24 Feb I’m retiring soon. Should I go to all cash because of Trump?

Q. With all the ups and downs of the stock market since Trump’s inauguration, I’m not sure what I should do with my investments because I was planning to retire in two years and I don’t have a ton of time to make back what I might lose. I’m thinking of going to all cash. Should I?
— Investor

A. Selling all your investments and going to cash is an extreme move.

There’s a lot to consider.

“My mother had a quote that she used a lot with me as a child” ‘Just because you can, doesn’t mean you should,’” said Jeanne Kane, a certified financial planner with OneDigital in Boonton.

She said it’s important to ask: If you get out of the market today, when would you get back in?

“While diversification does not guarantee against loss, we believe you should invest in a diversified portfolio,” she said. “Don’t put all your eggs in one basket.”

Different sectors will do well in different market conditions, and this allows you to stay invested in different market cycles.

The first step is understanding your current portfolio and if it is appropriate for you, Kane said.

“There are two key factors to consider when you think about your investments and your overall portfolio allocation: your risk tolerance and when you need the money,” she said.

Let’s start with risk tolerance:

Kane said you should think of this as choosing how you’ll travel on a trip.

Higher risk tolerance is like a sports car.

“You can drive fast but you will feel any bump or pothole in the road more than other modes of transportation,” she said.

A moderate risk tolerance is like a family sedan.

“It offers a combination of speed and stability. You’ll not get there fastest but it can handle some bumps in the road without too much worry,” Kane said.

A lower risk tolerance is like taking a train.

“It’s a slower, steadier, more predictable route with fewer surprises,” she said.

“Each of these modes of transportation offers a different experience and potential challenges along the way vary based on your comfort with risk,” she said.

In financial terms, she said, a higher risk portfolio will have a higher allocation towards stocks and fewer towards bonds and cash. Stocks tend to be more volatile than bonds whereas bonds tend to provide more stability in a portfolio.

A moderate portfolio will have a balance of stocks, bonds and cash, while a lower risk tolerance portfolio will have lower allocation of stocks and higher allocation of bonds and cash, she said.

“Review your portfolio on a regular basis to ensure that your investment allocation makes sense for where you are in life,” she said. “It can change over time.”

Your risk tolerance at 60 is likely more conservative than what it was when you were 30, Kane said. That’s because at 30, you have 30+ years until retirement and can weather the ups and downs of the market. But at 60, you’re closer to when you’ll need your money. You don’t have a lot of time to recover from a large downturn.

“The closer to when you need your money, the more you should protect that money and look towards having more conservative investments in your portfolio,” she said.

Kane said you could take a bucket approach to your portfolio which can help you manage your investments based on when you need money:

You should always have an emergency fund “bucket” to cover unexpected expenses. This should be cash and cover three to six months of living expenses, she said.

This will help you avoid selling investments to fix your furnace or buy a car.

Your near-term bucket money should be invested conservatively and would be funds that you would need to access in the near-term, she said. Your moderate-term bucket is money that you would want to grow and won’t need it for several years. And your long-term bucket is money that you won’t need for a very long time so it can be a bit more growth-oriented.

“The buckets should come together to match your overall portfolio allocation and risk tolerance,” she said.

All this in mind, ask yourself if you need to make any adjustments to your overall portfolio.

“It might be set up for someone with a high-risk tolerance but that’s no longer you,” she said. “If so, you likely need to adjust it into a diversified, but lower risk portfolio.”

Consider speaking to a financial advisor who can also help you understand if your allocation is appropriate for you at this life stage.

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This story was originally published in February 2025.

NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.