I want to redirect my retirement investments to a more defensive posture. Ideas for best choices?
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Contrary to the prior answer, if you do live to age 90, you can cut your buying power in half two times! The stock market has had a bull run since before WWII. Sure, there are market corrections, but just look at the charts for the S&P 500 Index or one of the old mutual funds that go back to the 1930s.
If you have a million dollars today and you get a 5%-6% return on your money, you can only live off of about $20-$30,000 a year taxable income if you want the income to keep up with the cost of living. If, instead, you invested in a high-quality balanced portfolio of stocks and bonds, you can reasonably generate $50-60,000 a year with COLA.
Let's not mention the fact that most pension incomes are not inflation adjusted, and that Social Security does not in reality keep up with inflation because of increases in Part A. Consequently, your portfolio has to work extra hard to offset inflation for your total income. A challenge that should only be left to a professional money manager and which cannot be achieved in a "defensive" portfolio.
My wife and I are in no-load Mutual Funds. I have aggressive growth. She has a more balanced approach (defensive posture) with a mix of stocks (70%) and bonds (30%), again, in a Mutual Fund. She also has a 401k at work which is a balanced portfolio with a 70-30 mix.
I am 63 and I retired at 62 thanks to aggressive investment in Mutual Funds many years ago and making sure we were debt free at the time of my retirement.
With my Social Security, our investment returns, and my wife still working (too young to retire), we do quite nicely.
The best advice I can give is - be debt free as soon as possible and no later than the age at which you want to retire.
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Jim DeSantis publishes a blog about money matters at http://on-line-tribune-money-matters.blo...
Defensive is different for us all. Without considerably more information, it is difficult to give you a 'best answer'. But I can tell you this. You are 60 now, and there is a great chance you will survive to 90+. So your money has to be able to pay for the things you do for that time. If you have MORE than enough money to do that, then consider selling ALL you holdings, and put it all into a MMKT/SAVINGS account - you can currently get 5% - Why? No need to take on more risk than you need to. If you DO NOT have MORE than enough money to pay for stuff - then consider 60/40 - where 40% of your pfolio is bonds, and 60% stocks - consider companies that provide the stuff we ALL need to survive - GAS, ELECTRICITY, SOAP, RAZORS, FOOD, NATURAL GAS, PAPER etc. Most will provide some yield. Then once a year re-balance - 60/40 - This is simple and in my experience effective. Good luck
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