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Retirement Planning

By Terry Savage on November 26, 2019 | Financial Planning / Retirement

I am 63, my wife is 64. I lost my job during the summer, with severance pay through the end of the year. I have been to two different retirement planners, and asked them to run some “worst case” scenarios on our retirement plan if I or my wife (she retired in 2018) do not work again in “career” jobs making decent salary. Both planners advised waiting until FRA to begin social security. That means, worst case, we would have to live off our savings and 401K money (haven’t rolled over yet to IRA’s) for all of 2020, 2021, and part of 2022. We can get through 2020 with savings, and after that, would have to hit the 401K money. They both advise a 40/60 (stocks/bonds) IRA portfolio split. My concern is given the long bull market, having 40% of my portfolio tied up in equities during a 2-2 1/2 year period where I have to live off of this money seems risky if a recession and market pull back occurs. Neither thought “parking” this money for the two year period in question was a good idea. My short term instincts say “preserve” what I have accumulated.

Terry Says

I like your “instincts” — and I agree with the planners’ advice NOT to take Social Security until your full retirement age. So let’s do a compromise.
Definitely wait until Full Retirement Age to take Social Security. And recognize that a financial planner has a different and more distant sense of history and discipline when it comes to investing retirement money. They know that “over the long run” you will need growth. But you and I know that you need to make it to the “long run.”
My suggestion: Rollover your 40l(k) plan now because you won’t find a “safe haven” inside the plan since it is designed for younger workers to grow their money. Roll it over to Vanguard (call them and they will handle the details) and put HALF in a government-only money market deposit account, and half in their Equiy-Income Fund — a more conservative type of fund. then promise not to panic when the market crashes because you have plenty of cash.
And concentrate on figuring out how to earn some more money in the next couple of years — even driving an Uber or consulting or something — so you don’t have to use that retirement money yet!! You have a long time ahead of you, and I’m betting that you will find some new source of income. That’s your challenge!

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