October 6, 2014

Time for boomers to play defense with retirement investments

Two of the most brilliant minds in financial planning, Wade Pfau & Michael Kitces, suggest that boomers approaching retirement or already retired should plan for a market correction after 5 years of a raging bull market. Ian McGugan, write in the Toronto Globe & Mail: "After five years of surging stock prices, many people are nearing the end of their working lives while sitting on big gains in the equity portion of their portfolios. A bear market now could tear a massive hole in their retirement plans.While that risk is always present to some degree, there's reason to think that the danger is particularly acute right now."McGugan explains:
"The first strategy consists simply of reducing your stock exposure in the early years of retirement then gradually increasing it as you age. This, of course, is precisely the opposite of the traditional strategy of paring back your equity holdings as you age."
"The second strategy consists of reducing your stock exposure at times – like now – when the market is seriously overpriced in terms of what is known as the cyclically-adjusted price-to-earnings ratio."
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