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I'd really hope that people about to retire don't have a significant amount of their investments in equities...

• jsight 7y ago
  It is common to maintain a significant amount in equities well into retirement. Due to low interest rates, it sometimes is the only valid strategy. The key is to maintain a mix that allows for short to medium term fluctuations in the market (and economy) like this. EDIT: I highly recommend the book "A Random Walk Down Wall Street" for more details on asset allocation strategies at various ages.
  • FartyMcFarter 7y ago
    > It is common to maintain a significant amount in equities well into retirement. Due to low interest rates, it sometimes is the only valid strategy. Why are stocks a valid strategy (where there's possibility of easily losing 20-30%), while losing a few percent due to inflation in something like a savings account isn't?
    • maximente 7y ago
      retirements these days can last 20+ years (65 => 85 or earlier if wealthy). Federal Reserve mandate means your money loses significant value every year if stuck in a savings account. i am not aware of savings accounts paying 3%+, even bonds don't return that YoY. yes you may "avoid" losing 20-30% in one year, but those tend to come back quickly; with risk averse investments you're just stemming losses, not breaking even. also see cFIREsim for an idea of the math: you're basically guaranteed to run out of money if you try to park in safe havens and you end up living a fair bit after you retire.
    • jsight 7y ago
      I wouldn't say that sticking with savings accounts is an invalid strategy. If you have enough money, many strategies are viable. If you are struggling to stay within a "safe" withdrawal rate of 2-3%, you may find that equities are your only chance of getting the returns that you need.