What Happens to Your Retirement if the Market Drops 30%?!

(don’t forget to checkout the video of this blog too)

How susceptible to market fluctuations is your retirement income?!

This is something very important to consider as you approach retirement.

As you get closer to retirement, you want to have MORE of your money in a safe, predictable environment.

You don’t want to be at the mercy of the market with ALL of your money in retirement.

A good rule-of-thumb is to have your approximate age (as a percentage) in “safe money”, or what money that is NOT susceptible to losses in the market. So if you’re 60, you should have 60% of your retirement assets shielded from losses in the market.

And usually, the safest dollars you want in your retirement portfolio are the dollars you’re going to use to create income.

That’s because almost everybody needs an element of fixed income in their retirement years…

And you don’t want that fixed income in an environment that is matching-and-mirroring the fluctuations in the stock market.

It’s fine to have a chunk of your money in the market, in fact, I encourage that in a lot of cases, just not the money that you are using to generate income in retirement.

There are a couple of reasons for this:

✅ Market Fluctuations Make For Low Income Withdrawals

The market is VERY inefficient at generating retirement income because of the volatility.

To account for volatility, income being withdrawn from the market typically has to be taken at a much lower rate than it could be otherwise.

The volatility makes the market very effective at GROWING your wealth over time, it just becomes significantly less effective when you start making withdrawals (often referred to as the sequence-of-return risk).

✅ Insurance Companies Do It Better

Insurance companies might not be the best place to grow your wealth long-term, but they offer something that is incredibly value as you enter into retirement….

Contractual Guarantees

By leveraging the contractual guarantees and income-paying ability of insurance companies, you are able to generate a contractually guaranteed income stream (for life) that is often a much higher payout rate than you can generate with your assets in the market.

This means more guaranteed income to layer on top of your social security income.

This gives you MORE income using LESS money…

Plus you have the peace-of-mind and an ironclad guarantee that you will never run out of money in retirement.

Also, dedicating a smaller amount of your net worth to income allows you to keep more money invested in the market for growth AND gives you the ability to create a larger tax-free wealth transfer to your loved ones. 💙

Let’s chat 💬😎