No Green Bananas?

By Linda Leitz - Last updated: Monday, October 3, 2016 - Save & Share - Leave a Comment

Very often, retirees or people almost in retirement don’t want to hear about issues involving their money if it suggests any type of long range view of things.  Often I’ll talk to someone in that category about the long term performance of something relevant and they’ll reply that they don’t even want to look at long term issues and that they “don’t even buy green bananas”.  While that makes for a great come back, it may be more short term in nature than is in the person’s best interest.

The biggest problem with a “no green bananas” attitude is that it assumes one of two things of which you can’t be sure.  One assumption is that inflation and whatever you currently have your money in will cooperate so that you will have as much money as you need for the rest of your life.  The other assumption is that you aren’t going to live long enough for it to matter.  Both premises are pretty risky.

There’s good news in retirement planning and it’s that people are living longer.  That means more time in retirement than your parents and grandparents had.  It may mean that instead of having 10 years or less in retirement, most of you will have 20 or even 30 years.  What can be bad news is outliving your money.  It doesn’t take a Harvard economist to figure that if you’re going to be in retirement longer than your predecessors, you need to save more money and make it work harder to have the lifestyle you want in your Golden Years.

In terms of making your money work harder, you’re more likely to get higher returns over the long haul with some type of equity.  CDs and money market funds are safe, but don’t really pay much – especially these days. And what little money you make in interest is subject to income tax. So even with low inflation, you might not even be breaking even.

The other important factor to consider is that you should not have all your money in the same place.  There are a couple of reasons for this.  One is that you probably need your money to do different things.  Some of it needs to be available for emergencies, some needs to produce income, and some needs to grow for the long term.  (There are those green bananas, again.)  The other main reason is that almost any investment will have good years and bad years.  Some years bonds have performed better than stocks.  Most years stocks have performed better than bonds.  Some years, the money in your mattress may be your favorite investment.  If you have your money spread around in a variety of places short term events should not cause you major problems.  Being willing to look into different alternatives can certainly help you get where you want to be financially and actually help reduce some of the risk of having all your eggs in one basket.

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