New to investing here. We are 56F/53M middle class with a 3% mortgage we are only 5 years into and we live in a MHCOL area. We each have an IRA we started maxing out last year and both have 401k's thru work that we contribute to up to our employer match. 56F will also have a small pension after 65. Our investments are just now starting to get to a worthwile place – about 200k as of now and we do also have a 6 month emergency fund.
We were broke until about 10 years ago when we were finally able to start saving and investing towards retirement. so we have struggled to get what we currently have. However, we are limited in the years we have left before retirement so we are pretty worried about that nest egg. Also, Social Security in the US is not something we feel we can rely on so we are not planning on it and if it still exists when we qualify for retirement, that would be a bonus.
I heard that the stock market is inflated and we will probably have a crash. What is the best way to save that small nest egg we have built and not lose it? Do we move all our investments (most are with Fidelity) to overseas funds? Do more with Tech stocks or less (AI backlash is worrying me right now). We currently try to have a wide range of funds but most are in the "moderate" to "aggressive" categories seeing as we are down to 15-ish years before retirement which makes me nervous too. Should we move to safer funds? And which funds?
Everyone says invest and then just forget it until retirement and I was fine with that until just the last year and a half because of…current events in the US. Now I am losing sleep over this. I think we are in the worst spot to be in, not close enough to retirement to move out of risky investments but too close to retirement to just ignore it and let the market correct itself over a large period of time.
How do we not lose everything we have saved in next couple of years if we get a crash/recession (US)
byu/glimmergirl1 inpersonalfinance
Posted by glimmergirl1
22 Comments
Read age appropriate asset allocation in the wiki
“I heard that the stock market is inflated and we will probably have a crash.”
People have been calling for another crash every single year since 2008/2009.
What is your money invested in now?
Most crashes last less than 2 years. You will be fine, unless we get a 2000-2007 repeat. If I were you I’d focus on making sure your house is paid off in 15 years and invest the remainder.
As much as I am hoping for the AI bubble to violently explode, there’s not really anything we (as self-concerned individuals) can do to prepare for massive market movements like that.
This is also a “timing the market” issue, which is not a good thing to plan for
It is very important to understand market and market conditions. The best thing is to stay in the market long term and overall it recovers. Usually you have conservative to aggressive categories or the option to go to money market and cash. Boglehead theory basically says stick with S&P500 fund and never sell. Keep your emergency fund in a fixed income account, but invest the rest.
There is no easy way to protect the money. I am currently split between 4 accounts. Small caps, S&P500, Growth, and Bonds. If interest rates are rising stay away from bond funds unless it is short term 3 to 6 months bonds. I can also adjust to go from Growth to Value in my 401K once the market becomes more overbought. I might do this when the S&P500 is 14% over its 200-day MA.
I can tell you right now you’re probably just going to lose your money by making emotional a mistakes. People that get emotional about the news and start trading based on that always lose money.
If it crashes you still own the same amount of shares. That’s why it always goes up if you don’t sell.
>What is the best way to save that small nest egg we have built and not lose it?
Don’t sell the dip. That’s what it comes don’t to – not letting your emotions force your hand into selling to realise the losses.
Keep in mind that even if the market “crashes” you won’t lose *everything,* and you likely won’t lose it for long. It’s not like you go from $200k down to $0 for the rest of your life, it’s more like you’ll go down to $160k for a year, then it starts crawling back up to $200k within 1-2 years or maybe a decade.
Having said that, as you get older you probably want to reduce your market exposure and focus more on bonds and *maybe* income-generating (dividend) stocks. Look up “asset allocation by age” to get a feel for what might be appropriate.
Check out treasuries and ultra short term bonds?
> Also, Social Security in the US is not something we feel we can rely on so we are not planning on it and if it still exists when we qualify for retirement, that would be a bonus.
zeroing out social security is really dumb. if you want to estimate it at idk, 70% of current value great.
>I heard that the stock market is inflated and we will probably have a crash.
market has been expensive since forever, and we have had multiple crashes. i’m not sure if you’ve noticed those, but yeah, look at 2018, 2020, 2022, 2025.
if you want to not have any market risk you can convert to bonds. but there’s no risk free, because then you are just exposing yourself more to inflation.
You’re more likely to die before the market “crashes” so stop worrying about it.
1. Stay diversified
2. Have enough liquid or in fixed assets to survive 3+ yrs.
3. Don’t sell when the market corrects/crashes. The absolute WORST thing you can do. Don’t try to time the market. It will come back.
Put all of your money in a target date fund appropriate for your planned retirement year (so 2035 or 2040). Do not look at it again until you retire.
The target date fund automatically shifts the allocation as you get closer to retirement, so you don’t do things like make fear-based investment decisions.
Seriously, just do the target date funds and get some some rest.
You only lose it if you sell.
If you are retired when it crashes, you sell from your bond positions as those wouldn’t have dipped as hard as stocks.
When stocks rebound you can rebalance to fill your bond space again.
If you aren’t retired when it crashes, enjoy buying the dip
You don’t lose unless you sell. The older you get, the more you should diversify to reduce risk.
You could certainly change your asset allocation to be a bit more conservative if your apatite for risk as you age decreases. This is pretty common, although I would argue your probably behind in retirement savings per your post, and may not be retiring at 65 as a result unless your able to suddenly invest more than you are today. So your runway is likely longer than you think, meaning if the market does go through a recession then you have longer to recover before you need the money and you may want to be a bit more aggressive while your nest egg grows. Also remember you don’t need 100% of that money on day 1 of retirement whenever that might be, it’s meant to sustain you for probably decades making your runway even longer.
Go read about the 2008 market crash and the people who pulled out, vs the people that stayed in. The people that stayed in, and weathered the storm vs sitting in cash and trying to time the market did substantially better in the years since because they were not trying to time when the market was at it’s bottom to get back in.
The stock market will crash.
It has in the past. It will do it again.
The stock market will rebound after the crash.
It has in the past. It will happen again.
You don’t lose all your money when the stock market crashes, unless you sell all your holdings off.
Keep your holdings, and they will eventually go back up in value.
Keep enough money in something other than stocks, so that you don’t need to sell anything after a crash.
You don’t change a single thing. Keep investing. Do not sell. Do not change your investments. Do not check your balance. Seriously. People who got screwed in 2008 were selling. People who were able to hold recovered. You are not too close to retirement to wait it out. You have a solid 10 years.
Separately, you need to think about the appropriate asset mix going into retirement. You don’t want to be at 100% equities the day you retire. This has nothing to do with “current events in the US.” It has to do with avoiding sequence of returns risk.
Personally I would not worry too much about this as you are over a decade away. There will be a crash at some point but based on the history of the market, it will always rebound higher.
Timing the market is impossible. If you are able to put more in when it is crashing, you are basically getting to buy more shares at a discount. When it eventually recovers, your account will grow higher faster. You just need to be concerned about downturn markets closer to when you retire. Having alternative means to take less from your accounts during these times will help your retirement savings last longer.
You just wait it out until it recovers 5 years later.