WAll STREET ANd RETIREmENT - A BIG dIScONNEcT50% bonds, and knowing that usually they work in opposite directions
to each other, I will have 50% of my portfolio working against me at
all times. When stocks are doing good, what happens to bonds? When
bonds are doing good, what happens to stocks? According to a study
done by the Putnam Institute, they suggest that for retirement portfolios
whose primary goal is to minimize the risk of depletion and sustain
withdrawals, optimal equity allocations range between 5% and 25%.
keeP sIx Months oF InCoMe lIqUIDKeeping six months of income liquid is a good rule for some but not
for a person to rely on for income in retirement. Their idea is to use
that money in the times when the market is going down, so that you
don’t pull funds from a losing account and compound the problem. Six
months worth of income won’t work when some recessions last as long
as five years before they ever get back to even. Six months worth of
income might be a sufficient emergency fund for unexpected expenses
but not as an income replacement or supplement for a bear market. You
must have incomes that will be dependable even in the bad times.
Don’t WoRRY - YoU ARe In It FoR the long hAUlRemember that we are entering our retirement years. I know that most
folks call that middle age, but I don’t really think our chances are really
good to live until age 120 or 130. Most of my clients tell me they don’t
even buy green bananas anymore because they are not sure they will be
around to eat them. Do we really have a long haul left? How long is a
long haul? That is sort of like how long is a piece of string?
Be wary of the broker that tells you that you are in it for the long haul.
That’s just a bad answer for a bad situation you are experiencing.
RetIReMent ACCoUnts shoUlD not
Be FUnDeD WIth eqUItIesRetirement accounts (such as 401k, IRA, 403b, 457, SEP-IRAs) are
unique types of account and should be treated differently. One problem
with using equities to fund your retirement account is the fact that when
you are in a bear market and losing money, you can’t even take a tax
deduction for the loss. I feel that you should fund these accounts with
conservative accounts that have little or no chance of loss because of the
fact that they offer no tax deduction. Also when you reach 70-1/2, you