Mark Twain once remarked: “I am more concerned with the return of my money than the return on my money.” In other words, Twain was more interested in preservation than growth. Likewise, many people today who are nearing retirement age share Twain’s concern. When you are nearing retirement there are many questions at stake about your money, such as the safety of your capital, possibilities and choices for investment, inflation, deflation and risk.

50:50 Ratio

When people are thinking about their retirement they are often considering allocating part of their capital for safety and investing another portion. This is a wise decision, as it is important to always have a liquid account for emergencies. It is also important to invest your capital so you can gain a better return on your money. Often, following some internal logic, this division of safe cash and investment cash falls into a 50:50 category: invest half, protect the other half. (For more, see: Analyzing the Best Retirement Plans and Investment Options: Cash Investments.)

However, Johanna Turner, a financial advisor with Fox Wealth Management in Mayfield, Ky., questions the benefits of a 50:50 ratio, wondering whether this is the right recipe for the financial future for people nearing retirement and whether this would produce best results. “You have the ingredients for a financial plan, but you’re not using the right recipe and this will result in less than stellar results. While that division [50:50] may seem nice and simple, it is most likely not going to yield optimum results for you,” said Turner.


Making a viable financial plan for retirement is the most important step you can make. It would be best to make this plan with a certified financial planner, if possible. This is part of your life when you should have the best plan that would provide you with optimum results.

At this stage in life you need to identify your financial goals carefully and specifically. As far as your immediate and short-term needs are concerned, Turner recommends keeping "any money you will need in the next five years liquid in a money market account for unplanned needs (think emergency funds) and in CDs or high quality corporate bonds timed to mature at a date of need for planned needs (a cruise with your family in four years).” In terms of your long-term goals, Turner notes, “The rest should go into a well-diversified equity mutual fund/ETF portfolio.”

If safety is your main concern, any savings or high-interest savings account is good idea, as they are FDIC insured. Arie J. Korving, a financial advisor with Korving & Company in Suffolk, Va., notes, “Here is what safe money looks like: if you’re asking for really ‘safe’ places to stash cash you should try the banks, but stay under the $250,000 FDIC insurance limit in case the bank fails. I believe banks are paying less than 0.1% annually today. Or you could buy U.S. Treasury bills which are currently paying about 0.25% annually, but stay away from anything longer than 12 months because if interest rates go up and you need your money now you may have to sell them for less than you paid.” (For more, see: How Much Cash Should I Keep in the Bank?)

Addressing some other financial concerns that can appear as you near retirement, Kirk Chisholm, a financial advisor with Innovative Wealth in Lexington, Mass., offers the following advice: “You should diversify your assets into different areas. If you are concerned about inflation, you should focus on assets that do well during inflationary periods (stocks, precious metals, real estate, etc.)." On the other hand, if you are concerned about deflation “you should focus on holding cash and safe bonds that pay a reliable income,” said Chisholm.

When you are nearing retirement age, good planning is more important than ever as it will affect your quality of life during retirement. It is important to keep a portion of your money in an easily accessible savings account for emergencies and in a CD (for short-term goals). The rest should be invested in a well-diversified mutual fund/ETF portfolio. Hiring a certified financial planner to help you reach your financial goals and offer advice may prove to be invaluable. (For more, see: Are Your Bank Deposits Insured?)

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