Balancing Stocks vs Bonds as You Retire

For those fortunate and dedicated enough to have built a significant portfolio balance before retirement, determining what to do with it post-retirement can be difficult. For these investors, optimal growth and effective risk management has been their entire focus for the last 30 or 40 years, and it can be difficult to shift gears once it’s time to retire.

The last thing any retiree wants is for their portfolio to take a major hit after they retire. It’s a big commitment to pass on the torch and give up your job at the peak of your career and earnings. It’s not a decision that can easily be reversed; in many cases, it would take a decade to get back to where you once were.

As such, even the wealth management experts of the Oxford Club understand that is not practical to pursue maximum gains forever. Alexander Green, director of the Oxford Club in a few pieces of advice for retirees in this exact situation.

The major takeaways from the lesson is that bear markets do not last forever, but they often last a lot longer than is comfortable. Since the average bear market takes three and a half years to recover, Green recommends that retirees keep 5 years worth of living expenses in a fixed-rate account.

It is not something that is done lightly though. You do not want to make this change if you are already in a bear market because these stocks are poised to make a comeback. Nobody can completely time the market, but it has been more than 10 years since the last bear market, and the business cycle indicates that the next bear market is coming soon.

Once the market recovers, a minimum of five years after the bear market has begun is when he recommends that retirees re-balance their stock portfolio. They can do this by liquidating equities and restocking their five-year reserve.

For many, this five-year reserve can be difficult to build, but for anyone who follows the principles of the Oxford Club and Investment U it should be no problem. Starting early and following the principles in the newsletter is all any investor should need to ensure a stable income for retirement.

For more information on the Oxford Club, follow them on Twitter @The_Oxford_Club

LizaF