Pension in a diversified portfolio

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This topic contains 3 replies, has 3 voices, and was last updated by  Waterdude 1 year, 9 months ago.

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    In past MTN articles there is mention about maintaining proper diversification – e.g. if 50 years old, 100-50=50, so 50 into stocks, 25 into bonds and 25 into cash. Well, in my portfolio, I am practically 100% into stocks. My rationale being that I am also to receive a pension of almost 8Gs per month when I retire. I imagine that the pension would be considered a cash annuity. Please comment on whether what my understanding is correct – cash annuity pension is part of the total portfolio so that going by the numbers, one could invest more into stock equities.

    Dan Schointuch

    I read an article on Fidelity’s site that addressed a similar issue, where a couple had their retirement savings entirely in stocks and were treating their Social Security as the bond component.

    Here’s what the article boils down to:

    But when it comes to investing your retirement nest egg, you should focus on these two real-world questions: Would I be comfortable with the way my retirement savings are invested if the stock market nosedives? Or would I be selling stocks in a panic in search of safety and ruing the day I began thinking of Social Security as a bond?


    WaterDude, I am invested much like you are. I will have Social Security, a government pension, general savings and my investment/IRA. In my investment portfolio I do not have any bonds. I see my government pension as the bond portion of my holdings. If the market tanks I realize that I may have to go 2 or 3 (maybe more) years without touching my investments.


    Thanks, the way I see things right now, long term: our economy is still in the process of improving and kicking-off; employment and salaries are still to improve; eventually the Fed will gradually increase the interest rates; stock equities are reflective of that improvement and so still have a ways to go till we collectively plateau. There is much upside in the stock equities. Sure, there will be the few hiccups – e.g. the Greek predicament, but that will eventually resolve itself and we be back on course. The market is fickle. Greenspan once used the term irrational exuberance, there too is irrational fear. I snicker to myself observing the market reactions when the Greek Prime Minister says one thing and then reverses himself and says another multiple times. Someone is making money in all that volatility. I’ll back off the stock equities once it seems that we have reached or come close to that economic plateau. However, what are the indications of that plateau – unemployment at 4%, 30 year mortgage interest rates at 7%, things humming smoothly, etc? Still trying to figure it out. What’s neat about the pension and social security is that it will be cash in hand regularly for as long as you live. You mess-up in one month, the next month starts fresh with another cash amount, unless the government changes the rules or the plan messes-up. Stay healthy, live long, and prosper.

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