Some want zero stock market exposure when they retire. Maybe they were burned in 2008. Maybe they remember the decade from 2000 to 2009, when the S&P 500 actually lost money. Maybe they just sleep better knowing their nest egg cannot drop 30 percent overnight.
It's possible to fund retirement this way, but it takes more money to do it, and you give up the growth that comes with risk.
Here are the building blocks of a no-stock retirement plan:
Social Security is the foundation. It pays for life, adjusts for inflation, and never goes down.
Annuities convert a lump sum into a monthly check. A single premium immediate annuity, or SPIA, works much like a pension. Remember that once you hand over the money, you usually cannot get it back.
Treasury bonds, notes, and bills are backed by the federal government. T-bill yields have been around 4 to 5 percent recently. Interest from Treasuries is exempt from state and local tax.
Bank CDs lock in a fixed rate for a fixed term and are FDIC-insured up to $250,000 per bank.
I Bonds and TIPS adjust with inflation, a hedge for a 25-year retirement.
Home equity is important. Kiplinger.com calls this "all-asset" planning. A paid-off house counts. You can downsize, take in rent, or use a reverse mortgage to turn equity into income.
But, you do give up growth. Over the last 10 years, the S&P 500 averaged increases of about 14 percent a year. CDs and Treasuries paid a fraction of that. The market rewarded patience.
Most planners suggest a middle path: a guaranteed income floor from Social Security and annuities that covers essentials, plus a modest stock allocation for growth and inflation protection. You can be cautious without being completely out.
