questions for board

johnN

Hope you are good
my friend will retire in ~ 6 or 7 yrs, he lost 27% of porfolio past 4 wks. He is well diversified I think 70% stocks 30% bonds mostly in index and Target dated funds 2030

He was asking me when DOWS reach new highs >31K again so he can slowly pull out and go 50/50 before retirement

I told him maybe good to consider changing porfolio 6-12 months prior your retirement maybe heavy in bonds [like others did here when DOWS 28K or so RIGHT prior to crashes].

Any Ideas? 2023? IMHO - I think it may take awhile for this to recover few months and then we may have slow downs, maybe takes some times to market to recover/heal and start upswings again so could be 12-36 months before see DOWS 30K again. But we never know, it maybe there again in 6-8 months.

David_Snowball

Hi, John.

You might want to check in with T Rowe Price. They have revised the glide path for their Target Date funds and have, for a number of years, recommended considerable caution in the years immediately before retirement. If I recall correctly, they allow for somewhat greater equity exposure after retirement than in the 2 years preceding it.

They have likely posted articles on the subject, but I don't have immediate access to them because I am sitting in the waiting room of an auto repair shop. No coffee. Too risky, they've concluded. Also, no one else in the waiting room.

David

Mark

"He was asking me when DOWS reach new highs >31K again so he can slowly pull out and go 50/50 before retirement"

NO ONE I repeat NO ONE can answer that question. Period. They can guess all they want but they would just be guessing.

catch22

my friend will retire in 6-6 yr, he lost 27% of porfolio past 4 wks.

This is a paper lose I presume; meaning he did not sell anything for a real lose, yes?

As with @Mark . Tis not possible at this point to provide any guidance.

john,you agree, yes?

johnN

thank you all. yes, lost about upper 27s% paperloss

Sven

Your friend need to review his retirement strategy carefully. It is still not too late since he has 6-7 years before retirement. He may consider using an asset advisor to guide his planning. In my humble opinion, his 70/30 allocation is too aggressive given the current market conditions. He should be reading the informative MFO articles from our Charles Lynn Bolin. Also he writes for Seeking Alpha.

Using target dated funds is a good starting point in his planning. Being well inform will keep him/her of making irrational changes in this moment of time.

Mark

@johnN - Maybe you and your friend might benefit from reading this article today from Michelle Singletary at the Washington Post in her Personal Finance column.

Where to Now

Derf

"The last time the stock market saw declines like we’re experiencing, Congress suspended RMDs for one year. Because of the dramatic decline in retirements accounts, RMDs due in 2009 were suspended. The waiver also applied for people who turned 70½ in 2009 but decided to delay their withdrawal until April 1, 2010.

I’m sure such a waiver for RMDs due this year would be a welcome relief to many people who are looking at taking withdrawals when their retirement accounts have experienced major declines."

If one has (CASH) sitting in account due for RMD, take the RMD, pay the taxes & then put what is left of distribution to work !

What say he or her ?
Derf

Mark

@Derf - Sounds reasonable. I got a 2-yr reprieve on the RMD business but I've used this downturn to convert my entire T-IRA to a Roth IRA. At before and after pricing all things being equal it has saved me 1/3 to 1/2 the taxes I would have owed eventually. It also makes my portfolio easier for my eventual inheritors to deal with. Sum total (I think) 2 wins to one big paper loss and as the song lyric goes "2 out of 3 ain't bad."

sma3

One of the most aggressive "allocators" I have run across is American Association of Individual Investors "Level three" portfolio. James Cloonan spends an entire book trying to prove that there has never been a period longer than five years where the market has not recovered.

I looked at SPY from it's peak in 2008 and discovered that in fact it took seven years if I remember. In the 1930s it took longer if you start at the very peak.

70 % is probably too heavy a stock allocation that close to retirement if he needs to live on the assets at retirement. It is probably too late to do anything, but I think this will rival the drop in 2003-2009 which was 45% so if it will torture him in the next seven or more years he could lighten up stocks, but no one can tell him when.

Will the market be higher sometime between now and when he retires? Probably but who knows?

THE WSJ has a chart of the price at various levels of PE but no one knows what the E will be. We are also seeing a dramatic de risking so the PE will clearly fall

I am on the pessimistic side and I think calls that this will be over in early summer are too optimistic. It may slow but will probably come back until their is an effective vaccine.

Having said that there will probably be a better time to reduce his equity exposure in the months ahead

royal4

Lucky if back to even in 5 years but NOBODY knows. Many people will find they weren't comfortable with their current asset allocation. They will be re-balancing and pulling out of stocks as they get "back to even" or close to back to even so there will be major headwinds IMHO

johnN

Thanks for extremely helpful advice ..will let him know and asks to join

.he maybe too busy w works