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re: Goal for retirement savings as a ratio of salary
Posted on 4/1/24 at 5:10 pm to baldona
Posted on 4/1/24 at 5:10 pm to baldona
I like the bucket approach pushed by an investment website I won't name.
The basic approach is 2 years of projected spending in a cash bucket, 8 years of projected spending in a bond bucket, and everything else (15 + years) in stocks. I deviate from these amounts, but I like the approach.
The thing about this approach is that if you elect not to reinvest them, the annual distributions from stock mutual funds tend to fill up the cash bucket every year regardless of market conditions. It's not really scientific, but it is kind of painless in that you don't have to put a lot of thought into it or agonize about selling at the right time. It's going to happen anyway, and hopefully the fund manager chose to sell at a good time. This probably doesn't work as well with passively managed funds.
The basic approach is 2 years of projected spending in a cash bucket, 8 years of projected spending in a bond bucket, and everything else (15 + years) in stocks. I deviate from these amounts, but I like the approach.
The thing about this approach is that if you elect not to reinvest them, the annual distributions from stock mutual funds tend to fill up the cash bucket every year regardless of market conditions. It's not really scientific, but it is kind of painless in that you don't have to put a lot of thought into it or agonize about selling at the right time. It's going to happen anyway, and hopefully the fund manager chose to sell at a good time. This probably doesn't work as well with passively managed funds.
2
Posted on 4/2/24 at 10:37 am to CharlesUFarley
quote:
The basic approach is 2 years of projected spending in a cash bucket, 8 years of projected spending in a bond bucket, and everything else (15 + years) in stocks. I deviate from these amounts, but I like the approach.
There's no reason to go "cash" right now though. We are just used to having very poor interest rates from 2010-2022 or so, but historically that's not normal or average.
Compared to the last 15 years, if you are close to retirment you should feel more comfortable than ever with your ROI IMO. Again, go 60-80% bonds or CDs if you want. Then live off of that.
I don't understand why this is downvoted, but in the entirety of the 80s, 90s, and early 2000s many were 60/40 or great in bonds earning 4-6% (maybe more). Their equities was really just for additional returns and to fight long term inflation.
Historically the stock market has recovered EVERY SINGLE TIME in 2-3 years at most. So if you have 2-3 years in fixed income, you'll recover.
People don't like the truth, but that's been proven over and over historically.
ETA: IMO if you are saving 20% You are doing well. 15% you are doing fine. Under 15% is not good and over 20% is great.
You gotta live your life and enjoy it also. Unless you are a super high net earner, saving more than 25% or so means you are really cutting into your current life to save for later.
This post was edited on 4/2/24 at 10:42 am
Posted on 4/2/24 at 1:11 pm to CharlesUFarley
This is the way…great approach and what I am planning to do give or take 10-15% in the bonds vs equities bucket
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