Allocate Smartly is an investment platform that allows investors to research, implement, and manage professional investment strategies in ETFs.
Some of the Allocate Smartly strategies are based on buy and hold investing, which is also known as strategic investing. The majority of strategies on Allocate Smartly use tactical investing, however. Tactical strategies rotate in and out of asset classes as warranted.
You can read my entire Allocate Smartly Review if you’re unfamiliar with the platform.
Is Allocate Smartly good for retirement investing? I’ll answer this question based on my own experience using Allocate Smartly after “stumbling into early retirement” many years ago.
I can’t predict the future or tell you what to do. I can only share my own investing experience with you here on Retire Certain.
In this post, I’ll address:
- The pros and cons of Allocate Smartly for retirement investing
- How and why I use Allocate Smartly for our retirement accounts
- Insights about Allocate Smartly most investors don’t realize
Let’s get started.
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The Pros of Using Allocate Smartly for Retirement Investing
Allocate Smartly has more pros than cons. Let’s look at each pro.
The truth is we have enough risk with our home and rental properties being subject to the occasional but harsh blow ups in the real estate market; those occasional blow ups hit our net worth.
This is a risk that I begrudgingly live with, so I like to manage risk tightly in our retirement portfolios. I feel like the data at Allocate Smartly helps me do this since the strategies I use rotate out of stocks in bear markets.
Not Having to Predict
I regularly listen to professional after professional on my favorite YouTube channels for advanced investors, including Weathion and Thoughtful Money. After every interview, I think what the financial expert said makes sense and surely their prediction will come to fruition, but it usually doesn’t within the predicted time frame.
Not only this, but the experts constantly contradict one another.
These are some of the brightest and best minds in the financial world.
I love knowing that I don’t have to try to figure out what asset class is going to rise or fall when. Instead, I can analyze decades of past performance data, and select a strategy based on that data.
Then I just follow the strategy every month rather than agonizing about when the stock or bond market will take a big hit.
I love learning and knowing what’s happening in the financial markets and the economy, but I also love knowing I have risk management in place based on data vs a prediction.
How I Manage Risk
I know how much risk I am willing to take based on an overall financial plan. Then I select a strategy that has had a drawdown percent over several decades that’s within acceptable risk for me.
This is something most older investors can certainly appreciate if they invested through the tech bust and the GFC in the 2000s decade!
Safe Withdrawal Rate
Most retirement plans are based on making retirement savings withdrawals of 3% to 5% to support retirement living.
Several of the strategies on Allocate Smartly show safe retirement withdrawals of over 5% lasting 30 years based on past performance!
The data used to support this high withdrawal rate is based on 40 or 50 years of investing performance for most strategies; past results for time frames this long are almost impossible to find when researching investment strategies.
Remarkably, as of this writing, 35 of the strategies on Allocate Smartly showed safe retirement withdrawal rates of 5% to over 7% based on multi-decade past investment performance!
I’ll add that I tend to be conservative in making financial plans. Therefore, I don’t plan on making withdrawals as high as 6% or 6.5% even though many strategies on Allocate Smartly would have supported such a high withdrawal rate for the past few decades.
I feel relatively confident, however, that a 4.5% to 5% retirement withdrawal rate will be doable for us while using a tactical investment strategy from Allocate Smartly.
If I still used a typical buy and hold investing strategy in stocks and bonds, I would personally plan on around a 3% withdrawal rate over the next decade, however. This is supported by the fact that a 60% stock and 40% bond portfolio had a safe withdrawal rate of only 3.6% based on comparable past performance data at Allocate Smartly. There’s also the reality that the next decade is unlikely to have returns as high as the past decade since most assets, including stocks, are overvalued as of this writing, and relevant macroeconomic factors.
The data showing success for such high withdrawal rates for multiple decades is a boon for retirement investing.
Perpetual Withdrawal Rate
The Allocate Smartly data also includes perpetual withdrawal rate projections based on historical data for each strategy.
This data is helpful for someone who wants to live off their investments but not spend down their investment capital during retirement.
Ease of Investing
Implementing a strategy using the tools at Allocate Smartly is easy. There was admittedly a learning curve; but now it takes me about half an hour a month to implement Allocate Smartly strategies in multiple accounts, including both regular and retirement accounts.
The ease with which Allocate Smartly strategies can be implemented makes them ideal for someone in retirement who wants to spend little time on investing but also has the luxury of free time.
Tax Benefits Inside Retirement Accounts
Allocate Smartly can make sense for retirement accounts in particular because most of the strategies’ returns come from short term capital gains. Remember, short term capital gains are taxed at the taxpayers’ highest rate.
Inside retirement accounts, however, there are tax benefits that vary depending on the structure of the account and the financial picture of the retiree. The best thing to do is check with a CPA if you’re considering Allocate Smartly for investing in retirement accounts.
Low Cost Investing
Retirees are almost always looking to cut costs. Shaving thousands of dollars off of wealth management fees saves a lot of money every single year.
Relatively Worry Free Investing Amidst the Uncertainty
Selecting investments based on valuations has become harder in the past two decades, as asset pricing has disconnected from logical fundamental valuations, such as earnings multiples.
Given this, I especially like using a solid all weather strategy that has demonstrated acceptable performance in various economic situations.
Cons of Allocate Smartly for Retirement Investing
There is no perfect investment, so let’s take a look at the cons of using Allocate Smartly for retirement investing in particular.
Underperformance During Bull Markets
The strategies that I use and Allocate Smartly are relatively defensive. Defensive strategies usually underperform during strong bull markets.
The truth is it can be frustrating when, in hindsight, simply owning the S&P 500 index would have outperformed during certain times with less effort than my Allocate Smartly portfolio. It’s the risk management I value by knowing my portfolios will rotate into defensive asset classes when warranted.
Little Investment Income
My belief is there’s far too little focus on income generating strategies in traditional retirement planning.
The returns from strategies at Allocate Smartly are based on total return, however; the majority of the return is from short term capital gains rather than dividend income for the strategies that I use.
The fact is that you do have to take responsibility for implementing the Allocate Smartly strategies unless you hire someone to do it for you, which could be done.
I only rotate my portfolios once a month now, so I find this isn’t a lot of effort.
I implemented the rotation at a Memphis airport coffee shop on my laptop over a cup of tea when the rotation occurred on a travel day. Alternatively, I could have waited until the next morning to implement the ETF trades.
Implementation isn’t a big deal to me; it saves thousands of dollars in wealth management fees, so I honestly don’t mind.
If I equate the time it takes to an hourly rate based on the amount of money it saves in financial advisor fees, my rate is over a thousand dollars an hour; I’ll take it.
Taxes on Transactions
A retiree who has retirement savings outside of a retirement account will likely have to pay taxes on the capital gains. The upside of this issue is that most retirees are at a lower tax rate than they were when they were employed.
A high amount of short term capital gains can result in a higher tax rate and loss of some tax reduction benefits, however. We experienced this one year, in particular.
Summary for Allocate Smartly Retirement Investing
These are some of the pros and cons I’ve encountered using Allocate Smartly for retirement investing.
Some people who hire me for financial coaching want me to help them with Allocate Smartly. The starting point is always clarifying how much money you need to live how you want. From this place, you can decide if Allocate Smartly makes sense for your own retirement investing, and then select a suitable strategy.
If you decide to get Allocate Smartly use my affiliate link so you can get my free video training on getting started. (Email me a screen capture of your receipt showing the email you used to purchase AS and I’ll email you access to my training.)
Source: Allocate Smartly