Fixed Income in Retirement Accounts

Even young people who will not be needing to withdraw from their retirement account for many years should consider keeping some money in the fixed income option. Here is why.

Historically the stock market increases along a bumpy curve until every few years it decreases drastically before resuming its upward climb. During those drastic lows (crashes, recessions, etc.), you can use some of your fixed income money to buy into a fund at a bargain price. Then some time after the market recovers and you have realized a gain, you can replenish your cash position. Of course you have to plan ahead and have more money in cash (fixed income) than you will need right away. You can find lots of advice on how much cash would be appropriate for you.

This stategy does not require you to check the stock market every day. When the stock market takes a sudden trumble, it will be in the news, so you will know to start paying attention and decide when to change your allocation. There are some simple options for where to move your cash. You can opt to buy more of your age appropriate fund, e.g. 2050 Retirement, or the Vanguard 500 Index.

A even better option, especially if you do not have much of a cash position, would be to sell some of your devalued fund and roll it over to your Roth IRA where you would invest it in a similar fund or stock that is also devalued. Visit the link to learn about the tax advantages of a Roth IRA.

Charles Young wrote this in an effort to offer some quick and simple advice. God bless.

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