Retiring in 1-5 years

[captainrab]

Torn between getting in the market with a substantial investment due to all time highs. With a little luck I’m waiting on a down turn to get into the market. Any advise from the folks that have crossed this bridge already? Concern is retiring on an up cycle then having a 2008 scenario that takes 3.5 years to recover. I’ve met with 18 Financial Advisers, have dabbled on the outside a bit and have some investments with Edward Jones already. I believe the advisor makes more of a difference than the company after all of the interviews. At any rate, penny for your thoughts. Take care and stay safe.

[2015Ranger]

I think we are all struggling with when to get in or out.
I will say this if as a country we continue to borrow money, run up the debt, encourage people to work less to earn more we will be in big trouble. I cannot give good stock advice other than do just the opposite of what I do and you will be fine.LOL

[Bassin08]

I cannot give you advise on getting in the stock market now, or when to get in. I have been with four different investment companies since I retired in 2005. All of the “advisors” I had seemed to do a lot better than me. I have been terrible in trying to read these people. I have been mostly in cash since 2018. I know I missed the largest run up in years, but I don’t want to participate in the largest sell-off in history either. What is going on now with all of this debt and free money cannot continue. But like 2015Ranger said, just do the opposite of what I have done.

[captainrab]

Thanks for your honesty. Exactly what I was concerned about.

[Peetee907]

captainrab, i am in the same boat as you. Have my money in a conservative investment earning 2.5 - 3%. not really exciting but I don't want to risk what i have. as you, i am waiting for the downturn before doing anything. In the meantime, I'll keep saving as much as possible while still working. Any thoughts on annuities?

[NitroZ7]

I think the question comes down to whether you can be in cash or bonds for your retirement and not run out of money, especially if inflation continues to rise. If inflation averages 3% a year and you earn 1% a year in las or bonds you are essentially losing 2% of your purchasing power every year. Over 25 years that is a 50% loss. On the other hand the market could fall 50% at any point as well. With interest rates this low there really is not good choice.

[Bassin08]

We put my wife’s 401K in a fixed annuity in 2008 @ 5% declining to 3% over time. It is well past maturity now, but that safe 3% looks real good right now. I know we would have earned much more in the market, but that safety feeling really feels good. We put our ROTH IRA’s in high dividend stocks and have just let them grow. Should we have put them in growth stocks, yes, but that’s 20/20 hindsight. I rolled my 401K into a self directed IRA with a 60/40 stock and bond blend. The mistake I made was high expense ratio funds. Like I said earlier, in 2018 I had enough of the BS and went mostly into laddered CD’s in my IRA and brokerage account.

Right now I am trying to figure out my next move to combat the inevitable inflation that has started. Where can I safely get 3-4% today and with whom? I have the worst advisor now that I ever had. My CFP retired the first of the year and I got stuck with a do nothing guy.

[boneil]

There's just too many variables to give you any good ideas. At 1-5 years before retirement, thats when you start thinking about moving some holdings out of the market, not getting in. I can only tell you what I hope to be doing just before retirement. I'm hoping that my holdings today, turn into dividend payers in the future, or, they appreciate significantly and I can sell them to buy dividend payers. But also have enough of a cushion that if the market was to get cut in half at any point, I would still be okay.

You say you are waiting for a down turn, we just had one a year ago. Why didn't you put money to work then?

[captainrab]

We have a lump and 401k at work. You can’t access it until you retire. I’m 57 now and will likely try to make it to 58 or latest 59.5 unless interest rates go up then I will go prior to interest rates going up. Interest rates are included in our lump sum calculations. When interest goes up then the lump sum goes down. That’s why I didn’t get in a year ago. I have enough on the side to wait to get in. Looking at setting up a 70/30 mix so as to minimize exposure. In the interim, just gathering experiences and thoughts.

[BoilermakerZ519]

Too much more information needed about your situation to provide direction you can act on. So only general rules of thumb are useful to reply with.

-Amount to invest depends on what you need to sustain yourself in the short term and long term for that matter.

-level of risk depends on your ability to deal w ups and downs and also depends on your plan’s assumptions on what you need in retirement.

we obviously have been in a long bull run and valuations seem stretched. I have been concerned about these lofty valuations for a decade or more. If I would have listened to the “experts” and perhaps my fearful side and pulled out and moved to cash due to “high valuations”, I would have missed out BIG TIME. Yeah, I know that was a run on sentence.

That being said I do wait for small downturns as opportunities to put money to work. But I don’t pull out…rather I let it ride…and so far, ride higher.

if your question is how best to get in when things are feeling high, then step into it using increments that you are comfortable with. As you do this and the market gives you an opportunity to buy more, then take advantage of it. But holding everything waiting for a big drop is possible but very very tough to do. Most likely you will miss the market returns as it sits on the side negating the benefits of trying to guess a bottom.

wish there was something more technical to share or help you with but that’s the best I can give.

by the way, be sure to have a roadmap that lays out what you need, what to invest, all based on your living needs and other assumptions like years to live, etc. Know the ins and outs of this plan and adjust as you go along or something changes, things become clearer, or both.

hope this helps.

[NitroZ7]

We may get our buying opportunity in the near future. Keep your shopping list ready.

[BoilermakerZ519]

We may get our buying opportunity in the near future. Keep your shopping list ready.

yes. Have been nibbling already as it has been dropping.

