What should I do with a lump sum pension in an IRA?

I already have a personal IRA with a major mutual fund company. My lump sum pension will be going into this account because it is all tax free until I start to withdraw. I have a fear of co-mingling it with my other investments which are at a 60/40 split between stocks and bonds. What is your recommendation? I have a tentative fund picked out consisting of 88% bonds of all types and 12% in a stock fund. This fund is the least risky fund right above money markets on the companies risk and benefit sliding scale! Any thoughts?

Bonds / Fixed Income, IRAs, Stocks
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October 2016

Hello,

One of many investment risks for a retiree is to take either too much risk or not enough. Taking too much may result in irrevocable loss that you cannot recuperate because your time horizon for investment is short. Taking too little may not get you very much purchasing power later in the retirement, especially considering the escalating cost for the healthcare.

Ideally you want to treat your portfolio as a whole, not multiple mini-portfolio. You already have a portfolio 60/40, but you’re afraid the new infusion of the pension money may disrupt the balance.

Here’s an idea: use a bucket approach. Have the first bucket stuffed with cash for your 3-5 years of living expense, a second-bucket mostly with the bonds (70-80%), and the third bucket with most equities (60%). Every year you do a rebalance to fill your first bucket of cash, and at the same time, you have both bonds for some protection and securities for future growth. Sounds good to you?

October 2016
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