Regardless of the market's inevitable misbehaviors, the long-term nature of investing in retirement still means that a healthy investment in stocks is the key to preserving financial security for the rest of your life.
In the past, conventional wisdom suggested that retirees follow two basic precepts: Switch your investments from stocks to safe, income-producing securities, such as bonds and CDs, and never spend your principal. Baloney. Today, for many retirees, especially younger ones, following either dictum could lead to financial calamity.
The new reality is that retirement is getting longer, perhaps 30 or 40 years or more, as more people retire earlier and lifespans steadily increase. Over such a long period, running from the possibility of stock-market risk by investing in fixed-income securities guarantees that you'll run straight into the risk of inflation.
"Inflation is your enemy, even if it's not hyperinflation," warns financial planner Deena Katz of Coral Gables, Fla. If, for example, prices rose at a rate of 3% a year, the cost of living would double in 24 years; at 5%, it would take only 14 years.
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