Zophia,
I don't think your formula is all wet but I woul consider it too conservative by 20% overallocation to fixed income. The rule of thumb was a good one when life expecancy was lower, but longer living people altered it.
So you know what the life expectancy is at 80 for a female- 8 years. One can consume part of the proceeds of an asset base no matter what the asset is held as. If 75% of it is in fixed income and the market is not too hot for a time, you still have 75% of the assets to work with and when the market turns around you can switch back.
My example is from practical experience. My aunt and uncle had all their assets in CD's and the like in 1980 and the lower return would have made their life a lot more comfortable if they had been LESS risk averse on 20% of their nestegg the did not depend on. An example from the time. Exxon's dividend was 10% and was up 7 fold the last time I looked and still yielding 2.8% when short rates are 1%.
http://finance.yahoo.com/q/bc?s=XOM&t=my
Ps My aunt is 85 and still feisty as hell with a BF 20 years younger.
As for Mel's feelings on IRA's. I like the fact that it is not as liquid and is "on hold" for what I saved it for in the first place--retirement. I have more accessible assets for short term wants. I was unable to work for a while and was able to take a small partial distribution with no penalty, just a low tax rate in a low income year. You only have a few asset type restrictions and a sh*t lot less paperwork to mess with.
As for Roth vs traditional ira, for a lot of people, some should be in both. Depending on when you start and contribute, the taxes today may be cheaper than the taxes at 70 and have to pay taxes on some %, whether you need the money or not and the compounding is tax deferred.



Reply With Quote
Bookmarks