BOSTON
T. Rowe Price's Stuart Ritter is a certified financial planner and a parent, and he sounds like it. There are repeated reminders to save more and spend less -- advice that's undoubtedly wise but unpleasant to hear.
But Ritter doesn't sound quite so cautious when he bucks conventional wisdom about retirement. Rather than stick with the modest income that bonds can generate, Ritter suggests that it is safer in early retirement to continue holding slightly more in stocks. That's because you need to consider your long-term prospects for not running out of cash.
Consider that there is a better-than-even chance that one spouse in a 65-year-old couple will live to 90, and a 23 percent chance that one will live to 95.
That makes the balance of bonds versus stocks critical for retirement planning. Many retirees fled to the sidelines after the market meltdown last fall, and are skittish to get back in. And while inflation is negligible for now, that won't last forever. Retirees can't lose sight of generating enough income to avoid outliving their nest eggs, and the historic inflation rate of 3 percent can make a big dent in overly conservative investment returns.
According to T. Rowe Price's contrarian position, a 64-year-old retiring next year should keep about 60 percent in stocks.
Retirees and those on the brink of retirement increasingly want the greater protection bonds offer from short-term market volatility, and fund companies and regulators are responding. Several fund companies, among them Charles Schwab and Putnam Investments, have adjusted their target-date funds to add greater protection against steep losses as retirees age.
As for T. Rowe Price, it's not budging from its more stock-oriented approach. Greater exposure to stocks "doesn't work in all cases," Ritter says, "but works in most cases historically."
Much of the company's approach is rooted in its belief that investors need to plan for retirements lasting 30 years or longer.
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