Your portfolio allocation

by Rhett

What are your investments: index funds, bonds, individual stocks, timber land, oil and gas leases, gold, diamonds, farm land, etc?

What percentage of your net worth do they represent?

The Danger In Index Funds

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75 thoughts on “Your portfolio allocation

  1. We own real estate (beyond our primary residence), and our equity in that is 10-15% of our net worth. We also own some metal funds, which hopefully provide us with the assurance of having gold under the mattress without actually having gold under the mattress. I think that may be as much as 5%.

    I bought 0.02 Bitcoin the other day (about $50). So, I am adding cryptocurrency trader to my hobby list. Mostly I did it as proof of concept. But maybe I should keep 20% in Dogecoin. I thought this was a joke, but apparently it is reasonably capitalized. http://dogecoin.com

  2. I’m open to being challenged by the article, but so much of it seems like bullshit. In his argument that index funds aren’t as cheap as commonly believed (e.g. 0.13%), he cites a figure that “annual dilution of company shares for executive buyback compensation” adds 2.5%, and “ongoing company share buybacks to offset dilution” adds 1.6%.

    How are these specific to index funds, or am I missing something?

  3. I could see that the “blank check” to the companies aspect of index fund investors is potentially concerning, but not at the proportions they are currently held.

  4. Am currently in the midst of a good deal of rebalancing. I inherited a wide variety of assets (no real property though) from my parents – including a large percentage of bonds and laddered CDs – that were tailored to their age and investment style. While I am working toward more of a growth portfolio, it is not there yet. With some of the larger CDs coming due in the next 6 months, it should be much closer by the end of the year.

    In doing some cleaning out, I found 3 Savings Bonds my parents bought for DD#1 in 1999, 2000 and 2001.

  5. When I watch FOX News, I’m always amused by the commercials for investing in gold. It’s like a parody of itself, but they seem to understand at least a good portion of the network’s core audience, and they play on their common fears:

  6. Milo,

    My biggest concern and the reason I moved 15% into DODGX and DODWX was how each index fund I looked at had the same tech stocks (Alphabet, Facebook, Apple, etc.) as an ever increasing % of the index. The argument that index weighting can result in an ever increasing weighting of certain stocks seem reasonable to me.

  7. The other argument is you should never have all your eggs in one basket regardless of what that basket is.

  8. Rhett – That seems reasonable. At the same time, the big stocks that populate so many indices can be pretty varied, bc there’s going to be Apple, but also Exxon, and P&G, etc.

    In my case, the Vanguard target funds put a relatively high 30% in international stock funds. That’s about two thirds of my portfolio, so figure I have 15% in international.

  9. At the same time, the big stocks that populate so many indices can be pretty varied, bc there’s going to be Apple, but also Exxon, and P&G, etc.

    The issue would be that indexing would start driving the value rather than fundamentals in a self reinforcing cycle. I think it could be a risk in 10 or 20 years if indexing continues to grow like it is.

  10. Not disagreeing. But if that were to start happening, then I would think there’d be enough investors who still pay attention, who would realize that Apple is overpriced, who would pull their money out, and then wouldn’t that drive Apple’s overall market share lower, which means that it drops lower on the index, which means that the index itself rebalances its Apple holdings to a lower proportion of its fund?

  11. But if that were to start happening, then I would think there’d be enough investors who still pay attention, who would realize that Apple is overpriced, who would pull their money out

    If it blows up what will happen will be people will see it and try to exploit it and the market will remain irrational longer than they can remain solvent and they’ll get burned*. It’s not enough to know the market is mispriced if you don’t time it right. This process will thin out those who don’t buy into the latest bubble. Then it grows and grows until it all suddenly imploded.

    * In your specific examples people will pull out and see the index continue to soar and panic that they are missing out, go all in and then get burned in the collapse. That’s how it’s been in cycle after cycle since the tulip bulb panic of 1637.

  12. And if you find yourself saying, “But index funds are different!” Then you might want to take that as a warning.

  13. So after we talked about this a little last week I went back and looked at our liquid investment portfolio (excludes our primary residence and DWs shares of a privately held business, one parcel of developed business real estate, and two single family dwellings. These in aggregate are approximately equal to our investment portfolio). I used Morningstar x-ray, which I get as part of my client level at Merrill Lynch.

