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In twenty years million bucks wont be worth much anyhow. College will be 100K a year, kids out of school will start at 100K salary and a value meal will be 20 bucks.
My father is retired and is living off dividends and withdrawals from his million dollars in investments, plus Social Security. Retirement was suppose to be the most pleasant years in his life but he is always worrying about what the stock and bond market is going to do and what impact that will have on the standard of living during the rest of his retirement.
He is 50% index funds in the stock market and 50% in a total bond index fund. He told me about how much he had to do to save up a million dollars in his retirement account. Now if we have another bear market like 2000-2002 or 2007-2009, a good percent of the money he saved could be lost. He keeps saying, "this is real money, not paper losses, big numbers." On one day when the stock market dropped 3% he lost $15,000. (3% of the 500K he has in stocks.) He said, "Son, back in my day $15,000 was a years salary!"
Are you a nervous wreak that your retirement funds will go away in the next recession or bear market? Are you a nervous wreak in retirement when everything you have is based on other people's decisions totally outside your control?
If your father is retired, he should not be 50% in stock index funds. He should be really no more than 20% in stocks, and the rest in bonds and and other income producing investments. I manage my retired fathers portfolio, but it's a nightmare, because he too is one of those "emotional" investors, who likes to buy high and sell low.
You can't really change their mentality, but if you can, I would advise him to move more money into more stable bond funds and other high income producing investments right now. REITS are a good value and have very nice monthly dividend returns, and many are selling at a huge discount to their book value currently.
A million dollar portfolio going up and down $15k in a day is really not that unusual. You have to look at like this....If it was only a $1 portfolio, it went up or down about a half a penny.
My father is retired and is living off dividends and withdrawals from his million dollars in investments, plus Social Security. Retirement was suppose to be the most pleasant years in his life but he is always worrying about what the stock and bond market is going to do and what impact that will have on the standard of living during the rest of his retirement.
He is 50% index funds in the stock market and 50% in a total bond index fund. He told me about how much he had to do to save up a million dollars in his retirement account. Now if we have another bear market like 2000-2002 or 2007-2009, a good percent of the money he saved could be lost. He keeps saying, "this is real money, not paper losses, big numbers." On one day when the stock market dropped 3% he lost $15,000. (3% of the 500K he has in stocks.) He said, "Son, back in my day $15,000 was a years salary!"
Are you a nervous wreak that your retirement funds will go away in the next recession or bear market? Are you a nervous wreak in retirement when everything you have is based on other people's decisions totally outside your control?
~Your father and I have a similar situation. I’m retired in my mid-seventy’s thus required to withdraw approximately 4% annually from my IRA account. All of my investments are in an IRA, 60% stock funds and 40% bond funds. I also have $60K in my checking account and $100K in money market account. Our monthly income is about $10K. Our adjusted income tax is approximately 11 or 12%. I never worry about the ups and downs of the market and lost over a million dollars during a down cycle and recovered nicely. We have no need for so much income and are able to help our children.
We are fortunate at this time in that we can look back into the recession years of 2006,7 etc and see how our investment did at that time, and thus expect at least that amount of damage. If we raise our standard of living above that then we would be foolish indeed.
If your father is retired, he should not be 50% in stock index funds. He should be really no more than 20% in stocks, and the rest in bonds and and other income producing investments.
I have to really question some of the advice I am reading here, including this comment as well at the other one about not being in funds. Now I will admit that the OP's father may have a lower risk tolerance than most, though I'm sure I'd be the same way when my paychecks stop, but there is no way I can see only 20% in stocks unless he is going to be gone in 5 years. Most retirements last decades and if you are not in at least half stocks you are simply losing to inflation. And investing in funds rather than individual stocks reduces the risk.
I actually like his breakdown of 50/50 with low fee index funds.
This is a mindset issue... no matter what investment choices he makes apparently he will agonize over it. Counseling by an investment knowledgeable professional might help.
A million dollar portfolio going up and down $15k in a day is really not that unusual. You have to look at like this....If it was only a $1 portfolio, it went up or down about a half a penny.
This is a mindset issue... no matter what investment choices he makes apparently he will agonize over it. Counseling by an investment knowledgeable professional might help.
I totally agree. I came across a financial advice article today which makes a lot of sense to me:
My father is retired and is living off dividends and withdrawals from his million dollars in investments, plus Social Security. Retirement was suppose to be the most pleasant years in his life but he is always worrying about what the stock and bond market is going to do and what impact that will have on the standard of living during the rest of his retirement.
He is 50% index funds in the stock market and 50% in a total bond index fund. He told me about how much he had to do to save up a million dollars in his retirement account. Now if we have another bear market like 2000-2002 or 2007-2009, a good percent of the money he saved could be lost. He keeps saying, "this is real money, not paper losses, big numbers." On one day when the stock market dropped 3% he lost $15,000. (3% of the 500K he has in stocks.) He said, "Son, back in my day $15,000 was a years salary!"
Are you a nervous wreak that your retirement funds will go away in the next recession or bear market? Are you a nervous wreak in retirement when everything you have is based on other people's decisions totally outside your control?
What is his withdrawal rate? If it is 3% or less, he shouldn't have anything to worry about. Even it it's as high as 4%, the odds that his money will last are pretty good.
But the real issue is you can always worry no matter how much you have or how low your withdrawal rate, and that is a much tougher problem to solve.
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