In a previous post we learned that the wealthier one gets, the larger the business component in the individual’s net worth composition. Once you hit a net worth of $100 million, the business component reaches roughly 50% of net worth. Although most of us will never reach such levels of wealth, it’s obvious you should start a business if you hope to get really rich one day.
But what about zeroing in on the public investment portion of a high net worth investor’s wealth. A high net worth investor is defined as someone with $3 million or more in investable assets, not including the value of their primary residence. A ultra high net worth investor has $30 million or more of investable assets.
What are some insights we can gather from their asset allocation that may be most relevant to readers here? After all, everyone can invest in stocks and bonds, but not everyone has the capability or the drive to build a business.
The good news is that U.S. Trust, the Private Wealth Management arm of Bank of America put out a 2018 High Net Worth investor survey consisting of 892 high net worth and ultra high net worth adults across the United States we can analyze.
Average Asset Allocation For High Net Worth Investors
According to the pie-chart below, the average asset allocation for respondents with over $3 million in investable assets is 55% stocks, 21% bonds, 15% cash, 6% alternatives, and 4% other.
Ah hah! I thought I was being a little too conservative with my 55% stock allocation in my 1H2018 Financial Samurai investment recap. But in reality, I am slightly more aggressive than other high net worth investors because I only carry a 6% cash balance, have 10% of my investable assets in Alternatives, and have closer to 34% in bonds after the 10-year bond yield broke 3%.
What’s more interesting is how the High Net Worth asset allocation is broken down by generations and between men and women.
Four Generations Of Respondents:
Millennials: Ages 21 – 37 (Born 1981 – 1997)
Generation X: Ages 38 – 53 (Born 1965 – 1980)
Baby Boomers: Ages 54 – 72 (Born 1946 – 1964)
Silent Generation: Ages 73+ (Born before 1946)
Some key points from the second chart:
* Men are only slightly more aggressive than Women with their stock allocation
* Every age group except the Boomers increased their stock allocation in 2018, which could be a contrarian indicator
* Millennials and Gen X were the most aggressive in increasing their stock allocation and decreasing their cash allocation
* Millennials still have way too much cash at 21%, but that’s not terrible if they are taking advantage of much higher money market (1.85%) and short-term CD rates (2.5%) thanks to the Federal Reserve raising rates since 2016
* The Silent Generation has the most aggressive stock allocation of them all
After a great 2017, it’s understandable that most generations increased their stock allocation. If you’re a Millennial, you’ve mostly seen good times since 2010. Even though you may have graduated college during the recession, you had no money to invest for the first two years anyway. Now that Millennials are entering stronger earning years and are better educated about the benefits of long-term investing, the trend towards higher stock allocation should continue.
For me, the biggest surprise really is how those ages 73+ have a 61% allocation towards stocks. 73+-year-olds have seen it all, yet they are still undeterred. This is very insightful because it seems experience has taught them that staying the course long term is the way to go despite the stock market being at close to record highs today. To them, long-term investing has been proven correct.
It would be one thing if the 73+ year olds represented the average 73+ year old American with less than $200,000 in retirement savings. Having a more aggressive stock allocation might be more necessary to generate higher returns. But these are high net worth individuals with at least $3 million in investable assets, so they are not hurting for money.
But please note we’re not talking about the 70% – 100% aggressive allocation in stocks that most financial advisors recommend for younger folks. We’re talking about a classic 60/40 allocation that has proven to perform quite well and to be less volatile during downturns. See the historical risk/return performance below.
Related: Various Portfolio Compositions In Retirement To Consider
I would happily accept an average return of 8.7% for the rest of my life. That would mean my investments would double every 8.3 years. However, I have doubts that at this point in the cycle, we’ll be returning 8.7% a year for the next 10 years. Remember, there was an entire lost decade of stocks after the dotcom bubble burst in 2000.
It’s safe to assume the largest percentage of ultra-high net worth individuals are from the oldest generation. Hence, if you have over $30M in investable assets, you’re already so far ahead of the game that even a 50% correction still leaves you with plenty of assets remaining.
