Most of the Personal Finance columns that I have read in newspapers seem to focus on the Doom and Gloom, which many people associate with Retirement.  Will you have enough to live on?  What will the impact of higher expenses for Health Care be?  And, when will the Social Security System run-out of money–if ever?  Unfortunately, many pre-Retirees have just not put enough money aside for that day when the paychecks stop coming in.

It has traditionally been assumed that Retirees would live on a combination of:  Social Security; Pension Benefits and Personal Savings.  Many employers don’t even have pension plans today?  So, for the people who didn’t plan ahead themselves, life after the paychecks stop coming-in could be very difficult.  But, what if you did have a Pension, stayed employed, lived frugally and invested wisely:  what about then?

Assuming that you first updated your Estate Plan (Will, Durable Power-of-Attorney and Health Care Surrogate), the next step is to review your Financials.  What is your Net Worth:  the net difference between your Assets and Liabilities?  Then, what will your Cash Flow be after you retire:  regular Cash coming in (Social Security, Pension, Business or Rental Income, etc.) and regular Payment Obligations (Mortgage, any Loans, other Family Obligations, etc.)  In some cases, you might not really need to take much money from your Retirement Plan or personal savings.  So, how does that change things?

Now, let’s look at your Investment “Asset Allocation” (percentage in Cash, Stocks, Bonds, etc.).  Traditionally, for investors who were, let’s say, 60 years old, it was recommended that they invest roughly 60% in bonds, 40% in stocks, and carve a little out in cash.  Nowadays, as people live longer, it might be suggested that a Woman have, perhaps, 40% in bonds and 60% in stock.  Similarly, a Man would be encouraged to use a 50-50 split between the two asset classes.

If you live for, let’s say, 30 years in Retirement, you will certainly still need to keep pace with the Cost of Living throughout. Remember also, if the World’s Population keeps growing, the Price of Food and Commodities will certainly rise.  And, then there is the Cost of Health Care.  When you do Retire, always, ALWAYS factor into your portfolio the assumption that, at some points, there will be major down-cycles in the Markets.

Also, if you don’t expect to need much of your Retirement Funds when you stop working, then you might actually be investing for the Next Generation.  So, now the updated Asset Mix might not look so very wrong, huh?  Gifting now (perhaps for Grandchildren’s College Fund) might be suggested in order to reduce your Taxable Estate.  Remember that all withdrawals from tax-deferred accounts will be taxed.

Also, you might consider shifting tax-deferred assets out of Traditional IRAs and company-sponsored retirement plans before you are required to do so.  The amount of your Taxable Income may impact the Tax-Bracket you will pay on your Social Security benefits.  As always, be sure to address any specific tax considerations to your personal tax advisor
Don’t allow the Financial Advisor to design what your Investment Objectives should be.  You might accept their guidance; however, they should be based on your own Risk-Tolerance and Personal Preference.  Remember, it’s Your Retirement!

As you get older–50, 60, 70, etc.–the bond portion of your portfolio will be emphasized more and more to you.  Most FAs really don’t understand the bond markets; because, they don’t have the excitement of stock-picking.  So, if your FA recommends mutual funds with “buzz” words, like High-Yield or Short-Duration, ask them what those terms mean.  Does their explanation(s) make sense?  The bond portion of your Portfolio should have a mixture, just like stocks vs. bonds, domestic and overseas, and a varied distribution among the industrial sectors (i.e. energy, health care, industrials, technology, etc.).  A bond mixture between longer-term, global, and short-term issues might make sense.

The Portfolio recommendations that the FA is proposing should make sense, and be explained to you in an understandable manner.  Just because it is a “Plan”, and it is managed by some team of analysts in the Home Office, is not an explanation. Also, if the FA cannot explain their recommendations fully and answer all of your questions, you might consider looking elsewhere.  Remember that you are deciding how to invest for your (hopefully) many Years in Retirement.  The FA should also commit to be in touch with you from time-to-time, and suggest future changes, when appropriate.

NOTE:  Many years ago, I read several articles, by psychologists, suggesting that, once people reach 50 years of age or so, they tend to better understand pictures and charts, more than “reports”, busy graphs and statistical documents.  The necessary software is available, and it should be used and properly presented to you.



  1. #1 by Caleb on May 19, 2014 - 6:25 PM

    Hello i am kavin, its my first occasion to commenting anyplace,
    when i read this article i thought i could also make comment due to this brilliant post.

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