock. But during the paycheck years, we were just about 100% in stock, other than the emergency fund which was our I-bonds, and the kids' college funds. Always plan for survivability in a down draft of the market. Sorry to hear that you interpreted it otherwise. Just be careful in thinking that bonds have an inverse correlation to bonds. No longer seems to be the case and hasn't been for a while. I much prefer money market or rental properties over bonds. Real estate has been very good to me, but it is work and it takes more thought than most put into it.

FWIW,

IP

Just be careful in thinking that bonds have an inverse correlation to bonds.

Sorry, long day and late posting yesterday. In case it's not obvious, I meant to say be careful in assuming that there is an inverse correlation between stocks and bonds. It's not a given.

IP

I did misunderstand you.

My apologies.

I'm not a doomsayer even though it probably sounds like it, and I am optimistic about the stock market when I think objectively about it. I have often thought I invest far too conservatively.

I would like to be someone who can invest 100% in equities and not sweat it.

I sweat it, in spite of myself.

Can't help it.

Sorry if that anxiety led me to misread or misinterpret your post.

I would like to be someone who can invest 100% in equities and not sweat it.

I sweat it, in spite of myself.

Can't help it.

Sorry if that anxiety led me to misread or misinterpret your post.

No worries. But remember, this is not a race. You be you. The only good strategy has to be one you can execute. What works for me doesn't necessarily work for someone else, but that doesn't stop you from asking questions and pulling ideas from someone else that you execute in your own style.

There are many ways to mitigate risks, and many ways in which risk presents itself that is not always prominently considered. Always best to have a survivability plan in place for any market. You can come back from a down market if you haven't overextended yourself with shorts and margin, causing your loan to be pulled and shares to be sold without you having a choice in the matter.

IP,
a very vanilla investor, who prefers the downside of a purchase to be limited to what she paid for it

<< marco100 Well, I'm not a retirement advisor. In fact, neither is Dr. Choi, and he admits that later on in his article.

But, the general principle should be to avoid bad left tails, i.e., try to structure your portfolio in such a way that you avoid catastrophic or potentially catastrophic outcomes.

E.g. unrecoverable sequence of returns risks in the first 5-10 years of retirement from which your portfolio can't recover. >>

I think you need to re-read the first post in this thread.

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. The "4% rule" is the ultimate "sequence of returns" insurance.

As an early advocate of FIRE, I myself retired way back in 1994 at age 38 after a blissfully short 17-year career as an engineer in the oil & gas industry. Once I'd accumulated enough capital to live off the 4% rule, there was no way you were going to see me sitting in an office for 40+ hours/week.

I learned my lesson on steep stock market drops during the Black Monday 22.6% one-day drop in the DOW in 1987. Stayed out of the market sitting in fixed income for the next 2 years. I'm at least 25% poorer today as a result. Since then, it's been "Stocks for the long run" and I've maintained my asset allocation through thick and thin -- including 50% stock market drops in 2000 and 2008. In 2024, I reached 30 years in retirement with a portfolio balance of more than 10 times its starting (1994) value. Note that's "10 times it's starting value" after 30 years of inflation-adjusted annual withdrawals. Pretty amazing!

Of course, I happened to retire into a favorable sequence of returns. Someone who retired 5 years later in 1999 just before the 2000 dot-com bust experienced two 50% stock market declines in the first 8 years, yet today after 25 years of withdrawals our 60/40 retire who maintained his asset allocation through thick and thin still has his initial retirement portfolio balance intact, even under the burden of 25 years of annual withdrawals.

Why the 4% rule is the ultimate "sequence of returns risk" insurance
https://retireearlyhomepage.com/sequenceofreturnsr...

intercst

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%.

Ray, what are some signals or indicators you’d be looking at to tell whether the downturn might have bottomed?

what are some signals or indicators you’d be looking at to tell whether the downturn might have bottomed?

Generally, The current price of S&P500 going above the 43 week SMA.

Note that I don't look for "the bottom". You don't need to catch the bottom to win, you just need to catch it when it is going up.

In this specific circumstance, when the situation in IRAQ is over.
And possibly when the Strait of Hormuz is open and kept open by non-US countries.
Non-US because they need it and we don't.

People have been saying that the market is overvalued for the last several years. That the market is way overdue for a correction. Anything would have triggered this correction, Iraq was just the one that happened.
I suspect that when the dust settles we'll pop back up. The US is going to come out the other side as the big winner. It will finally be widely recognized that big parts of what is called the First World are more accurately Second World.

It's hard to keep one's political positions out of one's investing. Try to keep them separate.

==============================
I get this guy's daily email and often listen to the part of his podcast that is free. The recent one was complete for even free people. IMHO it's pretty good.

