Let’s say I’m 60 years old and looking at retiring soon. My 401(k) has gotten hammered. What would you tell me if I asked you for advice?
Well, three things. One is there certainly is a reality — a number of people in that position are certainly going to have to think about postponing their retirement for a short period of time.
The second thing is, whenever you retire, whether it’s as you originally planned or longer, don’t let that change in your retirement plans change your big plan about how you’re going to live in retirement. Because whenever you retire you will live, given what’s happening with demographics, another 25 or 30 years in retirement, so you still have to think about that as a very long period of time.
The third is continue to keep track of the basic ground rules of investing, saving and spending. Investments still have to be diversified. The nature of diversification might change as you get older, but the rules of diversification are still important.
Particularly for retired people, you have to plan on inflation and inflation risks, so that’s one of the components of diversification. Obviously you have to really think about unexpected expenses in retirement, such as healthcare, and plan for that.
For people who are 60 or older, it may be too late to start saving, but generally speaking, planning for unexpected expenses and often healthcare expenses is the second leg of thinking about retirement.
You also have to think about what your basic must-have expenditures are going to be, for shelter, clothing, etc., and have a guaranteed income for those, and then maybe have one for things that are discretionary, perhaps more variable income.
That translates into having a good annuity for the basic expenditures where you really need guaranteed income for life. Then have other sources for the kind of expenditures in retirement that are much more discretionary, like travel.
What is going to lead us out of the recession? We were once a manufacturing-based economy — we could build anything and people wanted it. Do you think clean tech is the direction manufacturing will go?
I think manufacturing will go more in that direction because that is what the consumer is demanding. At the end of the day, those who are producing produce what it is that consumers want. So, since there is now such a heightened interest and concern about the economy and also about the environment, those two things I think will go together and there will be a real desire to have more green manufacturing, more clean tech, and probably other industries that we don’t even perceive of right now.