Some Retirees Dialing Back on Equities Ahead of Schedule

Some older investors are going a bit off plan.

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I’ve had some friends over the last few months who have lightened up a bit more on equities, more than their original plan had called for, especially US equities. “So Dave, aren’t they market timing in a way then?” Yes, absolutely. But here’s a couple key points to add needed context to this. These were friends in their mid-60s and 70s. Old like me. Not as much time as most of you.

And also, think about it: They didn’t have to worry about properly timing their re-entry into equities. They weren’t coming back in with these dollars. If you think we’re bad at timing our outs, you should see the data on our timing of back-ins. And finally, their portfolios had outperformed the conservative projections

their planners had wisely used. They knew they had accumulated more than enough to spin off the income they needed in retirement. They could afford to take on less risk, therefore they were already in good shape. What’s interesting here is that they weren’t panic-selling. They weren’t selling low, they weren’t letting their emotions guide.

They were thinking rationally and taking a little extra off the table with markets high and them opting for less risk. Is that a form of market timing? Sure, but hard to criticize. On a separate note, Rob Carrick, the Globe’s outstanding personal-finance columnist, my fav, has recently reminded people that if you need a certain pool of money in the next five years, it probably shouldn’t be in equities.

Equities indeed offer strong long-term performance numbers, but hey, they are volatile and there certainly are some extended stretches of not-so-good performance. I’m with the consensus expert opinion here that you really should be thinking 7-10 years minimum when you invest in equities.