By Alessandra Malito
‘We have seen growth that we did not see in the market’
“We have $100,000 in metal and $90,000 in a high-yield savings account.” (Photo subjects are models.)
Dear Help Me Retire,
My wife and I pulled out $90,000 from my 401(k) in April when the market was dying. We put that into a self-directed IRA and purchased precious metals to protect the assets. We have seen growth that we did not see in the market.
We are still maximizing my 401(k) and have reached out to Fidelity to have it changed to a more aggressive blend as I would like to retire in five years. We have $100,000 in metal and $90,000 in a high-yield savings account. Our home, car and truck are paid off and we have minimal expenses.
Are we in decent shape to retire and live off Social Security and the metals which we see increasing yearly?
Mixed in Metals
See: My husband died last year, but I only received $250 from Social Security. Can I get more under the new law?
Dear Mixed in Metals,
There are quite a few moving pieces to your letter.
First, pulling money out of your retirement account when the market is down breaks one of the biggest rules of investing. There’s a logic behind the rule: withdrawing makes the loss (or, on happier days, the gain) official. For instance, say you had a $100,000 portfolio and because the market tanked, your balance is now $50,000. That hurts, yes, but it’s just a theoretical loss until you sell the investment. Your balance can still recover, back to $100,000 or perhaps even more. But if you take that money out? You’ve officially lost the $50,000. There’s no way to get it back from that portfolio. Starting over in a new account just gives you the same risks as before, but with a smaller balance.
And if you don’t think the market can recover, look at what the S&P 500 SPX has done since April. On April 8, the index was at 4,982 and today it’s at 6.472. That’s a perfect illustration of what you miss out on when you sell impulsively.
It’s great that the choices you made thereafter have proven effective, but I also caution you not to fall in love with precious metals, or any other type of investment for that matter. Precious metals can provide some protection in your portfolio, but they still come with their own risks. Even when one precious-metals fund was seeing a 35% return earlier this year, a wealth manager told MarketWatch investing in this asset class was like wanting “equity-like risks with bond-like returns.”
“Gold doesn’t provide cash flows; it doesn’t produce earnings and is not a long-term effective inflation hedge. Holding gold incurs holding costs and suffers from poor tax treatment,” George Padula, chief investment officer and wealth manager at Modera Wealth Management, told MarketWatch.
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I’m also concerned about the push to an aggressive portfolio when you only have five years to go until retirement. I understand you want to ramp up your earnings as much as you can before you stop working, but this is the time to find a better balance. There are a few ways to do that, in and out of the portfolio.
Outside of it, you should have emergency savings accounts. I suggest two: one for actual emergencies, like if your roof suddenly has a hole in it or your car engine light goes on; the second for when you do retire if the market is in a downturn. There’s something called “sequence of return” risk and that happens when you withdraw money when the market isn’t doing well. It takes money out of the account at a vulnerable time, and can result in less returns in the future because of the initial lower balance. A high-yield savings account, like the one you have, could be a good place for this kind of money. With emergency accounts, it’s most important that the money is easily accessible should you need it.
As for the portfolio itself, growth-driven investments are good but you don’t want it to be so risky that if the market is down, your balance drops significantly, right at a time you will need it most. Take into consideration your risk tolerance and your risk appetite. The former measures what you are willing to lose, while the latter measures how much you can actually lose without jeopardizing your goals.
Take into consideration your risk tolerance and your risk appetite.
And now to the big question: Are you in “decent shape” to retire? Unfortunately, there are far too many more variables to consider before you can draw that conclusion. It’s great that the big expenses are paid off, but the answer depends on so much more: your age, your estimated duration of retirement, your and your wife’s health, how much you have in retirement savings, what you expect to spend in retirement, how much you will receive from Social Security every month, and so on.
During these next five years, get serious about retirement planning. Look carefully at Social Security claiming strategies – you and your wife should both have online accounts with the Social Security Administration so that you can see what you can expect from benefits at various claiming ages, such as at the earliest at 62, at your Full Retirement Age and by delaying until 70. Also take into consideration how your benefits can work together: the person with the higher earnings may wish to delay Social Security until age 70 to get more money each month – as much as around 8% more each year between Full Retirement Age and age 70 – while the other spouse might want to claim at Full Retirement Age to get 100% of what he or she is owed.
Run a few calculations for various withdrawal rates from your 401(k) and IRA. The typical guideline is 4%, but you might find you can rely on less, such as 3%. Make a mock budget of your retirement expenses, and include the extras, like needing to replace your car one day or downsizing homes, or any medical bills and long-term care costs you think might come up down the road.
There is a lot that goes into planning retirement, and it does not rely solely on the type of investment you pick for your portfolio.
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Have a question about your own retirement savings? Email us at HelpMeRetire@marketwatch.com
-Alessandra Malito
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09-05-25 0938ET
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