    Lots of ways to look at things:
    1. Overall Asset Allocation:
    – Equity 81% (a combination of individual stocks and funds/etfs)
    – Fixed Income 17%
    – Cash 2% (both direct and underlying holdings within the funds/etfs)

    2. Market Cap of Equities (again, largely inside of the various funds/etfs) – these add to the 81% that’s equity above.
    – Giant 44%
    – Large 18%
    – Medium 4%
    – Small 14% (due principally to a large concentration in one small bank whose stock performance has been extraordinary…maybe this is our “put $10000 into WalMart/Amazon/etc way back when and let it ride” opportunity
    – Micro 1%

    3. Sector of the Economy, again adding to the equity 81% above:
    – Financials 33%
    – Tech 12%
    – Consumer Goods 8%
    – Consumer Services 7%
    – Industrial 6%
    – Healthcare 6%
    – Oil, Gas, Natural Resources 5%
    – Telecomm & Utilities 3%
    – non classified 1%

    4. Geographic (all asset types)
    – North America 85%
    – Europe 8%
    – Rest of the World 7%

    We are overweighted in Financials, due to the one holding as described, and underweighted in Healthcare, IMO. Otherwise re sectors I’m good.

    New money coming in is being invested roughly 60/40 equity/fixed, but I’m also moving holdings out of equity into fixed every so often to address the heavy mix of 81% equity at this point.

    Geographically, I’d like to move to more like 20% foreign especially as I believe the dollar’s relative value will diminish vs the current level.

    Last, across our 401ks, rollover IRAs, taxable accounts we have “positions” in 33 securities (funds, etfs, individual stocks).

  14. “And if you find yourself saying, “But index funds are different!” Then you might want to take that as a warning.”

    Yeah, it’s just that, while acknowledging the concerns you’ve raised, I think index funds are different because they’re not really a specific asset class. They’re just a way to buy various types of assets.

    It’s like saying “401(k)s are way overvalued!”

  15. <i.It’s like saying “401(k)s are way overvalued!”

    401ks don’t involve a very specific investing strategy. Index funds do. They say buy only these stocks based on a very specific criteria and weighting. It’s not hard to imagine how everyone buying stocks based on the same rigid formula might go wrong.

  16. “They say buy only these stocks based on a very specific criteria and weighting.”

    Well, 3587 stocks in VTSAX.

    And the weighting is proportional to their market share.

  17. In the past indexing worked because it reflected what the market was doing. Now it’s increasingly driving what the market was doing. It’s hard to imagine how that won’t eventually blow up. I guess this time could be different but the track record of people who say “this time is different” isn’t very good.

  18. I have a question about the companies people are using for investing. Do you have your money split between several management companies (Vanguard and Charles Schwab, etc)? How many different places do you use?

  19. “Hence the problem.”

    Which goes back to my 1116 point about how I think it’d be corrected. It’s not like you’re either totally in tulips, or totally out of tulips. Investors can much more easily decide that Apple is way overvalued based on indexing effects, pull out of Apple specifically, or even pull out of the top 10 holdings entirely (about 15%?), while staying put in all the rest. And that would drive the top 10 out of the top 10, and the self-balancing would continue from there.

  20. Investors can much more easily decide that Apple is way overvalued based on indexing effects, pull out of Apple specifically, or even pull out of the top 10 holdings entirely (about 15%?), while staying put in all the rest.

    What in the history of bubbles and panics makes you think that’s likely?

  21. Fred,

    Great idea! I was thinking the managed funds would also likely get caught up in the bubble because as soon as a manager determines the indexes are driving the market he needs to go all in or he’s going to get fired. That it all blows up in 5 years won’t help him get his bonus and keep his job this year .

  22. “What in the history of bubbles and panics makes you think that’s likely?”

    Index funds don’t have any preference or bias to a specific company. To the extent that index fund investing drives up prices, the funds, and the investors, don’t care whether the #1 holding is Apple or Wells Fargo or Exxon.

