I am 85 and my wife is 76. We live comfortably on Social Security and two rather meager pensions. Our very conservative investment portfolio is down almost 15 percent in recent months. I was in favor of turning at least half of it into cash so as to not take on additional losses at least in part of the portfolio. I would get back onto the market when things turn around. Our financial advisor says to hold our positions because you don’t want to sell at the bottom of the market and make our losses permanent. Our asset allocation is approximately 50/50 in very conservative stock and bond funds and nothing is in cash. I usually save my retirement distributions and we generally do not depend on the portfolio for income. If I was younger I might think differently. — Concerned
Source: Should I sell half my portfolio and put it in cash? – NJMoneyHelp.com
What do you say?
I think the advisor is correct, especially given this couple does not rely on their portfolio for income. Why lock in losses?
50/50 in stocks and bonds with a loss overall of 15% is pretty average for 2022 so I’m thinking that their investments are not “very conservative.” My 401k is down 22% with 30% in bonds and money market funds.
In any case, I hope they, and you, don’t fall into the panic trap and lock in losses. When the time is right – like when you break even again, think about reallocating to a truly more conservative investment mix that is more conducive to sweet dreams.
The fact that selling would be at a loss is irrelevant. What is important is for the asset allocation to be correct at this time. History is not relevant except as it relates to taxes. Each investment should be evaluated as to its suitability, without regard to its history (again except for tax considerations).
My wife and I have separate banks, checking and savings. Joint accounts, but separately controlled. All her savings are in cash. I keep a couple thousand in cash and the rest in index and bond funds. We are each continually adding to the accounts, and it is all (hopefully) “for the kids” anyway.
In 2008, she had about $10,000 in profit sharing from a previous job, and, of course, lost a big chunk. She drew out the remainder at the bottom of the market. I don’t even remember what we did with the money. Both of us had 401(k)s at the time, but “out of sight, out of mind” they both recovered nicely, of course.
We each have IRAs that, fortunately, we don’t look at every day. On cruise control.
For the kids.
50/50 stock and bonds is about right for long term holdings. Just forget it’s there and if rmd is required, take the withdrawals as necessary. Ups and downs happen.
This is not a simple question without further information. For example, what kind of health is the couple in? How much money do they have in cash? What is their net worth? Do they intend on leaving anything to heirs? It may well be prudent to sell much of their holdings as they may not live long enough for this to be considered long term holdings.
While all those things are factors in retirement finances, I don’t think they are particularly relevant here. Selling at a guaranteed loss to move to more cash seems a knee jerk reaction that is not prudent.