It's always a good idea to plan conservatively for retirement, as unexpected expenses are almost always the rule, while unexpected income is a less frequent occurrence.
Retirement planner Henry Hebeler, a former vice president of strategic and operational planning at Boeing, offers several elements of a conservative strategy on MarketWatch.
- Establish an emergency fund. Obviously you want to be in a position to handle those surprise expenses.
- Account for major expenses, such as a new car.
- Take into account your investment costs.
- "Use a planning program that lets you choose a stock allocation in which you can accommodate the swings in security values and inflation," Hebeler writes.
- "Select a retirement budget level that will support you well past your 50 percent life-expectancy age." You certainly don't want to outlive your savings.
- Adjust your retirement plan every year. If your plan includes a budget increase much higher than inflation, consider changing the budget to an average of what you planned for the new year and your budget from the prior year.
As for retirement investing, be careful not to overstuff your portfolio with bonds, says CNBC commentator Jim Cramer.
When investing in Treasurys, "you're saying, this money—I'm not going to use it to generate more wealth, I just want to keep it safe," he explained on his "Mad Money" show last week.
"I know retirement money is meant to be sacrosanct with little risk taken, but it's possible in this era of very low interest rates, to be too cautious, too prudent, and too risk averse. There's a point where all of your prudence becomes recklessness."
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