We received an inquiry on our Facebook page from a gentleman who wrote, “My wife and I are on a very tight budget. We have little or no extra money for long-term or short-term investments unless we give up or cut back on our charitable gifts. I will be 80 next year. We do have a long-time financial adviser that is doing well for us, but the market is not kind to us. I guess my question is, is there any hope of increasing our investment portfolio? All I see are long-term investments and information for those who will be retiring. We are retired. Any plan for retired people?”
Thanks for the question, James.
For you, and for all people who ask us, Am I too old to invest, we’ve turned to Robert Brokamp, advisor for our Rule Your Retirement service. He says:
Hi, James. One standard (and Foolish) investing guideline is to not put money you need in the next few years in the stock market. This is especially important for retirees; they should have enough cash or short-term bonds set aside to cover their bills while they ride out the inevitable bear markets (which, by definition, involve stock-market declines of more than 20% and occur, on average, once or twice a decade).
However, retirees who play it too safe in their portfolios run the risk of it not keeping up with inflation. That’s why most retirees should have some of their portfolio in stocks; historically, the overall stock market has appreciated in value at a rate faster than inflation over most several-year periods, as have dividends (which also provide retirees income). The key is to be very diversified – you don’t want to bet your retirement on just a handful of companies. Even long-established, “blue-chip” companies can struggle. Consider GE, which is as blue as blue-chips come – and is still down almost 50% from its high in 2000.
So that’s the theory. However, every person’s situation is different. Some retirees choose to have little to no money in the stock market for perfectly valid reasons, such as their current and future expenses will be adequately covered by other income sources (such as Social Security or a pension), their expenses are mostly fixed or even declining (most retired households tend to actually spend less in most budget categories as they age, with the notable exception of health care), or because they’re uneasy with the unpredictability of the stock market (which could lead to them to panic and sell in the middle of a bear market, which is not a recipe for success).
I’m not permitted to provide individualized guidance, so I can’t advise you specifically. But I will comment on two points you raised in your post:
1) Giving less to charity in order to invest for yourself is partially a values question, which of course only you can answer. But it’s also a financial-needs analysis. Can you afford to NOT invest for your future? Are your expenses growing to the point where your Social Security and other sources of income won’t be enough? If the latter is true, then perhaps you should keep more of your money now. If you end up not needing it, you can leave it to charities in your will. Note: If you’re able to deduct your charitable contributions on your tax return and you decide to contribute less, be prepared for a higher tax bill.
2) From what you wrote, I got mixed messages about your financial advisor; you indicate that she/he is doing well for you, but you also clearly have questions that she/he hasn’t addressed. There also seems to be some dissatisfaction with your portfolio. Financial advice rarely comes cheap, so you want to make sure you’re getting your money’s worth. Here’s an article I wrote on the topic a few years ago.
If the advisor has put your money in mutual funds, read this article for tips on how to evaluate those.
Finally, here’s an article about evaluating your overall portfolio performance.
After you read those articles, you’ll likely have some questions for your advisor. Make an appointment, ask your questions, and bring up the point I raised in No. 1 above. That should arm you with much of the information you need to determine whether you should invest more in the stock market … or find another financial advisor.