“I have $350,000 in home equity, $1 million in a 403(b), $80,000 in a Roth IRA, $40,000 in an HSA and $60,000 in cash.” (Photo subject is a model.) – Getty Images
I’ll be 63 next month. I’ve been retired for almost a year. I’m single, have no debt, and I’m in excellent health.
I have $350,000 in home equity, $1 million in a 403(b), $80,000 in a Roth IRA, $40,000 in an HSA, $60,000 in cash and $200,000 in a traditional IRA. My expenses are $4,000 a month. I have $1,300 a month in passive income that could end at any time. I’m drawing $2,500 a month from my traditional IRA ($2,075 after taxes) and get the monthly expense balance from cash.
My traditional IRA is 80% stocks and 20% bonds/cash. I’ve asked my financial adviser to put it into a money-market account with 4% to 5% interest. He says don’t do it or I’ll shortly spend all my funds. That’s my objective — I will exhaust the account in six to seven years, at which time I’d tap my 403(b), which I plan to leave invested in the market at roughly 70% stocks and 30% bonds.
I think we’re in a market bubble based on AI exuberance and don’t want to sell from my IRA assets in a downturn. I also will likely inherit about $300,000 from my father, provided he doesn’t need nursing-home care. He’s 95 and fairly healthy. I will also draw Social Security when I reach 70, which will be $3,500 per month.
Should I stay the course with my IRA and risk a bear market, or play it safe with a guaranteed (low) rate of return?
If you are proven wrong by moving your $200,000 to bonds, at least you can take comfort in doing what YOU believed was best at the time. – MarketWatch illustration
The clue is in the title: You hire your adviser to give you advice and to put your interests first, and he has done that to the best of his ability. He says don’t do it. So you either take his advice or you don’t. If you do take his advice, and there’s an almighty tumble in the stock market, you will rue the day you ever listened to him and curse yourself for not listening to your gut.
If you don’t take his advice and the market continues to climb, notwithstanding the usual bumps and grinds like we had in April, you may wonder why you allowed your fears to get the best of you. I received many emails like yours during the market correction in April — people wanting to move 100% to bonds or gold — and they might be regretting that decision now.
Your letter is timely. Stocks rose for a fifth-consecutive day on Thursday, with the Dow Jones Industrial Average, DJIA S&P 500 and Nasdaq COMP all hitting new highs, making this the 30th record close of the year for the S&P 500 SPX and Nasdaq, and 10th for the Dow. It was the first time since November 2023 that all four indexes rose for five consecutive days.
It’s your decision: You’re in your 60s and you’re in a very solid financial position. Your financial adviser doesn’t know anything you don’t, and vice versa. We do know that, looking at historical averages, the stock market will continue to head north, even if there is a significant downturn that could take months or, in a worst-case scenario, years to recover from.
You’re ring-fencing your short-term withdrawals, so you have a pot of money over the next several years. You’re lowering your risk at the expense of potential returns of 10% a year, before inflation, from your equity investments. By all means, follow your own instincts — not mine and/or your adviser’s — by putting this $200,000 in a seven-year Treasury or CD ladder.
You are advocating for a “bond-tent strategy,” which involves gradually exposing your portfolio’s allocation to bonds in the years leading up to your retirement, keeping a higher bond allocation during the early phase of retirement, and gradually lowering that exposure later in retirement. The logic: You get to retire on the appointed date, regardless of what happens on the markets.
The numbers: By leaving your 403(b) untouched for the next seven years, you would have up to $1.5 million with a 7% average return for your equity investments, and a return of 3% to 4% for your bonds. That does not account for your feared bubble bursting, but it shows you the potential of your 403(b) and a potentially healthy landing for your 70th birthday.
That 403(b) alone, without a $300,000 inheritance from your father, would see you through the rest of your lifetime. You would be withdrawing around $60,000 a year while your portfolio would continue to grow at a modest 6% a year (adding $90,000 in value every year). Even at a very conservative 4% annual return, your 403(b) would still last 30-plus years.
Given your feelings about AI, you are actually quite aggressively exposed for your age. The rule of thumb (which is just a guide, not a prescription) is 100 minus your age = exposure to stocks (38% in equities in your case) or 110 minus your age = exposure to stocks (48%). Your current exposure is 68%. It would move to 55% by converting your 403(b) into bonds.
Everyone has an opinion: You are more bearish than your financial adviser, but it’s your money and, therefore, your choice. Plus, you still have enough money to live a comfortable retirement whatever path you choose. If you are proven wrong by moving your $200,000 to bonds, at least you can take comfort in doing what YOU believed was best at the time.
You will have health-insurance premiums for the next couple of years before Medicare kicks in and that you may have unexpected health events, and that Congress needs to act in order to fully fund Social Security by 2033. President Donald Trump’s tariffs, the partial government shutdown and an uncertain jobs market may yet weigh on stocks in the short and medium term.
As investors focus on corporate earnings and the Fed’s recent decision to cut its key rate by a quarter percentage point, U.S. consumer confidence has fallen to a five-month low, so you’re hardly the only one who is concerned. In the meantime, enjoy your retirement savings and travel, or stay home and turn your backyard into a putting green, if you so wish.
As for a recession, it’s not about being right. It’s about being prepared.
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