Further, if you’re over 73 years old, you’re probably not going to be able to spend all your $30M+ before you die. Hence, perhaps the Silent Generation is taking a very casual attitude towards money because it realizes life is way more meaningful than money since they’ve had so much money for so long. At this stage of life, it may be more about family, friends, and leaving a legacy.
Stay The Course
This survey should give people the confidence to invest in stocks for the long term. Your portfolio doesn’t have to be wildly overweight stocks, but you should probably hover between a 51% – 100% weighting depending on your age and your financial goals.
I’m personally happy with a 55% weighting in stocks and a 10% weighting in alternatives at this point in the cycle. I already experienced what it felt like to have a 70% weighting in stocks when the market dropped 10%, so I’ve adjusted accordingly. My long-term goal is to earn a 5% – 6% annual return with low volatility. Maybe I’ll get lucky with my private investments and do better.
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Wow, interesting data, 15% cash is a lot! But I guess when you get to that point you want to lock things in and get more safety and security. With that much cash you definitely need to use cD’s or something to protect from inflation.
Anyone who invests in bonds will be a looser. Over the past 100 years the rate of inflation per decade has been 18% or more for 9 decades out of 10 and more than 100% for 2 decades. Therefore a 10 year bond is redeemed in devalued dollars worth only 82% or less compared to the real purchasing value when it was bought.
Insurance companies make money taking risks that are carefully calculated and widely diversified and a similar portfolio 100% invested in good equities and real estate will in the long term safely gain in real capital value ahead of inflation.
But you own bonds for deflation.
Don’t confusion disinflation for deflation. Bonds thrive in disinflation. Bonds default in deflation. We’ve haven’t had real deflation since the last Winter 80 some years ago. This is what the Fed and other central banks have been fighting since 2008.
Holding cash now is no longer a big drag. CIT Bank money market account for 2.45% for 2019. Just last year, that MM was at 1.85% or less.
Im not sure I would bet on high (or even just positive) safe real returns long term.
The Fed has engaged in financial repression for a decade now with few apparent ill effects (SO FAR , the big caveat). So they may have gotten addicted to this indirect redistribution from risk adverse investors to consumers. A more “progressive” administration could easily revert back to this type of redistribution to (temporarily and short sightedly) please the masses that elect them into office.
Wow, somebody else out there knows what’s been going on. You know, somebody big has been in the markets since 2014 when Bullard came out when markets were getting wobbly and this agent(s) has been there since.
What I worry is that the next flash crash they’ll step in and fluff the market back up intraday and then…they fail…and markets close.
I don’t think there’s a great conspiracy. Simply the dynamics that are all around us, between a majority of voters who are net borrowers against a minority of savers. The borrower majority puts our economic masters into office, therefore it is natural that these masters will cater to their electoral base by steadily redistributing from risk adverse investors to net borrowers. They seem to have been successful at that in the past decade. Hence investors invested in safe vehicles (government bonds, CDs, Money Markets) have had essentially negative real returns on their savings. Their supposed reward for delayed gratification was redistributed to net borrowers by inflating away their debt (including of course the gigantic collective government debt) stimuli etc.
This trend is reversing a bit today, but it’s obvious that once more “progressive” Keynesian “demand side” economics get reelected into office we will likely revert to the saver to borrower redistribution we experienced from 2008 to 2016.
Are you aware of the Exchange Stabilization Fund?
I find the amount of cash held a little interesting, although with 2-year Treasury rates back over 2.5% and money market rates nearing 2%, it’s not a bad “investment” anymore. The combination of higher than expected stock investments with higher than expected cash seems to make sense. Since you don’t need the money, put it in something that needs a longer time frame while at the same time having plenty of cash reserves to ride out any storm. Seems like a solid barbell approach.
Once not too long ago you could get 5% on a one month Tbill
It’s very surprising to me that the 73+ age group has so much invested in the stock market. I thought at that point, they would be a lot more conservative.
