We are 50 and saving for retirement, should we switch to a safer portfolio?

GL writes:

I have been contributing to my 401(k) for 8 years (since I re-entered the workforce) and my husband has been contributing 5% to his 401(k) (with a 5% match) for 32 years. We have a $10,000 CD and $23,000 in an emergency fund. We have six years remaining on our mortgage and we owe $55,000. We are both 50 years old and we pay for our daughter's college. With education expenses being so high, we can't save anything more than what we are contributing to our 401(k)s. We are both fairly aggressive with our portfolios but it is scary to look at our statements over the past year. Should we panic and switch to a safer portfolio?

No -- please try your very best to stay calm and invested in the market. As I have written in previous posts, a down market is a buying opportunity for long term investors. And, at age 50, you and your husband are long term investors.

Think of it this way: stocks are now on sale. And when things are on sale, you usually buy more. If you can possibly carve out some additional savings, now is the time to invest. Jason Zweig had a great article in the Wall Street Journal a week or so ago called "Stop Worrying and Learn to Love the Bear". Reading it might allow you to view the market in a more positive way.

It is wonderful that your husband has been saving 10% of his salary (the 5% employer match "counts" too) since he began working. He should be in pretty good shape for retirement. Also, by the time your both are 56, your daughter would have graduated from college and your mortgage will be paid off. You should be able to save a lot more for retirement at that time. In fact, if you retire at age 65, you should have a solid decade of aggressive saving. If you both can get to the point where you are saving the max permitted in your 401(k)s ($20,500) your accounts will really begin to grow rapidly. Finally, don't forget that you can also contribute to IRAs as well.

Remember that you probably have 15 years or more before you retire and you will (hopefully) be retired for 30 years or more. You definitely have a long term investing horizon so resist the urge to move to a super conservative portfolio. As I discussed in a previous post about safe withdrawal rates for retirees, portfolios consisting of 60-75% equities are often needed to assure 30 or more years of inflation-adjusted withdrawals in retirement.