Dollar-Cost Averaging When A Stock Splits

Lynn from Ohio saying 65 and 61, husband and wife were expecting to head into retirement for health reasons. Now, we figured that we may need about $40,000 a year. How many years of income should we set aside in cash or cds? Now, about a third of the 40,000 may come from annual dividends and interest.

Any advice you have would be appreciated. Thank you. Lynn has a follow up question as well, Shana, but perhaps I’ll let you answer the first one.

Okay, sure. So our asset allocation models are kind of structured to address that question, question specifically. So when you get into the, if you’re going into retirement, then the logical suggestion would be to follow the 65plus or 65 to 75 model.

What that does is the cash allocation part. The percentage that we have recommended there addresses how much you should keep in cash. And so you should have your, your dividends and interest flowing into that cash.

And what Lynn just said is a great illustration. About one third of the income is going to come from their interest in dividends, and then the rest will come from that, from that cash. And then as you rebalance every three, six or nine months, you know, periodically, I would do it between, you know, two, no more than four times a year.

When you do that, that’s going to replenish your cash allocation. So if you just follow the strategy, you should have plenty in cash and cds. Awesome.

And then Lynn’s follow up, Shana, is this, if we have some new money left over to invest, how many months should it be moved into the market? Well, I think what you should do is you should go back and look at your original plan and stick to it. So, you know, if you started a new averaging plan at the end of every month, you would never get all of your money invested. So let’s say that you started six months ago with the intent to get fully invested into your asset allocation model within six months.

I would do your best to make that happen. So, you know, if you’re on the last month, then go ahead and deploy the rest of the money. If you had three months left of that original six month period, then stick to the plan

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Changing your plan may require you to select new sectors for certain stocks

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