As Matt explained yesterday, we’re poised for a major downturn in stocks right now.
But despite multiple warning signs, many investors seem content to just “let it ride.” They keep betting that everything will turn out just fine.
But maybe you’re different than other investors… maybe you saw the signs of a downturn and decided to shift a chunk of your assets out of stocks and into cash.
At first blush, that might have seemed like a smart move. But as I’ll explain today, it won’t be enough to protect your nest egg.
You see, a little-understood “retirement killer” is lurking out there.
And no matter how well-prepared you think you are, it could annihilate your retirement plans…
Could You Survive “Another 2008”?
If you have a significant amount of money sitting in cash right now, you’re not alone.
Last year, as the pandemic spread across the country, many companies and investors shifted a big portion of their assets into cash and money-market funds.
In fact, it’s estimated that over $2 trillion is currently parked in cash — a new record.
It makes sense when you think about it. As people approach retirement age, they become increasingly risk averse.
And with over 70 million baby boomers retired or fast approaching retirement (combined with the major market crash we experienced in 2020), you can see why many folks have adopted this strategy.
I mean, nobody wants to live through another 2008…
Especially if they’re at retirement age, or even just getting close to it.
You Might Be Losing Money Right Now…
The thing is, when you keep your money in cash, you face two major problems:
First, you miss out on the opportunity to put your money to work for you.
Over the last century, for example, despite all its peaks and valleys, the stock market has consistently gone up. Average returns are roughly 6% per year.
And if you believe the stock market is overvalued, or too volatile for you, you can put your cash in fixed-income investments like government bonds.
So there’s no excuse for keeping your capital tied up in cash. There’s always a way to put your money to work for you. And that brings us to the second problem:
When you keep your money in cash, not only are you not making money...
But you’re actually losing money as well!
The Secret “Retirement Killer”
You see, over time, the price of most goods and services tends to increase.
You can probably remember when it cost just a few dollars to go to the movies. But today in New York City, a ticket will run you nearly $20.
As you might know, this phenomenon is called inflation.
But what almost no one talks about is this:
Inflation is the secret retirement killer.
Because of inflation, your money loses buying power over time.
Historically speaking, prices rise by about 2% to 3% per year. That might not sound like much, but at that rate, prices essentially double every 20 years.
To put it another way, your money will only buy half as much as it used to. So if you’re keeping the majority of your savings in cash, your retirement funds might only last half as long as you’d planned.
That may sound troubling already, but here’s the really scary part:
Inflation is getting out of hand right now…
Inflation is Skyrocketing
You see, because of all the government money-printing last year, the dollar is losing value at a much higher rate…
According to U.S. Bureau of Labor Statistics, inflation has rocketed above 5%:
At that rate, instead of doubling every 20 years, the cost of basic goods and services will increase by about 4x.
And that means you could be paying 4x more for your rent, your groceries, your travel, etc.
In other words, your retirement nest-egg will be worth just 25% what you thought it would be worth.
This is terrifying. Imagine that you finally retire, you’re finally able to spend time with your friends, family, and loved ones....
And then, when you’re 75 years old, you have to go back to work because you “played it safe” and parked your money in cash!
But thankfully, as we’ll show you next week, there’s a way out of this mess…
There’s a way you could potentially avoid a major stock market correction and protect your portfolio from inflation at the same time.
So stay tuned, we’ll reveal more in next week’s newsletter!