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What should I do with an IRA that is currently in cash?

I rolled over a 401(k) into an IRA at the end of 2015. Money was put into cash at time of rollover. With the significant losses in the stock and bond markets so far in 2016, I have been reluctant to get the money invested and have just let the money sit in cash. I haven't lost any money, but I need to get this money working for me and provide income. I am recently retired and need income from my investments. Unclear to me how to proceed - I have contacted several capital investment firms who have provided me with sample portfolios - mostly a mix of dividend stocks, a variety of bonds, REITs,etc, with varying degrees of risk. Should I dive in or keep in cash until market direction becomes a little clearer?

Investing, IRAs
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February 2016

Dear Reader,

First, I'd like to congratulate you on your retirement! This is an exciting next chapter in your life. You have brought up a very good point and question. The recent fluctuations in the overall market have caused many investors to ask themselves the question of, “what should we do now?”. In order to provide the best possible answer to your question, it is imperative to begin by analyzing your overall investment strategy by reviewing what you are looking to accomplish now and in the future. Next, it is important to look at your appetite for risk, investment time horizon, and any liquidity needs.

I understand you are looking for income from your investments. From an investment and time value of money perspective, it would behoove you to have your money start working for you. We tell our clients that if they have short term needs, cash is essential to have on hand. Over the long run, cash will not outpace inflation. It is also important to note that your savings and investments must last you throughout your entire years in retirement.

I suggest beginning your investing schedule by utilizing a dollar cost averaging strategy. The focal point of this strategy is to invest a fixed dollar amount at specified intervals, therefore you are not timing the market. It is extremely difficult to time the entrance, exit, and re-entrance of investing in the stock market. This strategy takes out the emotions of timing the market. Over time, you will buy more shares when prices are low and less when prices are higher. This reduces the risk of investing a large sum of money into the market at a given potentially wrong time.

Market volatility, retirement and investment strategy questions are great topics to review with an independent wealth advisor/planner. After you go through these next steps, your advisor will be able to help you navigate these next steps in your life.

July 2016
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February 2016