![]() ![]() One way to better preserve your nest egg may be to go with a two-bucket investing strategy. If you can’t stomach much of a loss, it’s best to address your fears ahead of time.) (Ask yourself if you would panic should the market go through a minor or major decline while you’re retired. This helps me ascertain whether someone is taking on too much risk for their expected future rate of return and how that risk could impact their ability to generate income in retirement.Ī sizable majority are taking on much more risk than they say they are comfortable with. ![]() To give an informed answer, I usually suggest we do what’s called a “stress test” to see what would happen to that person’s retirement accounts in up and down years and to get an expected rate of return over time. Prospective clients who plan to retire soon often ask if they should reduce the risk level in their portfolio. It only makes sense to do some proactive planning so that no matter what the market conditions are, you’re not left scrambling.ĭon’t Let Sequence of Returns Risk Cook Your Goose The average investor - who may live two decades or more in retirement - can be almost certain there will be both good and bad times ahead. (and world) history is replete with tales of boom-and-bust cycles. How can you mitigate sequence of returns risk? Steve had to downsize his retirement simply because he stopped working at the wrong time. To close out the decade, Steve had just $60,241 remaining. And in 2008, the Great Recession took another bite out of Steve’s savings. By the end of 2002, Steve already had less than half of what he started with. You may remember that the 2000s started off with a bursting “tech bubble,” followed by 9/11 in 2001, leading to three straight years of market declines. When retiring at the perfect time, the market can be an incredible tailwind. So, while Linda was able to pull out more than $300,000 for income over the course of 10 years, her ending IRA balance heading into 2000 was … wait for it … $1,625,254. stock market had only one mildly down year. What happened to Linda? During the 1990s, the U.S. ![]() The only difference is that Linda retired in 1990, while Steve retired in 2000. Each had $500,000 in an IRA when they retired, and both planned to withdraw $30,000 per year ($2,500 per month) to supplement their retirement income. Let’s say there are two retirees - Linda and Steve. If you take nothing else away from this article, please, just keep this hypothetical comparison in mind: ![]()
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |