Q: I am 57 years old and have $200k in money market fund (457b plan). I will retire next year with $10k/month pension, and receive my deferred retirement option plan (DROP) money, $650k.
I have read your books, web sites, recommended authors, and learned about risk management, diversification, portfolio management, re-balancing, buy and hold strategy and variable draw down.
I’m afraid to move into equities when the market is at an all time high. When do I know it’s the right time to enter the market? I understand that we need to have a long-term perspective (35 yrs.) and there will be ups and downs. But, if I enter right before a down, my wife will never trust me with our nest egg again. What do you suggest?
A: You have a couple of approaches. One is to dollar cost average in over 12 to 24 months. If during that time the market goes down 30%, go ahead and invest the balance. You can also wait until the market is down 20% to 30% to make the commitment. I am assuming you will meet your cost of living with the $10,000 a month. If that’s so, there is no reason to make the investment in a hurry.