Tag Archives: investments

Two Important Benefits to Rebalancing Risk in Retirement Investments

Posted on by

Investments can be complicated, but they don’t need to be. Investors just need to know their objectives and some intelligible ways to achieve them. Generally, investors want high returns and low risk. Once they achieve suitable exposure to both, rebalancing—maintaining balance among components—keeps investors on a steady course.

High returns usually come from owning stocks. History has shown that over long periods of time, stocks almost always out perform bonds, real estate, and many other investments. Alternatively, stocks are often risky.

Bonds usually produce lower returns, but they tend to be less risky. A portfolio that combines a diversity of stocks and a diversity of bonds is likely to generate good returns with only moderate risk. Continue reading →

How to Make the 6-Step Investment Model Work Better

Posted on by

Two weeks ago we wrote about a 6-step investment model for retirees, and two days ago we saw that the model worked. Now we can show how to make it work better. The key is to further diversify the stock investments. Originally we used a mutual fund that reflects returns to 500 leading U.S. companies, and today we use one that reflects returns to the entire U.S. stock market.

Continue reading →

How to Make Retirement Investments Last—and Find Peace

Posted on by

Most people work 40 years or more to accumulate assets for retirement. Then, if they use the assets too fast, they may end in poverty. How fast is too fast? The answer must balance withdrawals and longevity against investment growth, yet it need not be overly complex. It is entirely possible for many retirees to self-manage their investments if they organize an initial approach into a few basic steps. Over time, retirees can learn to refine and augment the basic approach outlined here. Continue reading →

Offering Responsible Help

Posted on by

The last post related how emergencies can put a retiree’s living standards at risk. Now the discussion turns to thinking and working through emergencies in ways that manage the risk appropriately.

If retirees pay regular living expenses from their investment portfolios, and then spend some of those investments to resolve emergencies, they put future withdrawals at risk. It’s different in middle life when living expenses are paid from salaries or wages, and savings are commonly used for emergencies.

Some Financial Approaches

One solution is to set aside a portion of a retirement portfolio for emergencies. A retiree with a $500,000 portfolio could set aside $100,000 for emergencies, using only $400,000 for ordinary living.  If the withdrawal rate is 4 percent, the retiree would withdraw $16,000 annually for ordinary expenses. The $100,000 emergency fund would be left alone.

In addition, retirees have other options:

Continue reading →