Ask Terry Questions Stock market correction and two years from retirement

Stock market correction and two years from retirement

By Terry Savage on March 06, 2020 | Financial Planning / Retirement

Hi Terry,
I am really stumped about what is prudent to do at this juncture. I consolidated my retirement accounts last year. I invested in an Annuity and put the rest in the stock market. I was advised to change to lower risk selections and I am not certain if two years from retirement if I don’t need to move completely out of risk. My question is where do you suggest that someone should put the funds?

Terry Says

Well, this company made its money off of you when they sold you the annuity. It will be interesting to see if they are around now to give you advice! How advised you to make “lower-risk selections” and when did they give you that advice?
It’s impossible for me to give you specific advice without knowing your entire financial situation.

In general, I always advise having at least one year’s living expenses in liquid cash OUTSIDE a retirement account. But if you’re in a vulnerable job — one that deals with travel, conventions, events, etc — then at this moment you should have TWO years of living expenses available to you.

If you’re retired, I think you should have at least THREE years of RMDs in liquid assets inside your IRA or 40l(k) account.

I’m not advising anything drastic, just practical. Look at your own situation and imagine what life would be like for you if this virus spreads, as it seems to be doing. That’s the liquidity you need.

And if you’re retired, there is no reason to be fully invested in the stock market right now. Protect the profits you have made in recent years in this bull market. We are still relatively near the top.

As I’ve said many times recently, if you take a large “cash” position and I’m wrong, and the market goes on to make new highs in the near future, then you still have your cash! But if the economy suffers and the market suffers, you can at least sleep at night with a large cash position.

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