Model portfolios for retirees?

by: Roger Nusbaum

I found this article over at Morningstar (I'm not sure if you need to subscribe to access it), writes Roger Nusbaum.

It is written by Sue Stevens who has every conceivable professional designation there is. The article provides 5 templates based on different volatility tolerances for portfolios for retirees.

A couple of the templates are just different shades of the same color. Sue suggest several OEFs and a couple of ETFs for people to use. She is clear that the weightings are just a starting point and she does not pound the table on the funds she suggests (I am using the word suggest as opposed to recommend).

I think an article like this needs to be accompanied by something that addresses income need from the portfolio. If you have $1 million to retire with, you need $65,000 per year and you volatility tolerance is very low, you have a bit of a dilemma. Something in the equation will have to change. Actually an income need above 6% is potentially problematic, I am more comfortable with 4%-5.5%.

The article also avoids any ongoing maintenance of the portfolio. If your time horizon is anywhere between 10-20 years (as discussed in the article) I am hard pressed to think there would be no tactical changes over that time.

Long time readers know I favor proactively minding the store ( think opposite of set it and forget it), exploring new products as they come and maybe reducing exposure a little at times, like when bond yields start to approach all time lows or when energy goes up 20% in a quarter.