Should You Move Your Retirement Fund From the Stock Market to a CD? Here's What Experts Say

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Yes, the stock market has recovered from last month's freefall, but plenty of investors are still shaken. Watching your portfolio plummet overnight is scary for anyone, but if most of your retirement fund is in stocks, it can be especially terrifying. With the economy still far from settled, should you consider pulling your retirement savings from the stock market and putting them into lower-risk assets like certificates of deposit?

That depends, experts say.

"CDs can feel like a safe haven in this kind of environment because they offer predictability, which is appealing when everything else feels shaky," says Taylor Kovar, certified financial planner and CEO of 11 Financial. But, he warns, "there are some trade-offs."

Here's what you need to know before you make any drastic decisions.

Is retirement a long way off? Stick with your current strategy

Stock market swings are scary, but a smart investing strategy factors in the dips. The S&P 500 has historically delivered around a 10% annual return for investors who keep their money there for decades. If you have many years before retirement, you can afford to ride out the waves and grow your money over the long term.

"One of the biggest retirement risks is getting too conservative too soon," said Noah Damsky, CFA, principal of Marina Wealth Advisors. "Retirement can last for over 20 years, so get too conservative too soon, and you risk prematurely depleting your portfolio."

Keeping some of your retirement savings in low-risk assets is wise, but the amount depends on a number of factors, including your age and risk tolerance. A financial adviser or robo-advisor can help you create the best strategy for you.

Nearing retirement? Moving more money into a CD could make sense

If you're close to retirement -- or are already retired -- you have less time to recover from stock market dips. So, your priority should be less on growing your nest egg and more on preserving it. In this case, allocating more of your savings to low-risk, fixed-income assets like CDs and bonds can be a smart move. Again, a financial adviser can help you determine your best route.

Don't give in to panic

Whatever your age and investment goals, don't let the economic headlines spook you into making any drastic changes to your retirement plan.

"For investors rattled by the recent dip, I’d say this: Don’t make emotional decisions in response to short-term volatility. Step back, review your timeline, and make sure your investments match your goals and risk tolerance today, not what they were five years ago," said Kovar. "A well-balanced plan usually includes both stocks and CDs, one for growth, the other for peace of mind."

Kelly is an editor for CNET Money covering banking. She has over 10 years of experience in personal finance and previously wrote for CBS MoneyWatch covering banking, investing, insurance and home equity products. She is passionate about arming consumers with the tools they need to take control of their financial lives. In her free time, she enjoys binging podcasts, scouring thrift stores for unique home décor and spoiling the heck out of her dogs.

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