A Simple Longterm Plan

[eukrate]

imported post

According to William Bengen, http://www.fpanet.org/journal/articles/2004_Issues/jfp0304-art8.cfm?renderforprint=1
there's a simple allocation plan for your retirement. Divide your portfolio into 63% stocks, and 37% bonds, initially. The stocks are divided equally between C and S, and the bonds equally between G and F. Nothing in I. In your 1st yr of retirement, withdraw 4.25% of this; in following years increase the withdrawal by the inflation rate. Each yr the stock allocation decreases by 1%; the bond fraction increases by 1%. This should last you 40 yrs, with a lump at the end to leave your kids. Very simple.

 

[zbwmy]

imported post

The 63/37 split is in your first year of retirement?

 

[eukrate]

imported post

That's right. In the second year it's 62/38, etc. The 62% stock would be 31% each in C and S. The 38% bonds would be 19% each in G,F. Each year the 50:50 splits are maintained, while the overall stock allocation drops 1%. 40 yrs later you're still 23% in stocks. He tested this against many years of actual returns. The initial 63% Stock allocation could be raised to 75%, but there's downsides to this - see the study
link.