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a money market fund (or something that is immune to the ups and downs of the stock market).
Mostly ups lately, but will that change? Do you think the stock market is over-valued?
Of course if the stock market keeps going up you don't make any more gains in a money market/cash fund but I recently heard someone say: "I'd rather be a year too early than an hour too late".
not a chance. no more than 2 years cash gets put in my money markets .
all other money gets appropriately invested for the time frame it will be used to eat . some money will not be used to eat for 20-30 years.that is still as aggressively invested as when i was in mt 30's.
,
there is no way i could support the draws i need, safely , trying to use cash instruments .
a money market fund (or something that is immune to the ups and downs of the stock market).
Mostly ups lately, but will that change? Do you think the stock market is over-valued?
Of course if the stock market keeps going up you don't make any more gains in a money market/cash fund but I recently heard someone say: "I'd rather be a year too early than an hour too late".
First off, there is no reason to pull your entire 401k out. You need to look at the entire portfolio. The reasons are simple. If you put all your savings in a money market you will lose to inflation every time.
In no way is it good to what you suggest. Let's go over a couple of scenarios.
1 Okay you retire and you withdraw all your tax deferred savings and put it in money market or some other such thing. You pay tax on the entire amount as normal income. Big tax hit.
2 You do a roll-over to a money market fund type investment. If you are up now all is fine but if you had a down year as you were doing it you lock in your losses.
3 you roll it into a mutual funds of balanced investments based upon your age and where you are in the work/retirement game. There has been a rule of thumb that your investments should mirror your age.. How this works is this. take 100 and subtract your age and the remainder should remain in equities (stock and index fund type investments). The rest in low risk.
I have been retired for three years, but what I did before I retired was to have my investments in a 60:40 stock:bond allocation. I pretty much maintain this although I do have some dividends swept into a money market fund in case I need to do house maintenance, etc. It is not a huge amount, though.
If you are going to be in the market, you have to be able to tolerate the ups and downs. If you aren't in the market, you have to tolerate loss of buying power due to inflation and depletion of principal from drawing upon your funds.
2 You do a roll-over to a money market fund type investment. If you are up now all is fine but if you had a down year as you were doing it you lock in your losses.
a money market fund (or something that is immune to the ups and downs of the stock market).
Mostly ups lately, but will that change? Do you think the stock market is over-valued?
Of course if the stock market keeps going up you don't make any more gains in a money market/cash fund but I recently heard someone say: "I'd rather be a year too early than an hour too late".
Two guarantees are the market will go up and the market will go down. It's just a matter of when.
It's not a bad idea to have a decent amount of money in liquid assets because the worst thing is to be withdrawing money from an investment account when the market has just tanked. If you do that, every dollar pulled in a much bigger percentage of your account's value that won't help you by compounding when the market recovers. This depletes your assets much faster. Exactly how much cash vs. how much investment funds depends on lots of factors (how close to retirement or in retirement, risk tolerance, how quickly you will need some money, etc.).
If you do a search for "sequence of returns risk", this explains that situation in much more detail.
Have a decent nest egg to pull from until the bear market subsides, because money pulled from an account with a depressed value has a much bigger long term impact than when it's taken out of a market that is soaring.
Close to retirement and I'm mostly cash and conservative funds.
I spent half my life building a nest egg and I won't be playing musical chairs with it.
Sounds like a good plan to me.
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