Recent studies have found that baby boomers could be putting their retirement savings at risk by investing too aggressively.1 Some may say we have more assets in the stock market than we probably should at this point. The question is: How much is too much? Let’s take a closer look at common investment strategies.
We believe that your investments should be based on need, not greed. A lot of baby boomers remember experiencing returns of 12%-15% on a regular basis during the ’90s and have the idea that is normal, which may not be the case. We look at your portfolio and run the plans, which most of the time will offer 5%-6% returns so you don’t have to take a lot of risk to make your retirement plan work.
One important question we ask clients with risky portfolios or the capability for high portfolio risk is: If the market were to go up 25%, would it change the way you retire? The answer is usually no. However, if the market were to go down 25%-30%, the answer would be very different.
It’s important to remember that different parts of your portfolio can have different types of risk. You can choose to put 50% of your money in stocks and 50% in bonds. You may also have a Roth account you’re planning to pass on to your children, in which case you may want to be more aggressive with that money. How you segment your money should be based on your current financial stage and risk tolerance level. If you need a certain amount of money per year to live off of, we suggest being more conservative. We also typically prefer that tax-deferred assets be more stock-related because there are advantages of owning individual stocks in your tax-deferred or brokerage accounts. When it comes to your IRA or Roth IRA accounts, we usually look for controlled growth because you’re going to have to take required minimum distributions from them.
Our goal is to help protect your portfolio from market volatility. We see a lot of people investing more aggressively in stocks because they know that when interest rates rise on bonds, the value of the bonds goes down as well. They believe they are guaranteeing locking in a loss, which is why we like to use fixed index annuities that are geared for growth purposes with no cap on the amount of growth. We want to avoid added costs, fees, and writers. If you’re unsure about this particular investment method, ask yourself what you’re doing to better protect the gains you’ve had over the last 10 years and especially last year.
We want to help you succeed in investing. The most important thing to remember is that everyone’s financial situation is different and what works for someone else may not work for you, which is where we come in. Through our comprehensive financial services, we will take the time to understand your current financial situation and determine a strategy to get you where you want to go and help accomplish your financial goals. Don’t hesitate — let’s start planning your financial future today!