The 'Couv'

The 'Couv'

Tuesday, June 28, 2016

Nearing Retirement? When was the Last Time You Looked at the 401k?

Anyone over the age of 50 needs to stop what they are doing and look at the assets in their retirement account. Whether it's the title mentioned 401k company account or an IRA, any self directed accounts need to be, well, self directed.

Since the economic crash in late 2008, the stock market indices have roughly doubled, some better some worse but about double. There has been a nice run up in values and many people that were in their early to mid-40s in 2008 may have been aggressively invested post-crash.

Now they find themselves precariously perched on the edge of what could be the top of the market and retirement is no longer that way off distant event. You can practically smell it from here. A major market correction could derail plans and postpone retirement. Unless that is, you start making adjustments to your portfolio to protect assets. Too many Americans stay aggressive way too long.

It is difficult to move assets to slower performing asset classes when the market continues to grow, but it is necessary to preserve the wealth already acquired. No one knows when the next big bust is coming, only that it is coming.

50 somethings need to begin sheltering some of those holdings in to safer havens that grow slowly but often weather storms. Assets such as treasuries, government bonds, long term cash assets and such. The small cap stocks and exploratory type investments are no longer a wise choice when you reach the half century mark, unless you are abundantly wealthy. Most of us are not.

Real estate is a solid long term investment but it can be laborious. Be very careful when considering a home refinance as well. If retiring with a free and clear house is important, then taking another 30 year note that matures when your 80+ is not a good move. Perhaps you can look at 15 year note to capitalize on the crazy low interest rates and stay on target for a free and clear home at retirement. A mortgage is not always a bad thing for empty-nesters and retirees with income. At this stage in life people often find themselves with good income and no tax shelter. A mortgage can offer an income tax deduction that may be quite beneficial. A chat with your trusted tax pro is a good idea.

The most important thing for the 50s crowd is to look at your financial picture and start making the necessary preparations for retirement. Too many people fail to make what often amounts to simple corrections that could protect them from the fallout of another big market adjustment. If you are underfunded, start packing in the cash now.

Young people that happen to read this, if you are in your twenties and you have the diligence to sock away 5-10% of your income into savings or an organized retirement account, you will get to 50 with a huge bankroll of cash. Huge bankrolls of cash are always a good thing.

Talk to you trusted pros in taxes and retirement and get your house in order, otherwise you have to work forever. If working forever is your plan, remember, sometimes your body won't let you do what your brain plans.