Do you need to be in the market, or do you want to be in the market? There is a big difference.
Some retirees not working or bringing in earned income may need to heavily rely on investment
results to help keep them afloat. The majority of people we've met with only use a portion of
their dividends and interest or none of it. Sure, we’d all like to make as much money as we
possibly can, but experience tells us that the more we can make, the more we can lose. If you
don’t need a certain rate of interest to cover your basic and discretionary money, you may not
want to be in the market with the majority of your nest egg.
As individuals get older, their risk tolerance typically is reduced. People of all ages should
review their risk tolerance annually to be in line with their goals. Many times, the timing of
negative market results or volatility can impact ones future and current assets. For example, a
person retiring at age 65 today would have a major problem if his/her nest egg took a hit of
negative 10% the year they were retiring. This translates into the possibility of depleting
retirement assets much earlier than desired.
I am not saying that everyone should be out of the market and in a fixed account. For the
majority of pre-retirees and retirees we work with, they want security, guarantees and basic
solutions. If you don’t understand lengthy, confusing statements, maybe you should consider
consolidating to simpler, more conservative investments based on your personal goals. If you
don’t do well stomaching daily fluctuations in your nest egg, maybe it’s time to reduce your
risk and look at other alternatives.
The bottom line is that it’s your money and your decision. However, that doesn’t mean that you
have to take on the responsibility of keeping up with tax code changes and knowing all
investment vehicles available to you. It’s my opinion that everyone should have a good resource
that they can confidentially share financial information with to fine tune a savings and
investment strategy. A Financial Services Professional with experience, accreditation and
references can be your bridge that will help translate your financial goals into reality and
pave a positive and successful long term relationship.
