Unlocking Retirement Planning with AI Legalese Decoder: Simplifying Asset Allocation for a Secure Future
- May 27, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Guidance on Asset Allocation Approaching Retirement
Is there any specific guidance or recommended strategies for determining asset allocation as one approaches retirement? With the context of being 8 years away from accessing superannuation and planning for semi-retirement within the next 3-4 years, the ability to tolerate market volatility is a key consideration.
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## Evaluating the Traditional 60/40 Allocation
Is the commonly recommended 60/40 allocation of equities to fixed income considered too conservative for your retirement portfolio? Is there a more quantitative approach to determining the ideal mix of stocks and bonds, rather than relying solely on personal risk tolerance and emotional responses to market fluctuations?
### AI Legalese Decoder’s Analysis
AI Legalese Decoder can help you assess the historical performance of various asset allocations and analyze how different ratios of stocks to bonds have performed over time. By using data-driven insights and statistical modeling, AI Legalese Decoder can suggest adjustments to your asset allocation as you age, ensuring a gradual shift away from equities towards more stable investments to protect your retirement savings.
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I think it is better to stick to the ‘when do you need the money’ rule. For what you expect to spend in the next 5 years, have that in fixed interest. What you do not need within a specific timescale can be invested at a higher risk. I’m well past retirement age now, into my 70s, have fairly low expenditure, and have not changed my investment profile significantly since before retirement.
Early retired. 60/40ish portfolio overall but bucketed into 1. 3 years in cash 2. 7 years in a Balanced Fund 3. Rest in an Aggresive Fund. Withdraw based on best performance from Bucket 2 or 3 to top up Bucket 1. If it’s been a particularly bad year, don’t withdraw from Bucket 2 or 3 for as long as possible, adjusting the spending a bit if necessary. It won’t be some analyst’s version of spreadsheet optimal, but it’s sleep at night optimal (for us).
assuming your retirement to be 30years, then apportion when you need the money example
Purely from a numerical view? That would be 100% equities.
– Rational Reminder episode interviewing the main author of the academic paper: https://youtu.be/y3UK1kc0ako?feature=shared
Is that something most people would do? Probably not. It depends on your goals, risk tolerance, etc.
One thing I’d like to add is that withdrawal rate and strategy will be just as important:
– different withdrawal strategies in https://ficalc.app (click Edit on Retirement Plan, you’ll see Withdrawal Strategy)
– Morningstar’s bucket strategy, https://www.morningstar.com/portfolios/bucket-approach-building-retirement-portfolio
IMO, investing in global equities in NZ is quite expensive. You take the same amount of risk, but for lower returns, compared to US, thanks to FIF. However, one can generally take more risk if they have no debt remaining (including mortgage) and fixed income in NZ pension once they turn 65. It’s a personal decision.
Im semi retired, 13 years from super. Its an extremely personal question wouldn’t make any suggestions without a lot more information. Being a personal finance junkie ive settled on 80/20 till supper, then 90/10 after that assuming the current super rules apply.
Bonds make zero sense in NZ. There are way better sources of low risk cash returns that I mention below.
What does make more sense imo is shifting away from growth stocks and into good dividend paying stocks to boost income (you need income more than growth at retirement if you plan to leave no inheritance). If you’re mostly into ETFs that might mean selling VOO/VT type ETFs and focusing on dividend ETFs.
You should work out how much additional annual revenue you need on top of the superannuation and whatever dividends/yields you are getting from your investments. Keep 1-5 (depending upon your risk appetite) years of that in a cash fund, term deposit, mortgage offset account, etc for easy access.
Keep selling stocks to maintain your desired amount of liquid cash in future years. If you can tolerate risk, and think you can time the market, you can always wait to replenish your liquid reserves. By timing the market I mean, if you have say 3 years left of liquid reserves and your target is 5 years but the market is down, I personally think it’s a pretty safe assumption that the stock market will eventually recover so you’re better off waiting and selling more later when it recovers.
It is not about being too safe, it is more a question of how much risk are you comfortable with?
The world is on the verge of a world war, maybe hot or cold, carrying stocks over the next decade will be very risky.