Investing Based Upon Your Goals and Objectives (Q & A)

Jan 2016


Q         Dear Rick:

My parents are in their early 70s and I am helping them with their finances.  My dad never earned a lot of money but he was a good saver.  Between Social Security, a small pension and a three to four percent distribution from their IRA, they’re doing just fine.  Currently, their portfolio is about 50 percent in CDs and treasuries; the other 50 percent is in a variety of stock mutual funds.  My parents went to one of those free lunch seminars and they were told that at their age, they should not be invested in stock funds but should move their money into a fixed annuity.  My parents are smart enough to know that the annuity was just a sales job and that’s not up for consideration.  The question is, should someone in their 70s be invested in stock funds or does it make sense to keep their money in guaranteed things like CDs and treasuries?



A         Dear Ron:

First, I want to congratulate your parents for not falling for the salesman’s pitch.  All too often these seminars are very high pressured and are meant to frighten people.  Because these seminars don’t educate people but instead are intended to sell products, I don’t recommend that people attend them.  Why put yourself in an uncomfortable position just to get a free lunch?

With regard to your parents’ situation, my belief has always been that you do not invest based upon age but rather, upon your individual goals and objectives.  The problem with investing based upon age is that not everyone within that same age group is in the same financial situation.  Some 70 year-olds have pensions while others do not; some have a mortgage while others do not.  The bottom line is you cannot stereotype within age groups and that is why age is not the most important factor in determining how you should invest your portfolio.


Do I believe people in their 70s should automatically put their money in CDs and U.S. Treasuries – absolutely not.   Someone in their 70s is not ancient and it is important for them to have a rising income throughout their lifetime.  Unfortunately, investing in fixed-income investments such as CDs and treasuries won’t allow you to accomplish that goal.  In the old days, the general theory was the longer you lived the less money you needed.  I think that strategy went out with 8-tracks.  The bottom line is you need a rising income throughout your lifetime and as you get older, it doesn’t cost you less to live, it costs you more.


Someone in their 70s can easily live another 20 years.  Just think what the cost of living was 20 years ago versus today.  Twenty years ago no one knew what a smartphone was or an iPad; today they are the norm.  Twenty years ago the cost of food and healthcare was significantly less than it is today.  The bottom line, you cannot live on a fixed or a shrinking income, you have to live on a rising income.


Do I believe people in their 70s should be investing in stocks and growth mutual funds – absolutely.  Even though currently the markets are retreating, that doesn’t change my opinion that to have a rising income throughout your lifetime, equities are important.  After all, think what fixed-income investments are paying — one to two percent and that is taxable which means you’re left with significantly less than that.  Then ask yourself, does your cost of living go up more than the after-tax return you receive on your CD?  I think we all know the answer and that is, absolutely.


I recognize that market volatility causes anxiety.  However, what also causes anxiety is not having the financial resources to take care of yourself.  It would be easy if we all knew when we were going to check out because we could plan our portfolios accordingly; unfortunately, we do not.  Therefore, it is always important to keep a portion of our portfolio invested for the long run in things such as stock mutual funds and to not be overly concerned with the day-to-day volatilities in the market.  As Warren Buffet once said, it’s not timing the market that makes someone successful, it’s time in the market.


Good luck!




Rick is a fee-only financial advisor.  His website is  If you would like Rick to respond to your questions, please email Rick at