A $2 Million Portfolio Still Has a Safety Trap Most Investors Over 60 Miss

"The average retiree with $1 million to $3 million in assets holds 25% to 35% in cash and cash equivalents, which can lead to significant cash drag on their portfolio."

"A retiree who shifted $500,000 into cash equivalents may face tens of thousands in foregone bond appreciation and real purchasing power due to falling yields and persistent inflation."

"As the Federal Reserve cuts its target rate, high-yield savings account yields track this descent, leading to a thin real return against rising inflation."

Many retirees with $2 million in assets hold significant cash reserves, often 25% to 35% of their portfolio. This strategy, driven by a desire for safety, leads to missed opportunities for bond appreciation and diminished purchasing power. Recent Federal Reserve rate cuts have caused high-yield savings account yields to decline, while inflation remains high. As cash yields decrease, retirees face a mechanical issue where cash investments yield less, contrasting with the potential gains from bonds, resulting in tens of thousands in lost value.

Read at 24/7 Wall St.