Tuesday, November 2, 2010

Retirement planning with stocks at age 50

You may be feeling a little shaky about investing in stocks if you’re age 50 or older, but don’t let the rocky market completely scare you away from retirement planning. While many lost a large chunk of their money due to the falling market, research has shown that the market generally trends upward over long periods. If you’re age 50, there are still 15 years until retirement, meaning that you can take on some risk as long as you’re careful.
Balance your stocks
As a general rule, subtract 100 from your age to get the percentage of stocks you should have in your portfolio. So if you’re 50, then you should have 50 percent of your portfolio in stocks. However, if you have little risk and a high life-expectancy, many experts agree that the percentage should be more around 65 or 75. After you turn 60, pull the percentage down to 50. If you don’t feel comfortable with that much risk, abide by the rule of thumb for investing in stocks when retirement planning.   
Put retirement planning on autopilot?
Target-date funds take the decision making out of investment by automatically adjusting the amount of stocks, bonds and cash in the fund as you age. While they can provide an easy way to manage your retirement fund, it may be more beneficial to rebalance your portfolio on an as needed basis. You may get better returns through a proactive approach of checking your investments at least once a year.  
Can you afford the risk?
If your savings is high enough, and you only need to spend a small amount to supplement your pension, then you can afford to invest aggressively. If you have a smaller savings and have to take out a large amount per year, then you should be more invested in fixed income.

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