The Four Most Expensive Words Are Back
https://substack.com/app-link/post?publication_id=...

Jump to 1:04.
I ignore when he talks about technicals and support & resistance; I don't trade that way. It's the general overview that I listen to. In this one, that comes in about 21:30 & 23:00.

"when the Strait of Hormuz is open and kept open by non-US countries.
Non-US because they need it and we don't."

I may be wrong, but my understanding is that the US does need oil beyond or instead of what we produce. Our refining capacity is by in large set up to work on heavy crude, like what we have been getting, in some measure, from Canada. Our production is light sweet crude which we cannot process in bulk but sell on the world market.

The world oil market is so intertwined, and hence internecine, that it can only function presently as a whole. And maybe that is not such a bad thing as cooperation is the only way forward.

fd

I suspect that when the dust settles we'll pop back up. The US is going to come out the other side as the big winner. It will finally be widely recognized that big parts of what is called the First World are more accurately Second World.

I disagree. This issue will not be settled militarily. The US lacks both a plan and the will. Iran knows this. It will be settled at the negotiating table. A while back someone on the BRK board (I believe) recommended a book on negotiation called "Getting More" by Stuart Diamond. Very interesting book, I recommend it. A lot of it was doing things that should be obvious but many people don't think about, but the cardinal negotiating rule is never break trust.

One of the US demands is that Iran dismantle its nuclear program, surrender its enriched uranium, and allow 24/7 monitoring. Iran had already agreed to this deal and complied, but the US broke the agreement with the president claiming he could negotiate a better deal. Of course, he failed to do so. We broke trust, so Iran has no reason to trust us again, especially not the current president. They have no reason to trust us, so we're not getting a better deal.

Same the tariffs. Our agreements were carefully crafted over many years and we broke them arbitrarily, again with the claim better deals would be negotiated. To date, better deals have not been negotiated and they won't be. You get worse deals after you break trust, not better deals.

Nope, none of this stuff benefits us. We're not going to emerge stronger. We going to emerge as weak and untrustworthy. Shoot, that's what our former allies are already saying about us.

"what are some signals or indicators you’d be looking at to tell whether the downturn might have bottomed?"

rvt: "Generally, The current price of S&P500 going above the 43 week SMA."
...
"In this specific circumstance, when the situation in IRAQ is over."

Maybe Monday 3/30/2026 was the bottom. (???? Maybe so, maybe not.)


Looks to me that the main trigger for this recent drop was the Iran situation. Down on not-so-good news, up up up on good news.
The Dow doesn't go up 1100 points in a day for no reason. It is straining at the leash.
Looks to me that the market wants to go up but Iran is weighing it down. BWDIK?


Just looking at the price action, this reminds me of what happened several years ago, I think in an October(?), we were on a long cruise. I looked at the news (NYT web site was free access on the cruise) and said to myself, "That's it. This is the bottom." We got off the cruise a couple of weeks later and sure enough, that was the bottom.

I believe Charlie Munger's position on US oil was that it was stupid to use it. We should keep it becasue one day we'll wish we had more of it.
But, you know, Charlie was a longterm thinker.

I believe Charlie Munger's position on US oil was that it was stupid to use it. We should keep it becasue one day we'll wish we had more of it.

That reminds me of a remark made to me by a prominent professor of chemistry in the mid-70s while I was managing an internal organizational consulting group at UC San Diego. That was about 50 years ago. He said oil is a most precious resource because of its many invaluable applications, and that burning it up to propel vehicles or to provide heating or whatever was shamefully wasteful.

Tom

[A prominent professor of chemistry] said oil is a most precious resource because of its many invaluable applications, and that burning it up to propel vehicles or to provide heating or whatever was shamefully wasteful.


It must be nice to live in a world where you don't have to consider alternatives or tradeoffs.


I get the thought that we should burn other people's oil -- like the Middle East's oil -- and save ours for later, after they have run out of theirs.

On the other hand, what's the point of saving our resources for our grandchildren's grandchildren's grandchildren's to save it for THEIR grandchildren's grandchildren.
At some point, SOMEBODY is going to use that resource. So why not us in the present?

At some point, SOMEBODY is going to use that resource. So why not us in the present?

Stunning! So we should squander whatever we can of our resources now because everything's going to be consumed someday anyway?

You don't know the difference between "squander" and "use"? Interesting.

Have you ever driven past oil fields in Texas & Oklahoma?

If you want to talk about squandering, how about this:
"Gas Flaring is the act of burning off excess natural gas from oil wells when it can't economically be stored and sent elsewhere."

Burning off gas just because it is not economically viable to capture it and sell it. What a waste.

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