No. of Recommendations: 1
... My mother is 48 and my father is 52...

There is a very good chance that at least one of them will live into their 90's or beyond which means that part of their money will be invested for 40+ years. Encourage them to not be too conservative. It is not an outrageous assumption to think that sometime in the next 40 years inflation will hurt fixed investments as badly at it did in the 1970's and 1980's.

Somewhere (I can't remember where) I saw a strategy of looking at your retirement assets allocation by when you expect to spend it. For example you can pretend you have at three separate retirements funds to invest and look at how long they have to invest;

1) Late retirement fund, from age 85+ (35+ year)
2) Mid retirement fund, from age 70 to 85 (20 to 25 years)
3) Early retirement fund, Up to age 70 (about 10 to 20 years)

When you think of it this way, keeping much money in low yielding fixed investments for decades does not look very sensible.

When you are evaluating what percent of their current portfolio is “conservative” and don't neglect to include some allowance for social security or fixed pensions which can be basically treated like an annuity for asset allocation. For example if they are expecting $1000 per month from social security, then this should be treated as a fairly large annuity when you are looking at their total asset allocation.

Right now interests rates and inflation are about as low has they have been in a generation. For what it is worth I am about their age and I am underweighting fixed investments, especially in taxable accounts.

Greg
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