BBCWatcher
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I tend to agree with the late Jack Bogle that high confidence retirement income streams such as U.S. Social Security ought to be counted as "bond-like." I'm not a huge fan of "constant minus age" portfolio allocations, though. I prefer a trapezoid, if that makes sense.Future yes... but do you count them as bond equivalents in your present asset allocation model today (i.e. allowing for a higher stock % due to these considerations)?
The reason I ask is because experts do not generally recommend this.
Jack Bogle was in the minority in his view that Social Security should be considered as a bond equivalent, as well as recommending the more aggressive 120 minus your age guideline.
But the portfolio allocation percentages can be adjusted. It seems like an argument about algebra.Michael Kitces opined that in theory you could put Social Security on your balance sheet, but he doesn’t recommend it, since ordinary people typically wouldn’t have the stomach for the higher volatility resulting from the higher stock allocation.
I prefer adding no more complexity than necessary. It seems easier just to count everything and then set whatever allocation percentages seem age and risk appropriate on that basis, and as a "trapezoid" (constant allocation percentages held steady until X years before retirement) since that seems easier, too. Other approaches are possible, but "count everything, and hold XX% in stocks -- and check back again when you're Y years away from retirement" is operationally as simple as it gets, right?