Expert Q&A

The right portfolio begins with understanding what you want and can do with your life during retirement. Ask these questions: (1) If you had all the financial resources you needed, how would you live your life in retirement? (2) If your income were cut in half, what would you give up and how would your life change?

Most people cannot really identify their risk tolerance and tend to “deworsify” their portfolios in the name of diversification.

The correct portfolio for a retiree is the one that is customized to achieve the retirment objectives to outlive you the retiree.

Yes, there is a “standard” mix, but more importantly there are some major questions you should know before placing your money into any investment(s) – especially at retirement. Your answer lies in asking the right questions. Just answer “yes” or “no” to these basic questions:

1. Have you identified your personal risk tolerance? 2. Do you know how to measure diversification in your portfolio? 3. Have you devised a clear-cut method for measuring the success or failure of your portfolio? 4. Do you have a system to measure portfolio volatility? 5. Do you know the best and worst case scenarios for the mix of stocks and bonds you are considering.

If you answered “no” to any of those questions, then you must first get the answers BEFORE you place the right mix of assets in your portfolio.

Hope that helps.

If you would like to know more, then take the 20 Must-Answer questions at the bottom of our website: http://www.thefinancialcoachinggroup.com/

Michael

Great question.

Once you are at retirement, BE VERY CAREFUL OF THOSE “RULES OF THUMB” STRATEGIES. They can work but still do not ever cut corners on planning and evaluation. Retirees and Senior citizens get taken advantage of all the time and it is sick. First of all make sure you are DEBT FREE as fast as possible. Make sure you have a realistic FINANCIAL PLAN with the budget included.

Re-evaluate you insurance needs and expenses. Make sure you have some sort of emergency fund, ideally 1 years worth of expenses in a good money market account. Why? That way if your portfolio experiences a huge market downturn you can avoid liquidating your funds at an alarming rate.

And after you figure out where you stand financially and what sort of income you need. Then start thinking of how much risk you can afford, how long the money needs to last and so forth.

Once again be very careful and thorough in your planning. And only take good qualified advice from professionals who have the heart of a teacher not a salesman. The last thing you need is to purchase some ridiculous insurance policy.

Let me know if this helped. Thanks.

Dennis
www.dennischerenkov.com

Beware rules of thumb or generalizations about what your portfolio should look like based on your age or your stage of life. Your portfolio mix should be based solely on your personal goals, resources, willingness to take risk and other factors. I have younger clients with very conservative portfolios and I have older clients with relatively aggressive portfolios. This isn’t based on their age or their “risk tolerance” but is instead based on what’s important to them and their priorities.

We always like to use the rule of 100. Take your age (e.g. 66) and 66% of your portfolio should be in SAFE (CDs, annuities, etc.) money. The rest can be in equities, stocks, etc.