Free Suze Orman's Action Plan by Suze Orman

How much should be invested in stocks and how much should be in bonds/cash?
    ACTION: If you have 15 years until retirement, have about 70% in stocks and then scale that back by 5 percentage points or so each year, so that when you are 10 years from retirement you have 50% in stocks.
    SITUATION: You have 20 or more years until retirement and you want to know how much should be invested in stocks and how much should be in bonds/cash.
    ACTION: Aim for 80% to 100% stocks. You are in a great situation. You have so much time on your hands that you can ride out this bear market and profit when the market rallies.
    If you are afraid to have all your money in themarket, there is nothing wrong with keeping 20% or so in bonds/cash. With that mix, you are going to do well when the stock markets rally and also have a nice bond cushion to reduce your portfolio’s losses when the stock market is falling. If that helps you relax a bit and stay committed to a long-term strategy, I think 20% in bonds is just fine, but I’d prefer to be in stocks 100%.
    SITUATION: You were planning on retiring in the next few years, but after seeing your portfolio take a big drop during the bear market, you’re not sure you can still afford to.
    ACTION: Focus on what the market loss will mean to you in terms of monthly income.
    Let’s say in 2007 you had a $250,000 retirement stash. Today it is $200,000. So what does that mean to you in terms of retirement income? Your intention at retirement was to have your money invested mostly in bonds so your money would be safe and you could count on a return of approximately 4%. The $50,000 you lost would generate $2,000 in income at a 4% rate. In other words, your real monthly loss in income comes to about $170 a month. So the question is, does that loss of $170 a month mean you can no longer retire? If the answer to that question is yes, then the truth is you really were cutting it too close to retire anyway.
    The best move you can make is to delay your retirement, even by just a few years. The more time you give your portfolio to recover, and the fewer years you will rely on that portfolio to support you in retirement, the better shape you will be in. If you can keep saving for retirement during those extra few years you work, that will obviously help too. But even if you decide to take a less stressful job that does not pay as much as you currently earn—and you find it harder to save for retirement—you are still doing yourself a world of good. Every year you can live off of earned income is a year you are not requiring your retirement savings to support you. Now, I am not suggesting that you work until you are 80. But if you have set your sights on an early retirement at 60 or 62, I want you to consider working to 65 or maybe even 70, even if only part-time. Don’t look at it as punishment. It is an opportunity to live a less-stressful life, because you are not going to stretch yourself too thin. I also want you to focus on the fact that our average life expectancy keeps getting longer and longer. A 65-year-old man today has an average life expectancy to age 81, and a 65-year-old woman has a 50-50 chance of living to 84.5 years of age. That means many of us will be asking our retirement savings to support us for many years; by continuing to work until at least your mid-to late 60s, you will reduce the pressure on your savings to support you later on.
    SITUATION: You are retired and need more income to make ends meet. You wonder if a reverse equity mortgage is a solution to your shortfall.
    ACTION: A reverse mortgage can indeed be a good solution, but you must understand how it works. There are some serious trade-offs to making this choice that you should be aware of.
    With a reverse mortgage, the roles are, well, reversed. Instead of you paying a lender, a lender pays you a sum based on the value of your home, your age, and interest rates at the time you take out the loan. You can be paid each month, you can