Originally Posted by
SteveinMN
Unless one's last name is Walton or Rockefeller (or, now, Bezos) I don't think you can look at the next few years without concern about a big dip in equities or a large recession-ish drop back. Since DW is looking at retiring in the next year or two, we're especially concerned about this.
I've become a convert to the concept that retirees should have three income streams: a solid one which covers which necessary expenses (like housing costs, (known) medical insurance, etc.); one which serves as a hedge against inflation, because of its pernicious effect on savings; and one which funds discretionary expenses (like travel, hobbies, etc).
The solid stream should be savings, CDs, pensions, SS, and/or annuities, depending on their terms. The hedge stream likely will be equities though real estate or some other hard goods (like gold) might work into it depending on the investor; if there is a recession, there still is some time to recover. The last stream can be whatever one has a tolerance for, including, perhaps, more volatile equities than the other two streams (if stocks tank, you take a shorter vacation or skip it this year). That way the very basic expenses of life are covered with a high degree of certainty, there is some protection against the value of money lost to time, and there is money for the fun stuff.
DW and I have some cash/CDs, we will receive SS, and we have annuitized some of the 401(k)s I rolled over from previous employers. DW will receive a pension from work in addition to the deferred-comp plan she contributed to; I have a couple of small pensions which will come to about $1,000 a month. We will maintain some rollover IRAs as the hedges. We're not well set up for the discretionary stream as they've been part of the other streams, but we are working with a financial planner now to identify when to start pulling from the various streams, especially as we are years away from Full Retirement Age. We'll likely realign our equity holdings to better meet the criteria of the two streams because the investment goals are different. We can reduce expenses more than we have and we can consider working part-time to increase income.
I think that's pretty diversified. Certainly something could get in the way of some of it (for example, a disability that effectively eliminates the idea of going back to work). But I think it minimizes our exposure to the very worst.