Maybe it’s their financial advisor?
People are very bullish about the stock market. I hope it doesn’t come back to bite the Millennials. They made a big change this year. People were probably hoping that the tax cut would boost the stock market more.
I think stock allocation naturally went up due to the rise in the market, not that people were putting more money into it. Also when you have far more than you need for living expenses, you can leave more in the market without any concern.
That’s a good point, and probably explains 1-5% of the moves, but not the big moves the millennial generation made IMO.
But I’m surprised the overall stock allocation is low for all generations.
Plus once you annual bills are covered many in this group don’t want to incur capital gains so hold assets until passing when the basis gets readjusted.
For older folks (70+) often they aren’t investing for their own consumption but for the next generation or the one after.
I’m surprised the Alternatives allocation is so low. I would have expected at least 10%, especially within the Ultra bracket. Excluding emergency fund cash, I’m sitting about 19% Cash/68% stock/12% Alternatives/1% Bonds. I did the opposite of most Millennials though, my allocation to cash went up and to stocks went down from a year ago.
Speaking as an older boomer, I think we’ve had a lot of time to ponder how to invest strategically, tried all the old cliches that proved to be wrong at least part of the time, want to simplify our retirement (hence no alternatives), or have tried odd investments and returned to tried and true equities. I think the advisors are responsible for the bond allocation. Early on, I bought bonds because the were supposed to move the opposite of equities and learned that they move in tandem so why bother. Don’t forget, we’ve experienced incredible inflation and sky high interest rates, and various tax schemes. We also did not have the tax-free retirement plans to start with. I have cohorts that are afraid to invest, and don’t want the worry, and others who are right in there with confidence. Others still think is a game, have not learned that boring is good.
re: “boring is good”
Glad to see I’m not the only one who appreciates a lot of boredom when it comes to their investments. Boring is beautiful.
I wonder if this is personal cash vs cash held in a wholly owned small business?
For me, as long as the forecast of steady cash flow coming in remains then I am comfortable holding less cash.
-Mike
Not sure. But I don’t include the cash in my small business as part of my cash allocation. The cash in my business is for my business. Separate entities, although it does have value.
I don’ find 15% cash all that surprising for HNWs. I gather at least some of those outliers contributing to the average have an eye at business or investment opportunities all the time, and that requires available cash. But I could be wrong.
Agree, I usually try to have 20-30% cash at all times so I can close on a business or distressed asset quickly, if needed.
Do you have examples of when you mobilized your 20% – 30% cash hoard? The only time I would have so much is if I planned to buy a property with cash.
I mainly buy medical practices. But, I also have a stream of different types of investments continually being offered and never know when a good one will show up.
Basically, if I don’t feel confident that I can get a 6-8% return over 10-20 yrs, I may sit on the cash and wait.
I’m not retired though, I am still actively building businesses so I don’t rely on investments to fund my lifestyle.
The other question I have though is how many of these folks are managing their own money versus paying someone to do so. Does the actions of financial advisors cloud the decisions of the actual people in these age groups?
I was thinking the same thing. A lot of people rely on advisors and advisors are required to dispense conventional advice.
I too am surprised at the aggressive allocation of 73-year-olds and the lack of aggression for millennials. The last chart regarding demand and complication is insightful too because the results are from business owners. Owning a business is definitely a key to propel your net worth, but it comes with stress for most typical businesses.
How are measuring volatility with the 60/40 split? It has the highest worst year lost percentage and the most years with losses.
I’m surprised to see aggressive growth YoY in millennial and gen-x stock allocations. I suspect robo-advisor tends contribute a bit, but it’s definitely too steep of growth to be continued only to that.
Older people are more likely to have pensions. Together with social security, and possibly some other passive income, they don’t all need to be able to remove wealth from stock when the market is down in order to maintain their current level of income (other than a small bit for required mandatory withdrawals from retirement plans, of course, and even that’s only when they are 70+).
