When a positive is a negative

Dave Kutcher

by Dave Kutcher

More and more folks are coming to see us with the idea of moving their money to cash because they are looking for a safe harbor. We get it. It is hard to look at the markets today and feel enamored with prospective returns. For folks in that 5-year window pre-retirement who understand the issue with negative sequence of returns, it is easy to understand why shifting a large portion of their retirement funds to cash may seem like a safe thing to do.

However, there are other risks besides potentially losing money in the stock or bond market.

Inflation is something we must be cognizant of when contemplating investment choices. Playing it completely safe may produce a positive return on paper, but if your rate of return is less than the inflation rate, that paper positive is a negative in terms of real value.

If we look back over the last 10 years, we find that commonly used safe investment alternatives, when adjusted for inflation, have produced negative returns on your money. Bonds at – .1%, Certificates of Deposit -1.75% and cash at -2.3%.

We understand the desire for peace of mind, and we admire the spirit of trying to make changes in order to protect your nest egg, but a flight to cash at a time when inflation is higher than it has been for decades won’t leave you feeling like you made a good decision in the long run.

If your money is not keeping pace with the cost of living you will be lulled to sleep thinking you are doing ok in the short term, but you will find yourself eroding more and more of your available funds to try and keep up with your financial obligations during retirement. And let’s face it, the things we see rising higher and faster than others are necessities in life. Groceries and fuel for transportation as well as fuel for home heating are not exactly frivolous expenditures we can do without. Add in the rising cost of healthcare and not only might that safe harbor positive return not seem to keep up, but it may also result in the exact opposite of what you were trying to prevent … running out of money.

We have had tremendous success in helping people find a way to keep pace with inflation while simultaneously protecting themselves from the downside risk of the stock and bond markets. When we can capture much of the market’s upside while also protecting you from the market’s downside, you don’t have to run the risk of turning a positive return on paper into a real return that is negative, unable to keep up with today’s rising cost of living. 

I am Dave Kutcher, a retired Marine Corp Captain and founder and owner of Kutcher Financial Services in Eagle River. We are on the radio every Saturday morning, “Retirement in the Last Frontier”, 8:30-9:30 on AM 650, Keni Radio. Kutcher Financial Services, 10928 Eagle River Road; Eagle River, AK 99577, (907) 795-7452.