From Birch Gold Group
The economy operates in cycles. Booms and busts, bubbles and recessions, ups and downs.
Following this pattern of cycles means there is always some level of risk when investing in that economy through stocks, bonds, options, etc.
Your retirement security depends on a lot of factors, but your exposure to risk is what could be the difference between sipping a Mai-Tai on the beach or outright panic.
If your portfolio is over-exposed to riskier investments like stocks, a recession would act as a multiplier of that risk. According to a piece at CNBC, Megan Murphy thinks half of baby boomers are in this “higher risk” category:
Roughly half of baby boomers have their 401(k) plans invested in riskier allocations than Fidelity suggests for their age group, Murphy said. (Fidelity recommends having around 54 percent in stocks and the rest in bonds, money market funds or certificates of deposit.)
Eight percent of baby boomers have their entire 401(k) holdings in equities.
According to the same article, this risk extends beyond the standard “workplace” 401k plan. It also extends to IRA allocations (emphasis ours):
In 2015 nearly 30 percent of individual retirement accounts were more than 90 percent invested in equities — what the Employee Benefit Research Institute diagnoses as an “extreme allocation.”
Roth IRA accounts among people 65 to 84 were more than 63 percent invested in equities, according to the Institute.
You don’t need a PhD in economics to see that having 90% of your IRA exposed to high risk investments means you only have 10% elsewhere. If a recession hits, and 90% of your investments were to suffer, your retirement could be in serious jeopardy.
According to a recent EBRI study, four out of 10 “head of households” between the ages of 35 and 64 are already projected to run out of money in retirement.
If some of those have “extreme allocation” IRAs, the result could be dire during a recession. And that recession may be closer than you think.
The Retirement “Curveball” May Already Be On the Way
As the Dow opened on Wednesday, it fell by over 200 points. According to Fred Imbert at CNBC, the yield curve continues to haunt economic growth:
The benchmark 10-year rate traded at 2.359 percent and hit its lowest level since late 2017. Investors are keeping an eye on rates after the 10-year fell below the 3-month rate last week for the first time since 2007. It is a development that investors call an inverted yield curve and is seen as an early indicator of a recession.
The U.S. Treasury yield curve inverted prior to each major recession over the last 50 years. It is currently flattening, at only 17 basis points away from inverting again.
The recent performance of this signal is shown in the chart below:
You can see that in 2019, the curve is poised to invert again. That has stoked fears economic growth may be slowing down.
As a result, the Dow is dropping, and who knows how low it will go. Tom Essaye keyed in on the large caution sign in another CNBC piece:
We need global growth to stabilize to help propel stocks higher from here… The currency and bond markets continue to flash large and bright ‘caution’ signs on this market, and until bond markets start ‘acting’ better, I think it’ll be hard for stocks to sustainably rally.
Caution, preparation, and diversification may be a good prescription to consider for your own retirement portfolio, especially if it’s primarily exposed to high-risk assets.
How “Risky” Is Your Retirement Plan?
Too many people hold primarily paper-backed assets like stocks, bonds, and mutual funds. In today’s economy they can fluctuate wildly with each crisis.
Instead of having your retirement exposed, consider diversifying your portfolio into different asset classes with different risk levels. Having a diversified portfolio with assets such as precious metals could help protect your wealth during volatile and uncertain times.
You have the power to decide how much risk your retirement portfolio takes on. You can have a plan that is vulnerable to the volatility of markets during uncertain times, or you can have a plan that will offer you security.
After 8 long years of ultra-loose monetary policy from the Federal Reserve, it’s no secret that inflation is primed to soar. If your IRA or 401(k) is exposed to this threat, it’s critical to act now! That’s why thousands of Americans are moving their retirement into a Gold IRA. Learn how you can too with a free info kit on gold from Birch Gold Group. It reveals the little-known IRS Tax Law to move your IRA or 401(k) into gold. Click here to get your free Info Kit on Gold.
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Buy gold and miss what could very well be the biggest crack up boom in all of history. DOW could hit 40k before this shitshow implodes.
I love gold, but only at 10% of my net worth.
No thanks. If I bought $100k of gold January 1, 2008 and sold it Dec 31, 2018 I would have $153799.
If I bought $100k of a S&P500 index fund January 1, 2008 and sold it Dec 31, 2018 I would have $216093. This includes the crash of 2008 and all dividends during that time being reinvested.
I hear ya. What about the same example from Jan 1, 2000?
I missed out on all the profits so I will miss out on all the losses. Ain’t play’n that game no mo.
The Stocks versus Precious Metals back and forth argument is apples and oranges. You can pick your timing or time period and be right about owning either during the stretch either one was bullish. That can be said for real-estate, bonds, Bit Coin, and tulips.
I have gone back in and out of the stock market since the 90’s when a dumb monkey could have made huge money…and many of us banana eaters did.
From 88 to 99 I saw my 401k reach 92k on just 28k that I put in. That stunned me! I studied and studied and researched and read all the pundits and especially all the contrarians. (Now, I already was a modest silver stacker.) Then after praying (6 months decision) and explaining to my wife why I felt this was a wise move…I went long on PMs.
I cashed the stocks out (paid the taxes) and put a big chunk of it in PMs. By 2010 those hard assets had a 600% profit and stocks had been through two major crashes I completely missed.
When it comes to stocks I have always got out too early and always went back in too late, but my principle never decreased and that was important to me. I got 100% out in 2014 at 64. I was positive a massive crash was coming and the Everything Bubble was going to pop within the next year, two or three years at the latest. Finding out about the ‘Dark Trillions’ the sons of bitches and daughters of witches in our government with the FED colluders have been pumping the Everything Bubble up with confirms…technically I was right to get out when I did as I believe without the Dark Trillions the market would have imploded by now.
Obviously many of us believe the stock market and all ‘paper’ is a fake overvalued monster bubble in search of a pin, it’s the TIMING…once again that is all that really matters.
Like the article said I know a few Boomers who keep 80% of their 401k in stocks and who are driving 40k cars…and living pretty good. I have a few buckets of Ramon Noodles and Beans stashed away in case they knock on my door one day, starving. I’ll be well armed when I hand it out.
Like the dog said when they cut his tail off…it won’t be long now.
Invest in precious metals , lead & brass ! Since the general collapse for most working people of the defined benefit retirement excluding most government retirement recipients who generally receive unheard of payments while private sector receives a loss statement and bankruptcy of their unsecured debt pension oh boy nothing like equal protection under the law . Average people with little assets for investment have been used and abused by the Circle Jerk Of Wall Street to K-Street To Capitol Street . Now for a 401 k you put up 100% of the cash assume 100% of any loss and receive 30% of any gains and who dreamed that plan up ? Who else the circle jerk !
LOL. Too late, my “retirement” was already decimated…..twice. Now focused on trading paper FIAT for real assets plus some AU, AG, and plenty of PB.