In other words, the classic 60/40 split is unnecessary for them and, since they can wait indefinitely (other than maybe pulling some out for a cruise or a six month house rental on Maui) they are far better served by letting it ride in stocks rather than bonds.
And where else would they put it? Real estate may not suit their desires and the capital gains rates on collectibles makes buying them as investments silly unless they only intend for their heirs to sell them as soon as their will is executed. Certainly, given the fact of shrinking upward mobility in the world, and especially the US, they might feel it is important to leave their heirs as much of a leg up as possible but, for that purpose, stocks, especially with the diversification possible through a solid blend of mutual funds, still make more sense.
Given time, stocks have always recovered and grown at a better clip than anything else (aside from owning your own business . . . and that’s only if it is a really good one). If the time ever comes when stocks never recover and permanently discontinue their growth, we may be more concerned about stashing away canned goods and firearms than money.
Excellent point which I forgot about in my earlier comments. We have other sources of income that are equivalent to bonds (pensions, rentals). I have met quite a few men that have fleets of antique cars and collections of watches, but that is more play than realistic investment. People who have made their fortunes in business, do not think the stock market is risky in comparison. By the time people get to boomer or silent, they have experience in a variety of investments and it is not so interesting any more. They just want a less complex life.
Perhaps fat pensions may play a role. But social security is peanuts for individuals at these high net worth levels.
Yes, it may be small, but net worth is often tied up in real estate, business, etc. The certainty of pension income can make a difference to cash flow and amount of risk you can take in investing. Depends on the total NW but also how accessible it is. I know many examples of people in their 60’s and 70’s with NW of $5-20 M. which is largely inaccessible. Selling real estate and business to cash out at that age is a difficult decision and not necessarily easy to accomplish. With the definition of high net worth as $3m in investable assets, I agree, pension is not a consideration.
Well. Yes, social security by itself should not be the primary source of income for anyone who has planned ahead and avoided financial catastrophes (to include scammers, serious medical problems, and ruinous divorces). The reality is what it is.
But don’t look askance at Social Security, at least, not yet.
In our case, it’s what is going to augment our other income (pensions and passive) just enough, from 62 to 70, that we won’t have to withdraw any savings to maintain our lifestyle. Although, we will probably still take some for fun . . . but only on our terms and timing. At 70, RMD kicks in and SS almost does become peanuts, if peanuts means less than ten percent of taxable income.
Real peace of mind means never having to wonder if we will outlive our retirement savings, especially since Social Security might have problems not too long after we reach 70. Even our pensions might let us down someday. With that in mind, the end goal is sufficient wealth to continue growing indefinitely, even after inflation, RMDs, et cetera. Giving our savings a period to grow without substantial drawing makes that much more likely.
Thanks for sharing this lovely information with us. This will definitely give people the confidence to invest in stocks for the long-term.
I really enjoy your site and find your posts very interesting. I would like to know what portion of the high net worth investor’s money is in real estate not including personal homes. I have just made it into the high net worth category and have about 30% invested in rental properties. Thanks!
You can check out this post for the net worth composition for real estate: https://www.financialsamurai.com/net-worth-composition-by-levels-of-wealth/
Similar – I have about 25% in real estate holdings and fall into the high net worth category. I assume real estate in this data falls under “other” or “alternatives”?
Sam- any opinion on callable CDs? I just bought a 10-year CD with monthly coupon & 3.60% rate but it’s callable monthly. Figure that is a great rate even if it is called early I don’t lose anything but the need to reinvest the principal. In the meantime, get to collect on that 3.6% rate until it is called (if it is called at all).
Am I missing anything glaring in this analysis?
What is the trigger for it to be called? 3.6% is a great rate, but I’m not sure for 10 years.
And what is the penalty if you withdraw (that is if you call it). If the penalty is small then it’s a good deal.
Rate is actually 3.65% (3.712% APY)
It’s callable each month until maturity at 3.65%.
Can sell on the secondary market (bought through TD Ameritrade) where it trades like a bond.
