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Money Never Retires
Don't Let Your Money Retire
Dear Jeff:
My wife and I will have approximately $750,000 in stocks, bonds, T bills, etc. A piece of property which we plan to sell next year (1999) is assessed at $200,000. Do you think it would be a good idea to be ultraconservative; i.e., invest in CDs with the money from the land since I am 55 next year and will be retiring with another $250,000 from my 401K? I'm thinking of having about $4,000 per month income from the investment portfolio. My wife currently receives $1,500 each month from this account. Any information you care to share would be appreciated. Anonymous Jeff Says:
You are a young man at only age 55 and it sounds like you have been very disciplined over the years to have saved such a sum of money. However, just because you retire, does not mean your money should.
You did not indicate when you actually plan to retire or how much income you need, so let's assume you retire at age 60. You could easily need an income for 20 or 25 years, maybe even longer. Will your existing assets provide you sufficient income for the balance of your life and that of your wife? They may not.
At this point, you may think I'm nuts about the possibility of your money dwindling, but I am really not. Consider inflation. If inflation were to average 4 percent, your income in 18 years would actually have to be double the amount that you need at the beginning of your retirement just to maintain the same purchasing power. If you start to receive $4,000 at age 60, then you will need $8,000 at age 78 just to break even.
So, how should you invest the money from the sale of the land? Consider working with a financial consultant to determine your risk tolerance level. Once you know this, you can then design a diversified portfolio using an asset allocation strategy consistent with your risk tolerance. This approach to investing is relatively easy to manage and allows you to obtain better overall returns for less risk. It also helps prevent your money from expiring before you do.
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