  23. Nap –
    we have 5 investment firms (my IRA Rollover, DW’s Rollover, joint taxable, my 401k, DW’s 401k). The last two are set by our employers, so no choice. We’ve been happy with the performance of the funds in DW’s rollover, so inertia even though we could roll that in kind to where my IRA rollover is. The joint taxable is a vestige of when we started out, so again, potentially inertia since it could easily be moved to another one of our firms. Tiaa, American Funds, RBC, TRowe Price, Merrill.

  24. We have a significant chunk through Schwab, but we hold Vanguard funds through there, so I don’t think that constitutes a meaningful difference. I also hold Vanguard funds in my 401(k), and Vanguard funds directly.

    The only real difference would be an old TSP.

  25. Dh’s 401K is in index funds, our taxable account is in individual stocks and about a third of our net worth is probably home equity. I have a smaller 403B managed by TIA- CREF. We probably don’t keep enough cash on hand (about 4 months of expenses) so we are probably going to work on increasing that cash amount for the rest of the year as there’s nothing really compelling I want to invest in right now.

  26. Index funds don’t have any preference or bias to a specific company. To the extent that index fund investing drives up prices, the funds, and the investors, don’t care whether the #1 holding is Apple or Wells Fargo or Exxon.

    That’s the problem. As it continues to move the market the market is going to start following the index rather than the index following the market.

  27. Re: the Milo/Rhett carryover from last week: isn’t this just the ongoing debate over the efficient market hypothesis? I think over the long haul, the market is efficient, and if a given [sector/asset/generic thing] is overvalued or poses some sort of disparate risk, all of those brilliant quants and fund managers out there who are paid ridiculous amounts of money to find an edge will invent some new product to address/hedge/take advantage of that disparity. The problem is that over the short term, public sentiment can swing things wildly. So the real question seems to be whether the “indexing” bump is a significant enough player in the overall market to cause such a wild swing.

    Personally, I don’t think so. Part of it is that indexing is still not exactly controlling the market, and other alternatives and other ever-more-finely-sliced-and-diced indexes are constantly being invented. I don’t think it’s the 800-lb-gorilla that will swing the market yet.

    But the other part of it is that most major market crashes seem to be associated with the discovery of something that was hidden, not generally known to the general public, and with significant ramifications to the market itself, so that the revelation generated a huge and immediate revaluation (i.e., something that reacted more rapidly than the market could adjust to create new products/hedge the risk). E.g., Enron funny accounting; first tech crash “what do you mean that selling more doesn’t offset the fact that I am selling at a loss?”; CDOs that hid the value of the underlying assets; etc.

    Here, I don’t see either, at least now. First, the index “bump” is a well-known phenomenon that has been reported on forever, which means many very smart people are being paid a buttload of money to keep an eye on it and manage around that risk. And second, this isn’t an issue where the underlying asset itself is basically worthless; sure, being on the index might bump Apple’s price up a few percent, but at the end of the day, you still own the right to a fraction of all of the company’s future profits.

    IOW, if I own shares in XYZ MegaCorp via VTSAX, I think the magnitude of any loss is much more likely to be driven by (a) general or industry-specific economic downturn, (b) crappy management, and/or (c) funny accounting than by (d) its value being slightly inflated because it was added to the S&P500. And (a)-(c) are inherent in any stock investment.

    Not that it couldn’t ever happen; never say never. I just don’t see the seeds of it now, and I think the market will have plenty of time to adjust if the prices start to diverge too much from the underlying value.

  28. ) its value being slightly inflated because it was added to the S&P500.

    Keep in mind we’re looking at this over a +30 year time frame. It’s not that changes need to be made now (I feel better having made some minor changes) but something to keep in mind over the long term.

    those brilliant quants and fund managers out there who are paid ridiculous amounts of money to find an edge will invent some new product

    If history is any guide, they will invent products to take advantage of the impact of indexing (the equivalent of synthetic CDOs and CDOs^2) to magnify the gains*. In the long term this will obviously result in the losses being magnified as well. Keep in mind all those guys are going to notice the index is moving the market and double down – they won’t be able to keep their jobs if they try and fight the market even if they know full well certain securities are wildly overvalued.

