Two retirement-planning fallacies: too-conservative allocation and under-budgeted spending

Last time we covered neglecting small contributions and starting late. Now for two more common fallacies: inappropriate asset-allocation strategies and miscalculated retirement spending needs. Both directly shape your quality of life after retirement.

What counts as inappropriate allocation?

Young workers shouldn’t park everything in conservative funds from day one. With longer life expectancy, retirement lasts longer than expected — portfolios shouldn’t be overly conservative. Putting all contributions into conservative or guaranteed funds straight out of university risks returns that can’t beat inflation. Assess your risk tolerance and finances before investing, and allocate accordingly.

Are target-date “lazy funds” a safe bet?

Not necessarily: bad market timing at maturity still hurts, and extra fees may apply. Target-date funds (the so-called 懶人基金) auto-adjust the stock-bond mix toward your retirement date, turning more conservative near maturity — convenient if you must cash out exactly at retirement. But note: allocation may not adapt to market conditions, so a slump near maturity can’t be waited out; different providers run different strategies, so understand how each fund works; and watch for extra charges.

The old “100 minus your age” rule (at 25: 75% stocks, 25% bonds) may not fit either, since everyone’s retirement goals differ.

Why can’t you budget retirement spending too conservatively?

Plan to 75 and you may outlive your money by a decade or more. Many people — even financial planners — project retirement needs from life expectancy. Budgeting to an over-conservative 75 (ten years of spending after retiring at 65) exhausts your reserves at 75, yet you could easily live another ten to twenty years, with unpredictable late-life medical bills turning the remaining years into a heavy burden.

To plan your retirement asset allocation, visit MPF fund comparison.