Pulling Your Money Out of the Stock Market
Sep 29, 2011 |
Q: I’ve lost a lot of money through the stock market over the last few months. With how volatile the markets have been, I’m thinking about pulling all my money out. I’m close to retirement and I’ve got enough saved away at this point. I’m really more worried that if I keep my money where it is I could lose even more and then I won’t have enough saved up.
A: It’s easy to say that you’ve saved enough for retirement, but the truth is that a lot of people underestimate how long they’re going to live for. People are living longer these days, so it makes sense that what people typically thought they needed to save for retirement 10 or 20 years ago just won’t cut it today.
If you take your money out of the market, it will likely sit in the bank earning little to no interest. But if you’re worried that stocks look incredibly cheap right now, it’s because they are. Many are undervalued, which means they’re very likely to yield high returns in the future. It would be truly unfortunate if you pulled your money out now, only to outlive your retirement savings.
The stock market is going to get better, whether it’s in two months, six months or 12 months. But your money won’t grow very much sitting in a bank. Look over your finances again and make sure that you’ve accounted for living another 30 years. If you have enough money to last you well passed that, then you might be able to get away with playing it safe. But if you’ve only accounted for living 20 years passed retirement, then you might want to extend your expectancy, just in case.