    * Again, if history is any guide, almost no one will invent something to protect against the losses.

  29. Show of hands for who has no fricking idea??

    Anyone? Anyone?

    DH does all allocations for us. I know what our balance is, but no idea how things are allocated.

    We own a few individual stocks, more for fun than because we have any expectation of beating the market. And I couldn’t even tell you what those are. I know Amazon is one, and Disney. Possibly Starbucks. Very little $$ in those, though.

    And of course real estate.

  30. We are heavy in real estate – we have almost 40% overall between equity in L’Abbey and the timber property. Our investment accounts have equities (no bonds) and I think we are overweight international compared to US large cap. Also quite a bit of cash – DH thinks the market is pretty expensive right now.

  31. “and I think we are overweight international compared to US large cap.”

    I always thought that Vanguard went a little heavy on the international. This got more frustrating in recent years, prior to 2016, when that portion of the funds lagged bigly. I talked about it with my best friend from high school, who became a financial advisor out in the upper Midwest, and he reminded me that the only reason I’d be making a change would be to chase past performance. So I stayed put, and that has paid off recently.

    It’s silly, but it’s more scary and unfamiliar to think of “International” vs. looking at the actual holdings and seeing “Toyota, Honda, Nestle, Samsung, Deutsche Bank, InBev, Mitsubishi, Siemens…” I can better wrap my head around those.

  32. Nap – I sort of mirror Fred. 401K, 401K stock component, last of parents assets, and 2 taxable accounts (one of which is strictly for low cost online trading). My 401K has one firm, but if you wanted to hold individual stocks or stock index funds you have to put it in a separate sub-component managed by Schwab.

    Lark – I typically don’t look at it very often and unless it is right around the time I do my annual adjustments, I’d have no idea. It has been a process with my parents deaths and them having holdings in various places.

    Yes, individual stocks is more for fun that beating the market!

  33. Regression to the mean, people. It’s going to be ugly.

    Which brings us to the next question. Can you time the market? The answer seems to be almost universally no. I rolled an old 401k (did you know that ROTH 401k contributions can roll into a ROTH IRA but the employer match has to go into a regular IRA?) If not, now you do. Anyway, I was thinking, “Should I just keep it in cash? Then I thought, “You can’t time the market.” Any thoughts that you can or that it’s wise to try?

  34. “Regression to the mean, people. It’s going to be ugly.

    Which brings us to the next question. Can you time the market?”

    Everyone’s saying that it’s going to be ugly (and they’ve been saying some version of this for a while now), so it probably won’t be ugly at all. It could just as easily be mild, or slow down and let earnings catch up a bit.

  35. Yes, individual stocks is more for fun that beating the market!

    Most recently I bought iRobot because I thought a little Peter Lynch buy what you know might be nice and I love the Roomba. It was up almost 200% now it’s fallen back a little and is up 130%. At the same time a bunch of people I know bought Fords so I said, “Hey, buy some F.” The money I made on iRobot is almost exactly (to the penny!) how much I lost on Ford. That said, Volkswagen bought at the peak of the crisis is up a solid 30%.

  36. The rise of quantitative trading and the flood of money into passive strategies such as exchange-traded funds have also dampened volatility, investors and strategists say. ETFs owned nearly 6% of the U.S. stock market in the first quarter, the highest share on record, according to an analysis of Federal Reserve data by Goldman Sachs .

  37. It could just as easily be mild, or slow down and let earnings catch up a bit.

    In terms of what happens to investors I think typically it will race ahead and be up another 100% then fall 40% so you end up still buying at a 10% premium vs. staying in for the ride. Not to mention something like Ford’s 4.8% dividend. If you’re saying in 0.01% cash for a few years you’re missing a lot of dividend re-investment.

  38. “It’s going to be ugly & Can you time the market?”

    for probably the last 2.5-3yrs I have been talking with friends who are just into this stuff like me, other friends who advise others for a living, a couple of guys who work for a couple of the places we have investments, the investment bankers who advise my employer, my mom’s finance guy all with the same question…where to put money now given the fed is raising interest rates and eventually, eventually, the equity holders are going to realize that and so a correction will ensue as $$ is moved from equities to fixed income? But, of course if I’d (you all, too, probably) taken action in early 2015 I would have missed out on the ~20% return generated by the SP500 since then.

