34 • RUBY, WILDING & SWANSBURG in a n invest or’s portf olio), the trad itional s olution for retirees is adjust ing asset allocation. 20 If you’ve ever heard a f inancial pi sr wo fhe as st itohneayl mt ael ka na.bEosuste “nmt i aa lnl ya ,gsi na vg etrhseaedfjfui csitehnot wf r ot hn et iier ra, ”s st he ti ss are allocated as they age, moving their funds from higher- risk/higher- reward options like the stock market to lower- risk/lower-rewa rd option s lik e CDs. But, as you just learned, that model is insufficient in today’s low interest rate environment. Lower-risk instruments can’t provide enough growth to make this portfolio approach work for many savers. This tug-of- war between risky growth in the market and conservat ive non- growth in fixed income vehicles creates something I like to call the “Saver’s Dilemma.” In your IRA or 401(k ), you’re t rying t o bot h grow a nd pr irsokt eocf tt hy eo umr af ruknedtsa. nYdo uh ohpa ev et ot oa cmc easkse hai gdheecri sgi or onw: At hc ,c oe pr tt at hk ee the protection of C Ds and money market funds but give up meaMnionsgtfuolfruesturns. comp romise between the two, balancing and r c e o b n a s l e a r n v c a i t n iv g e o o u p r tio p n o s r . tf W ol h io a s t t b h e is tw m e e e a n ns th is e , o m ft a e r n k , e o t ur an ac d co m u o n r t e s are growi ng slower th an the y could be while stayi ng less protected than we’d like. COVI D didn’t crea te the saver’s dilemma, but it sure did exacerbate it. By increasing market volatility and decreasing the likelihood of risi ng interes t rates , the post-COVI D era ha s made it harder to grow and protect your retirement funds. 20 James Chen. Investopedia. July 17, 2020. “Modern Portfolio theory (MPT). ” https://www.investopedia.com/terms/m/modernportfoliotheory.asp
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