401 rebalance sugestion from Bohannon radio show
Plans are to retire next year at 62. I currently have my 401 in a 2020 target date fund from voya. As far as I can tell,it has about 30% to 40% in stocks. You had mentioned to reallocate some of it, if we've been in it since 2008/2009. What would you suggest putting it in to be a little safer for retirement, or is this a decent amount to have in the stock market at this time. I'm a little of apprehensive on this rising stock market nowadays.
Terry Says
Well, as you've seen in the past few days, the stock market can be volatile -- in both directions! You're taking an early retirement, so you do need some exposure to the stock market. But a big decline just before retirement could permanently impact your lifestyle. If you were younger, you'd consider a market decline an opportunity to buy more shares at lower prices. But in retirement you aren't contributing anymore. First question, are you really sure you can afford to retire at 62? You're likely to live nearly 30 years -- and even at only 3 percent, inflation will cut the value (buying power)of your savings in half in 25 years! I suggest talking to a financial planner about the overall picture. Find a fee-only planner at www.Napfa.org. This is more than an issue of your asset allocation. But the best rule of thumb on that is to "sell down to the sleeping point!" Many target date funds remain aggressive for people in their sixties, recognizing the need for growth over a 30-year retirement. But that doesn't help if you get scared and sell in a market panic.
