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My husband will retire in about 4 years and presently all his IRA money is in stock mutual funds. I have been reading that when you get that close to retirement, your money should not be in stocks. What else can we put it in that will give us a little more than the 3% savings and money markets are paying?
I'd suggest you look into bank Ceritificate of Deposits as they're insured by the Govt. up to $100,000 and the longer term ones have rates over 4% now.
Talk to a brokerage (like Smith Barney, for instance) and see what they have to offer. Ditto for your bank's representative. You might be surprised.
Many people do not like annunities, but I have found that the rate is higher and the percentage rate stays the same no matter the market, if you can go withouth the income for the term.
Buy individual stocks for the best return! If you do not know much about investing in individual stocks, then watch Jim Cramer's Mad Money on CNBC Monday thru Friday at 6 PM, 9 PM and midnight (same program, 3 different times). Better yet, set your VCR or TiVo and record the program every night, that way you can play it back in case you do not understand everything he is saying as at times such as during the Lightning Round, he talks very quickly and you can easily miss something.
Listen carefully to what he is saying! Some of his picks are for short-term trades, others are for long-term investments. You only want the ones for long-term investments. Carmer also has written a book on investing, I dont know the name of it, but he sometimes mentions it on his show. Many listeners call in and comment on how well it is written for the novice investor to understand. BUY IT and read it and use it as your stock investing bible!
A good portfolio of stocks should easily beat most mutual funds over time. AND, most mutual funds underperform the stock market anyway. You do not want to gamble with IRA investments, so picking good companies with good growth potential is your best bet.
Listen to Cramer for a good month or two before you invest. He is funny and very knowledgeable about investing in stocks and his show is devoted to the individual investor. Then start slowly, buying a few stocks at a time. Never expect stocks to move up after you buy them, often they will fall a bit as you can not predict short-term fluctuations. Do not worry, if they are good quality stocks, they will earn a good return over time.
AND, forget about the theory you should not be in stocks close to retirement. Stocks typically outperform every other investment over the longer term (10 years). AND, they will certainly outperform money market funds. The object is to invest IRA money you won't need to touch on a monthly basis. The very worst thing you can do is buy stocks this month and sell them next month to pay the rent! Stock investing is for the long term, not for the short term. Keep the money you will need in the short term in a money market fund.
If your IRA investments are not earning a good return, you might someday find you have outlived your money! You want your money to outlive you!
An investor should hold a portfolio of between 10 and 20 stocks. The more companies you own in different industries, the more diversified your portfolio will be. Stocks do not always move up in value, sometimes they move sideways and yes, even down. But, over time a good portfolio will give a nice return.
I retired 15 years ago and every cent I have is invested in stocks.