[USER]

Asking for a friend
Current situation: $7M in liquid assets – index funds. Running various simulations and using 3% safe withdrawal rate results in a $3M need, which means that $4M is extra cushion.

Goal: not run out of money and maximize estate value at death to pass on to children.

Question: What asset allocation to use?
1) Opition 1: invest $3M of required assets into 60/40 portfolio because that’s what was used for the Trinity study and invest $4M into 100%!equities to maximize returns.

2) Option 2: invest $3M of required assets into Ray Dalio’s All Weather Portfolio and $4M into all stocks. All Weather Portfolio minimizes volatility, but certainly lags in returns. There’s a price to pay for safety.

3) Option 3: use $3M to buy inflation adjusted annuity and $4M invest in all stocks. The annuity is expensive, but provides truly guaranteed income stream.

4) Option 4: keep the entire $7M in 100% stock
portfolio because even if the market declines 50% and stays there for a decade, it still allows for comfortable retirement.

This is the riskiest but has the highest potential return.

[David]

Depends on your life expectancy, risk tolerance, etc, but I would think with such a large cushion you can afford to be more aggressive, the kids inheritance has plenty of time to recover if needed.

Why not put like $750,000 – $1 million in bonds and the rest in s and p or total market index?

[Allison]

We’re looking at very long term, and he’s already oversaved, therefore it’s #4 for me.

[John]

My answer may change depending on how many more years you expect to live based on your current age and health.

[Wasim]

I would go for 70/30 for the whole amount and keep cash for 2 years expenses..

[Maribeth]

What happens when the company you bought the annuity from goes bankrupt or something regulatory changes…. not truly guaranteed.

[Author]

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