Over 80,000 investors and entrepreneurs in the United States and around the world belong to the Baltimore, Maryland-based The Oxford Club. This club focuses on helping its members gain and protect their wealth by looking for potentially high-profit investment opportunities that have minimal risk. The Oxford Club has a financial education program called Investment U, which provides members access to e-letters, courses, conferences, and videos. Through Investment U, members can also receive investment recommendations from the club’s in-house experts.
The Oxford Club’s Chief Investment Strategist Alexander Green recently wrote an article describing how much retirees should have in cash and bonds to protect their stock investments against inflation and economic downturns. He says retirees shouldn’t be concerned about the percentage allocation of stocks, bonds, and cash they have in their portfolio. Instead, they should focus on how much they have in cash and bonds so they can cover their monthly expenses without having to cash out their stocks when the economy drops.
For example, if someone in good health retires at 65, they can expect to live another 20 to 30 years. Alexander’s recommendation for them is to set aside five years of living expenses in cash and bonds. If a retiree needs $60,000 per year to live on, then they should set aside $300,000 in cash and bonds. Bear markets tend to last around 15 months, but it may take up to three-and-a-half years for stock prices to recover. Having $300,000 in cash and bonds at the start of an economic downturn can help a retiree maintain the stocks in their portfolio, so then they can wait for stock prices to recover.