Yes, You Can Still Retire

Here are the real roadblocks to a comfortable retirement and how to get around them.

by Jean Chatzky
Photograph: Illustration: Yuko Shimizu

But if your goal is to have 60 percent of your assets in stocks and 40 percent in bonds, you’ll want to bring those percentages back in line every January, he suggests. “That’s not easy,” he says. “It means selling your winners and buying more of your losers.” This is your protection for when the markets turn—and they always do.

Another challenge is achieving adequate diversification. The advice used to be to purchase in complementary sets: Buy small-cap stocks and large-cap stocks, growth and value, domestic and international. Why? Because these asset groups tended to move in ­opposition—when one was down, the other was up, and whatever happened, you were protected. But as the economy has become more global, those relationships have changed. One market isn’t as likely to go down when another goes up anymore. That’s not to say they are all moving in the same direction; it’s just that the relationships are more complicated than they once were.

You can’t simply hedge your bets by buying this way anymore—say, by purchasing European stocks to balance U.S. stocks. Malkiel’s advice (which I plan to take) is to buy globally in the form of a low-cost world index fund, which will provide greater diversity. Vanguard just launched one that is 24 percent emerging markets, 46 percent Europe, 24 percent Pacific and 6 percent North America. You can access this fund through Vanguard directly as well as through many other brokerage firms. The other alternative (there aren’t many of these yet) is iShares MSCI ACWI Index Fund, an all-world exchange-traded fund, which trades like a stock.

Finally, if you’re inclined to take a hands-on approach to managing your money, I’ve always believed there is enough information available from the Internet and other media sources for you to tackle it. But if you feel overwhelmed trying to figure out your financial life, by all means get some help. You can find objective financial advice at the National Association of Personal Financial Advisors (napfa.org; advisers bill by the hour, by retainer or by assets under management) or garrettplanningnetwork.com (where you’ll find consultants who bill by the hour). Remember, this isn’t a vacation you’re planning for, it isn’t buying your first house, it isn’t even four years of college—it’s the last 30 or 40 or 50 years of your life. If financial advice isn’t worth paying for now, then I don’t know when it will be.

Originally published in the July/August 2010 issue of More. Read more of Jean Chatzky's columns here.

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