What if you have time to hold stocks over the long term?
The view that stocks are almost safe in the long run is just plain fallacious. It's been proven many times over that stocks are risky in the long run as well as in the short run. If it were true that stocks are really safe if you hold them for a long time, then shouldn't the investment company that is trying to convince you to invest in stocks for the long term be willing to offer you a guarantee? What if I am willing to commit to holding stocks for 25 years? Will you guarantee me that at the end of 25 years that I will have at least as much as if I had invested in TIPS or some other safe security? I think you will find that the answer is no unless the company wants to go bankrupt. If it is true, then who should be taking that risk: investment companies or individuals who don't know the first thing about it?
Is it true that you didn't lose a penny in the market downturn?
I have 100 percent of my retirement money invested in treasury inflation-protected securities. That is not to say I don't hold risky assets. I do have risky assets, but I don't hold them in my retirement portfolio. I segregate my assets into ones I know I can count on to maintain my standard of living in retirement and other assets in which I am willing to take some risks. My target retirement age is 75. Truthfully, I doubt I will retire at 75 if I am still physically and mentally fit. I enjoy what I do at work.
Many workers with 401(k)'s are automatically enrolled in target-date funds. Are these a good investment?
In my opinion, the vast majority of them are completely misnamed. Suppose I am planning to retire in 2010. There is the expectation on the part of most people who don't know much about investing that at that target date they will have enough money to retire. The investment industry persuaded ordinary people that all they had to do was sit back while stocks delivered them a comfortable retirement. Nothing of the sort is true. The only thing that target-date funds do is they automatically lower the percent of retirement assets in the stock market and increase the portion that is in the bond market. Most of them still have you invested with half of your money in the stock market at your retirement date. The typical 2010 retirement fund lost 30 percent of its value. There is a very low likelihood that those  funds are going to make up that 30 percent loss.
Can someone who makes $40,000 or $50,000 a year get to a secure retirement without taking any risks?
The point is to be setting aside enough income during your working years so you can maintain your standard of living after you are too old to work. Someone who is making $40,000 or $50,000, unless they have a very modest lifestyle, probably is not going to be able to retire until they can't work anymore. That's the reality. Anyone who is trying to convince those people that they can retire at age 65 and live comfortably is selling them a dream. If they really hate their job, then they'd better prepare to make some sacrifices in terms of their standard of living.
So how should workers allocate their retirement money?
I advocate an investment pyramid. At the base, you've got your Social Security income and whatever you can continue to earn from employment. Social Security is probably the best investment you can find at later age. For every year you delay claiming benefits, the starting benefit increases by 8 percent. Try to postpone taking it until you reach age 70. The next layer is TIPS in an IRA account. TIPS are very safe and very simple and are going to be a good hedge against inflation. And if you have calculated and are confident that you have all your income needs in retirement covered with those safe investments, then take risks.