I try not to pay attention to the stock market, but it has been awfully difficult to see it flitting about as it has. My nest egg hasn’t taken too big of a hit, but that’s a fluke.
You’ll remember back in October, I rolled over my 401K from my former employer’s plan administrator to an IRA with Morgan Stanley, where the rest of the money is invested. That transaction was completed just before the market started dropping, so I saved a nice chunk of money by accident.
Although I am no longer working, I don’t plan to start withdrawing money from my retirement account for another three years. I still have a few long-term incentives from work. Add Dale’s military retirement, his social security and cash we set aside, and we’re doing fine.
Our adviser suggested we park the IRA in something safe until we had more insight into what the market is up to. We’ve been talking regularly, and by that, I mean he regularly talks me off the ledge.
Bob Lowry at Satisfying Retirement had an excellent post along with thoughtful comments submitted by readers about managing your portfolio in retirement. I’ve since seen more than a few horror stories from the Great Recession.
For example, I read this in bed during one of my 2 a.m. financial retreats:
“Between October 2007 and March 2009, the S&P lost 55 percent of its value. An investor with $1 million exposure to an S&P fund would have lost $550,000 in the span of 17 months.”
While impacts were felt across the board, I believe those hit hardest were people heavily invested in stocks. And that begs the question – what’s the right balance of equities and safer assets? I’m barely literate when it comes to finance, so please don’t mistake me for someone who knows anything. I can only share my own experiences.
There is no single solution. There’s no magic bullet. Some people can tolerate more risk than others. Some people have more money to play with. Some people have less. Our adviser suggested a 50/50 split, but that seemed too aggressive to me. I’ve read that’s actually a conservative allocation.
Just to make it confusing, factor in we don’t have children and don’t plan to leave an estate. We’re on board with the “Die Broke” approach, but because we are financially conservative by nature, it’s unlikely we will actually die broke. In our case, big growth is not a requirement. Our investment philosophy is hang onto the money we have and keep pace with inflation.
I talked again with our adviser, and we settled for now on a 35/65 allocation. For us, that means 35 percent in index funds and 65 percent in bonds and money market investments. There’s still a bit of risk, but we could ride out a recession if we had to – and maybe I can get some sleep.
Retirement planning isn’t easy, especially when you are already retired! In weak moments, I blame corporate America for abandoning pensions and forcing financial illiterates such as ourselves to eke out a retirement plan. But it is what it is, and we are fortunate to have a good adviser with a solid plan that includes Dale’s military pension.
For most of us, managing money is one of retirement’s greatest challenges. I say accept it, learn all you can and seek expert advice, if needed. I’m feeling pretty good since we settled on a prudent approach for our future.
As for words of wisdom, I’ll quote Bob’s conclusion, “Whatever comes now we believe we can handle it. And, that is a great feeling.”