24 Mar I’m close to retirement. Is it time to go to all cash?

Q. I have several friends close to retirement age that put their money into cash or CDs because they’re worried about what happens with the market under Trump. Should I do it? I have two years until I retire and I now have a 70% stock/30% bond breakdown in my portfolio.
— Investor

A. It’s a great question.

And it’s a common one these days.

But it is actually impossible to answer your question and give proper advice without knowing what your full financial picture looks like, said Matthew DeFelice, a certified financial planner with U.S. Financial Services in Fairfield.

“The proper asset allocation as you head into retirement and then enter your distribution phase depends entirely on your unique circumstances, and that is different for everyone,” he said. “What works for your friends and colleagues may be vastly different than what works for you, and you should never make portfolio decisions based on what someone you know is doing with their money.”

It should be based on what you need your money to do for you, and when you’ll need it, he said.

That being said, it is perfectly normal for investors to be nervous as a result of the current market volatility, especially those approaching retirement, he said. Things are even more amplified in today’s society, where we all carry around a computer in our pockets that basically gives you access to the entire world.

“You can’t spend five minutes scrolling through social media or the internet without coming across something negative about Trump or tariffs and how it will affect the economy and the markets right now,” DeFelice said. “You simply can’t escape the headlines, and it makes a difficult market environment even more challenging.”

However, the fact remains that the stock market has never been made or broken based on who sat in the White House, he said.

“If you look back through modern history, you’ll find bull markets and bear markets under both party’s tenures in Washington,” DeFelice said. “Sure, there have always been stomach churning swings up and down as a reaction to geopolitical events, but over the long haul it all winds up being short term volatility. That volatility is usually the trade off for receiving greater returns over the long term.”

Take Trump headlines out of the equation for a moment and look at where the market has come from.

“We have just witnessed back-to-back 20%+ gains in the S&P 500 in 2023 and 2024 on the headwinds of a strong economy and the AI boom,” DeFelice said. “Markets don’t go up that much all the time, and after two years of such out-sized gains, investors should fully expect a correction to occur.”

The sell-off that we are in the midst of is perfectly normal market activity, but it is exacerbated by all the news people see every day, he said. There is a lot of fear and emotion in the market right now, and that is generally not a great time to make sweeping portfolio decisions that can have vast implications for what your retirement looks like, he said.

Moving everything into cash and CD’s isn’t the answer here.

“Cash as an asset class has a hard time keeping up with inflation over the long-term, and is rarely a successful strategy when planning for what could be a 25 or 30 year retirement,” DeFelice said. “You’ll need to find the right balance between safety for your short term cash needs, and growth for the long term use of your capital.”

So what is that balance? To answer that question, you need to answer other questions first: What are your expenses? What sources of income will you have when you retire, like pensions, social security, and/or rental income? What tax bracket will you be in? How much of your assets are in tax deferred retirement accounts like 401k’s and IRA’s vs. taxable accounts vs. tax-free accounts like Roth IRA’s? Will you move to an area with a lower cost of living or stay where you are?

He recommends you meet with a financial planner who can help you answer all of these questions — and more — and who can run a complete cash flow/retirement income analysis to develop what will ultimately be your distribution strategy when you retire.

“Once you determine how much you’ll need to draw from your portfolio to meet your living expenses above and beyond Social Security, pensions, etc., it will then help you determine what the proper allocation to stocks and bonds (and cash) you should have as you head into retirement,” he said. “And this number is different for every individual.”

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This story was originally published in March 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.