May 3


It Doesn’t Matter If You Die

Sam and Sarah Mayer, ages 83 and 85, go to visit a local financial advisor.


“Sonny boy,” Sarah quips, “We have $500,000 in the bank and it’s making basically nothing. We were wondering if we should invest it in something.”


“Well,” he remarked, “You guys are old as dirt. I guess we can’t put you into anything too risky.”


“Old! We don’t even buy green bananas anymore,” she laughed.


“The standard rule is that you should subtract your age from 100 and that is how much you should put in the stock market,” the advisor informed them.


“So I guess we might want to consider putting 15% in the stock market and the rest into very conservative government bonds and money markets.  Maybe even in some fixed annuities.”


Sam nodded. “Makes sense to us. We certainly don’t have time for our money to recover if the stock market crashes. In fact, we are actually able to save money each month now. We are spending less than our Social Security and pensions. So we can probably put more money into this each month and make it grow even more!”


Sarah added, “We’re saving this money for our dear grandson anyway. If we don’t need it, we figure we can bless him with it. He had three great-grandkids for us!”


So Sam and Sarah put their money in this ultra-conservative portfolio and went home…never realizing their poor decision.


This anecdote outlines a concept I’ve battled for years — that as you get older, you need to become more and more conservative with your investments because you “don’t have enough time to make it back.”


Not only do I think this is a ridiculous idea, but the results can be incredibly expensive.


Let’s think about why this thinking is so faulty.


Markets recover very quickly. Even if they put 100% of their money in the stock market (which they shouldn’t), historically, recovery times have never been more than 3 or 4 years. So this whole concept of “We don’t don’t have time for this to recover” is assuming both of them will die in the next three or four years.


Granted, that is possible. This is why 100% in the stock market is not a good idea, either.


Now, let’s look at someone who invests 70% of their money in stocks and 30% in bonds. Remember that when stocks go down, bonds go up. In the past 50 years, the worst return would have been from 2008, where you would have lost 24%. Certainly not fun, but it’s not like you went bankrupt. With this portfolio you would have made all of the money back in a little over one year.


Quick note: The second worst return of this portfolio over the past fifty years was in 2001 where you would have lost 12% and the third worst was 4% in 1976.


Think about that for a second. In fifty years you would have lost a noticeable amount of money two times!


“But Dave, what happens if you need a bunch of money for medical expenses!”


I’ve spoken at length about how huge medical expenses just do not happen as long as you are on Medicare. The only real scare is a nursing home. You would have to start drawing down this money. But strategically all you need to do is use the money from the bond portion of the portfolio first (which is up if the markets are down). By the time your bonds run out, the stock market will have more than recovered.


But here is the main thrust of my argument. There is a 95% chance that they will never use the money. There is probably a 1% chance they use all of it. They’re pretty long in the tooth. They are happy with their lifestyle. They don’t want more stuff. Money doesn’t mean much to them. Their budget is not going to increase.


So if you think about it, what is this money for? In other words, whose money is this really?


It’s their grandson’s. There is a 90% chance he will get most, if not all, of the money. So what does this mean?


They need to invest the money as their grandson would.


It’s as if the advisor sat down with their grandson directly and advised him on a portfolio. A lot of professionals in my industry would look upon this as blasphemy, but with twenty years of experience I have absolutely no doubt this is the appropriate strategy.


By Sam and Sarah investing the money according to their age, they are taking money away from their grandson. Probably a lot of money.


Let’s say this conversation happened ten years ago in 2011 and Sam and Sarah made it all the way to 2021.


If they had invested $500,000 in 15% stocks and 85% bonds, the current account balance would stand at around $900,000. Not bad! Certainly better than getting .1% at the bank.


But what if they used the 70% stock/30% bond mix? In 2021, the grand total reached $1,500,000.


Oops. I’m sure Sam and Sarah’s grandson is grateful and will do great things with his $900,000. But the point is, they could have made him a millionaire.


I strongly believe that anyone, regardless of age, should have at least 60-70% of their money in the stock market.


The only time that it doesn’t make sense is if you are sure you are going to spend the money in the next five years. Most seniors do not have those plans.


Don’t buy into the traditional thinking. It’s a bunch of hooey. You need to invest your money based on what it is for, not your age.


Be Blessed,



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