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Question for the Money Doctors

Question submitted on Jan 10, 2012.

Question

I''m 63 and finally got our kids through collage and paid off our debt, except for our home. Last year (Nov. 2010) we started a simple IRA and have put the max in it every month ($12,000 each). I''ve found out that we have lost $3,500 this past year in those accounts.
Besides a savings account with 6 months living expenses in it, we don''t have any other retirement, except Soc.Sec.
My question is, since we can''t afford to wait 10 years for our investment to recover, should we just pay taxes on the money and put in CD''s at our local bank. I know the interest isn''t much, but I feel our money would be more secure.
Thanks for your help. My wife is on my back to pull it all out, cut our loses and go on.

Answer

I am never in favor of selling an investment while it is down.  Doing that is the opposite of what we are supposed to do (i.e. buy low, sell HIGH).  That said, you and your wife need to sleep at night.   

You need to determine how much longer you are planning on working and when you think you may need the money.  If the answer is more than 10 years, then a more aggressive investment strategy could be appropriate - at least until you make your money back.  If you plan on working only another 5 years, then I think you should move 1/2 of your retirement savings to more conservative investments and leave the other 1/2 in the market.  If you need the money within 5 years, I put it in a 24 month (no longer) CD which will earn a little interest while you are waiting.  At least then, you know it will be there when you need it. 

Hope this helps.  Good luck!


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