If your entire nest egg was liquidated and sitting in a checking account, would you re-invest it exactly the same way as you have it set up right now?

Yes, that’s two different pictures of the same Skydeck, suspended 1,000 feet in the air over the concrete sidewalks of Chicago. My palms are sweaty just typing this.

There’s a big, obvious difference between the two photos.

Would you let your child or grandchild go out on the Willis Tower Skydeck right after the floor started cracking?

In case you didn’t see it in the news recently, there was cracking in the Willis Tower Skydeck floor. When I saw the photos, and imagined myself on that see-through-floor, looking straight down 1,000 feet…. and then suddenly, out of nowhere all these cracks start to appear under my feet, oh boy, I’d probably have to go change my clothes.

Imagine you are this little girls parents, or grandparents. You have the choice. Let her go out on the Skydeck, or not.

Even when it’s perfectly fine and other people are on it, you still might be a little afraid to to let her go.

But, now imagine the floor starts cracking, 1,000 feet up in the air, and she still wants to go out on it?

Do you let her?

Ok, so what does this have to do with a safe and secure retirement.

Go back and read the title of this blog again.

If your entire nest egg was liquidated and sitting in a checking account, would you re-invest it exactly the same way as you have it set up right now?

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Here’s a chart of the SP 500 for the past 15 years.

Here you are, today, standing on the edge of a market that’s up 160% over the past 5 years.

A market that has DECLINED 50% twice in the past 15 years.

You are right on the edge of retirement knowing that your nest egg needs to last you for 20-30 years of retirement.

Then imagine all your investments were  liquidated today, and all that cash is just sitting safe and secure in a checking account.

You need to re-invest it tomorrow.

What’s would you do?

  • Would you buy back the exact same amount of every single mutual fund that you own right now at these high levels?
  • Would you put the money back into the CD’s that are paying 1%?
  • Would you buy back all the stocks you own at today’s high prices?

Maybe you would, but if you answered NO WAY, then what are you doing holding those investment now?

Most people have losers, or accounts that they don’t really like. Why would you re-invest in those things?

You also may have huge gains in something and buying back in at these prices seems a little crazy.

Or you may be looking at bond funds and thinking, if interest rates go up, these might get crushed.

To top it off, bank rates are next to nothing.

It’s OK, there’s a way to solve this problem.

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It goes back to the buckets of money that I talk about all the time.

  • YELLOW: This is your money you need in 2-6 months. Put enough in the YELLOW bucket to pay your bills and for emergencies.
  • GREEN: This is your protected growth money. Your principal is safe. GREEN accounts will also guarantee you income at some point and they have moderate growth potential
  • RED: This is your RISK money. This is mutual funds, bond funds and stocks. Take care of your YELLOW money needs first. Then make sure you have enough in the GREEN bucket for you future income needs. After that, you can invest the rest into the RED risk bucket however you want.

If you approach it this way and put the right amount in the right bucket, you let the right tool do the right job.

It won’t matter if the market crashes because you have your safety and income needs met with the GREEN bucket. You can wait it out and it shouldn’t affect your life too much.

But, if you choose instead to go back to your old ways, and re-invest all that cash into 80%-90% mutual funds and stocks like it might be right now………

That 1,000 foot drop from the Skydeck is not going to be very fun when it happens again.

P.S. If you need some help with the GREEN bucket, you might want to read my Definitive Guide To Hybrid Annuities

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