Nice articles in your 5 From 5i. Thanks.
This question is based on one of the articles about Retirement portfolio. By Christine Benz.
She talks about 8 (EIGHT!!) years worth of funds invested in BONDS in Bucket #2 for withdrawals! The example in this case study is 80000 per year minus the person's Social Security income. (US based of course.)
Question: Is this allocation to Bonds excessive or reasonable, especially in the coming years of inflation (rate increase) or worse Stagflation(rate decrease/probable/possible?)
I know every person's situation is different. But in terms of principles of asset allocation for a pre-retiree/retiree in Canada, is this a reasonable template?
If we are reading the article correctly, it talks about two years of withdrawals being held in cash. We think this makes sense and one could argue one year in cash but regardless we think is 'in-line'. It then discusses having 8 years worth of portfolio withdrawals in fixed income. I tmight be a bit excessive depending on the situation but the key word is withdrawals. If an investor only needs $10K a year, that amount probably doesn't total to an overly high fixed income allocation. But, the more one needs to withdraw from a portfolio, the higher the fixed income allocation should typically be. So, as a concept we think it makes sense but probably leans a bit on the conservative side overall and as noted whether it makes sense is dependent to a degree on the individual.