I figured with the rate above the current 10-year Tbill and as an FDIC investment it was a safe place to park some 401k profits in selling off some stock gains.
Wow Im kind of shocked there is not any allocation toward real estate. Mind blown!!!
I can see a 73 year old allocation more weighted in stocks because they are already receiving Social Security. So, if you are receiving some sort of a pension you can afford to allocate more into stocks. I am 64, my wife 62 and she will retire next year. We are going to allocate 20-30% stocks and then up it when Social Security kicks in. She will begin collecting at age 70.
People with $30+ million in investable assets really won’t care about receiving $30,000 a year in Social Security in my opinion. I don’t know if $30,000 a year and Social security when you have just $3 million in investable assets makes a difference either.
But if you have $100,000 plus pension, that probably would.
I would disagree at the low end of the range, which is actually kind of scary when you think about what it takes to retire comfortably. If you’re using the standard 4% withdrawal rate on $3M in investable assets that’s $120,000 + $30,000 Social Security you have $150,000/year to live on and 20% of your income is from Social Security. It might not make or break your retirement but I would consider 20% a meaningful amount of your income. Certainly at $10M+ it wouldn’t matter much, even at $5M it would be down below 15% of your retirement income. Hard to say what the threshold is for being material.
Depends on the age too. I’m assuming most folks in the survey with closer to $3 million in investable assets are the millennial generation who still have 25-35 years until they can collect Social Security.
SS will be play money to them.
For me I’m a little more aggressive for my age (47) in what I call my market portfolio (I do % based on this rather than my entire portfolio which is in real estate). I’m at 75% equities (55% domestic, 20% internatinoal), 20% Reit, 5% bond. I sort of take this approach because I feel I can handle the volatility and still be ok due to a decent passive income stream from all sources that gives me a relatively nice basic income floor. If times get awful I feel like I can survive just on passive income stream allowing everything else to recover. The silent generation having that much money in equities is as you said, because they have won the game and have far more money than they are likely to use up before they die.
Yup.
That’s encouraging. I’m light on stocks. My current asset allocation is 40% stocks, 60% bonds/cash. But that’s okay. I’m in the first five years of retirement and I fear sequence of returns risk. We’ll gradually increase our stock allocation every year until we reach the classic 60/40 allocation. May not be the optimal strategy, but it allows me to sleep at night. Thanks for sharing, Sam.
When people talk about the “risk” from stocks, they generally refer to some measure of volatility and / or the possibility of “losing” money over some specified time period. But one only loses money if one sells. History has shown that waiting out any downturns generally recoups the “loss” and then some. So one explanation is that the most experienced group in the survey understands this better than the others. Another possible explanation is the fact that while the price of certain stocks can be volatile in the short to medium term, the dividends produced by these stocks are much more stable. If one is living off of the income stream generated by one’s investments (as opposed to tapping into principal by selling the underlying investments), then the stability of this income stream is much more important than the current market price of the investment. It is reasonable to assume that the most seasoned group of investors in the survey have a portfolio geared towards stable dividend income generation, and therefore have less to fear from temporary market downturns.
I’m more focused on the risk of LOSING TIME. The older you are, the less you can afford to experience years of trying to play get back to even as we saw from 2000 – 2012.
Exactly. Who cares if the market is volatile, if you have a steady and GROWING income stream produced from your stocks? If you are generating say 100k in dividends this year, and the market corrects 20, 30, even 40%, guess what? Your INCOME will stay the same, or even increase, assuming you are invested in solid companies. This isn’t some dream scenario, its real and has been back tested for over 100 years.
So, given all this, and knowing stocks ALWAYS, yes, ALWAYS outperform other asset classes over long period, would anyone NOT have the vast majority of their net worth in the stock market?
As others said, you aren’t going to lose any money, because you don’t need to sell a single share! Just live off the income….easy peasy.
It’s great investing has come so easy for you. How long have you been investing and why do you think it doesn’t come easy for so many others? Why do you think the fun management industry is so focused on absolute and relative returns if returns do not matter?