    So is now the time to reposition our portfolio away from stocks and into bonds? A la Milo staying patient with his international holdings as they returned little, or even lost, while the US market was going along nicely and now over the past year he’s (and the rest of us, too given good int’l diversification) earned ~15-20% on that money.

    But remember, as interest rates increase, bond prices fall. So buying into bonds now, ahead of more Fed action to raise rates will depress those returns even if underlying coupons are higher. And at least so far the markets have shrugged off the fed’s actions.

    I did move 1% of our investments (yep, 1 whole %) from equity to fixed income last week, and plan to move more in the near future.

    But man, is it hard to mitigate risk when everything’s going so great. Vanguard Total Stock Market ETF (ticker VTI) up > 1/2% again today. When 6-7-8% is considered good average returns missing a 1/2% gainer is tough.

    Risk mitigation is the name of the game…how best to do it?

  39. “I think typically it will race ahead and be up another 100% then fall 40%”

    On Election Night last November, there was a lot going on to be sure, but it is kind of remarkable to think that was when a number of us were looking at DJIA futures dropping 900 points or whatever and steeling ourselves for a big shock. And now, eight months later, I’m up about 20%, which represents a lot more money than I’ve earned in those eight months.

  40. Milo,
    I’m right there with you…20%. Which in $ terms is almost 2x what DW & I have made from our day jobs.

  41. panic-inducing

    Panic seems to be the only real risk, as far as I can tell. Slow, steady and well diversified and you should be able to ride out most anything.

    In terms of risk scenarios, I’m thinking something along the lines of: market continues you boom such that you hit your retirement number early. Being smart you diversify into fixed income. But you buddies on the golf course say they are making so much by staying in the market… Yadda yadda you go all in. Then global panic. If you ride it out, you’re fine. But, you’re watching the news all day (because you’re retired) and it’s wall to wall blood and guts and panic in the streets. It could go to zero! So you sell. So now you’ve lost half your money and you’ve been out of the workforce too long so your stuck with significantly reduced circumstances going forward.

    I wouldn’t have thought a totebagger would panic but I recall some folks moving money due to fear of Ebola. So there’s that. And if you’re older you might not be in control of your faculties as much as your once were.

  42. I think it’s best for most people not to try to time the market. Our old neighbor is sitting on probably $300K in cash because the market has been too expensive for him for as long as I’ve known him (6 years). So maybe it is, but he’s lost out on all of those gains over the last six years. Dh was talking to him last weekend and his plan is to deploy it all when there is a huge pullback (but who is to say if there will be one or how deep). Stocks we own are ones we want to own for a long time (yada, yada, yada) so to paraphrase Joshua Kennon – as long as the underlying earnings are intact then who cares if the value drops by 50%?

  43. yep, I agree with that. I also think that with early retirement, you need to give some consideration to the current P/E of your investments, not just hit some magic #. (This would be a concern in any retirement, but any Totebagger worth his salt can happily live off Social Security with a library card and a working knowledge of the senior discount days at the local museums and cultural centers.)

    In all seriousness, I think my parents’ spending is less than the sum of Social Security and my dad’s pension.

  44. My agreement with “that” was directed at Rhett’s worst-case scenario, but I also agree w/ Atlanta.

  45. I think if you’re retiring you do need to look at the P/E of the market – the Mad Fientist had a good article on this last year about how at a certain P/E you need to only pull out 3% vs. 4% because the probability of your money lasting really came down to the market performance the first few years of retirement. And it’s probably a good idea to have two or three years of expenses in cash to ride out any market slump so you don’t have to sell.

    I was talking to my dad the other day because he keeps telling me he’s retiring at year end and he can basically survive just fine on social security. His house is paid off so he said maybe he’d spend $2K per month if he really wanted to do some spending. He only has about $250K in retirement funds but it’s in a high dividend paying fund (although he insists he’s probably just going to keep reinvesting those dividends). He pays $800 per year for the nice town golf course so he’s got it down to to some ridiculously low amount per game and said he’d maybe keep painting houses for ten hours per week if he wanted extra money.

