As I have said
, I have made a series of changes in the past six months to improve my financial situation. Many of the things I currently must do make me miserable. If I were financially free, I could walk away from some of this. I could choose to do what serves me.
When I decided I needed to prepare myself for buying a home in the next year, I made the decision to update my IRA, which I had started at the end of 2015. Then I fully funded it before 2015 ended, because I did not realize I had until April of 2016 to do this. I’m still learning.
But I was scared.
I had not previously started my IRA because I was worried about draining my liquidity in a very uncertain job market for me. I made the jump in September, but still put in a “safeguard.” I told close
to the truth about my risk aversion in my Intelligent Portfolio
. I told them I was less risk averse than I truly am.
I fear risk.
This is rational in many instances, but not the best decision at this point in my retirement timeline.
Starting an IRA was terrifying. Thankfully, since September, I have continued seeking out information to make myself more comfortable with the “risks” of having so many stocks in my portfolio. The risk of not having enough stocks in my portfolio is not having enough money for my life when I age. That is a risk I am not willing to take any longer.
So, on April 16th, 2016, I signed into my Intelligent Portfolio. According to their calculations, I was on track for retirement. In September, I had stated my retirement goal as $875,000 when I turn 67.
Thirty-five years from now.
That accounts for $35,000 worth of spending a year in a 25 year retirement with the standard caveats about investing. My portfolio said I was on target to get to $880,000 in 35 years, with the average returns it expects. It predicts a worst case performance of $675,000 and a best case performance of $1,300,000.
In 2051, thirty-five years from now, I will be 67 years old. This is not good. I want the option to retire much sooner than that. I may need to stop before then due to disability or enormous changes in the job market, because anything can happen. I want that option by 57 at the latest.
My heart is afraid to say that I want that option at 37.
On April 16th, 2016, I changed my risk profile. I assumed risk now to hopefully skip the risk later. I told the questionnaire what it needed to get me there. It is going to be a bumpy ride. Hopefully education will make it easier on my heart.
Before I adjusted my risk tolerance, my allocation was:
- 68.08% stock
- 16.76% fixed income
- 5.76% commodities
- 9.4% cash
It took a few days for the account to re-balance itself. The re-balancing says that it will be settled once it gets to 94% stocks and 6% cash and cash equivalents.
On May 9, 2016 the allocation is:
My IRA’s swings since re-balancing have been more dramatic than I experienced in January 2016. This will take getting used to.
Have you made dramatic changes to your investments lately?