[dvl2700]

Shortly after I retired at 56, my wife wanted both if us to put our money with a financial advisor. Through recommendations I put my money into Vanguard at the recommendation of other family members. Paid for their Advisory Services. They are doing better than I was doing alone, and are keeping me balanced in 50% bonds, 50% stocks. Wife likes it and says she won't blame me if we run out of money in retirement. That said, I have been taking my extra cash and occasionally buying some silver and gold from a local dealer.
This run up has been great, I am terrified about the downturn. I only know it will hurt most people except the politicians and real fat cats who are in the know.

dvl2700

A little government and a little luck are necessary in life, but only a fool trusts either of them.

[kmanbear]

Too much more information needed about your situation to provide direction you can act on. So only general rules of thumb are useful to reply with.

-Amount to invest depends on what you need to sustain yourself in the short term and long term for that matter.

-level of risk depends on your ability to deal w ups and downs and also depends on your plan’s assumptions on what you need in retirement.

we obviously have been in a long bull run and valuations seem stretched. I have been concerned about these lofty valuations for a decade or more. If I would have listened to the “experts” and perhaps my fearful side and pulled out and moved to cash due to “high valuations”, I would have missed out BIG TIME. Yeah, I know that was a run on sentence.

That being said I do wait for small downturns as opportunities to put money to work. But I don’t pull out…rather I let it ride…and so far, ride higher.

if your question is how best to get in when things are feeling high, then step into it using increments that you are comfortable with. As you do this and the market gives you an opportunity to buy more, then take advantage of it. But holding everything waiting for a big drop is possible but very very tough to do. Most likely you will miss the market returns as it sits on the side negating the benefits of trying to guess a bottom.

wish there was something more technical to share or help you with but that’s the best I can give.

by the way, be sure to have a roadmap that lays out what you need, what to invest, all based on your living needs and other assumptions like years to live, etc. Know the ins and outs of this plan and adjust as you go along or something changes, things become clearer, or both.

hope this helps.

this is very good advice!
you should plan on market down turns. Have enough cash that you don’t have to pull money out of the market during a market correction.I would advice sticking with a CFP. Edward Jones and similar companies tend to put you in investments with high expense ratios. Over the years, paying an extra % in expenses really adds up. Be patient, don’t be greedy, and don’t make decisions out of fear. All really easy to do in hind sight

[Bassin08]

this is very good advice!
you should plan on market down turns. Have enough cash that you don’t have to pull money out of the market during a market correction.I would advice sticking with a CFP. Edward Jones and similar companies tend to put you in investments with high expense ratios. Over the years, paying an extra % in expenses really adds up. Be patient, don’t be greedy, and don’t make decisions out of fear. All really easy to do in hind sight

This is very good advise! I paid those high expense ratios for years, plus made decisions out of fear. I learned of my mistakes late in life.

[mossie3]

What I'd give to know when a dip was a dip, and a peak was a peak. I'd have been just as well off investing in the S&P index at 100% when very young, with the rest in investments with no risk of principal, then adjusting that allocation down with age by the general recommended guidelines. Not as sexy as picking stocks, but typically just as effective.

[Charles Prestridge]

What I'd give to know when a dip was a dip, and a peak was a peak. I'd have been just as well off investing in the S&P index at 100% when very young, with the rest in investments with no risk of principal, then adjusting that allocation down with age by the general recommended guidelines. Not as sexy as picking stocks, but typically just as effective.

Index funds are a great choice.

I think the general recommendations are outdated.

For example, 60/40 recommendation as you near retirement was very good when Bonds were yielding at least 4% (and hopefully higher some years). Now 40% in bonds is losing money due to inflation.

Also, 20% exposure to Foriegn investment used to be more predictable.

Now, I think the 40% may be better allocated to Dividend funds/stocks, instead of bonds.

I am leery of Foriegn exposure due to all the global chaos. Again, Dividend funds/stocks may be a safer platform.

For 401K’s, I do not like the target retirement funds. Even the 30-40 year target-date funds are too heavy in bonds and foriegn investments. The target funds are still using the general recommended guidelines that worked 30-40 years ago. 30-40 years ago, Interest rates were much higher than today.

[BoilermakerZ519]

Cheap index funds are your friend. As you gain confidence, owning individual stocks can be highly rewarding vs the indexes. Doesn’t have to be an either / or as I (and I would guess most do) use my individual holdings to complement my base funds.

Know your own risk tolerance to set your own asset allocation. Don’t rely on a one size fit all approach …like “100- your age” approach. As Charles says above, the past recommendations of bond allocation do not reflect the current reality facing bonds. Also as your assets grow you might find less and less utility for holding any bonds as a source of diversification/risk reduction. This is especially true when you have enough assets to survive a sharp downturn. Remember there are more ways to diversify beyond the stock/bond ratio. See below.

Understand the characteristics of each asset type…small cap vs large cap…dividend yielding vs non…growth vs value. You can use this to tilt your portfolio to the risk/diversification you can tolerate or want. Lower risk asset exposure can also be achieved using different types of mutual funds like balanced funds. These can be useful instead of holding bonds outright.

Most if not all sources of info and advice will tout the diversification benefits of foreign stock markets. Review the data and decide for yourself. I “diversified” for a span of years using a small allocation to international/emerging markets and learned there is a cost associated with such diversification. So a hard pass for me.

Armed with the confidence and knowledge, you can construct a portfolio that will fit your investment personality and will likely outpace those target funds. That being said, if you hate engaging with the topic of personal finance and investing, having your money in one of these cookbook funds is better than keeping it all under your mattress until you need it.

but likely if you expended the energy to read through this drivel, you likely have the aptitude and interest to learn more and control your own destiny.