Having a perfect portfolio is the holy grail of investing. The problem is that each person's situation is vastly different, which means a different strategy is required in order to achieve that perfect portfolio. If you can reach this goal, however, you'll find that your retirement planning goals will be met more easily.
Let's take a look at those investors who are still in their younger years, trying to create perfection for their future. We'll focus on a few basic scenarios and provide tips from the experts for each regarding savings, retirement accounts, and other strategies, to give you an idea of how to develop your portfolio.
Scenario #1: 34-year-old newlywed couple
This is probably the most relaxing time you'll have when it comes to retirement planning, because that's basically all you need to focus on. Right now, there is no immediate need to worry about buying a house or sending your children off to college. Instead, it is the time for you to build up your stock exposure and be a bit aggressive with bonds, preferably of the high quality international variety. Also keep in mind that you will want to put away a little extra cash as well, just in case of a financial emergency.
Scenario #2: 35-year-old couple plus one young child
This is the time of your life where you'll need to find a balance between retirement planning and saving for college. It's important to have some cash stowed away in case of a financial emergency or for the purchase of something big, such as a house. Plus, your investments need to be developed in such a way that they're forward-thinking for the long-term. When it comes to splitting your plans between retirement and college, however, you must keep in mind that whatever you put into one will take away from the other. This is an important element that some retirees neglect taking into consideration, and then one falls shorter than expected.
Scenario #3: 40-year-old couple with a child going to college
College can be expensive, no matter where your child attends. A good plan is to put money into a 529 or other education savings account. If college is still a number of years away, your education savings should be primarily in cash and bonds. And you will also need to cut down on some of your current expenses. As for your retirement accounts and savings, it is advised to invest 60% in stocks and 40% in bonds at this point in your financial plan.
Scenario #4: 42-year-old couple with one unemployed spouse
Unfortunately, this is a scenario than many people have needed to deal with in recent years. The important part of your retirement plan while searching for a new job is to protect your assets and retirement accounts. This takes some pre-planning on your part. Basically, you'll want approximately five years of living expenses allocated to safe assets such as CD's or money market funds, just in case it takes you longer than expected to find a new job. The best way to ensure protection of your money is to utilize a layered approach: maintain the current year's expenses in a money market fund and the following year's expenses in one-year CD's, the money from which will become available when the money market fund is depleted.
Source: http://firstsecurityfinancialshow.com/blog/bid/119590/What-Your-Next-Move-Should-Be
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