After far too much procrastination to be proud of, my wife and I are finally settling in on our investment strategy for retirement. Ironically, after lots of research, getting stuck, and avoiding it for months and months, we are going with a very simple strategy: a very general Vanguard index fund and a general bond index fund. We figure being intentional "lazy investors" and rebalancing annually is more than enough for us. We just want to make a wise decision, let savings grow slowly, plan for security, and not have to review & re-analyze. We're that type that finds investing - and potentially losing our savings - very stressful, and that's why we have failed to act until now. I am pleased to report to GRS readers though that I think we finally have some confidence in our plan. Better late than never, I guess!!
However, my hopefully last question before setting forth is still about fearing the worst-case scenario of investing just before a major downturn. Here are some stats to frame the question:
Ages: 30 & 34
Combined income: $86K
Cash on hand: $35K (planning to buy a home in the next 2 years, keeping in cash)
Savings in IRAs: $15K
Compared to some of what I see on GRS, these may be small numbers, but they're our world. We both work in social services so our income number may not get much bigger over the years. We've wisened up and realized that this very fact is all the more reason to invest for retirement -- but it simultaneously works to keep us skittish, too! Income will always be tight, so "gambling" seems scary. At any rate, although we were tentative about invest in the stock market for years, we at least set some money aside in Roth IRAs, and so now we're ready to roll that over.
But here's my question: We are proud to have saved what we have (in fact, we just went up two incomes for the first time in 3+ years three months ago, as my wife finished grad school, and we paid off all the loans right away), through making frugal choices about how we live. It has taken work, though we are happy with our lifestyle, too. I'm a little nervous that, relative to our income, we will be "launching" a significant chunk of cash into the stock market more or less at once -- $25K -- basically, rolling over our $15K in IRAs, plus hopefully maxing out $10K in contributions this year. $25K to start feels like a number for someone who's income is much larger than ours! But I'm not sure if it actually is risky to start with such a big proportion of our income -- or if our situation is kind of unique to the fact that we have saved, but delayed investing. I've never seen any "rule of thumb" about why starting with proportionally larger investments could be more risky, but it's a fear, nonetheless, since it is a signficant chunk of change for us. I do somewhat wish we had started small years ago, but now I feel that it is important to make up for our lost time.
Any thoughts on whether this is a rational or irrational concern? I do try to console myself that, worst case scenario, terrible timing and a major stock market crash right after we invest, we will have regained our money after a few years -- and that can't hardly be worse than 0.9% CDs for those few years.
Oh, and we DO plan to wait until the fiscal cliff has been resolved, so no *immediate* action, ironically, even though we finally have a plan.
Finally - it was GRS readers on the forum over a year ago who gently pushed me in the direction of investing despite our very real risk aversion. Yes, its taken that long to move forward! So thanks in advance for feedback this time around.