Here's how to build your own personal pension.
You’ve put money aside for retirement year after year, sometimes the max, sometimes less when you had expenses to pay. You’ve invested it well, so now you have a good enough nest egg to carry you through the next phase of your life — retirement.There are plenty of vehicles aimed specifically at investing for retirement, especially target-date funds, where fund managers reduce your stockholdings as your chosen retirement date draws near.
So, I’m going to suggest how you can do it yourself. The goal is to set up a stream of income that will last the rest of your life, the “personal pension” we’ve been writing about in Retirement Weekly over the last few months.Retirees face four kinds of risk.Second is that rising interest rates will cut into stock returns and reduce the value of their bondholdings.
The risks of inflation and higher interest rates seem remote now, but the risk of outliving your money is real and 10 years into a bull market, with the Dow Jones Industrial Average DJIA, -0.10% and S&P 500 index SPX, -0.11% at or near all-time highs, hundreds of thousands of baby boomers may well retire in the teeth of the next bear.
Similarly, Fidelity reported that the percentage of its account holders who had invested their 401s entirely in stock had halved over the past decade, to only 7% by 2019’s first quarter. “Employee asset allocation has improved greatly over the last 10 years,” Fidelity observed, attributing that to the spread of target funds which protect many investors from their worst instincts.
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