Time for another Q&A column! If you have a question or a comment about a recent article, send an email to: askjill@jillonmoney.com.
Q: Due to bad storms, we were forced to use a large portion of our emergency cash for house repairs. Can I skip maxing out my workplace retirement contributions for 2025 and then use the money to rebuild my cash savings? We would still be able to max out our Roth IRAs, and down the road, I will be able to rely on a large military pension.
A: I wholeheartedly endorse saving enough money in your emergency reserve fund to cover at least six months (maybe even up to 12 months) of your living expenses. In your case, this temporary pause in your workplace plan seems like a reasonable idea, and it sounds like you will be back on track in no time.
Q: My wife and I are in our late 30s and have about 90 percent of our portfolio (both retirement and taxable brokerage accounts) in a cheap S&P 500 index fund. We saw first-hand how fast stocks can fall during the COVID sell-off, but five years later, are we OK continuing to invest in a high-risk portfolio or should we look to diversify?
A: If you can withstand the market gyrations, and you don’t need this money for 10, 20, 30 years, then there is no real issue with keeping the risky portfolio in place. But be clear, adding a little bit more to your bond and cash positions might smooth out some of the high-highs and low-lows.
Q: I keep hearing and reading that we’re overdue for a stock market correction, so I’m debating pulling out a substantial amount from my stock funds and shifting it into a high yield savings account for safety. But I can just as easily see myself regretting that move if all remains calm. Should I leave my money where it is, or should I pull out?
A: If only we could perfectly time when to get out — and then back into markets! Unfortunately, all of the academic research has shown that market timing doesn’t work. As far as what you are hearing and reading, try to ignore the noise and stick to your game plan. Remember, you’re investing for the long haul, not just the next handful of years.
Q: I understand and agree with the principle of rebalancing but honestly, I am having trouble pulling the trigger on selling 10% of my low-cost, broad-based stock mutual funds and putting the money into my bond funds. I guess the only answer is courage or discipline to follow the system of rebalancing when I’m 10% above my targeted allocation.
A: When it comes to rebalancing, the most important ingredient is to have a plan and to stick to it. If your plan is to rebalance once a year, or twice a year, then make sure whenever that month rolls around, you review your allocation and make the necessary adjustments.
Q: I’m 75 years old and completely debt free. I’m in the process of downsizing my house, which is currently on the market for $575,000. If I can’t wait until my current house is sold, should I take out a $400,000 mortgage, which I would pay off after I’ve sold my current house?
A: As a self-described wimp, I’m not crazy about this strategy. I don’t like the idea of bankrolling two homes at the same time. I would prefer waiting until your current house sells, then work on acquiring the new place. At this point in your life, I’d much rather play it safe, versus being overly leveraged.
Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com.