Extending the CD Ladder for Retirement Safety
Once again Congress put a temporary fix on a long term budget problem. The markets reacted positively but with continued uncertainty. Volatility remains and it is still too much for us. We continue to add to our retirement accounts at a significant rate. Therefore, to maintain a positive trend until some reasonable level of market stability is found, we are staying heavy in cash.
Last year I set up a CD ladder inside my 401(k) account. We are still in a pedal-to-the metal accumulation phase. We are also close enough to retirement that I do not want to experience another “two steps forward, three steps back” episode. (2008 is still a raw memory.) So, by shoving lots of cash into the account and accepting potentially lower returns, our retirement nest egg goal will be achieved without substantial risk.
Therefore, yesterday I extended the CD ladder by another 6 months and put more cash into it.
It’s simple – if we don’t need to take the risk to reach our retirement income goal, there is no point in doing so.
Will I feel bad that the markets may go up 15% compared to our 5%? Maybe – for about 5 seconds. But now I get to enjoy all of the non-stressful days not worrying about a market crash.
The risk-reward analysis should include both financial rewards and peace of mind rewards, don’t you think?
I will look at all of this again each quarter, as each of the CDs expires.
This weekend its time for our year-end net worth analysis. Stay tuned for that. Are you tracking your net worth like us? Are you heavy in cash right now?
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