Not Losing all my Retirement Investment
August 7, 2020 9:54 AM   Subscribe

I'm retired, and finding work-from-home hasn't been successful. My retirement funds have taken a rollercoaster ride. At the moment, they're where they were pre-Pandemic, but that could change quickly. I've set an appt. with an adviser from my retirement investment company to discuss and possibly re-balance as I would like to be in more socially responsible investments and have a better sense of things. Comments on some articles to read and approaches to take on investing during Pandemic. It's not gobs of cash, and it's what I have to supplement Soc. Sec.

Socially responsible investing is a goal for me, even if not for you. And some sense of security. yeah, as if.
posted by chekhov's sock to Work & Money (9 answers total) 6 users marked this as a favorite
Yes, you should speak to an advisor to move your investments if they are not substantial (ie: $250k but less than $1m) into lower risk funds that have way less volatility, maybe CDs or bonds. At that rate, you don't have the money to survive crazy swings without taking a serious hit in investment income.

I think you are going to have more trouble with the 'socially responsible funds' part, not because it's not a good idea, but because that would leave them invested in riskier assets that will continue to wheel with the market. If you are good with that, then sure, invest in some socially responsible funds.

If you have closer to $1m, then you can split it by (1/4 invested conservative, 3/4 invested if risky) and still be good, depending on the amount of income you are expecting. Some more details about that might help.
posted by The_Vegetables at 10:11 AM on August 7, 2020 [1 favorite]

BTW, there are different socially responsible funds depending on what issues you care about.
Here is an article about different ones so you can have some info to discuss with your advisor.

US News slideshow
posted by The_Vegetables at 10:17 AM on August 7, 2020 [1 favorite]

I’m living on a fixed income. I’ve taken every penny out of the market and put it in AAA bonds or CDs. And that is where it will sit until at least next spring.

It kills me to be dipping into capital to live, but it beats waking up every morning wondering if the market has crashed yet.
posted by Tell Me No Lies at 11:36 AM on August 7, 2020 [2 favorites]

You have not mentioned the name of your "retirement investment company" but be very careful the "adviser" isn't motivated to steer you into investments that make more money for them than for you.

In particular there are a lot of socially responsible funds that have very high fees. Avoid them. A couple of low cost examples are the Vanguard FTSE Social Index Fund with an expense ratio of 0.14% and the Fidelity U.S. Sustainability Index Fund with an expense ratio of 0.11%. Avoid anything with an expense ratio over 0.20%. If you adviser tries to steer you away from the two funds above, you might take that as a clue they don't have your best interests as foremost.
posted by JackFlash at 11:54 AM on August 7, 2020 [8 favorites]

If your advisor tries to sell you an annuity, run far away. People looking for safety get sold on annuities and the kind of annuities that get sales pitches are inevitably just a way to line an advisor's pockets.
posted by BungaDunga at 12:10 PM on August 7, 2020 [2 favorites]

what you want is a fiduciary financial advisor. They make their money from you and not from commissions and so have a fiduciary duty to you to act in your best interest. On the flip side of the coin, they make their money from you so they cost a lot more. But better to pay somebody more to help than to pay them less to help themselves.
posted by rtimmel at 12:23 PM on August 7, 2020 [1 favorite]

The worst case scenario would be the Crash and Great Depression of the 1930s. If that were to happen today, stocks would fall by about 90% and take 25 years to fully recover. Ten years iirc if you factor in dividends.

People have been expecting a big stock market crash for quite some time. It may or may not happen. My approach is that I don't want to be blindsided. Sure it's a once in maybe 100 year event, but so is a pandemic. Therefore, I have less than 30% of my assets in the stock market. The rest is in fixed income, gov't guaranteed investments.

It comes down to your risk tolerance. But at any rate, it is generally not prudent to have more than 50% of your net worth in the stock market. Because it's a general rule it doesn't take into factors like the kind of stocks held (large cap, small cap, dividend paying or not) nor does it take into account measures of stock market valuation (P/Es and market caps). Still a stock market allocation of 100% for example would be beyond the pale for most people.
posted by storybored at 8:19 PM on August 7, 2020 [1 favorite]

But at any rate, it is generally not prudent to have more than 50% of your net worth in the stock market.

No it wouldn't it really depends on how much time you have. Let's take the pandemic: stocks fell by about 40% between March and August. Now they are up about 5% from before the pandemic. If you have 25 years before you need the money (your worst case), then who cares what it does day to day?

Think about what the best case scenario for investment: that for 50 years it is worth $1 and jumps to $1billion on the day you want to sell. Low taxes, low costs and them boom! huge payout. Most of us don't have a time machine, so we have no idea what it will do so we invest regularly and at the max of our risk profile, and most of us have a limited amount of time to invest, and your strategy needs to change as you get closer to having to use the money.

So since time is the most important factor, and having more time allows you to be brave. So a 100% stock-invested person who is between the age of 25 -40 is not at all particularly risky. Someone who is 65 on the other hand probably doesn't have 25 years to recover. They need the money soon.

The amount of investment matters too. If you have $10m and the stock market loses 40%, you still get $240k a year if you withdraw 4% in retirement. If you have $1m and the stock market loses 40%, you go from getting $40k a year to $24k a year, a huge difference. That's why you need to speak to an advisor about how much you have, how much you need, and what your goals are.

Also, PE ratios, dividends, and small cap vs large cap are completely immaterial to small time investors. If your advisors start talking about stuff like that, they are trying to snowball you.
posted by The_Vegetables at 2:15 PM on August 11, 2020

Please note, I was pretty much forced into retirement by current events. I am committed to investments that are at least not vile, i.e., I don't want to profit from making landmines. thanks for the answers.
posted by chekhov's sock at 9:18 AM on August 24, 2020

« Older Help me list film, TV, play, book, etc. scenes of...   |   Yellowstone, pandemic style Newer »

You are not logged in, either login or create an account to post comments