Regular readers know that I have become increasingly cynical and skeptical about conventional investing wisdom. Others are joining me in this trend, with actual investing science to back them up.
That may be true when considering market returns as a percentage. It is not true when you consider actual dollars in your retirement accounts.
That is the message of a recent post from the New York Times Bucks blog. The message is actually worse: Your investment risk in dollars can actually increase over time. The blog post cites an academic study that provides the science behind the bad news.
What does this risk conundrum mean to the baby boomer preparing for retirement? It means do not rely on a financial plan or retirement income plan that is based on an expectation of average percentage market returns. That is foolish. You must instead focus on income generated by your plan, in dollars. Most of that income better be guaranteed. If not, you may end up eating cat food or moving in with junior.
Next time some financial planner talks about long term investing and percentage market returns, you need to adopt a polite but firm “show me the money” attitude.
Here is the link to the post: Why Investment Risk Increases Over Time