Traditional retirement planning says that retirees should be ultra-conservative with their investments in order to avoid the risk of loss. Yet right now that advice is extremely dangerous, and investors should consider other alternatives.
In the following video, Dan Caplinger, The Motley Fool's director of investment planning, looks at whether conventional retirement planning still makes sense. He notes that planners typically recommend hefty allocations to bonds in order to avoid the risk of the stock market and to lock in more income for your portfolio. Yet Dan points out that with bond rates so low right now, they don't provide nearly the income they used to pay, and rate increases could actually make retirees suffer capital losses in their investment accounts. Dan concludes that while bonds aren't terrible to have in your portfolio, you have to be aware of the risks involved and not let them make up too much of your total investments right now.
Dan Caplinger and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.