(Dow Jones) Many investors nearing or entering retirement are doing so with too little in savings considering the current investing environment, and might be better served by delaying retirement a few years, a panel of retirement experts said Thursday.
"Investors are scared because of 2008 and want growth, and want it with too little capital and their options are extremely limited," said Frank Armstrong, a certified financial planner with AIFA Investor Solutions. "Delaying (retirement) for a few years is probably the best strategy for those who haven't saved enough."
He made his comments at the 2010 Morningstar Investment Conference here, which drew about 1,300 attendees, mostly advisors, despite strong winds and rain that canceled many flights Wednesday. The annual conference, hosted by investment-research firm Morningstar Inc., features speeches by mutual-fund industry insiders and exhibits by major mutual-fund companies.
Christine Fahlund, a senior financial planner and vice president at T. Rowe Price Group (TROW), said that when she talks to investors about putting off retirement a bit, many of them say, "No way."
Yet, trying to catch up on retirement savings by stashing away 35% of one's salary is "drudgery" and "isn't going to work very well," Fahlund said. "It doesn't help much because it's $1 in, and two years later $2 out."
A better alternative, and one she presents to investors, is to start doing the fun things they want to do while still continuing to work, Fahlund said. "Instead of being a slave to 35% contributions, be a slave" to the activities you love, she said.
As for bonds, Armstrong said they should be used to mitigate the risk of the rest of a portfolio. Trying to lock a portfolio into bonds only for protection won't work, he said. "Anybody who locks themselves into a fixed-income portfolio only is in a very poor position this year with interest rates as low as they are this year and-looking forward-bound to rise," he said.
Amrstrong said he'd hate to have to explain to his clients, as some advisors have, how they lost money in the bond portion of a portfolio. That's because they were putting clients in "Lehman Brothers preferred junk," he said.
He invests only in very high-quality short-term bonds, he said. "Find me somebody who really believes interest rates can stay this low, and I will show you somebody who's a candidate for 30-year bonds," Armstrong said. The equation is clear: When interest rates rise, bond prices go down, and the longer the duration, "the more they go down," he said.
Fahlund said that a high-quality blended fund, such as a balanced fund or a target-risk fund, might be a better choice than a bond-only portfolio for a retiree seeking low risk.