Q&A: A Need for Risk


I'm 62 and one of those who woke up to the need for retirement income late. I have about 28k in a mix of stocks, (mostly dividend), a couple mutual funds, a couple EFT's and a REIT. All of these are in a ROTH. This year I will be able to fully fund the ROTH, as well a one I set up for my wife. Stocks? Mutual Funds? Bonds? At my age I am way behind and am willing to take more risk than I probably should to try to catch up but I have no idea where to put the money to its best advantage. Advice?


When it comes to taking risk, there are two considerations: your tolerance for risk and need for risk. At 62, with less than $30,000 invested for retirement, your need to take risk is high and will likely far exceed your risk tolerance. That means that it is critical for you to invest with a commitment to both remaining invested and regularly rebalancing your portfolio, no matter what the market does in the future.

You must invest the maximum amount in both Roth-IRAs ($6,500 each since you’re over 50) and should also try to squirrel away some more outside of the Roths. Mutual funds are the only investment option you should consider. Plus, you should strongly consider completely restructuring your existing portfolio to eliminate the individual stocks and REIT.

To get a decent level of diversification (which eliminates the risk of total loss and tends to reduce the level of volatility, you might want to consider some of our do-it-yourself, low-cost mutual fund portfolios at talkingrealmoney.com/invest.

Don McDonaldComment