Moving back to some stocks”
About 2 years I swotched my TR Price, Vanguard, and AIG VALIC IRA/TSA accounts to 100% money market funds. So, for the last two years I haven’t lost money but I also haven’t earned much at all. I’m wondering if you think it would be safe now, or if not, when possibly, to move a portion of my funds to something a tad riskier but that would earn more so my savings grow and not lose to inflation. I’m 73 with a Chicago Schools pension and I rent after having lost my house in a divorce. I’m my adult daughter’s sole provider while she goes through some mental health issues that keep her from working. Fortunately, we get long quite well. We would like, someday to get a small house. I have about $138K among these three funds.
Thank you, Terry
Terry Says
There are two answers to your question. The first is the factual, rational answer that stocks outperform inflation in the long run. Money market funds haven’t done that for the past two years, since interest rates were artificially suppressed. That’s changing now, and you should start earning higher yields in your money market funds. But in “rational” financial planning, you should always have a growth component provided by stocks.
But I really don’t think that’s your question. You are in a tough spot, and I’m just guessing that ANY stock market losses on this money would be very painful — even though statistics say you’ll come out ahead if you hold on. By being in money market funds you missed out on some painful downswings in the stock market — and you may miss out on the upside as well.
But I consider this “chicken money” — money you cannot afford to lose. And the motto of the chicken money investor is: “I’m not so concerned about the return ON my money, as I am about the return OF my money.
Leave your money where it is –and don’t forget to take your required minimum distribution this year.