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CapitalPress.com
Friday, July 22, 2022
Tough decisions for today’s investor
By L. JAKE CARPENTER
VP Investor Relations
Due to a variety of political and eco-
nomic factors, individuals are having to
make some tough decisions as it relates
to their retirement and investment
accounts. I want to focus on address-
ing those tough decisions, as well as
some alternatives to being positioned in
stocks, bonds, and mutual funds.
I run across two common situations
that are causing people heartburn. Either
they have a bunch of money that is ear-
marked for retire-
ment in a 401(k),
IRA, or other retire-
ment account, and
the account balance
is dropping every day
due to market insta-
bility. Or they have a
lot of cash sitting in
L. Jake
checking, savings, or Carpenter
CD accounts at the
bank, earning little to nothing.
Let’s talk about the 401(k), IRA and
retirement account money fi rst. There
are some questions you should con-
sider, especially if you are getting close
to retirement or already retired. Your
answer to these questions will give you
some perspective on what changes to
make to your investment accounts, if
any. Here is the fi rst question you should
consider.
Will I need income from the
money I’ve invested in the markets,
at any time in the next 10-12 years,
for basic living expenses or discre-
tionary spending in retirement?
So here is the deal. We all feel the
eff ects of our current economy with gas
prices at an all-time high, infl ation get-
ting out of control, and interest rates
increasing, to name a few. All things
considered, it’s reasonable to assume
that we could be in for at least another
six years of a shaky market. That means
it could be 10-12 years before market
accounts get trued back up.
If you are trying to ride this out and
you’re not currently making contribu-
tions, you should consider if you can
aff ord to leave that account alone for a
10–12-year time horizon to allow the
market to come back. Most of the time,
I advise my clients to start scaling down
on the amount of market exposure they
have when they get within 10 years of
Working together to grow and protect your wealth!
retirement. I recommend only leaving
the amount of capital in the market that
you can aff ord to leave alone for at least
10 years. Next question...
Are you currently contributing to
your retirement account and likely to
do so for the next 10 years?
A market-driven account usu-
ally makes the most sense when you
are working and contributing to the
account. If you are currently contribut-
ing, and likely to do so for the next 10
years, you will be able to take advan-
tage of purchasing equities at a dis-
count when the market is down; there-
fore, you are able to buy more shares
and capitalize when the share price
goes back up. If you are not contrib-
uting to your account, your account is
basically like a bobber on the high seas
going up and down. You just hope that
the market will be up when you need to
take some income.
Take some time to think about
these questions and explore where you
are with how much you want to be in
stocks, bonds and mutual funds. Final
question...
If you were sitting at your dinner
table, and you took all the money
you have currently invested in the
stock, bond and mutual fund mar-
ket, and put it in stacks of $100 bills
in the middle of the table, how much
would you want to put right back
into the market?
Close your eyes and picture this for
a minute; just think about it. Now, how
much of it would you feel comfortable
putting back in the market? I ask this
question of all my investment clients.
Their answer often takes them by sur-
prise. Most of the time the fi rst thing
out of their mouth is, “I wouldn’t put
any of it back in the market!”
Now let’s back up a step. Is it
really that you don’t want ANY mar-
ket exposure, or that you want to limit
your market exposure? Maybe you’re
more comfortable with 20% or 40% of
it back in the market. I can’t tell you
what your answer is, but if you pon-
der your answers to these questions it
may help you determine if, how much,
and where you should be investing
based on your fears, concerns, and risk
tolerances.
If you have determined that you
want to move some of your quali-
fi ed retirement account money out of
stocks, bonds, and mutual funds, then
the next question is, where is a good
place to invest money right now? I
assume that you would probably like
to create some steady income that is
reasonably reliable. Remember, it’s
not about how much cash you have,
it’s about how much cashfl ow that cash
can generate. It’s a fact that there are
some great options for parking cash, in
a shaky economy, with a large, reputa-
ble insurance company. Options such
as life insurance cash values, fi xed
annuities, and lifetime income annu-
ities may off er some guarantees, but
the income potential is usually lower
and may not have enough to keep up
with infl ation.
Income-producing real estate may
be another great option to consider.
It’s an investment vehicle that tends
to be lower risk, with the potential to
produce income and growth as well as
potential tax advantages. Equilus Cap-
ital Partners, LLC has income-produc-
ing real estate projects located in the
Northwest. Our investors like the fact
that they can drive a few hours and
physically see what they are invested
in. If you are using straight cash to
invest, you may be able to take advan-
tage of a depreciation schedule, which
could provide some tax advantages on
the income you receive.
Finally, let’s talk about cash! I’m
referring to the cash in your check-
ing, savings, and CD accounts at your
bank. These can be attractive places to
park cash short term. We all need to
have some cash in our checking and
savings accounts for emergencies.
But generally, I advise only keeping
about 6 months’ worth of your living
expenses in the bank, plus any other
larger amounts you expect to spend in
the next year. Anything more than that
you should consider investing.
The big risk of parking cash in
checking, savings, and CD accounts at
the bank is that the growth will not keep
up with infl ation. I remember in 1997,
gas was 99 cents a gallon. Now it’s hard
to fi nd a place that sells gas for less than
$5.00 a gallon. If the growth of your
money does not keep up with rising
costs, you will be forced to spend into
your principal. And if you live long
enough, you might run out of money.
Don’t let your cash sit around doing
nothing. Work with a fi nancial advisor
to determine the best options that may
be appropriate for you and get the most
out of your money.
We’re the educators; you are the
decision-maker. It is time to make
better decisions by knowing all your
options! Feel free to reach out to me for
a complimentary initial consultation.
Call to learn more. (509)665-8349.