Recent stock market volatility suggests now is the time to crash test your retirement portfolio.
Walter Updegrave suggest the follwoing:
1. Review your asset allocation. Divide your portfolio into two broad categories: stocks & bonds.
2. Estimate the downside. "In the financial crisis year of 2008, for example, the Standard &
Poor’s 500 index lost 37% of its value, while the broad bond market
gained just over 5%. So if you’ve got 70% of your retirement portfolio
in stocks and 30% in bonds, you can figure that in a comparable downturn
your nest egg would lose roughly 25% of its value."
3. Assess the impact of a market downturn. "Go to a retirement income calculator
that uses Monte Carlo simulations and enter your nest egg’s current
value as well as such information as your age, income, when you plan
retire, how your savings are invested and how much you’re saving each
year (or spending, if you’re already retired). You’ll come away with the
percentage chance that you’ll be able to generate the income you’ll need throughout retirement based on things as they stand now."
Read the details at: http://time.com/money/3653799/retirement-plan-crash-proof/