60, unemployed: Is my $100,000 safe in gold and cash?

(MONEY Magazine) -- I'm 60 years old, unemployed and have $100,000 saved for retirement. Given my circumstances, I can't afford any losses. So I'm considering converting this money to gold and cash. What do you think? -- Robin, Scottsdale, Ariz.

Given your circumstances, I think you would be making a big mistake moving your hundred grand to gold and cash.

Let's start with gold. For all the hype about gold being a safe haven, the reality is that it can lose value as easily as the stock market. If you had plowed all your money into gold last September when it was selling for just under $1,900 an ounce, for example, your $100,000 stash would only be worth a little more than $84,000 today, since gold now goes for around $1,600 an ounce.

So whatever other merits gold may have as an investment, shielding you against losses isn't one of them.

Cash, on the other hand, can provide such shelter. Stick your hundred thousand in an FDIC-insured bank money-market account and, barring the U.S. government reneging on its promises, you can be certain that you'll always be able to draw on your entire original principal, plus any interest you earn.

But that interest, or lack of it, is the problem. Today, federally-insured bank money-market accounts that give you ready access to your money pay only 0.5% on average.

You can find higher yields by shopping around or by going to CDs that charge a penalty if you withdraw money before maturity.

But the return you'd earn probably still wouldn't keep pace with inflation. Which means that even though you may not be losing money per se, you would likely be losing purchasing power as inflation erodes the real value of your $100,000.

So I recommend that you think about your situation in a different light. Instead of trying to avoid any loss of any size at any time, focus on preserving capital in a way that protects your hundred large from devastating setbacks, but allows it to grow before and during retirement.

That way, you'll have a better shot at being able to rely on your savings stash not just today, but down the road.

Here's how to achieve that combination of short-term defense and modest long-term growth.

First, set aside the portion of the hundred grand you think you may need to tap over the next year to year and a half.

Since this is the money you really can't afford to risk, you should invest it where it has virtually zero chance of incurring any loss -- that is, in an FDIC-insured bank money-market account (or, if you belong to a credit union, an account insured by the National Credit Union Share Insurance Fund.)

Then put the rest in a conservative mix of stocks and bonds.

Of course, conservative is a relative term. But I'd say 50% stocks and 50% bonds would be appropriate for someone your age, although you can go with a lower stock allocation for more stability if you wish.

To get a sense of how much of a hit different stocks-bonds mixes might take in a market decline, go to Morningstar's Asset Allocator tool.

By adopting this approach rather than plowing all your dough into a low-yield savings account, you should be able to get enough protection so you don't have to lose sleep over losing money while giving the bulk of your savings a decent chance to outrun inflation long term.

One final note. While $100,000 is certainly a lot of money, it's not nearly enough to allow you to live large throughout a retirement that could last 30 or more years.

So in addition to making the moves I've outlined, you also want to do all you can to start working again and resume socking away money in retirement accounts.

The additional savings, plus the extra time your money will have to grow before you begin tapping it can significantly boost the eventual size of your nest egg, which will leave you in much better shape for retirement.