“I moved my retirement account to the money market sub-account when my account dropped more than ten percent in 2015. I read that is what you are supposed to do.”
When did you re-invest your retirement account?
“I haven’t, it is still in the money market, and actually, I feel pretty good about that.”
That is a good strategy to keep your account from declining in value, however, you retired recently. Aren’t you going to need income from your retirement account?
“Oh, yes. I figure I will need about four to five percent per year.”
But, your strategy has no earnings, thus you will be withdrawing your principal.
Well, IF that is all you ever have to withdraw, it would mean that your account will last about twenty to twenty-five years before it is fully depleted.
“I will be dead in twenty-five years.”
Maybe. However, I believe you are looking at your account with a very singular focus…one that seems quite emotional. You have a strategy to protect the account value from losing market value, but you have no strategy to protect against inflation.
At just three percent inflation, in ten years you will lose about thirty percent of your purchasing power. In twenty years, the loss will be almost one-half.
You have a strategy based on an emotional response, but you don’t have a meaningful, realistic retirement income strategy.