It seems like an easy question, but you might be surprised to know that many people don’t realize just how much risk they’re carrying in their portfolio. As you get closer to retirement, this can be a potential area for disaster. Let’s sort out risk, what it means to be risk averse, and show you how to plan over the last 15 years of your working career.
Part of building a retirement plan is deciding on the amount of risk you want to take on. Some people can tolerate large swings in the market while others just want slow, steady growth. Neither approach is right or wrong but it also depends on what phase of your life you’re in.
On this episode of No Payne, No Gain, Ryan and Bob will talk risk. What does it mean to be risk averse? Does your portfolio have more risk than you think? We’ll dive into that before looking at planning over the 15 years before retirement and the show will end with Financial Propaganda of the Week.
Are You Risk Averse?
We work with many clients that tell us they don’t want to be very risky with their retirement plan, but once we dive into all of their investments we find that there’s much more risk than they believed. Often times we don’t even realize it until a financial advisor shows us everything in our portfolio.
So how to we avoid carrying too much risk, especially as we get closer to retirement? Our ‘A to B’ strategy is something we share with clients to build a plan that gets them to an intended goal. Why try to get more aggressive than you need to? That’s the entire idea of the strategy and one we take pride in.[1:16] – What does it mean when someone says they’re risk averse?
[1:38] – You might not even realize you’re taking on more risk than you thought.
[2:40] – The key is having proactive asset allocation.
[3:08] – How you end up with more risk than you expected.
[4:29] – This points to the ‘A to B’ strategy that we’ve developed.
[6:27] – Don’t try to do more than you need to do to reach your goal.
Planning Over the Final 15 Years of Work
Once you move into your late 40s or early 50s, you’ve reached an important phase of your life. Earning potential is at its highest and you’re making the final moves to get ready for that retirement date.
So what should you be focusing on 15 years out? How about 10 years? And how does that change as you transition into retirement? Let’s discuss those strategies and what considerations you need to be making at each age.[7:54] – Let’s look at planning from different phases of life.
[8:06] – 15 years out from retirement, what does that look like for planning?
[9:41] – What should you be thinking about 10 years from retirement?
[11:24] – At this age, you’re also vulnerable to a big drop in the stock market.
[11:55] – Let’s talk 5 years out, early to mid-60s.
[13:36] – The big day finally arrives and you retire.
Financial Propaganda of the Week
We brought back our financial propaganda segment for today’s show and both guys found a story to share. For Bob, he’s been reading a lot about politics and how much it could influence the country financially during the next election cycle. But is it a good thing for one party to control the government?
And Ryan has been seeing an ad pop up a lot promoting an annuity with a 9.1% annual return. Who wouldn’t want that guaranteed return every year? Well, when something seems too good to be true, it always is.[15:40] – Time for Financial Propaganda of the Week
[16:05] – Bob found an article on politics and the impact on finances but it doesn’t apply to investing.
[17:13] – If you’re hoping for your political party to have full control of the government, it won’t be a good thing for your portfolio.
[18:57] – Ryan keeps seeing an ad for a 9.1% annual return from an annuity. What’s the caveat?
“It’s almost every week, almost every one of our listeners are coming in for their portfolio review. They all are in a risk situation where they tell us they’re risk averse but they have most of their retirement money in what we would consider very risky business.”
– Bob Payne
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