Does Investment Conservatism pay off?

June 10, 2013

One of the questions I get as clients approach retirement is, “What do we need to change with our investment strategy as we begin drawing an income?”

Our income portfolio’s do look a little different than our growth portfolio’s.  We start adjusting allocations 3-5 years from the expected withdrawal date.  Put simply, we allocate only enough funds to fixed income investments (bond funds) to protect two to three years of income draw and maintain as high an allocation to equities as our clients need.  Retiring at age 62 means a couple has a high probability of one of them still alive at age 90.  With inflation doubling our expenses over 25 years, investments that grow faster than inflation will be needed for a long time.  This means equities.

This article suggests that when you analyse the options, being too conservative with your investments isn’t worth the cost.

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