Should I Move My 401k to Bonds Before A Crash?

Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Should I Move My 401k to Bonds Before A Crash?

If there were a stock market crash, the value of your 401k would go down. However, if you are close to retirement, you may not have time to compensate for the losses. On the other hand, if you are younger, you may be able to afford more risk and can afford to wait for the market to recover.

The decision of whether or not to move your 401k to bonds before a crash is a personal one. You should consider your age, investment goals, and risk tolerance. If you are close to retirement, you may want to move some of your 401k to bonds. If you are younger, you may want to keep all of your 401k in stocks.

What Are The Benefits Of Moving My 401k To Bonds?

The benefits of moving your 401k to bonds include:

  • Preserving your capital: If there is a stock market crash, the value of bonds will not go down as much as that of stocks. This can help you preserve your capital.
  • Reducing stress: If you are worried about a stock market crash, moving your 401k to bonds can help reduce stress.
  • Generating income: Bonds typically provide a higher level of income than stocks. This can be helpful if you are retired or close to retirement and need extra income.

What Are The Risks Of Moving My 401k To Bonds?

The risks of moving your 401k to bonds include:

  • Missing out on gains: If the stock market goes up, you will miss out on the potential gains.
  • Income risk: If interest rates go up, the income from your bonds will go down. This can be a problem if you are relying on that income to live on in retirement.
  • Reinvestment risk: If you need to sell your bonds before they mature, you may get less than paid for them if interest rates have gone down.

Should I Move My 401k To Bonds Before A Crash?

The decision of whether or not to move your 401k to bonds before a crash is a personal one. You should consider your age, investment goals, and risk tolerance. If you are close to retirement, you may want to move some of your 401k to bonds. If you are younger, you may want to keep all of your 401k in stocks.

Consider Annuities

Bonds can lose value due to market conditions, while fixed index annuities can not.

Consider rolling a 401k from a previous employer into a fixed index annuity and want market exposure while avoiding the risk of loss.

We suggest you start a non-qualified fixed index annuity. This will allow you to save money without worrying about your contribution limits. In addition, only the interest on the annuity will be taxed when you start to take distributions in retirement.

Additionally, you can contribute to a Roth IRA fixed index annuity with the same benefit of tax-deferred growth, but you will never pay taxes on the gains since it is a Roth IRA. You also are protected from a stock market crash.

Related Reading: Can I transfer my 401k to a life insurance policy?

Next Steps

You should speak with your financial advisor if you consider moving your 401k to bonds. They can help you understand the risks and rewards of this decision and whether or not it is right for you. If you’re interested in annuities, contact us below.

Should I Move My 401K To Bonds Before A Crash

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Shawn Plummer, CRPC

Chartered Retirement Planning Counselor

Shawn Plummer is a Chartered Retirement Planning Counselor, insurance agent, and annuity broker with over 14 years of first-hand experience with annuities and insurance. Since beginning his journey in 2009, he has been pivotal in selling and educating about annuities and insurance products. Still, he has also played an instrumental role in training financial advisors for a prestigious Fortune Global 500 insurance company, Allianz. His insights and expertise have made him a sought-after voice in the industry, leading to features in renowned publications such as Time Magazine, Bloomberg, Entrepreneur, Yahoo! Finance, MSN, SmartAsset, The Simple Dollar, U.S. News and World Report, Women’s Health Magazine, and many more. Shawn’s driving ambition? To simplify retirement planning, he ensures his clients understand their choices and secure the best insurance coverage at unbeatable rates.

The Annuity Expert is an independent online insurance agency servicing consumers across the United States. The goal is to help you take the guesswork out of retirement planning and find the best insurance coverage at the cheapest rates

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