As Baby Boomers we must protect our Nest Eggs in Retirement by avoiding large losses. Why is this?

For this article I have assumes a 10% loss because it appears the average loss in stock Mutual Funds for the first quarter of 2008 is 8.8%.

"U.S. stock mutual funds plunged 8.8 percent in the first quarter, the most in more than five years, as technology and financial stocks succumbed to the slowing economy and a lending pullback. " http://www.startribune.com/business/17070456.html

One of the best articles on how long it can take to recover a large loss was written by Craig L. Israelsen entitled The Math of Recovery in Retirement Portfolios. He compares the investment returns needed to recover from losses when in retirement vs. when working and owning a "Buy and Hold Portfolio", over periods of one to five years.

The article makes many good points and is recommended reading, but this post will only cover the percentage return needed to recover from a 10% loss.

Here is the table for the Buy and Hold Portfolio. No pension is taken.

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If you are a Baby Boomer AND in or near retirement your Financial Advisor should be advising you on how to protect your Nest Egg in Retirement. If they are not actively working with you to control your Nest Egg you could be in serious trouble.

With the financial markets in turmoil and the stock markets tumbling, if your your Nest Egg is in the Stock Market it is likely to be down 20% or more. Do you understand that if you are drawing a pension from your Nest Egg, then being down 20% or more is critical to the long term survivability of your Nest Egg.

Craig L. Israelsen, Ph.D. is an associate professor at Brigham Young University. In his article The Math of Recovery in Retirement Portfolios he states “The Primary Goal of a Retirement Portfolio is very simple; avoid large losses.” If your financial advisor isn’t telling you this, there is a problem. If you suffer large losses just as you start taking a pension from your Nest Egg you could be in serious trouble. This article shows you just how much trouble. I recommend you read the article in full.

10 Questions you should ask your financial advisor:

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