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Consumer Watch: Risk and reward

Aggressive or conservative, comfort level is key to retirement planning

Sep. 15, 2011 - 02:23PM   |   Last Updated: Sep. 15, 2011 - 02:23PM  |  
Doug Nordman surfs at White Plains Beach in Oahu, Hawaii.
Doug Nordman surfs at White Plains Beach in Oahu, Hawaii. (Photo courtesy of Doug Nordman)
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Doug and Marge Nordman have the intestinal fortitude to invest aggressively, even in retirement. Their financial habits have gotten them where they are today enjoying life in Hawaii.

"We live a beach-bum lifestyle and are comfortable with the volatility, but I don't usually recommend that people take the approach I've taken," says Doug Nordman, who retired from the Navy as a lieutenant commander in 2002, at 41.

He and Marge, who retired from the Navy Reserve as a captain in 2008, were aggressive investors early on, partly because they would have steady retirement pay coming in down the road.

When Nordman retired, he did not start a second career. Instead, he spent a lot of time tracking the couple's stocks and researching companies. Today, he says, he's a much more "passive" investor.

"When the surf's up, you have to take advantage," says Nordman, author of "The Military Guide to Financial Independence & Retirement."

As young retirees, the Nordmans keep about 90 percent of their money invested in stocks and the rest in cash. Weathering the down markets in 2002 and 2008 has given Doug more confidence that his money is going to last. "When you go through volatility, you realize you can handle it," he says.

But he knows everyone has their own comfort level. "You have to find a selection of assets and asset allocation you can live with."

Know your risk profile

What kind of investor are you conservative, moderate, aggressive?

"It's important to figure out a risk profile that's good, so you can ride it out over the long term," says USAA's June Walbert, a certified financial planner.

Walbert says she talks to a lot of people who are leery of investing in the stock market, even though history has shown that while the market does experience volatility, it goes up over time.

Some things to consider in deciding how you want to invest, according to Walbert and Gerri Walsh, vice president of investor education for the Financial Industry Regulatory Authority:

Your goal. Is it to ensure an income stream in retirement, or to send a child to college? Then look at a tax-advantaged retirement account or 529 college savings plan. Sit down with an online calculator such as those at">

Your time horizon. If you have decades before you'll need to start using the money, you can take more risk because the market has more time to recover from dips. If your ideal retirement age is less than seven to 10 years away, you may want to consider more conservative options. Don't invest money in the stock market that you'll need in the next seven to 10 years.

Your risk tolerance. "If you're going to stay up all night worrying about your investments, they're too risky," Walsh says. Walbert suggests looking for an online questionnaire to gauge your tolerance, such as the Rutgers University quiz at">

Need help? If you want to hire a financial planner, do some research at, a site run by the Securities and Exchange Commission. FINRA allows you to check out brokers and brokerage firms at broker

Know your options

The possibilities for investment mixes are endless. Some people set up their investment portfolio so that it includes individual stocks that pay dividends, which, while never guaranteed, could provide a stream of income. Setting up an annuity is another way to get an income stream.

Visit"> for investing information and risks assessment, and"> for options under the Thrift Savings Plan. Some strategies to consider:

Diversify. Buy more than one stock, bond or mutual fund. "A well-diversified portfolio is the best way to ride out turbulent times," Walsh says. While diversification doesn't mean you won't lose money, it can help you lower the risk of a large loss.

Allocate your assets. Decide what percentage of stocks, bonds, mutual funds and cash you want in your investment mix for the long term. That percentage will reflect your appetite for risk, as well as your age and needs.

In retirement, Nordman has 90 percent of his investments in stocks but keeps two years' worth of expenses in cash, allowing the family to spend without having to dip into investments. Over time, he says, the growth of their stocks has outpaced what they've needed to take out.

Rebalance yearly. If your desired investment mix is 50 percent bonds and 50 percent stocks, for example, and your stocks have increased so much in value that they are now 60 percent of your investments, shave off that 10 percent and add it to the bonds, Walbert says.

Nordman says it was painful to sell stocks that were skyrocketing in value. "But we kept rebalancing. That was key. If we hadn't, we would have lost money."

Know your income

Nordman says knowing his family could rely on his future military pension made it easier for them to take some risks. And in retirement, that stream of income has enabled them to keep their desired base of stocks.

When he and his wife started saving and investing early in their careers, he says, they had a goal of a comfortable retirement in the distant future.

"But retirement is better than I ever could have possibly imagined," he says.

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