| Everyone would love to retire early, but
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| | egg follow conventional wisdom it will
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| they also desire to be free from the fear
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| | needlessly reduce their lifestyle or
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| of running out of money. Changing your
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| | impact what they leave their children or
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| attitude toward investing and the
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| | use to support charitable causes.
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| approach you take will help you
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| | Traditional portfolio management views
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| accomplish both. Read on to see how you
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| | stocks as being risky and bonds as being
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| can retire years sooner and make you
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| | safe. As such, you should increase the
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| money last decades longer.
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| | amount you have in bonds and decrease the
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| Last week I talked about our need to
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| | amount you have in stocks as you get
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| change the way we view retirement. I
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| | closer to retirement. The rule of thumb
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| explained that seeing retirement as a
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| | is that you should have roughly your age
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| transition to a less-stressful, more
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| | in bonds, so if you are fifty your
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| enjoyable job drastically reduces the
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| | portfolio should be 50% bonds, 30% stocks
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| amount you have to have socked away. Even
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| | and 20% cash. That's crazy!
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| working just part-time during retirement
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| | Along with that view is the philosophy
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| can allow you to retire years sooner, or
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| | that you should buy an investment and
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| make your money last years longer.
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| | hang on to it--buy and hold. Investors
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| Changing our view of retirement is only
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| | that lost 30-50% between 2000 and 2002
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| half of the solution. We also need to
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| | know that buy and hold can be a risky
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| change our attitude and approach to
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| | proposition. We all know that there is
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| investing for and during retirement. This
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| | the potential for stocks AND bonds to
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| by itself will have a similar impact on
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| | lose value. This is referred to as market
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| when you can retire or how long your
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| | risk and interest rate risk. Since the
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| money will last. Combining the two
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| | industry believes that you should buy and
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| together can completely change the
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| | hold, the only way to minimize the
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| retirement equation.
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| | overall risk to your portfolio is by
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| Our life spans grow longer every year,
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| | changing the allocation between stocks,
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| placing greater demands on our nest egg.
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| | bonds and cash.
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| Moreover, as a nation we are saving less
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| | It all sounds great--but by believing it
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| and less. In fact, recently the national
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| | you may be forgoing tens (or even
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| savings rate was negative--collectively,
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| | hundreds) of thousands of dollars. I
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| we spent more then we earned.
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| | don't accept their underlying assumptions
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| Let's face it--few of us save as much as
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| | and neither should you. There are other,
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| we should. The demands of raising a
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| | more effective ways to manage portfolio
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| family, saving for our kids' education
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| | risk that may dramatically increase your
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| and caring for aging parents make it
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| | returns.
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| difficult to set aside as much as is
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| | Think about it. Interest rates the last
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| needed. By the time our kids are
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| | several years have been at historic lows.
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| independent, our retirement may only be
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| | That didn't change the traditional
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| 10-15 years away.
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| | allocations provided by the industry.
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| Unfortunately, the conventional wisdom
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| | They still said you should have 50% of
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| provided by the financial services
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| | your nest egg in bonds if you were 50
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| industry hasn't made reaching our goals
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| | years old. The return on bonds wasn't
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| any easier. Conventional wisdom says that
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| | even enough to keep place with inflation
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| you should invest more conservatively
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| | and you were supposed to put half your
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| each year you are closer to retirement.
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| | money in them? Ridiculous.
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| Their wisdom also says that in
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| | It's possible to grow your money faster
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| retirement, you should only withdraw 4%
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| | with less risk. It's possible to draw out
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| from your portfolio each year.
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| | more than 4% without the fear of running
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| The conventional wisdom is wrong.
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| | out of money. And it's done by adjusting
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| Frankly, if the average person follows
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| | conventional wisdom to the realities of
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| this advice it will be a wonder if they
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| | the markets. Next week I will share
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| retire at all! If those who have been
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| | specific strategies and methods to do
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| successful setting aside a healthy nest
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| | just that.
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