U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 02-25-2015, 12:53 PM
 
63 posts, read 67,548 times
Reputation: 118

Advertisements

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?
Reply With Quote Quick reply to this message

 
Old 02-25-2015, 01:42 PM
 
Location: Idaho
4,622 posts, read 4,460,757 times
Reputation: 9040
You give no hint about your dad's lifestyle and what his cost-of-living is in his retirement. If he saved a million bucks, he must have been highly compensated during his work years and therefore has a decent Social Security income. Sounds like your dad would benefit from purchasing some annuities that would guarantee what his monthly income would be into the future, irregardless of what the market does.

I'm still a bit less than two years away from retirement, but during the bull markets you mention, I just let my money sit. They have fully recovered from the downturns. The stock market is a long-term investment and it just causes anguish to look at the short term ebb and flow. I learned this when I spent some time with my TIAA-CREF rep last month. Asking him about one quarterly statement, when I lost a bunch of money, he answered by showing me a long-term trend chart of the fund. That one quarter was just a blip in the overall upward trend of the fund.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 01:42 PM
mzd
 
419 posts, read 756,155 times
Reputation: 932
First - it's "wreck", not "wreak".

Second, tell your father to buy an annuity if the ups and downs of the market make him uneasy.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 01:45 PM
 
Location: SoCal
6,064 posts, read 9,524,350 times
Reputation: 5789
The 'value' of our retirement funds took a bath in 2007-2009 (as well as during previous downturns). But it has since more than made that up. Your dad needs to look longer term at how his investments are performing.

Besides, it's not real money until you get scared enough to sell the stock at a loss.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 02:08 PM
 
Location: Idaho
1,452 posts, read 1,153,447 times
Reputation: 5482
Does your father have a financial advisor or is he investing on his own? The validity of his concerns with the stock/fund market up and down depends not only on whether his current investment/allocation is appropriate for his financial need and age but also on his risk tolerance level.

There are many missing elements in the case you presented here: his age? longevity prospect? what % of his expenses come from fixed income (SS, dividends), what % comes from withdrawals of his nest egg? etc. A good financial advisor should be able to work with him to come up with an asset reallocation that he can be comfortable with.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 04:28 PM
 
71,511 posts, read 71,674,131 times
Reputation: 49088
Quote:
Originally Posted by oddstray View Post
The 'value' of our retirement funds took a bath in 2007-2009 (as well as during previous downturns). But it has since more than made that up. Your dad needs to look longer term at how his investments are performing.

Besides, it's not real money until you get scared enough to sell the stock at a loss.
thats what you think. it is all real money and represents your real net worth at any time.

whether you choose to sell every night and rebuy the next morning or keep the money in play it is all a loss or a gain at any point in time. whether you care is a different issue but don't ever think for one second nothing is real .

if you sold one stock at a loss and bought another and rode it back up as opposed to keeping the same one in play and riding it up there is not one bit of difference except for creating a taxable event if in a taxable account.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 04:37 PM
 
Location: Colorado Springs
4,833 posts, read 4,947,484 times
Reputation: 17302
He could also invest in a bond ladder: own individual gov't bonds with different maturities. Hold them to maturity and you get your principle back. Of course, inflation could reduce their real value.

There is no such thing as a safe, high return investment.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 05:41 PM
 
Location: Florida
4,359 posts, read 3,694,371 times
Reputation: 4085
I think the bond fund is a big problem.
He should have a cash reserve for 2 or 3 years of expenses so he does not have to sell in a down market.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 06:27 PM
 
48,516 posts, read 83,901,398 times
Reputation: 18049
At least it keeps him in the game of life; is my only thought. But then many would love to have his millions dollar worry really.
Reply With Quote Quick reply to this message
 
Old 02-25-2015, 06:55 PM
 
Location: Wisconsin
21,535 posts, read 43,982,964 times
Reputation: 15135
Quote:
Originally Posted by rjm1cc View Post
I think the bond fund is a big problem.
He should have a cash reserve for 2 or 3 years of expenses so he does not have to sell in a down market.
Absolutely. The allocation is not right. Where's the cash???

He should be:

15- 20% Cash/Equivalents - $150k/$200k or enough to cover his cash withdrawals for 3-7 years or somewhere in between
35% Bond
50% Equities

or some combination of the above. Not 50% bonds/50% equities.

Then if the market takes a dive, so what? He's got enough cash to ride it out. In years of big profits, either in bonds or equities, take some profits, replenish the cash. And rebalance annually.

Also, the idea of an annuity is a good one to secure a portion of what he needs from this portfolio.

He shouldn't be worrying with a 1MM portfolio. Easily fixed. Do a reallocation and consider an annuity.
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top