I'm 69, Retired With $1.5 Million in 85% Stocks: Am I Taking Too Much Risk?

"“10% bonds? Wow. That's an aggressive portfolio. Heavily weighted towards large cap. Heavily.” His one-word summary: “Hodgepodgey.” He softened the landing: “You're just doing it a little wacky, but not dangerously wacky.”"

"McDonald is right. Bonds aren't supposed to win you anything. They're supposed to keep you from losing on the days stocks do. Here's the math that makes 85% stocks at age 69 a real exposure. Francisco's $1.5 million portfolio currently holds roughly $1.275 million in equities. A 30% bear market scenario would meaningfully reduce that equity sleeve, while his bond and cash buffer combined is only $225,000. If he keeps drawing $42,000 a year out of a shrunken portfolio while waiting for stocks to recover, sequence-of-returns risk does the rest. The portfolio that looked bulletproof on the way in starts bleeding on the way out."

"This is what McDonald was hammering on: “Way underweight small. Way underweight fixed income. Way underweight. And I know, I know, I know, we look back and we go, but fixed income doesn't do anything. That's the whole idea.”"

"The good news is that fixed income actually pays something useful right now. The 10-year Treasury yields about 4.4%, the 2-year sits near 4%, and the 30-year is close to 5%."

A $1.5 million portfolio with 85% stocks, 10% bonds, and 5% cash is paired with about $42,000 per year in portfolio income and $60,000 in Social Security for a retired 69-year-old couple. The equity sleeve is heavily large cap and tilted toward value, while fixed income is relatively small. In a 30% bear market, the equity portion could drop substantially, but the bond and cash buffer totals only about $225,000. Continued withdrawals from a reduced portfolio can increase sequence-of-returns risk. The allocation is described as “wacky” due to being underweight small stocks and fixed income, though not dangerously so. Current Treasury yields around 4% to 5% make fixed income more useful now.

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