Picking up pennies in front of the steam roller

S&P500 is close at high levels, impact of rate rises are yet to be determined.

This could be another case of stock markets climbing the wall of worry and another long bull market.

On the other hand, I’m 3 years from retirement and wondering: “Should I really still be trying to pick up pennies in front of the steam roller just as the driver is becoming more erratic?”

Anyone else close to retirement and dealing with the same question?

If you’re in a position to say “I have enough”, and you feel you might be risking too much, why not simply derisk and sleep peacefully?


Well yes… every night… :wink:

…but into what?

CHF savings account? CHF Obligationen?


I feel you, I’ve just barely reached my FI number, currently at 90% stocks. But I’m really hesitant to let go more of them, especially since I’ve read the Cederburg study about retiring with 100% stocks.

Also, the longer your retirement, the better you fare with a higher stock allocation. But there’s clear sequence risk at beginning of retirement. My strategy is to go from 100% to 90%, then scale up to 100% again within the first 5 years of retirement (rising equity glide path).

No idea if it works, but looks nice on paper :sweat_smile:


That question’s been haunting me too. I hate nominal assets like cash & bonds, cause they get eaten up by inflation. Also, I don’t like the whole monetary policy rate fiddling circus :stuck_out_tongue_closed_eyes: Real estate is highly correlated to the stock market, so basically useless to me. Same goes for equity sector or factor tilts, and for commodities.

So in the end, for lack of better alternatives, I settled for some “risk-free” cash anyway (5%), and some systematic managed futures fund (5% diversified bond/currency/commodity momentum). But I’ll continously get rid of them during the first 5 years of retirement.

If Switzerland had TIPS, I’d go for them in an instant. Inflation-protected bonds would be an awesome safety cushion

Why not?
If goal for a portion of wealth is preservation, there are Kassenobligationen from 2% upwards.
Yes you might still lose a bit if inflation re-kicks in, but it’s the best we’ve got that is “risk free”.
The rest can stay in stocks (I don’t think I would ever go below 50% there).

Or dump it into your 2nd pillar while you still can, and get the double whammy of tax savings + some return likely better than 2%.



I don’t plan to reduce my stock weighting and instead I plan to manage the risk by having a low withdrawal rate. See this thread.

The posts from @thepoorswiss on trinity study are quite helpful. tl dr: higher equity allocation results in lower risk in some circumstances


That was around my aim too, but …

… It’s around 70% currently. More than planned (~30%) is in Festgeld and Obligationen (yielding around 2% - tax - inflation). It “hurts” the expected returns.

I’m worried about getting FOMO on the better stock returns at some point, or simply missing the “best time” to increase the stock allocation.


That’s a great strategy, but if you’re already at your minimal withdrawal rate, you barely have any flexibility with spending.

And retiring on social welfare levels doesn’t seem much fun to me :stuck_out_tongue_closed_eyes:

Totally get you. On the other hand, you wouldn’t want to be retiring at the start of a 13 years bear market. It’ll always be a gamble, I guess, no matter how you invest.

Best deal I could imagine would be an inflation-adjusted monthly pension that covers your basic needs (annuity AHV-style), or a Swiss TIPS-ladder, for the first 5-10 years of retirement, and the rest in 100% VT.

What I meant by low withdrawal rate is spending (say) 3% of net wealth increasing with inflation each year. The most likely outcome is that wealth at death will be a lot higher than at retirement, see the links above

If 3% of nw meant social welfare level spending I would most probably postpone early retirement

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well this is the big question. what can you move assets into that still generates sufficient return that allows you to retire?

this is my current strategy. i put a fair bit in at the end of last year and converted more to cash/bonds with a view to paying into pillar 2 later this year or next year.

however, this still leaves a question over the assets that remain outside the pension and what they should be invested in.

Since the end-year interests are usually applied pro-rata from the date of in-payment, it might be better to do it sooner rather than later in the year.
(If the planned amount is there already, of course)

I do it at the end of the year to see what expenses I have during the year to bring taxable income down to the target level.

I find interesting this kind of reasoning (that we all do), since most of us don’t have 100% of nw in stocks, so that 3% is not really comparable to the typical return of stocks (7% annually). On the trinity study they usually say 7% minus inflation (3%) = 4%, but since that study used a 60/40 portfolio, that 7% is already lower (4% stocks + 2%bonds?) If we then have 0% with bonds?

I think you mix up growth rate of the portfolio, when you accumulate, and withdrawal rate, when you also consume the principal. The relationship between them is not so straightforward.

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I did mix up because I prefer to have the withdrawal rate lower than the growth rate of the portfolio.
The growth rate is valid also when I stop the accumulation phase (which for me is the phase where I have external funds added).

That is fine, but it is a different approach than used in the Trinity study.

I don’t think we can simply compare CAGR when it comes to sequence of returns risk (which is why the 4% rule is 4% and not 7%, or 10% nominal -3% average inflation). Part of the risk in the withdrawing phase is that if a big enough and lasting enough crash happens early on, your assets may not have the time to recover as you draw them down and too few of them remain when (if) the recovery kicks off.

That being said, Big Ern’s serie about safe withdrawal rates does come to the conclusion that a 100% stocks allocation has higher chances of success than those mixed with bonds over the time periods studied (part 2 linked: The Ultimate Guide to Safe Withdrawal Rates - Part 2: Capital Preservation vs. Capital Depletion - Early Retirement Now).

That only stands if one stays on track when markets crash and even then, the urge to sell can make one’s life stressful and miserable even if they don’t sell so psychological aspects should be taken into account when picking an allocation.

As for what more conservative assets to pick and how to implement them, I have plenty of time to change my mind and am not speaking from experience but my current plan is to borrow a page from the lifecycle investing crowd and accumulate stocks until I reach the nominal amount I want to hold in retirement (then adjusting for inflation each year), then complete it with more conservative assets.

As Swiss investors, I think we are very well served with medium term notes, which are very low risk (insured by esisuisse), grant better returns than most bonds of similar quality and duration denominated or hedged in CHF and can be bought at the date of our choice to make laddering them pretty easy, at the cost of liquidity.

My plan is to start laddering whatever very low credit and market risk instrument grants the best returns for a fix term leading to my target date of retirement so that I can get enough of them maturing at 6 months intervals for their principal+the interest coming from the remaining ones to cover my expected expenses.

I’m not overly worried about inflation in Switzerland and think the stocks part of the portfolio should allow to outpace it.


If you have a 3% bond with no re-investment risk, then you are done as you can just take your 3% each year.

If you have stocks, you need much more than 3% due to volatility and sequencing risk.

In reality, even the 3% bond is not safe as you need to account for inflation. If you assume 2.5% inflation then you are already up to 5.5% required return.

But the inflation is also volatile and create the same kind of sequencing risk, so maybe you need, say 7% nominal return.

Maybe in the end you will need real estate, stocks or some other real asset investments to keep up with inflation if you want to avoid having to build a massive pension pot.

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