Ask Terry Questions Asset Allocation

Asset Allocation

By Terry Savage on July 16, 2019 | Financial Planning / Retirement

Your most recent article urged a conservative approach for older investors. I am 83, in fairly good health, divorced, no children, own my home, have no debts, and I have over $500, 000 invested…28% in equity and 72% in bonds. Is this too risky? What split should I aim for? And should I consider a Treasury money fund? Thanks.

Terry Says

So much of that depends on what other money you have. Certainly you must have additional money on the sidelines — outside both the stock and bond market.  For that type of “chicken money” a Treasury money fund or a FDIC insured money market deposit account at a bank would be the ideal solution.   You should have enough “cash” outside your investments to carry you over for at least two years, just in case of a stock market decline.

But are you aware that you are also vulnerable in the bond market?  If the stock market declines because of a recession, unless you have the highest quality bonds, you could face some defaults. And if interest rates rise because of inflation, then the market value of your bonds will decline.

I hope that you have done an estate plan, and also perhaps purchased long-term care insurance — so that things are in order in case of an emergency.

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