In Your Interest – by Valerie Rumbough

How’s your retirement plan doing? Although many have seen significant gains this year, those gains have not offset the losses that have occurred over the last two years. What has been very interesting, however, is the pattern of recovery.

Valerie Rumbough

Even though the last two years seemingly have been unusual, the recovery actually almost mirrors the average rate and length of recovery for the last 75 years. This helps me to understand that, although past results cannot be relied upon for future returns, we can still look at patterns in the past to help us make decisions for the future.

One of those decisions that you may need to make is how to allocate your portfolio between stocks and bonds. I still believe that if you are within 10 years of retirement, you should begin shifting your portfolio to bonds, a little each year. By the time you are ready to retire, you may only need 20-30 percent of your portfolio in stocks. The actual amount depends on what you plan to withdraw from your portfolio each year for living expenses.

If you can’t afford to lose any of your retirement, you need to lean toward a smaller percentage in stocks. It may be tempting to keep your money in stocks, especially when the market is booming, but you never know when it will drop, and then you may end up having to delay retirement or do something else to supplement what you have lost.

Don’t take unnecessary chances, no matter how tempting it may be. The Lord has blessed you with funds to live on when you no longer want to work. He expects you to be a good steward of those funds. If you are not sure how much you should move from stocks to bonds, check with your broker or CPA. They can give you the best advice on how to manage your money.

Rumbough, CPA, CFP, is chief operations officer with the Baptist Foundation of South Carolina. Contact her at 800-723-7242. In accordance with IRS Circular 230, any U.S. federal tax advice contained in this communication is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed herein.