  46. Up 100% then down 40%…
    Well if the starting point is election night we’ve bagged the first 20%. If the additional 80% (which would be 2/3 of the current balance…$100 * 1.2 = $120. 100% on the original $100 would be a value of $200. The $80 remaining/$120 current value is 67%) happens to my portfolio in the next 2.5 years let’s say then I’d probably move close to all of our investments to fixed income and then start (re)investing in equities with any new money.

  47. “Show of hands for who has no fricking idea??

    Anyone? Anyone?”

    Lark – most of my portfolio is tied up in food and shelter. And children. Little to no equity in the first two (though the shelter is steadily climbing), and the last will take about ~16 years to show potential return, with full return realized somewhere ~30-40 years from now.

    As for the rest of it – I have a rollover IRA that is hardly worth mentioning and a healthy 403b which is doing quite nicely with the “set it and forget it” targeted fund (it’s targeted to my potential retirement year).

  48. “He pays $800 per year for the nice town golf course so he’s got it down to to some ridiculously low amount per game ”

    That’s great. That’s kind of the equivalent of my Rosnorough boat that I posted on the David Brooks thread.

  49. I finally found the sector allocation. 95% of my equities are individual dividend growth stocks after tax under management. 30% consumer staples, 25% utilities, 5% other, and the rest split equally between health care, industrials, and info tech. Bonds are all in tax deferred accounts. short term and mid term bond funds in the 401k, a few corporate bonds (natural resources, mostly) in my self managed IRA, a few CDs. I sold all the munis – they are being called soon anyway.

    We had dinner last night with the Tucson snowbird friends and they have decided to roll over all of their tax deferred and Roth stuff to Fidelity in a group of managed IRAs/Roths. The advisor’s reasoning is not that index funds are bad, but that broad index funds are bad for the reasons cited in the article. The institutional funds available because of the management are these micro sliced index funds, including a lot of international even for folks in their 60s. (Ownership of individual stocks is great for me in after tax accounts, but of little importance in tax favored accounts.) One reason they let someone else manage it is that they are seeing more and more how friends have not realized that their judgment is slipping in their 70s and 80s and have lost a lot of money – not so much to scams or rapacious brokers but to very poor investment decisions they made themselves.

  50. Milo – if he liked the beach he could also purchase a beach sticker for $20 for the whole summer season.:)

  51. “any Totebagger worth his salt can happily live off Social Security with a library card and a working knowledge of the senior discount days at the local museums and cultural centers”

    LoL ! Goodbye fancy cars and boats, hello hushed art gallery.

  52. Not sure my allocation, but over the past several months I’ve been trying to free up cash. We have a couple of big bills coming due soon, and another couple coming due at the end of the year.

    This pattern will continue over the next 7 years or so, so I will need to continue to move assets into cash. I imagine we’ll need to realize some CG (and pay tax, and further decrease chances of aid) to ensure we have sufficient cash.

    I imagine I’m not the only one here in this boat now, and more will be joining us (and some will be leaving us) each year.

  53. “I sold all the munis – they are being called soon anyway.”

    Why would munis be called in a rising interest rate environment?

  54. Milo’s quite right — my parents, in retirement, went to the library, rode their bikes to the park, rode their bikes to the grocery store, did housework and gardening, and read their library books. Once a week they’d splurge and go to Sizzler (early bird menu). They listened to KKHI or KDFC, the classical FM stations. They didn’t watch any TV. Dad went swimming in the afternoons. Earlier in their retirement, Mom took tap dancing lessons at the municipal rec center and Dad took random classes at the community college. They never traveled. They didn’t seem to want to.

    They didn’t spend much money at all. Their income far exceeded their outgo.

  55. Finn – I had 4% to 4.5% munis. A year or so before the call date the towns issued new bonds at 3%, used some of the money and put the rest of the proceeds in escrow (prerefunded) until the call date.

  56. “In all seriousness, I think my parents’ spending is less than the sum of Social Security and my dad’s pension.”

