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Is it smart to for retirees to get out of the stock market entirely?
| Special to USA TODAYShould you do this before you retire?PennyGem’s Elizabeth Keatinge debunks some common myths about retirement.Buzz60, Buzz60My wife (76) and I (78) are retired. We both have a pension, our house is paid off and our income greatly exceeds our expenses. We have over $1.2 million invested, we haven’t touched it and don’t plan on touching it.We’ve always been conservative investors, but we’ve recently gotten to a point in which we want to be done with stock market investing altogether. We just don’t want to think about our money fluctuating in value. We don’t want bonds or annuities. We just want to be done. Are we being foolish?– William, Newport BeachBe done. You have absolutely earned the privilege to ignore the market.Throughout your investing career, whether you knew it or not, you’ve had a specific investing objective. At one point, it was growth, albeit conservative growth; then it likely transitioned to liquidity and tax sensitivity when you prepared for retirement and the new cash flow that was soon to follow.But now your objective has changed again. Simply put, it sounds as though you’ve entered the capital preservation stage of your financial life. That’s fantastic.I don’t think you’re being foolish at all. I think you’re operating in a world of trade-offs. You’re sacrificing the potential upside of a larger estate for the freedom of well-earned apathy. I’ve always felt the goal of our financial lives is to get to a point in which we don’t have to care about money. For many people, that means accumulating a lot of money. But as you’ve learned, what has allowed you to not necessarily worry about money is a very healthy cash flow and relatively low living expenses. And once again, your situation is further proof of how valuable good pensions can be.As I think through a miniature S.W.O.T. (strengths, weaknesses, opportunities and threats) analysis of your finances, one threat stands out to me. Your strengths are obviously your high income, your low expenses, and your nest egg. Your weaknesses are your aversion to risk compared to your current portfolio holdings. Your opportunities likely revolve around your opportunity to leave a large estate to a family member or community organization. But it’s the potential threat which gives me a pause.There are actually a couple of different threats, but I’m willing to look past one of them if you are. Inflation, which can lead to the loss of buying power, is often a threat when your investment earnings don’t exceed the current inflation rate. In other words, your $1.2 million becomes worth less and less as the price of goods increases. If you were at all dependent on your nest egg, I’d be concerned. But you’re not, so I’m not. The bigger threat is what happens if one of you needs extended long term care or in home care.The picture you painted for me of your financial life is beautiful. It truly is. The whole point of taking time to identify threats is to specifically imagine what could ruin an otherwise great situation. Your nest egg would be rendered nearly worthless if either you or your wife had a long-term care need. There are various ways you deal with this threat, including exploring asset-based long term care insurance. It’s a way you can leverage your nest egg to provide long term care coverage instead of paying monthly premiums you’d associate with traditional long term care insurance coverage.Leveraging some of your $1.2 million nest egg to protect the rest is not only in line with your investment objective, but it’s a prudent solution to a major threat to your overall financial stability. Asset-based long term care does just that. Talk to a licensed professional about your options.But yes, you can absolutely stop subjecting your nest egg to investment markets. Make sure you’re aware of the FDIC regulations revolving around insured bank deposits, as you don’t want to leave your money exposed to bank failure risks, although those risks are relatively slim. Congrats on coming to a very wise conclusion of your investing career.Peter Dunn is an author, speaker and radio host and he has a free podcast: “Million Dollar Plan.” Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.