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A group of us retired folks were sitting at the pool and the conversation turned to retirement and money. A number of the group said they had pulled out of the stock market and now have ALL their money in cash. (Money Market, CD, Checking Accounts, etc.) They said it allowed them to sleep at night.
I said that was short sighted because inflation would force them to pull out more and more money every year to support their lifestyle and they would lose money every year just playing it safe and putting all their money in cash. They needed to take some risk to allow their money to grow to cover inflation and future needs. They would not consider my argument. Is this thinking common?
Diversified dividend-paying stocks, mutual funds, and cash. The only bonds are those within some mutual funds that are part of our 401ks. I am retired, but my husband is not. This mix has been good to us, and we plan to continue being diversified after he retires.
When my in laws retired at age 65 they sold their home which had been paid for many years and put the $250,000 profit from the sale of their home and the little other money they had into a checking account. They did this so they would quality for HUD housing since the money being in a checking account was not considered income, so with their SS checks and my FIL's small pension being considered their only income they qualified for HUD housing. They managed to get a lovely 2BR apartment in a very well run mostly senior complex and got very involved in all the activities sponsored by this complex and very much enjoyed their retirement lifestyle there. My MIL who had worked in the food service volunteered at the meal site held at the complex so pretty much my in laws ate for free for the next 20 years. When my FIL passed away 10 years ago my MIL moved to a 1BR apartment in the same complex and lived there until 6 months ago when due to dementia required nursing home placement. Since there was pretty much no money left the bank account and or other assets aside from an insurance death benefit policy my MIL once she exhausted her Medicare A days she transitioned very quickly to Medicaid status. Although the transition to a nursing home initially was a big adjustment for my MIL she seems to be OK with it now, gets lots of visitors from the residents of her former complex which is walking distance to the nursing home, and she continue to periodically attend activities there.
My in laws were not world travelers, and the boats and higher end cars they had in working years were no longer of interest to them in retirement. So essentially aside from no longer being home owners which to them in retirement was considered a burden, their lifestyle in retirement was not much different than it was when working. Despite having little money left in the bank following my FIL's death, my MIL managed fine financially living solo in her HUD apartment on my FIL's SS and pension survivor benefits.
My in laws were not highly educated individuals, always worked blue collar jobs, were clueless about investing money, but had enough smarts, luck, or both to live what they considered a nice life pre and post retirement and did not ever lose a minute of sleep worrying about their finances.
Your retirement friends choices to convert all their money to cash with their reward for doing so is to eliminate worry may not only improve the quality of their lives, but add years to. I think we all have the same goal for our retirement years being quality and quantity of life, but how one from another defines quality and quantity can be as different as night and day.
If I owned a lot of stocks and bonds I would probably read the financial news every day and get all stressed out. There is always some expert saying stocks are about to crash. Bonds are vulnerable to interest rates.
If I can possibly keep everything in cash, with some fixed immediate annuities, I will, just because then I can forget about money, or at least not be obsessed with it.
Can you sleep better knowing your money is 99% safe but only getting two percent? Or would you toss and turn all night thinking there may be a world crisis and your investments funding your retirement could crash 70 percent?
For example, lets say North Korea attacks Japan or South Korea using a nuke. The world stock markets could drop 80% overnight and wipe out the savings of millions of retired folks.
I have been retired for 5 1/2 years and have averaged about 8% annual returns. It seems that my cost of living is increasing faster than the official amount of less than an annual 2%. I would be real nervous about my long term standard of living if my investments were not increasing by at least 3-4% annually.
Some people have so much money, they do not need to be concerned about their investments. I am not in that category.
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