If you plan to retire soon, you may be wondering if you should change your asset allocation to something more conservative. However, the question is not that simple during these high-risk years.
In this episode of Financial Symmetry, Allison Berger joins me to explore what you can do to be prepared for the retirement danger zone. You’ll learn what the danger zone is and how to prepare for it within the context of your retirement plan rather than by simply stating generalized rules of thumb.
What is the retirement danger zone?
When retirement is soon approaching your nest egg is the largest it has ever been. This is when people start to think that they should become more conservative with their investments.
There is a much higher risk of error at this time and you won’t have time to make up for it. Your investment returns are significant, so if you hit a bear market and couple that with an investment mistake, it could mean that you have to work longer. This is why these years are considered the retirement danger zone.
When making an error is dangerous and there is a large margin for error you’ll need to tread carefully. It’s important to not use general rules, but instead look carefully at your own situation. Understanding your attitude towards risk and your capacity for temporary loss alongside your income and expenses will ensure that you come up with a targeted plan to see yourself through the danger.
Questions to ask yourself
When preparing for the retirement danger zone it is important to not focus on generalities. You’ll want to understand the specifics of your situation so that you can be best prepared. To do so, ask yourself some questions.
Are you maxing your retirement savings?
What are your other income sources in retirement?
What is the breakdown of your retirement savings?
Do you utilize an HSA?
Where do you hold your accounts?
These questions can get you thinking about the opportunities that lie ahead.
Create a retirement plan
The best thing that you can do for your future retired self is to create a retirement plan that you continually revisit. You may not know the intricacies of your situation until you map it out. Even if your situation changes you’ll be able to make adjustments along the way. Listen in to learn what you can do to successfully navigate the retirement danger zone.
Outline of This Episode
[1:10] It can be beneficial to be a wise shopper for Roth
[2:38] The retirement danger zone
[8:55] Questions to ask yourself
[14:05] Adjustments you can make to your retirement plan
[18:44] Other considerations
Resources & People Mentioned
Connect With Chad and Mike
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Chad Smith
Chad Smith is a Certified Financial Planner™. He is an active member of NAPFA, the Financial Planning Association, and FPA’s NexGen. He has been quoted and appeared on WSJ.com, Bloomberg.com, Businessweek.com, Msn.com, Financial Planning Magazine, Triangle Business Journal, and Investment News.
Allison Berger
As an experienced Financial Advisor and partner, Allison builds custom financial solutions to enhance today and enrich tomorrow for our Wealth Management clients. Allison has a particular interest in working with clients in or on the cusp of retirement who want to delegate their portfolio management so they can enjoy life.