Opinion: A recession is coming, so here's how to protect your retirement.
With slowing global growth, trade wars, and inverted yield curves, it seems everywhere you look someone is talking about a recession. Will we have one? When? Will it be mild or severe?
Is there a better way? Yes. It’s called having a plan. Businesses have them to manage their cash flow, inventory, expenses and such, and they use them to help navigate the constantly changing economic environments. Retirees and near-retirees need a plan, too. A plan keeps you from making quick and all-too-often misguided emotional decisions that may derail your retirement.
Suppose you’re three years out from retirement and you’re 62 years old. You plan to retire at 65. You need $80,000 a year to be comfortable. You plan on delaying your Social Security to age 70 at which time you’ll get about $37,000 a year. From age 65 to 70, you’ll need to withdraw $80,000 a year from savings and investments. After age 70, only $43,000 a year. You want to plan for a 30-year withdrawal time horizon.
Next, you add up your first seven to eight years’ worth of withdrawals, which equals $486,000 and $529,000 respectively. You turn that portion of your investments into a bond ladder, or use other types of safe investments, with the amounts maturing each year matched up to what you need to withdraw that year. You invest the rest in stock index funds. Your allocation will be about 48% to 52% in bonds.
Now, if a recession or bear market comes along, depending on the number of years you want covered, you have five to eight years of safe investments in place, giving you time for an economic cycle to play out. With this type of plan in place, there is no need to let the latest headlines drive an emotional reaction.
Australia Latest News, Australia Headlines
Similar News:You can also read news stories similar to this one that we have collected from other news sources.
The Fear Fund: Nancy Davis’ ETF Aims To Protect Investors From Scary Stuff, Like Recession And InflationThe veteran trader has a contrarian view: investors, all too complacent, are in particular need of insurance against financial trouble.
Read more »
Elizabeth Warren Wants To Cut The Value Of Your Retirement AccountElizabeth Warren's plan for 'accountable capitalism' risks doing more harm than good for American retirement-savers.
Read more »
The Joys Of The Minimalist Life In RetirementHow becoming a minimalist in retirement can save you money and time.
Read more »
Berry Gordy reaches another milestone: retirementMotown founder Barry Gordy announces his retirement at 89.
Read more »
Could a Thomas Cook-like travel nightmare happen here? Here's what you need to know.What steps can consumers take to protect themselves should their airline nosedive while they’re traveling? It comes down to one surprisingly simple move - NBCNewsBETTER
Read more »
Elizabeth Warren calls for a dramatic expansion of Social Security benefitsHer plan hasn't been “scored” by the actuaries, but one estimate is that it would extend the life of the Social Security trust fund by about 20 years.
Read more »