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Investing for Retirement

Here is what it is all about.  When young, our most valuable asset is our ability to earn money.  Protecting this income stream with life and disability insurance is critical.  Over the course of our working life, we convert our wages into savings and/or investments that will generate an income stream when we are no longer willing or able to work... or they no longer want us around.

We already discussed the importance of aligning your investment objective with your investment time horizon. Because you don’t spend all your money on day one of retirement and given that many married couples age 65 today will see one spouse live to 95, even those on the verge of retiring have a long investment time horizon.

When you are young and accumulating wealth the volatility of the stock market is your best friend. By dollar cost averaging you buy more shares when the market is beaten down and less when it is rich and expensive. This volatility becomes your enemy when you retire and begin withdrawing from your portfolio. To maintain the same income stream you must sell more shares when the market is weak.

So over time you must reduce your exposure to stocks and increase your allocation to bonds. But you cannot give up on stocks altogether as they keep up with inflation. Over the long term treasury bonds actually lose money on an inflation-adjusted basis. 




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