The blog post of March 23 implies that a “steady-as-you-go” approach to investing during these times is a good idea. Think long term, attend to your asset allocation, rebalance on schedule, and provide for some cash. The post two days later (March 25) advised us to be generous if we can—many people don’t have portfolios and the economic disruptions are severe. But neither discusses why we should have faith.
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Fear can paralyze us. We fear the Coronavirus, getting sick, and long waits for treatment. We fear the reactions to the virus, including those of business and government. We are shutting down normal life under the edicts of common sense and government proclamation. Retirees, we’re told, are especially vulnerable because of our age, and we seem psychologically vulnerable as well. Gyrating asset markets add to the stress, and many retirees depend on portfolios for their livelihood. Several people I’ve spoken with wonder whether they’ll be able to sustain themselves through and after this crisis. What should we do? Continue reading
Over the last 15 years I’ve met several new retirees who are waking up to the poor condition of their portfolios. They saved and invested for years, often choosing mutual funds or annuities offered by employers, then changing jobs, picking new funds, and so on. At retirement they own a collection of high-cost accounts and an unplanned, hard to discern asset allocation. To fix things—plan an asset allocation and convert to low-cost investments—they have to sell old assets and buy new ones. They ask whether it’s better to do it all at once or string it out over weeks, months, or years? Continue reading
Retire early and fly away
Last time we saw Christy Shen and her husband, Bryce, living one version of a radical retirement: they retired in 2014 (Christy was 31 years old) after only a few years of work. Each year while working they saved more than half of their earnings. Can anyone do that, or were they just lucky to invest when returns were high? Continue reading
I recently taught a course to retirees on passive investing at the University of Georgia’s Osher Lifelong Learning Institute (OLLI). Many in the class had portfolios with various brokers or financial planners, some local, some far away, and the portfolios were complicated and laden with high-cost mutual funds as well as individual stocks and bonds. They were not making much money, and they wanted to hear about a different approach. Continue reading
With the end of 2014, year-end investment returns are coming in, and two noteworthy results are these:
What should your stock allocation be at your retirement date, or in different words, how much risk (variability) should you tolerate near and at retirement? I discussed this issue in a series of posts earlier this year (see links at end), and recently the Wall Street Journal (WSJ) published an article (paywall) about it. Continue reading
Managing your trip in a risky environment
Risk is sometimes the elephant in the investing room, especially for retirees. People understand stocks as ownership and bonds as debt, but risk is hard to grasp and instinctively dangerous.
Later Living has recently published four posts on risk. Risk and high returns go together, so retirees who want high returns must deal with risk. Here are the four earlier posts knit together into one risk story: Continue reading
Afternoon at a long-term care facility
Retirement might be easier if spending needs stayed nearly constant from year-to-year, but they don’t. Long-term care, motor homes, family members in need, and other special plans require lumps of cash at particular times. Continue reading
Investment risk is good in that it accompanies greater long-term wealth but it is bad if investors sell during a downdraft. Stocks are riskier (more volatile) than bonds yet offer more long-term gain.
Should retirees dial back their risk exposure to, say, 30% stocks, as is sometimes recommended, or can they carry much more risk, perhaps up to 70% stocks? The answer follows their goals and plans. Continue reading