Investment Options for Safety
I admire your knowledge and understand what you say. You have repeatedly stressed if you’re close to retirement can you afford a steep market down turn which appears to be on the horizon. My question is I have never read where to move my money to?? I know bonds are not the right place and if i just cash out while I’m still working the tax bracket will eat a majority of my gains. I’m 60 years old and have a current 170% return on my modest portfolio. I am single with no children and plan to retire in 5 years if not sooner. What do I do with what I have saved to retain as much of it as possible as the inevitable collapse and the bear market approaches ?? My savings are in an employer provided 401k and a personally managed portfolio. The 401k is yielding 16% from an index fund and my personal portfolio is yielding 170%. Any help you can offer would be greatly appreciated. Thank You, Ms. Savage
Terry Says
Wait, you need some perspective. Your 40l(k) is NOT “yielding” 16 percent! It has had a return of 16 percent, perhaps for the past 12 months. Ditto, your personal investments. Those are gains — not yields! So you can’t compare them with “chicken money” investments such as bank CDs or money market deposit accounts, now yielding only around 1 percent. The tradeoff is that there is NO RISK in these safer investments.
You likely have at least 25 years to live, if not longer. So you definitely need some stock market investments to offset the effects of inflation over those years. And you’ll feel better when you see losses in your stock portfolio if you have some money set aside safely. Now, you can’t do many “safe” things inside your 40l(k) plan. They are designed with long-term growth in mind. Perhaps there is a stable value fund or a very short-term bond fund you can move some of your money into. Otherwise, build up some chicken money outside your retirement plan.
You have five more years to keep investing in that 40l(k), getting “bargains” if stock prices drop. And at least a decade until you’re forced to take money out. As long as you have perspective — and some safe money on the side — you can stick with your plan.
