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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
by 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 agoretirements 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 agoI 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.