I’m guessing you were too young to be investing during the financial crisis. Dividends are dependent on the cash flow of the businesses. In 2008/2009, from peak to trough on an annual basis the dividend payout on the S&P declined by -23% and on a quarterly basis it declined by -38%. It is empirically false to claim that your income will stay the same or grow when the market drops 40%. If you can afford to live on your dividend payments then staying completely in equities and riding out a massive downturn will be the best long-term course of action. But when your dividend income drops 20% and you have to sell stocks that have fallen by 40% to make up the difference you can seriously jeopardize your long-term retirement plans. I suspect for the UHNWI they can ride out a cut in dividend income without selling stock but for most people in retirement that is probably not true.
I don’t meet the high net worth 3 mil liquid target. As far as millennials though I have not seen the point in being to heavy in bonds this early in life. Every year I focus on contributing more vs asset allocation and it is working great.
Let another decade roll by though and I am sure I will have a different opinion, and hopefully 3 mil!
Readers, what have you learned from this high net worth survey? Are you surprised with the asset allocation of 73+ year olds like I am?
I feel more confident that my strategy of 100% equities is not too risky (I have real estate, and pensions).
I manage my 79-year old Mother’s (she’s high net worth) investment portfolio and I have her tilted very conservatively at 28% equities/40% fixed income & preferred’s/20% CD’s/12% Alterntives
My own portfolio (I’m Gen X- 52 years old) is 33% real estate crowdfunding/27% equities/15% mortgage bonds/25% cash
I’m risk averse by nature and avoid8ng downside is way more important to me than gaining upside. Slow and steady as she goes with consistent cash flow from real estate and interest income. Besides, my annual savings rate is 25% of my income. A high savings rate trumps investment returns anyway.
The age and gender changes between ’17 and ’18 are interesting.
As far as the total allocations, we know the averages but what about standard deviations?
If the individual results are all over the map then the averages mean little. It simply means that high net worth individuals have various areas of expertise and feel most comfortable investing in the areas they feel most competent in. It’s like polling a number of geniuses and finding that about half are scientific geniuses while half are literary geniuses and concluding that you have a better chance at genius if you mold half your brain as literary and the other half as scientific. For most people it will be a suboptimal approach.
Similarly, there are people who got rich by investing and becoming competent in real estate while others became so through securities. But this does not mean that 50% securities and 50% real estate is a better investment approach for everyone. It is often the diversification benefit vs the Jack of all trades and master of none compromise.
My guess is that the 73+ year olds are net worth individuals who will get through just fine in their lifetimes regardless of what markets do. So they are seeing wealth through the eyes of their much younger heirs.
Couples in their 70s also are much more likely to have one or two COLA pensions that when coupled with their SS retirement probably exceed their expenses.
So why not leave their assets in equities for their heirs?
That fits the profile of my parents I their 70s.
Despite hordes of advisors and brokers telling them to buy bonds and money market funds, they are heavy on stocks which they buy on their own using discount brokerages.
They have seen how inflation can seriously degrade the value of cash and bonds over time. They did well with real estate rental property but now it’s just too much of a bother. So what is low maintenance and beats inflation? Well diversified equities. Can’t argue with them as they’ve thrived through countless market corrections, recessions and inflationary periods.
Yes, this is where I am too. Real estate and stocks are easy and best return. Ignore conventional advisc from all the people that want to manage my money. Always lost money listening to advisors. I still have rental property (2 small units in my house) but sold off others to simplify life. The pension and rental income are enough to pay housing, transport, and basic living expenses, and income taxes. You just don’t need that much money to live very well. My travel funds and luxuries come out of the investment income. My house is a huge bank of funds (non-taxable) which keeps going up and up. I don’t need bonds or CDs, but if I kept cash, I would choose CDs. I would not buy bonds or dividend stocks as you just have to pay tax on the interest/dividends and they go down with interest rates. Equities are easy to manage using a discount broker and if I ever have to sell a few stocks at a loss to take a trip, it won’t jeopardize anything. I pay the taxes only when I sell them. Returns from stocks have been fabulous for years and my portfolio is still growing, but I can withstand another recession without cutting back. I have more than adequate income and it grows every year. I do find that the prices go up a lot year by year and one tends to need more for travel and technology. There is a limit to how much food, clothing, and dinners out you can buy. I suppose I could start buying cars and jewellery but it makes no sense with my travel life style. Ditto I could double my travel spend by staying in 5* hotels more often but I prefer small local hotels, which are far more hospital and comfortable.. So much has happened in the last 10 years, that I won’t be surprised to double my net worth in the next 5-10 years. To bet on 2-3% return being adequate for decades is scary to me.
