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By Terry Savage on October 13, 2020 | Investments

Terry, I am age 66 and am considering retiring next year. Have appx. $140,000 in a 401 K stable value money market account……very low risk tolerance, and pulled out of stocks when the pandemic began. I know that to beat inflation, I need to have some money in stocks but right now I want to maximize, without loss, my 401 K. I will have a decent pension plus social security. I make a very good salary but do not “love” my job and am not of a mindset to keep working until 70. I have a mortgage, less than $1000/mo., and very little credit card debt. I am doing things to fix up my home and anything else needed while I am still actively earning. Am also working toward having $25,000 in savings before retiring. Do I sit still until I retire then converting 401K to a Vanguard or Fidelity account, or do I bite the bullet and invest at least 20% in stocks? Any advice would be helpful. I had reached out to a Wealthramp advisor who wanted to charge me almost $2,000 for advice. I don’t see doing that. Your columns have helped educate me quite a bit and I am thankful for that.

Terry Says

Ok, I was about to recommend a financial planner. Did you at least get the “first free meeting” to pick his or her brain about these questions??
Let me give you some perspective that I hope will be helpful.
!. You can’t MOVE your 40l(k) till you retire. And maybe you shouldn’t want to do a rollover even then because a stable value fund will give you a higher yield for your “chicken money” than you can get in a money market fund.
2. Go to www.livingto100.com and take the online blind quiz. You may find out that you have a 30 yer life expectancy! And that means you should keep working and saving as long as you possibly can. You can’t travel now, anyway! Seriously, the more you save, the longer you work, the later you take SS –the better off you’ll be in your really old age.
3. This is tough, but yes you do need exposure to the stock market — probably an equity-income fund or the S&P 500 stock index fund. 20 percent should do it. It’s scary– but just tell yourself you won’t use the money until much later in life. It will offset inflation. In fact there has never been a 20-year period where that diversified index fund, with dividend reinvested, resulted in a loss — even adjusted for inflation. So see what’s offered inside your company plan– and then don’t panic in the next market crash!



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