A Retiree Should Avoid This Risky Money Move In December, According To A Financial Planner

The end of the year brings a raft of interesting and sometimes exciting financial decisions into focus. As the calendar rolls over, workers will want to finalize the bulk of their retirement contributions while those enjoying retirement already may need to meet their required minimum distribution figures. Lots of moving parts can be found in the final month of the year, and that's before ever considering the holiday season that often commands our consumer attention. Just before the Christmas season kicked into full swing this year, Joshua Brooks, a certified financial planner (CFP) who founded an advisory firm in Texas, told Money Talk News about one particular money decision that can place retirees in a considerably vulnerable spot. He warned against dabbling in something new with extra money that may have been set aside throughout the year. Specifically, he warned against investing in Bitcoin and other cryptocurrency vehicles.

Cryptocurrency and other speculative investment options can be a valuable addition to some portfolios. However, with the increased risk load that comes from this tool there's a different mindset that must be adopted. Likewise, older investors on a fixed income may not be in a position to put much (if any) of their nest egg on the line with an investment like this. At the end of the day, though, Brooks said that "any investment in this space, especially for a retiree, must be fully coordinated with your overall financial roadmap, tax planning and estate plan." Here's why Brooks generally warns against retirees parking funds in crypto.

Retirees are generally looking for stability in their portfolio. At this stage of the game, growth or even stagnation in underlying price is everything. For those largely reliant on dividend producers, selling out of a position is the worst outcome possible. Therefore, building up enough volume to make routine payouts go the distance is key. More to the point, these kinds of investors don't care if the market suddenly freezes, but a major downturn can be catastrophic.

Another option is to pour resources into growth assets like ETFs. This approach starts from a position of volume and requires a slow selloff. Over time, ETFs will generally continue to increase in value, so even though a retiree is gradually selling out of their position, with each successive drawdown they'll frequently get more for their transaction. Naturally, bear market conditions still dramatically hamper a retiree's financial picture with this strategy.

The problem, Joshua Brooks suggested, for retirees who are thinking of getting into cryptocurrency with some leftover capital at the end of the year, is that neither of the aforementioned benefits can be found in that marketplace. Crypto trading involves wild price swings and little to no dividend-style access that can immediately become spending capital. As a result, many retirees trying their hand at this new asset class will be going in blind and hoping for the best. "The mistake," Brooks offered, "is treating it like a lottery ticket instead of a coordinated part of your financial plan."