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Posted by jIM on January 9, 2007, 1:34 pm
>My targeted retirment age is 60 not 65 so i should be more aggressive now
>because I plan on living until 90. It's simplistic to say I know but I
>would want 30 years living covered by my portfolio. However the option is
>there to work until 65 or longer of course. But all my planning for the
>next 10 years will be on retirment at 60.
>Now according to your rule of thumb I should not consider bonds until 39. 40
>or 41 Correct?
Bonds not needed until about 20 years prior to retirement (and then a
small position 20 years out). For a person retiring at 60, create the
bond position at age 40 is my suggestion and my opinion.
>Here is why I feel Conservative investing and why I want fixed income funds
>or holding in my portfolio.
>I make blue collar income and my prospects for increased salaries are
>diminished. I do not have a high school diploma so indeed any shift into a
>white collar position will be rarely presented although not unlikely, and I
>would probably not pursue it. I do however make a decent slightly above
>national salary now with a stable employment picture. Good for tax refunds
>directly related to retirement and long term investing. Unfortunately the
>city where I live in is I make a low salary. Bad for cost of living
>expenses.
Low income or high income does not indicate risk tolerance (to invest
aggressively or conservatively).
>However after all that spiel I'm thinking several consecutive years with
>bear markets will be harder for me to make up for with a lower salary. That
>is my thinking. But if a prolonged bear market (war, running out of oil,
>bankrupt fed blah blah blah etc etc etc.) were to occur do my portfolio
>increases and reinvestments from earlier bull markets allow me to recover or
>does the addition of capital, i.e. a percentage of my salary, allow me to
>recover??? If somebody can guide me on that question with their expience in
>the 70s or 80s or 90s I would be willing to research. How do you deal with
>a long bear market? My thoughts are to use it as a buying opportunity.
>Could I use the sale of bonds or fixed income assets to fuel the buying
>during a bear market to make up for a smaller contribution from my salary?
>So I think It's my salary that makes me believe to be conservative for my
>age.
>And yes I do have emergency funds set aside that will not enter my portfolio
>and no I do not have any consumer or car debts. In fact I have way too much
>cash in emergency reserves.
Relative to your income, how large is the cash position? Having a cash
position, then investing the rest in equities (100% equities) could
make sense. Maybe 4-6 months expenses in cash, rest in equities. If
there is bear market, use that as a buying point for a portion of the
cash position (maybe 1/6 of cash).
The idea of selling bonds during bear markets to buy equities would be
"rebalancing" and would probably benefit your return (buying low during
a bear market is a good idea).
Savings is based on percentage. A person at a low income level still
needs to save the same percentage (of income) as a person making 5X
more.
A person making 50k per year would be wise to save ~10% of their salary
(5k per year).
A person making 150k per year would just as wise to save 10% as well
(15k per year).
In the US, the person at lower income has some advantages in that
Social Security will replace a large percentage of the 50k income than
the person making 150k. In this regard it would be important for the
person making a higher income to save more to maintain same lifestyle
during retirement.
I agree with most of what JoeTaxpayer posted further down as well.
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