Interesting conversation with Christine Benz from Morningstar about retirement asset allocation.
Overview:
In retirement:
Assume portfolio of 25x annual living expenses (less pensions and social assistance)
allocate 2 years worth of expenses in guaranteed investments. High interest savings.
allocate 8 years worth of expenses in low risk funds. Quality bonds, a small amount of dividend paying equities
Allocate the rest of your 25 years worth of funds (15 years worth of expenses) in globally diverse equities according to risk tolerance.
Continuously rebalance to maintain the same allocation.
ie, in a time when equities are doing well, draw living expenses from your equities, in a time when equities are doing poorly, draw from the savings account, and bonds if needed.
I have been thinking that the idea of putting retirement funds on cruise control is a bad idea. Some of that money could be invested for 30+ years. That's a lot of opportunity cost. This podcast is exactly what I was thinking.
Maybe people smarter than me already do this. I liked the podcast anyways. Very good presentation of the idea.
Submitted April 30, 2017 at 01:12PM by finanshalom http://ift.tt/2pxAkiR
