Retirement asset allocation - poll results

[disneysteve]

There is an article in Kiplinger's this month (October issue) called "The Pandemic is Reshaping Retirement". It discusses the results of a recent poll asking about various aspects of retirement and planning. One thing that I found interesting was the asset allocation of the respondents.

The national poll was conducted in June sampling people 40 and older (median age of 67) who are fully or partially retired or plan to retire within 5 years. Median household net worth not including primary home of $422,000. Equally divided between men and women.

Current asset allocation was:
35% stocks
26% cash
15% bonds
15% other
9% real estate

So a large cash position and a pretty small stock position. Probably not too surprising for the older cohort of people but I still would have expected that to be higher than 35%. Of course, it doesn't say how many of these people have pensions and other sources of retirement income vs how many are living on their portfolios, so that is likely a factor. Since the median age is 67, half or more of them are likely collecting SS already and many probably have pensions.

[scfr]

It may not seem as surprising when you take in to consideration that, according to Gallup, 39% of Americans age 65+ own NO stock. So among those who own stock, stocks make up around 50% of their financial assets?
https://news.gallup.com/poll/266807/...wns-stock.aspx

[frugal saver]

I'm retired and am always wondering what the right mix should be. I have 25% cash, 50% very diversified mutual funds, and 25% very stable dividend stocks. I used to have more in cash but with interest rates so low it's hard. I have a CD coming due at Barclays and just found that they've lowered all their CD rates to .25%, so probably that money will move to a mutual fund.

What other options are there?

[disneysteve]

I have a CD coming due at Barclays and just found that they've lowered all their CD rates to .25%

That's ridiculous. I always wonder why anyone would put money in that. Ally is paying 0.60% for a year and even their savings account pays 0.50%. Why lock up your money for 0.25%?

[frugal saver]

That's ridiculous. I always wonder why anyone would put money in that. Ally is paying 0.60% for a year and even their savings account pays 0.50%. Why lock up your money for 0.25%?

I'm not. It is an expiring 1.75% CD--which still feels too low--but a new CD that's lower than the savings rate? Insane. I think the highest I've seen lately is .70%, which is still pitiful.

[Jluke]

That’s not too far off of 40:60

[disneysteve]

That’s not too far off of 40:60

Except it's only 15% bonds. I suppose you could say it's 41% fixed income if you include the cash.

I'm curious what the breakdown is of the 15% other. Is that gold? Bitcoin? Art? Stuff that generates any return or not?

[kork13]

Honestly, I don't think that's terribly unreasonable of surprising. Apply those numbers -- it means roughly $100k in cash, $200k in stocks & bonds, plus another $100k in other stuff. That's a 2yr EF, plus enough in various investments to safely draw off about $1k/mo to supplement SS, any pension they have, and oh btw these numbers ignore housing, so they could very well have a paid off house to dramatically reduce their living costs.

Is it conservative? Yes. But for someone retired on a $40k-$50k/yr income with only ~$400k to their name, I'd want to be pretty conservative too. I've generally heard that ~30% stocks is the minimum required to keep pace with inflation. This AA meets that, and it's unclear what else that "other" 15% is invested in... But what I see is a viable path to a secure retirement.

[kork13]

I'm curious what the breakdown is of the 15% other. Is that gold? Bitcoin? Art? Stuff that generates any return or not?

I strongly doubt that folks with a median NW of $400k has a large holding of art or other collectibles. I honestly expect that it accounts for stuff that many people doubt understand as readily add stocks & bonds -- mutual funds/ETFs (yes, these will mostly be stock/bonds, but huge numbers of people don't recognize that fact), cash value insurance policies, annuities, precious metals, and that sort.

[disneysteve]

Honestly, I don't think that's terribly unreasonable of surprising. Apply those numbers -- it means roughly $100k in cash, $200k in stocks & bonds, plus another $100k in other stuff. That's a 2yr EF, plus enough in various investments to safely draw off about $1k/mo to supplement SS, any pension they have, and oh btw these numbers ignore housing, so they could very well have a paid off house to dramatically reduce their living costs.

Is it conservative? Yes. But for someone retired on a $40k-$50k/yr income with only ~$400k to their name, I'd want to be pretty conservative too. I've generally heard that ~30% stocks is the minimum required to keep pace with inflation. This AA meets that, and it's unclear what else that "other" 15% is invested in... But what I see is a viable path to a secure retirement.

Fair point. 35% stock is good for offsetting inflation in a conservative portfolio. And there’s a lot of inflation drag when 26% is in cash.

On a 400K portfolio a 4% WR only gets you 16K/yr income so odds are most of these folks have pensions and a lot collect SS too.

[LivingAlmostLarge]

With the rates now in the 0% category I would say you should be more like 60% stocks and 40% fixed income (cash or bonds and short term only). I swear they say inflation is minimal but it doesn't feel like it.

[srblanco7]

I strongly doubt that folks with a median NW of $400k has a large holding of art or other collectibles. I honestly expect that it accounts for stuff that many people doubt understand as readily add stocks & bonds -- mutual funds/ETFs (yes, these will mostly be stock/bonds, but huge numbers of people don't recognize that fact), cash value insurance policies, annuities, precious metals, and that sort.

Have to admit that the numbers surprised me. Stock allocation seemed very low. Assumed that the "other" category could include what Kork mentions as well as vehicles and other household items since it's a net worth summary (vs. investable assets).

[disneysteve]

it's a net worth summary (vs. investable assets).

That's actually a really good point. I'm thinking in terms of investment portfolio, not net worth (which I never look at). So their stock allocation may actually be higher in the terms we typically speak of. And again, it doesn't say what falls into the "other" category. If they're counting things like vehicles, jewelry, etc. that would throw off the numbers.

[scfr]

Have to admit that the numbers surprised me. Stock allocation seemed very low. Assumed that the "other" category could include what Kork mentions as well as vehicles and other household items since it's a net worth summary (vs. investable assets).

I'm not so sure about that. I found a link to the online article, and it mentions the numbers disneysteve provided are the breakdown of portfolios (according to Investopedia: financial investments). Net worth is only mentioned in the Methodology, as a criteria for who was selected to participate in the survey.

But then again ... who knows what the survey respondents included when asked about their portfolios???

https://www.kiplinger.com/retirement/retirement-planning/603347/kiplinger-personal-capital-poll-pandemic-retirement