<p>we…must…not…let…this…thread…die… bumping it. This is going to be a topic of interest to me for the next 6-8 years.</p>
<p>perhaps 8-10. Depends if I retire at 62 or 64…</p>
<p>Or 68 or 70 . . . . </p>
<p>Or 55. :)</p>
<p>Even though I have issues with a certain health insurance program, I hope something exists in three or four years so we have some insurance option that is not job-dependent.</p>
<p>My entire retirement was in mutual funds (equivalent of stocks) in 2008. I lost 50% of it. It’s nice to think you’ll get 7% or something, but that doesn’t always happen. </p>
<p>Barnardmom, didn’t you get it back after the market went up? </p>
<p>Till about 5 years ago, practically all our liquid assets with the exception of 529 funds were in equities, typically in unmanaged index funds and ETFs, both domestic and international. Like BarnardMom, we took a monumental hit, and like OF noted above, we’re back in the green. We’ve begun to put a lot more current savings into target year funds, but we didn’t touch the equities, and now I’m questioning if I’m being too cautious. </p>
<p>Here’s my question about a strategy that I haven’t seen discussed very much - if there’s a fundamental flaw, you’ll be doing me a favor by calling me out. Rather than the traditional idea of rebalancing the portfolio from stocks to bonds with age, assuming we’re fortunate enough to afford it, what is the downside of maintaining 5-6 years’ worth of money in instruments that won’t dip much like short term bonds, and the rest fully in equities? If the market goes down as with the tech- or housing- bubbles, keep your hands off the stocks and live off the 5-6 year funds; if after a few years it recovers, begin liquidating as stocks hit highs to get back the 5-6 years of “emergency” money, but don’t do any automatic rebalancing just because of age.</p>
<p>My last job ended in 2007 when I was 54. At the time I didn’t consider myself retired and didn’t think we had enough saved to last us forever, but we lowered our housing cost by moving and got lucky with the stock market going up, so it would appear now that I am in fact retired (and have been all along) and will probably be ok. College for 2 boys was paid for and in various segregated accounts when I stopped working. We have more now than we did in 2007, and of course a lot more than in 2009. A good-sized bond allocation (US Treasuries) gave me the stomach to withstand the large stock portfolio declines in 2008/09. Also, after getting shaken out of the stock market in 1987 and again in 2001 I had decided to just ride this one out, and fortunately it worked out OK. Next time… who knows? In 5 years we will hopefully get some help from Social Security. </p>
<p>I think many people keep working and don’t realize that they have enough to retire if they would just relax and adopt a slightly more frugal lifestyle. </p>
<p>(This thread is 58 pages long. How do I know I didn’t reply to this thread a few weeks ago? LOL, it would probably be almost the identical post)</p>
<p>Well I have good timing and do have a sense when the stock market is going to crash but like someone wrote above, the hardest part is knowing when to get back. I do constantly monitor my account, but I was short on the market before 1987 crash, I was all in cash before 2009, the only problem was when the stock market dropped to 6000, my husband listened to the guy from Mad Money and was hoping for it to drop to 4000 before he was going to buy. The minute I realized that it wasn’t to drop that low, I slowly moved in the market. But I wish I hadn’t listen to my husband, I should have used him as contrarian indicator since he is a child of a depression parents, they are very cautious about stocks. So going forward, I’m going to develop a strategy that takes the emotions out, more systematic investment, rebalancing at least once a year if possible and have a lot of cash to buy some more when the market dives.</p>
<p>While that fund may have recovered now, I left that job shortly after but it is just now getting to the level where it was when the crash happened which means I lost about 6 years of increases. Some of my co-workers who were in more risky funds lost more than I did and had to delay retirement. We had one bond fund option that went belly up so those folks initially lost everything but I believe they got it back from bailout money or something. I don’t know exactly how that worked because I didn’t have money in that fund. </p>
<p>^ a bond fund that went “belly up” must have used tons of leverage and/or shorted bonds. A bad year for a bond fund is a decline of single digit percent, whereas a bad year for equities is 25-50% down. The effect of higher rates on the value of existing bonds is softened by the increased yield on newly purchased bonds (more softening in shorter duration funds). </p>
<p>I have “stayed the course” with my roughly 60/40 (equity/bond) AA, and usually one type zigs while the other zags. My one fear is a 90% drop in equities; my retirement can withstand even that, but it would really hurt. </p>
<p>Haven’t read this entire thread and anything with numbers makes me catatonic but we met with a financial advisor last night and it looks like we are in good shape for retirement at age 60. 7 years for me. When the market crashed in 08 my husband had heard something on NPR radio a few days before that scared him and he moved most of his 401K to bonds in advance of the crash. He is VERY conservative and it took him a while to get back in but have done well considering loosing a bit of time. 12 years ago we remortgaged to a 15 year loan and are almost done. Still have a ways to go paying back a home equity line of credit that we took out to pay for D2’s tuition but we are whittling away at it. </p>
<p>Relieved to finally be looking at this stuff and getting our ducks in a row.</p>
<p>Does anyone else think the stock market seems really high considering the anemic state of the economy? I’m one of those who doesn’t really watch my 401k all that much - we chose a variety of funds and then once a year meet with the fa. </p>
<p>Next question - my kids both have money in a growth fund in their roth ira’s (both now college age kids). Since they’re so young and have so much time I had no issue with being aggressive. At what point either in dollar amount or age would anyone suggest diversifying?</p>
<p>@eyemamom, you should always have a portion in bonds, even at a young age. A rule of thumb that’s stood the test of time is 110 minus your age in equities. Another heuristic is “age in bonds.” Risk tolerance factors in also. A lot depends on individual circumstances. </p>
<p>With interest rates having nowhere to go but up, are bonds really a good investment right now? I think low yields are fueling the stock market to some extent.</p>
<p>I’m about 60% equities/40% cash right now, although that is more by accident than plan. I’m 30-35% ahead of where I was before the crash, but it is difficult to say how much of that is due to new contributions and how much is due to the run-up of the market.</p>
<p>My kid has $400 in her Roth, all in cash. She is very proud of her earnings that I couldn’t tell her it’s too small to do anything with it yet :)</p>
<p>eyemamom,</p>
<p>My DH said that usually the market drops in the summer, but this yer, when they expected it to drop it rose. So probably when we expect it to rise it will correct. </p>
<p>Notrichenough – I’m right there with you. I understand the theoretical function of bonds in a porfolio – to zig when equities zag – except for the disconcerting fact that the bond market isn’t following its usual pattern. With interest rates sure to rise in the not-too-distant future, I just can’t get excited about holding bonds. Am I missing something?</p>
<p>A question about Roth IRAs for children: can parents open and fund Roth IRAs, without telling the kids? Wouldn’t it make a terrific wedding present? “Surprise!! Here’s XXX in a Roth IRA to jumpstart your new life together!”</p>
<p>Isn’t a bank account a contractual obligation between the bank and the account holder? I’d think they need the acct holder’s signature. There may be a way to e-sign misrepresenting oneself. That’s a bit beyond my comfort zone even in good intentions.</p>