What are those "larger levels of risk" you are referring to?

You are speaking very generally here. Regardless of the guaranteed income a retired person might be receiving, any larger levels of risk for investment funds would have to be considered on an individual basis.

Just being nosy--are you trying to make an investment and someone is telling you, "no no no!" ?

Best wishes to you, Joyful, for a good year ahead.

Hi Socks 1234 ... what was that other number, again, please?

Many advisors suggest that as people get older, they should carry a smaller percentage of their assets in equities, where the values fluctuate substantially and concentrate more on investing where their principal is more secure, e.g. bonds, GICs.

Trouble is - when you invest where your principal is guaranteed, there are two rats that eat your cheese.

There's an entity that favours you with a question, each year ... and a statement.

Regarding your annual income, ...

"How much did you earn, last year?", and

"We want part of it", ...

... are the messages that most of us get from the income tax people.

And, if you invest your dollars where you want that touted guarantee that the number of invested dollars isn't going to shrink over the interim ...

... there's another guarantee that the folks who want to use your money (read "banks" or "bond issuers") never seem to mention ...

... the number of dollars of "principal" is "guaranteed" not to grow, either.

So - since we've had to cope with inflation every year since the Great Depression of the 1930s, you need to take some of those dollars that they earned to put with the principal in order to preserve your purchasing power since the inflation rat nibbles off a corner of each of those "guaranteed" "principal" dollars every year.

Know what?

The rats eat first!

You get what's left. Which in recent years has been very little ... if anything.

I favour people, especially seniors, learning more about how money works, with a view to carrying a larger component of equity-based investments, where justified.

I took the course that stockbrokers take (much more complex than the mutual fund guys need) and 6 courses leading to Chartered Financial Planner (passed only 5). Course revamped aiming at slightly different designation, Certified Financial Planner, I'd have needed to have started all over - at age 70 or so? I don't think so!

I sold mutual funds (for a broker, so could offer a wider choice) for a short while, and for years have worked as a personal financial advisor, selling no products - no conflict of interest.

Also, very few mutual fund managers justify their vaunted claim of more skillful money management, for they don't outperform the market averages.

But in the U.S. they like to collect about a fifth or sixth of the average growth rate that the market produces, and in Canada about a fifth to a quarter of it.

If individuals can develop the skills necessary, and the nerve to avoid getting upset if the market goes down some (i.e. sleep soundly at night at the time of a sliding market), they can usually produce a better result, long term, using a larger component of equities, I think.

Maybe you noted a thread that I wrote here a few days ago asking that folks compare stock certificates (of one company) and rabbits for proliferation.

I've written a number of threads on "Money Saving Tips", "Household Finance" and "Retirement" which will give you quite a bit of information about my approach to effective management of income and assets.

If you have further questions, I'll be pleased to answer them.

Good wishes to you and yours.

ole joyful

Greetings all,

I note that I didn't mention in the earlier posts on this thread the additional concern if your pension isn't at least pArtially indexed to inflation.

If so, if the number of your pension dollars won't grow, they'll cover a smaller portion of your needs in future years, increasingly so after a substantial period.

That is, there'll likely be minimal shortfall for several years, probably the first five or so.

As the period grows from five to ten, the shortfall will become more pronounced and you'll notice it more strongly.

On the other hand, your need for supplementary income won't be heavy in the first few years, but will grow much higher after a number of years.

That would lead me to feel that it would be wise to have a substantial portion of my assets based in equities over the long term, but possibly a somewhat smaller percentage than if I could expect the number of my pension dollars to increase over the years.

That would be to have some more non-equity (i.e. GIC, bonds, etc.) dollars available, in case of larger than expected shortfall during the first five to ten years.

However, after ten years, twenty years and more, those non-expanding pension dollars would cover an even and ever smaller portion of my income needs, so I'd want to have built a larger asset base to be available then to cover my increasing needs.

Which would mean that I would want a substantial portion of my assets in equity-based systems, after ten and twenty years, and more, though with an increasing number of dollars in more stable assets to cover my more rapidly increasing annual needs.

The main reason for my wanting a substantial portion of my assets in equity-based systems in the early retirement years would be because I knew that, were I to survive for 30 - 40 years, my annual needs would be a lot higher, so I'd be thankful that I had carried a substantial portion of my total assets in growable dollars in the early years of my retirement.

Probably in more stable companies, in order to reduce the risk that there would be heavy reductions in value over the intervening years, resulting in my being short of necessary dollars after those 30 - 40 years.

For pensioners more fearful of running short of dollars, and feeling rather inadequate in terms of choosing the individual stocks on their own, they might want to have chosen some good quality equity-based mutual funds to have sought that larger increase in assets to cover the much larger need for available funds in later years. Even though the managers, though about 85% of them can't produce better growth than the market averages, were taking about 1/5th to 1/6th of the average growth rates, year by year.

Good wishes for learning more about how to make your assets (and income) work more effectively - you'll reap the benefits more, and increasingly, as the years go by.

First, kindergarten, then elementary school, then secondary school. Some people have tried to start at secondary ... and decided to forego the whole thing because they had gone out beyond their depth before they'd learned to swim.

Come on in - the water's fine! Just stay within your depth tolerance. As with swimming, your competence - and confidence - will grow as your skill and experience expand.

ole joyful

Good advice, ole joyful. Thanks for sharing your expertise with us.

DH and I have been "lucky". (We've found that the harder you work, the more you save, the wiser you invest, and the better you manage finances...the "luckier" you get.)