Peter Lazaroff posted Investing in Your 50's which focused on both portfolio and lifestyle considerations as people in that age group are looking around one corner or two toward their retirement. All the advice is sound, nothing that was clearly incorrect or anything but as I read it I repeatedly thought to myself, yeah but.
Again, "the book" would agree with the post but being well into my 50's now, I feel like it ignored real world stuff, or put differently, peoples real life situations are not as simple as the post, as "the book," would have you believe.
I disagree pretty strenuously with his second point of eliminating unnecessary risk from your investments, really the way he framed it. How old are you now? What sort of unnecessary risks are you taking in your portfolio? If they are unnecessary then, ahem, why are you taking them regardless of age? Simply being in your 50's is not a call to derisk your portfolio in my opinion. My oldest brother just turned 70 and our mom is still alive at 91. If you have some sort of similar longevity in your family and you take decent care of your health then in your 50's, you still have a long time you should be planning for.
Side bar, there's a lot of research out there that says habits matter more than genetics. Look it up and draw your own conclusion.
In your 50's, if you don't plan on retiring soon then hopefully you have a decent emergency fund. If so, don't change your investment strategy. In your 50's, if you do plan on retiring soon then yes I would raise a little cash to manage sequence of return risk but would not make wholesale changes out of equities if that is what Peter is implying. He may not be, but that was how I read it and if that is what he meant, I'd say not to do that. Take care of sequence of return risk in whatever way makes you comfortable but if your financial plan needs normal stock market growth in order to work then you need a normal stock market allocation.
Update your retirement goals. Peter notes that in your 50's, you are better able to envision yourself in retirement than you were in your 40's. I suppose that is the case, but what is your experience with how you thought about retirement when you were younger versus how you think about it now? Has it changed and if so how?
My thoughts have expanded I'd say, not changed. I knew in my 30's that I wouldn't want to stop managing money at some specific age and many years later that hasn't changed. Where there's been expansion is into other interests that I could add in for income if I needed but are already a part of my life, have been a part of my life for quite a while.
At 30 or 35, maybe even 45 you may have no idea what your retirement or lack thereof might look like but there are related aspects of self-awareness that play roles in retirement planning at those younger ages. No one, wants to be hurting for money now or in the future. We learn as children to save for a rainy day so that can start at any age even if you give no consideration to what that means for you in 20 or 30 years. If all you knew was if I save now I will have money in the future. Then as you get into your 40's or older and maybe start to question how long you want to stay in your current career you realize that all that money you've been saving gives you some flexibility or as I call it, optionality.
Taking it to your 50's, there are anecdotes and news stories all the time about people in their 50's being forced into retirement or having a much harder time finding work and if they do find work it can be difficult to replace their income. If that happens to you or anyone you care about, how glad will they be to have to face that situation with "ok, can I make retirement work or can I take some job that I'd love even if the pay is a lot less?" versus being 54, losing your job and only having two weeks of expenses in your checking account? Just vaguely knowing 25 years ago to save for a rainy day makes the former far more likely.
The same applies to your health. No one wants to be sick, or weak or shelling out a lot of money every month for prescriptions. Even if at 30 or 35 you can't conceive of what it means to be 60, you learned as a child it's important to exercise not have too much sugar. Again the payoff comes in your 40's, 50's, 60's, forever really when you're able bodied, self sufficient and can do what you enjoy.
There's a whole arc to this of cultivating your interests, finances and health over decades as opposed to waking up on your 55th birthday and saying to yourself "oh man, I gotta figure some stuff out." I realize the latter is what most people do but your odds of success go up taking a very long term approach that starts now. The odds that retiring or moving on to your next chapter or whatever else you want to call it won't be some sort of emotionally traumatic event improve dramatically. If you've been exploring three or four interests for a while, then retiring becomes more like taking one thing off your plate leaving more room for those other three or four interests.
If you're in your 50's and this is all foreign to you, that's ok, start now. It's never too late, you'll be doing your future self a favor.
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