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Seeing your portfolio shrink can be tough so close to retirement, but you should still be investing for the long term.
Question: I’m 58 years old. At the beginning of June, my 401(k) was worth $482,000 and now it’s worth $430,000. How can I stop the bleeding? —John, Tyler, Texas
Answer: If your goal is simply to staunch the bleeding, the answer is simple. Just move all your money into your 401(k)’s money-market option. That will pretty much assure that your account balance will fall no further.
But I don’t think that should be your goal.
Why? Well, if you keep your money in your plan’s money-market option (or any guaranteed-return investment, for that matter), you’ll be relegating your retirement stash to a mediocre long-term return, which means that your nest egg isn’t likely to grow very much between now and the time you retire.
Of course, you could move it to a safe haven today with the idea of switching back to a portfolio of stocks and bonds at some point in the future. But you then have to figure out when the right time is to move it back. You don’t want to switch out of the money-market fund too soon and incur more losses. Yet if you wait too long, you can miss the big gains that come in the explosive early stages of a stock rebound.
So if stopping the bleeding isn’t the right goal, what should your objective be? |
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