No. of Recommendations: 2
I came across this video from a financial planner, James Conole, on how he helped a couple in their mid-60s re-allocate their portfolio, just as they were about to retire. The couple had $3.2 million of liquid assets, mostly in an S&P 500 index fund (VOO) and a Fidelity target date 2025 stock/bond fund.
What I like about Conole's approach is that he worked backwards from what the couple said they needed for living expenses and discretionary travel, analyzed their projected annual outflows and inflows, and set up an asset allocation to meet those requirements. The couple said they needed $8,500/month in living expenses, plus $20K/year for leisure travel. So they needed about $120K/year post retirement.
Conole then put 5 years of living expenses ($600K) in short term treasuries and bond funds. So this is about 20% of the portfolio. Then he put 70% of the portfolio in a diversified set of stock funds, and another 10% in a total bond market fund. The idea here is that they would live off the interest and principal from the cash and bond pile during years when the market was down, and sell from the stock fund during years in which stocks do well.
https://www.youtube.com/watch?v=k1iRsKjeTOE&t=929sThis advice resonates with me, and is similar to what I've been doing as a retiree. Thoughts?
