Many people have been skeptical about the market. New highs and significant volatility have bred uncertainty among investors. These feelings are understandable given the news of a Greek debt crisis, the Puerto Rico default discussions, and Chinese stock market corrections. Those who are headed toward retirement in the upcoming three to five or even ten years have justification in not wanting to put their cash into a market that seems quite unstable.

Yet, if that cash sits on the sidelines in a money market or bank, account earning just about a zero percent return you are losing money. The Core Consumer Price Index ("CPI" minus the volatile food and energy components) over the past year has been approx. 1.7% which means that your cash can buy fewer goods year over year. Now extrapolate that out over five or ten years and those losses create a significant dent in your retirement spending. How much less?

While the figures vary by person this T. Rowe Price example estimates that a 65 year old who wants an 80% chance he'll have income for 30 years invests his nest egg of approx. two million dollars entirely in cash or cash equivalents would need to limit the income drawn from his savings to approx. $5,700/month. Yet, if he invested in 50% stocks and 50% bonds he could draw approx. $6,700/month in income. That's $1,000 more per month with the same 30 year timeframe!

This does not mean that the answer for every investor is to have a 50-50 stocks and bonds portfolio upon retirement. It means the best way to help ensure you can afford to live the retirement you deserve is to get your hard earned money working hard for you; not sitting on the sidelines. In other words, the true cost of cash is missed opportunity. Work with an advisor and create a plan which takes into account your risk tolerance and your personal goals. You have one life and you deserve to live it the best way possible.

Caroline Hill, Financial Advisor

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(This article contains the current opinions of the author but not necessarily those of Brighton Securities Corp. The author's opinions are subject to change without notice. This blog post is for informational purposes only. Forecasts, estimates, and certain information contained herein should not be considered as investment advice or a recommendation of any particular security, strategy or investment product. References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities).