No. of Recommendations: 3

You wrote,People never have the risk tolerance they think they have. I good test or thought experiment, go to a casino and gamble with more money than you can afford to lose. Say 3 to 6 months of paychecks/living expenses. Make you break out in a cold sweat just thinking about it?

What do you think can happen in the stock market? You'd hate to be a year away from retirement, or two or three, and have 2008 happen all over again.


However for a person in their mid-40s, a 2008-like event shouldn't be 3-6 month's worth of living expenses. Honestly it should be a loss of more like 2 YEARS worth of living expenses if they were fully invested in say the S&P 500.

Now when you first read that, you may react and say something like, But I only have 6 months worth of living expenses! How am I supposed to get to years worth of living expenses if I don't take some risks?

Well it's true you should be taking some risks. But while taking risk might be necessary to earn a "real rate of return" over the long haul, taking a lot of risk can be a good way to guarantee losses.

Instead what's usually missing from the retirement plans of individuals like juststartinout isn't an investment strategy. Its a "saving strategy". If juststartinout had one in place for the past decade or more, I guarantee he'd have more than $30,000 in a rollover IRA.

People must save to retire. Too few do.

- Joel
Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.