Here's a good question from pete about bonds and interest rates...
Rich, a followup from One Wife, Two Kids...
Pete - Long-term bonds react much more strongly to changes in interest rates than do short-term bonds, so if you are concerned, as I am, that rates are more likely to go up than down in the future, you should avoid long-term bonds. With bonds, as interest rates rise, bond prices fall and vice-versa.
Curt, can you take this second question from Pete? a good question about age and asset allocation...
One wife, two kids. JUst to add to what has already been said, a very important element of a will is to name a Legal Guardianship for the kids. You and your wife should mutually agree to this provision and ensure it is placed in the will. An estate attorney can help you with this.
Also, Pete, unless you are fairly experienced in the bond market, use a mutual fund and get the value of either an index or an experienced manager. The bond market is the last trace of the wild west in terms of investing.
Yes, I think that this is the most important right now. The will directs who controls your estate (an executor) and more importantly where your assets go. You do not want to have your estate split up by the state. T
hat can get very sticky. Im not sure using legal zoom is the best idea, however it all depends on your situation and how complex it is.
Here's a question from KC about dividends...
Pete - beware of rules of thumb; the percentage/ratio of stocks to bonds depends more on your outlook and investing time horizon. That said, bonds are very un-attractive to me now, so the alternative for income might be dividend-paying stocks, REITs and the like, which effectively drives your ratio to a very high proportion of equities. Personally, at age 69, I have only 20% in very short-term bond funds, mostly bank loan funds.
Pete, you have to ask yourself if you are ok with a loss of retirement funds having 60% stock in your portfolio.
Pete - Phil raises a good question about your tolerance for volatility. I figure that I've got about 25 years in which my portfolio has to provide for me. At some point interest rates will go back up as inflation makes a cyclical reappearance, so I'm prepared to see my portfolio fall and rise quite a bit over time. Are you?
Pete, for example, assuming 60% stock mix; a 40% drop in the market would be a 24% loss of your total portfolio. Alternatively, for a 40% stock mix; a 40% drop in the market would be a 16% loss of your total portfolio.
KC - no, it doesn't change a thing for tax purposes: dividend income is income whether or not you re-invest it. You should be keeping good records, because those reinvested dividends become part of your cost-basis when the time comes to sell - you don't want to have to pay taxes on after-tax money!