Re: Near Retirement: Asset Allocation Thoughts

kibucs wrote: Thu Oct 02, 2025 6:22 pm

For perspective, I’m a relatively new DIY investor. One thing I do miss about working with a financial advisor is the mental buffer — I didn’t spend nearly as much time worrying about every potential market downturn. Ignorance was bliss

Since going the DIY route, I’ve been doing a lot more reading and I keep seeing videos and articles about how a correction is overdue, or how near-retirees could be facing a prolonged bear market. I take it all with a grain of salt, but it’s definitely in my head more than it used to be.

We currently have ~$3million in our retirement portfolio, with a 55/45 stock/bond allocation. I started at 70/30, but have gradually shifted more conservative — probably a mix of age and “cold feet.” Based on our projections, we’re on track to retire early in 3 years at 60, live comfortably on our expected income needs, and still leave a meaningful legacy for our kids.

Part of me is thinking: if we already have “enough,” maybe I should reduce risk further to protect what we’ve built, rather than continue chasing returns we don’t strictly need.

I’m curious how others in a similar situation are handling this. Have you shifted your AA as you got closer to retirement? Stayed the course? Regretted going too conservative or too aggressive?

I’d appreciate hearing how others approaching (or already in) retirement are thinking about risk, allocation, and staying the course vs. dialing it back.

Thanks.

M.

I did some analysis that suggested that 50/50 was the least-risk portfolio as you reach 35x+ multiples of expenses. Smaller portfolios (25-30x) actually need more stocks. I would be careful in thinking that more bonds makes you safer, unless of course you are doing an entire TIPS ladder that lasts as long as you could possibly live. I also found that the risk reduction from AA changes was very small compared to the risk reduction from portfolio size.

-A 10% bigger portfolio is ~2x less likely to fail

-Working 1 more year cuts failure rate by about half (say 4% failure to 2% failure, or 2% failure to 1% failure) and increases expected lifetime spending by ~10%

-AA doesn’t help (much) across a broad range of AA’s for risk, but it can significantly increase or decrease expected portfolio size and thus lifetime spending/inheritance assets

Only the more extreme portfolios (100/0 or 30/70) really benefit from AA changes. AA reductions near 50/50 reduce expected lifetime spending without noticeably improving expected risk.

I would be okay with someone putting all new investments into cash/fixed income for a few years if that makes them feel better, but I would encourage people to think about risk differently if they feel that more bonds (other than a full TIPS ladder) equates to less risk. We do have a bunch of people here that do partial TIPS ladders and I am almost certain they have no information about if this actually reduces risk. I’ll recommend the full TIPS ladder if you go that route.