Not surprised at all with the 73 + year oldies at 60-40 stock allocation. These high net worth individuals are most likely investing not for their benefit but their kids or even grandkids. Remember they are high net worth and 73+ group. Most of them could be thinking that they have enough money or retirement savings to hold them up in the next ten years or so, so why not invest for the long-term, for their younger family members’ benefit. With their age and enough retirement savings, they may be more willing to take chances now than when they were younger. My 2 cents.
I agree that at some point, it almost seems like you MUST start a business with a fairly loose definition of what a “business” is. But at some point along your savings and investing life, you’re going to have significant assets tied up in typically stocks/bonds/real estate. Even if you use index funds, the economy as a whole can tank sending your S&P 500 stock down.
That’s why to me it makes sense to invest in some sort of business or freelance venture with a focus that might do well in a down economy. I think of it as another egg to add to your diversification basket.
I’m 66 and fully retired. I’ve been investing since 1975. I’m 25% bonds (up from 15%), 60% stocks (down from 70%) 10% alt and 5% cash. My portfolio has an 8% expected yield and a 10% expected risk and lives on the efficient frontier. I base my portfolio on 2/3 of market risk and let the return follow suit. I’ve been reinvesting dividends but at some point may use that as an income stream. Not yet on SS. When I take that with my wife it’s about $55K per year when I hit 70. I’m Roth converting close to 100% of my pretax before RMD which will minimize my tax burden in post RMD retirement and I have about 400K of LTcap loss harvested. I consider tax loss harvesting a separate non correlated asset class. Last year I sold $450K in stock and paid zero cap gain. My taxable portfolio is twice my pretax portfolio. My WR is 2% and will drop accordingly when we take SS. I’m presently just living on cash to maximize my Roth conversion’s efficiency. Having lived through many downturns, which is how I tax loss harvested so much, my experience is if you pay for your return with too much risk it kills you in the long run. In 2008 spy fell 50%, I fell 33%. Spy took till 2013 to get even to the pre crash high in 2007. My portfolio was in the black in 2011 and I was 18% ahead by 2013. I re-balanced and bought new shares every year as part of my risk management.
I’m really surprised to see such high allocations to stocks in high net worth individuals. I was wrong to assume that many high net worth individuals had a high percentage of assets in real estate. I assume real estate would fall under the “alternative” investment category. My portfolio currently is about 50% active real estate, 40% stocks and 10% Cash. We Have no bonds. What’s the argument against more real estate?
Nice article!
Hi Sam,
I’m a fan of your blog and appreciate your dedication to educating others.
I wanted to get your thoughts on Indexed Universal Life Insurance policies. With policies that offer significant upside while minimizing downside risks (e.g., Allianz LifePro+, LSW SecurePlus Provider), I’m curious to hear your POV.
Thanks in advance, Sam!
Daniel
1)Silents up to mid boomers are far more likely to have pensions, which NOBODY counts as a financial investment. there are also paid off houses
My wife and I have Pensions, a house and Social security in addition to our “financial investment” It is Totally rational for us to have a higher percentage in stocks.
2) Dynastic investment (e.g. for children also puts a premium on stocks, becasues of teh liquidity and stepped up basis.
Good morning, All!
Very interesting thoughts. My question: Sam, what find do you keep your Bond investments and where does tax consequence come into play? thanks from williamsburg in advance g