mickeyd
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
As I approach geezerdom and RMD time I still think that I can adequately manage my financial stash as well as I did 20 years ago. This article clearly does not support my thesis. After reading it a couple of times I'm thinking that I may have to reassess my nearly 70yo abilities and risk assessment.
Around 70, wrote Alok Kumar of the University of Miami, investment skill “deteriorates sharply” and investors’ “ability to handle risk declines.”
David Laibson, who specializes in behavioral finance at Harvard University, said in a 2011 interview with the American Association of Individual Investors that between those who have full-blown dementia and other kinds of cognitive impairment, “we’re talking about, in total, half the 80-year-old population that is not in a position to make important financial decisions” (italics added).
That means you and me, my friends.
This is what the financial-services industry, obsessed with preventing retirees from outliving their money, just doesn’t get: What good are sophisticated solutions like inverse glide paths if half your clients have trouble balancing their checkbooks?
The biggest retirement risk no one talks about - Howard Gold's No-Nonsense Investing - MarketWatchThat’s why, as we age, we need to look for regular income through some kind of annuity besides Social Security; automatic solutions like regular rebalancing or life-cycle income funds; and a support network of friends and family to lean on with specific instructions for spouses and survivors.
Things we should avoid: focusing on individual stocks or putting too much into equities or exotic “alternative” investments with brief track records and unexpected volatility. And active trading, which is a joke for most people anyway, could be a catastrophe for older investors.
“Based on our evidence, a passive buy-and-hold strategy seems most appropriate for older investors, especially if they hold larger portfolios,” the University of Miami’s Kumar told me in an email.
So, “keep it simple” should be the mantra, especially as we age. “You’ve got to address these issues at 60 instead of 80, because at 80 you may be too late to the game,” Harvard’s Laibson said.
“I think you should do it as early as possible,” agreed Verghese, adding: “If you haven’t done it at age 70, that’s not too late.”
There are all kinds of risks in investing: economic crises, political turmoil, market panic, whimsical central bank policy. Handling them is tough enough. But who knew that the biggest risk of all may be our own aging brains?
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