Park Your Cash in a Safe Neighborhood

BOSTON (TheStreet) --They say "cash is king," but it may take a while for it to reclaim the throne.

Conventional wisdom has usually divided savings into buckets. There is a portion of your assets -- including 401(k)s and IRAs -- that is invested to reap returns. The opposite end of the spectrum prizes security for your nest egg.

Choosing the best way to park your cash comes down to how available you want your money at all times, how important returns are and how much risk you can stomach.

With "longevity risk," the prospect of running out of money during a lifetime -- a top concern for many near or in retirement -- the question being asked more and more is actually a chicken-or-egg type riddle: Which is more important, growing capital or protecting it? With the Fed still intent on keeping interest rates low, even as inflation creeps back onto the landscape, finding places to park your cash that offer both peace of mind and reasonable value is no easy task.

Choosing which instrument is best for your needs comes down to how available you want your money at all times, how important returns are and how much risk you can stomach.

Mike McGervey, president and founder of McGervey Wealth Management in North Canton, Ohio, describes a typical cash and cash-equivalency strategy as "protective mode."

"Typically cash in a money market earns next to nothing," he says. "Sometimes I will have a client ask, 'What's our cash going to earn when it is on the sidelines?' and I'll stop and tell them they are missing the point. If we are preventing a 30% decline in your portfolio then maybe, in effect, your cash has earned you 30% because it kept you out of the fire."

"There are things we need to talk to a client about before we run off and park money in a certain place," says Chris Abts, founder and president of Cornerstone Retirement Group in Reno, Nev. "When you are dealing with retirees or somebody getting close to retirement, one of the first things we want to do is address how much liquidity they need now and in the future. We find some people try to have too much liquidity, and that harms earnings, while other people don't have enough liquidity."