Announcement

Collapse
No announcement yet.

Cash's role in a retirement strategy

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • unofan
    replied
    Re: Cash's role in a retirement strategy

    If you are so risk averse that you're considering cash, then you should at least be looking at bonds or even a broad basket of commodities as hedges against inflation. You should be able to invest in either within the confines of your 401k program, or, as Almington pointed out, an IRA or Roth IRA.

    Leave a comment:


  • Almington
    replied
    Re: Cash's role in a retirement strategy

    Originally posted by Timothy A View Post
    I'm a typical mid 40's working guy who has a 401K whose employer pitches $.25 for every $1.00 I put in, up to 3%. I put in 6% of my pay, so I essentially get $.125 for every dollar I put in. I also have an annuity from a previous job that I don't contribute to, it just feeds or eats itself. (I also will have SS (theoretically) when I retire, but I am not counting on that.)

    Here's the thought. Would it be crazy to stop contributing to the 401K and just stick the money in the bank? If there was some catastrophic market meltdown, I could lose all my 401k and therefore most of my retirement gets wiped out, other than the annuity that has a guaranteed value. I'm not at all worried about spending this retirement cash on other things, we are very disciplined spenders.

    I could still invest the cash at some point if I felt it was the prudent thing to do, obviously sticking it in the bank won't make me any money.

    Am I nuts to consider cash as part of my retirement plan? Part of me says I am crazy for just following the herd and investing in the stock/bond markets when the markets/economies are entirely global and therefore more volatile, unlike 20 yrs ago. Part of me says I am crazy for thinking outside the box and not making any money on the money in the bank.

    Thoughts?
    The problem with sticking large sums of money earmarked for retirement in cash, when you are 20-30 years away from retirement is that you are just going to get killed by the impact of inflation eating away at the buying power of that cash over time.

    You should be contributing at least up to what your employer matches in your 401K, that would require at least a long term 20% fall in the market for you to lose any of the principle of what you personally added. Given your investment options, unless they have a very high risk fund, you will never lose all of the value you have in the market, and as you get closer to retirement you can switch over to a more conservative investment allocation. If the market were to collapse to the point that everything that you have in the stock market were wiped out, that annuity would also be lost and inflation would quickly destroy the value of any cash you have saved (if you were even able to get it out of the bank).

    What I would do is:
    Cut my contribution on my 401k back to 3% of my pay to take advantage of my match.
    Since you are a working guy, I suspect that your AGI is below $150k, start a Roth IRA at either Vanguard or Fidelity for both you and your wife with the objective for contributing another 7-12% (total retirement savings of 10-15%) of your take home pay, up to the annual contribution limit of $5000 each to your IRAs. You can be as conservative as you want with how you diversify with your IRAs, but with a 20-25+ year time horizon to retirement you really need to stay in the equities markets to try and build a large enough retirement fund.
    If you have maxed out your IRAs and still have money to invest and you want something very safe, l'd look into Treasury Inflation-Protected Securities (TIPS). They are not as liquid as cash, but they will hopefully allow you to not have inflation completely eat away at buying power of what you have saved.

    This is just a generalized suggestion, the details of would require knowing much more about your current financial state and where you want to accomplish in both the short and long term.

    At the end of the day, you have to do what you feel is best for you and only take the risks that you are comfortable taking. No one cares more about your money than you do.

    Leave a comment:


  • Red Cloud
    replied
    Re: Cash's role in a retirement strategy

    *****http://4.bp.blogspot.com/_XADVZkORRe4/SaSLXNPhVPI/AAAAAAAAACI/0nGyywovzwM/s400/johnny_cash_1969.jpg******

    Leave a comment:


  • FlagDUDE08
    replied
    Re: Cash's role in a retirement strategy

    Originally posted by Timothy A View Post
    I'm a typical mid 40's working guy who has a 401K whose employer pitches $.25 for every $1.00 I put in, up to 3%. I put in 6% of my pay, so I essetially get $.125 for every dollar I put in. I also have an annuity from a previous job that I don't contribute to, it just feeds or eats itself. (I also will have SS (therhetically) when I retire, but I am not counting on that.)

    Here's the thought. Would it be crazy to stop contributing to the 401K and just stick the money in the bank? If there was some catastrophic market meltdown, I could lose all my 401k and therefore most of my retirement gets wiped out, other than the annuity that has a gaurenteed value. I'm not at all worried about spending this retirement cash on other things, we are very disciplined spenders.

    I could still invest the cash at some point if I felt it was the prudent thing to do, obviously sticking it in the bank won't make me any money.

    Am I nuts to consider cash as part of my retirement plan? Part of me says I am crazy for just following the herd and investing in the stock/bond markets when the markets/economies are entirely global and therefore more volitile, unlike 20 yrs ago. Part of me says I am crazy for thinking outside the box and not making any money on the money in the bank.

    Thoughts?
    If your employer is offering you free money, you would be crazy to not take it. Heck, I think you're crazy for not contributing 12% in order to take advantage of the full 3%.

    If you're really worried about your 401k going down, there's always stable value funds or cash-heavy funds you could elect.
    Last edited by FlagDUDE08; 11-17-2011, 05:38 PM.

    Leave a comment:


  • Timothy A
    started a topic Cash's role in a retirement strategy

    Cash's role in a retirement strategy

    I'm a typical mid 40's working guy who has a 401K whose employer pitches $.25 for every $1.00 I put in, up to 3%. I put in 6% of my pay, so I essetially get $.125 for every dollar I put in. I also have an annuity from a previous job that I don't contribute to, it just feeds or eats itself. (I also will have SS (therhetically) when I retire, but I am not counting on that.)

    Here's the thought. Would it be crazy to stop contributing to the 401K and just stick the money in the bank? If there was some catastrophic market meltdown, I could lose all my 401k and therefore most of my retirement gets wiped out, other than the annuity that has a gaurenteed value. I'm not at all worried about spending this retirement cash on other things, we are very disciplined spenders.

    I could still invest the cash at some point if I felt it was the prudent thing to do, obviously sticking it in the bank won't make me any money.

    Am I nuts to consider cash as part of my retirement plan? Part of me says I am crazy for just following the herd and investing in the stock/bond markets when the markets/economies are entirely global and therefore more volitile, unlike 20 yrs ago. Part of me says I am crazy for thinking outside the box and not making any money on the money in the bank.

    Thoughts?
Working...
X