Ask Terry Questions future market risk for retirees

future market risk for retirees

By Terry Savage on November 22, 2014 | Financial Planning / Retirement

We are retired for nine years, living on SS and interest funds. So many scary predictions on the coming market crash. What’s your opinion on long and short term market?

Terry Says:  Here’s the thing:  There’s ALWAYS risk in the stock market.  That’s risk of loss.  Now, you can mitigate this risk by diversifying your investments; by having a long-term time horizon (at least 20 years because history show a diversified portfolio is usually a winner, with dividends reinvested, over 20 years); or by making regular investments so that drops become an opportunity to buy at low prices.  BUT, once you have reached retirement age — and are  well into retirement — those three mitigating factors don’t really help you sleep at night –unless you have a LOT of money to invest, far more than you’re likely to need in your lifetime!

But if any loss would cause panic, if a loss might mean the difference in your lifestyle, then this is the time to “sell down to the sleeping point.”  That is not to say the market wont go higher —  it probably will. But the joy of market gains doesn’t offset the fear of loss at your age.  Yes, you should keep some stock investments — a diversified mutual fund — to offset inflation and get some growth.  But not so much that you will panic and sell at the wrong time.

How much in each category?  Call T. Rowe Price  800-638-5660 and go through their retirement income and investing program with one of their counselors.  They can give you fact-based analysis, using “monte carlo” modeling — far better than “intuition” or guesswork.



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