Did you know, you can greatly decrease the amount of risk in your portfolio, while greatly increasing your chance of running out of money in retirement?
One of the biggest paradoxes in retirement is that someone can greatly decrease the amount of risk in their portfolio, while greatly increasing their chances of them running out of money in retirement.
Now, take the case of John, our sample client. So John, our sample client, is 45 years old and wants to retire when he is 65. John is saving $1,500 per month and has $650,000 in retirement savings and hopes to withdrawal $5,000 per month in today’s dollars when he retires. We assumed inflation was 3% and that John would increase his savings by 2% per year and that he would live to the age of 90.
Currently, John’s retirement portfolio has a risk of 60 inside of it (with 100 being the most amount of risk someone could hypothetically have). Actually, with this program 99 is the most that Riskalyze will show. Let’s see what would happen if we decreased John’s risk number. If John wanted to be conservative or “safe” in retirement and brought his portfolio risk down to a 25, let’s see what his hypothetical outcome would be. Now as you can see (if you watched the video), this is a case where somebody thought that they were trying to be more conservative and decrease the amount of risk in their portfolio, but what they had actually done, is greatly increase the chances of them running out of money in retirement.
For anyone who is viewing this and wants to have their own risk number done, feel free to send an email to firstname.lastname@example.org and myself or one of my assistants would be glad to help you out. You can also find a Riskalyze banner ad on the right side of our blog page to get started
FocalPoint Wealth will also be willing to go over your retirement map with you as well. Just please note that this is not a substitute for a financial plan, but it is a good first thing to do to make sure you are at least on the right path.
Now if you are a conservative and you are only willing to accept a 25 risk, there are much better ways to do this and to go about it than just keeping your money in really “low-risk “bonds or in cash. But for that, I would direct you to our video’s on sequence of return risk, where I dive deeper into this subject or give us a call at FocalPoint Wealth. Our phone number is (480)-771-PLAN or feel free to email me at email@example.com. You can also take the Riskalyze test which can be found on focalpointwealth.com on the right side. Or feel free to email us at firstname.lastname@example.org so we can get you on track for all of your retirement goals.
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Disclosures: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly. Stock investing involves risk, including the risk of loss. Bonds are subject to market and interest rate risk if sold prior to maturity. Bond values will decline as interest rates rise and bonds are subject to availability and change in price. no strategy assures a profit or protects against loss. The economic forecasts set forth in the presentation may not develop as predicted and there can be no guarantee that strategies promoted will be successful