The Coronavirus pandemic and resulting stock market plunge and uncertainty has had many retirement investors across the board wanting to get out of the stock market entirely — from those who are younger and working, to those about to reach their retirement, to those who have been retired already for years.
But the alternative carries several risks, too. Mike Hennessy, founder and CEO of financial advisory firm Harbor Crest Wealth Advisors in Fort Lauderdale, Florida, spoke with The New York Times about the risk of inflation when putting all your savings into cash. “Cash isn’t riskless,” said Mike Hennessy, CFA, CFP®. “If inflation averages 2 or 3 percent, cash today will be worth half its value in 25 years.”
Other risks of getting out of the stock market completely depend on your age. For instance, working people would find it nearly impossible to accumulate meaningful savings, and retirees still need exposure to stocks and bonds to meet expenses over lengthening life spans. Using tools like Riskalyze can help retirement investors gauge their risk tolerance, but this approach also has its dissenters. As one certified financial planner noted: “The way we feel about risk is very unstable. I can ask what you would feel if stocks went down 50 percent, but I’d have to kick you in the gut three times to simulate the pain you would actually feel.”
Read this March 2020 New York Times article “You Hate Risk. You Need Growth. What Do You Do?” to learn more about what you should do in the midst of market volatility and a crisis like the COVID-19 pandemic.
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