    My parents told me they currently sell about $13-15k/yr of investments, in addition to their social security and small pension. About half that is gifts to kids and grandkids that could easily be cut out. They likely spent more in early retirement when they travelled more (retired at 58), but they are pretty conservative with their spending. If my mom were a widow, I think she’d have to dip into savings a bit more.

  57. “If my mom were a widow, I think she’d have to dip into savings a bit more.”

    Is that because your Dad’s SS and pension are larger?

    I see us having a similar spending pattern, traveling a lot early in retirement (although taking advantage of the flexibility of retirement to minimize travel cost, e.g., traveling during low season, picking days to fly based on ticket prices), and traveling less as we get older.

  58. These days I get more pleasure from hanging out with people I like v. traveling to new places. As long as I can make some good friends and have a few activities, i will be happy in retirement.

  59. Finn, when one of the two married people dies, only the larger of the two social security payments continues. In a case like yours, where you and your DW both have lifelong earnings, the drop off when one dies could be something like 30K per year. Two in general do live as cheaply as one in older old age.

  60. “when one of the two married people dies, only the larger of the two social security payments continues. …. Two in general do live as cheaply as one in older old age.”

    It’s interesting to think that this program was developed at a time when the biggest expense was probably food. So that would make sense in the 1930s.

  61. Disappointed no one is speculating in crypto currency. Double your money! It’s only going up!! And Tax Free!!!!

  62. Ada – DH has invested some ($10K?) into ethereum and bitcoin. I told him not to do any more than that. :)

  63. “. At the same time a bunch of people I know bought Fords so I said, “Hey, buy some F.” ”

    FWIW, I bought Ford in 2008 because i thought that they were the only Detroit company that was going to keep their sh*t together. It’s 6X what I paid for it. But I put in <$1000, so it's mostly just a fun experiment.

    One of my coworkers panicked & pulled all his 401(k) $ out of stocks after the election. I told him it was a terrible idea, that the world would go on, etc. I never asked if/when he put it back in.

  64. “Disappointed no one is speculating in crypto currency. Double your money! It’s only going up!! And Tax Free!!!!”

    Wouldn’t those gains be subject to capital gains tax?

  65. “when one of the two married people dies, only the larger of the two social security payments continues. …. Two in general do live as cheaply as one in older old age.”

    OK, so if Becky’s mom became a widow, she’d have to dip into savings more than her parents are currently jointly dipping, because of the loss of one SS income stream.

    Her statement includes an implied comparison: dip a bit more… than what? I assumed her comparison was to how much her dad would have to dip into savings were he a widower.

    BTW, FWIW, I think (hope?) DW and I will both get close to the max SS benefit, which would be about $42k/year (today’s dollars), since we’re planning to wait until 70 to start collecting.

  66. Finn, I meant more than they do today, due to the loss of one income stream.

    What is your confidence level in social security? We could live on our social security if we actually receive all of it by the time we retire, but I don’t know what percentage of that to include in my retirement planning.

  67. The uncertainty around Social Security availability is troubling to me, since it means I really can’t plan. But I might be grandfathered (no pun intended) into the current benefits levels by the time Congress actually acts to fix the problem since I’m so close to being able to claim benefits. I think it’d be wrong to reduce a current recipient’s benefits especially when so many count on just SS for income.

  68. When I was in my 20s and starting to plan for retirement, I didn’t think SS would be around by then, and planned under that assumption.

    Fast forward to now, and SS is still around, and as I get closer to retirement, it’s looking more and more like it’ll be there for me, in some form, especially with the gridlock in DC making it seem unlikely that there will be any agreement to significantly cut benefits in the near future. This would make for a pretty comfortable retirement, as well as provide a backstop against eating cat food should DW or I get fleeced out of our savings when we’re old.

    OTOH, it doesn’t seem sustainable in the long term, and I see the most likely change being to once again punish the fiscally responsible, IOW, means testing, or perhaps most likely, taxing of benefits.

    At this point, I’m kinda working under the assumption that pretty much all our retirement income, except Roth withdrawals, will be subject to income tax.

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