Moving Money Toward Retirement
David is getting close to retirement. Should he keep the percentages on his mutual funds as they are, or does Dave know better?
QUESTION: David is 55 years old. He asks if Dave recommends dividing his retirement saving percentages among the different types of mutual funds in a down economy, or when you are close to retirement.
ANSWER: It doesn’t change in those situations. You’re still dealing with long time frames. Statistically, when you make it to 55 or 65, the average male death age is 78. You actually have a great chance to live well into your 90s. During that time, you’re not going to live off your nest egg. You are going to live off of what your nest egg creates. So even during that time, you’re not going to cash out your nest egg. In a sense, we have perpetuation to invest.
Given that, 100% of the 10-year periods in the stock market’s history have made money. Given the current economy, who cares? You’re not talking 10 years here, you’re talking about 40 years. During that time, America’s best and brightest companies like McDonald’s, Nike, Hewlett Packard and others will go up, as a whole.
The problem that I get into with the financial community is that, as a person nears retirement age, they want to move people into bonds and money markets and call that more conservative. When you invest money at 4% or 8% over a long period of time, you’ve hardly kept pace with inflation and taxes. To move all of a 65-year-old’s money into low risk investments like that is a huge mistake, I think.