In Your 50s? Design Portfolio for the Long Term
BERKELEY HEIGHTS, N.J. (TheStreet) -- Many 50- and 60-year-olds look at the pot of money they've accumulated for retirement and think they can't afford to lose any. They have a very short-term investment perspective with minimal tolerance for risk, and given the market carnage of 2008 and early 2009, who could blame them?
Unfortunately, those taking this approach are unwittingly sabotaging their retirements, because they have focused solely on investment risk and are ignoring two others: inflation and longevity.
|For most people, being 100% invested in cash is a sure-fire way to lose purchasing power and outlive their money.|
What impact does inflation have on a retiree's standard of living? The long-term U.S. inflation rate is roughly 3%, which sounds relatively benign -- but for perspective, here is the impact a 3% annual inflation rate has on $100 of purchasing power over time:
- 10 years: $74.40, or 26% decline
- 15 years: $64.18, or 35% decline
- 30 years: $41.19, or 58% decline
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