Retiree should keep some money in stocks

I've written several columns in the past couple of months about people who are nearing retirement age and trying to plan their financial futures.

But for the subject of this week's column, the future is now.

This reader, who wishes to remain anonymous, wrote that she is almost 69 years old, and her husband is a little younger. Both are in good health.

"We have a couple of annuities, a couple of (certificates of deposit), a little stock in a large local bank and some invested in three mutual fund accounts," she wrote. "Rich we are not, but we are OK. My son told me I should get everything out of the stock market and put it all into CDs because they are FDIC insured and the stock market has its risks. What do you think?"

Our anonymous reader said she and her husband also are considering downsizing to a condo.

"I worry about having a mortgage payment again yet am hesitant to withdraw the money we would need to be debt-free," she wrote. "At least with a mortgage we would have some tax write-off. I would need about a fourth of our retirement funds if we choose to pay the condo in full at the time of purchase. Any suggestions?"

I've got several, courtesy of Jeff Salisbury, principal at Independent 401(k) Advisors, with offices in Cache and Davis counties.

Regarding the first question, Jeff says the stock market, over the long haul, is going to have higher returns than any other investment noted by our anonymous reader.

"And more importantly, the stock market is the only one of those investments listed that is historically going to beat inflation," he says.

With that background, Jeff suggests that our reader remember the following two stock market rules.

First, "you should not be in the stock market unless you can leave the money there and ride out the ups and downs for at least five years, and preferably 10 to 15 (years)," Jeff says.

Without more information, he does not know if the anonymous reader is planning to use her stock investments to pay monthly expenses in the short term. If so, her situation will be much different than it is if she can let that money grow in the market for a while.

Which brings us to Jeff's second rule: "Stocks should be owned exclusively through a broadly diversified, low-cost, low-turnover mutual fund, and most funds that meet these criteria are going to be index funds."