Keep Your Age (as a percentage) Safe From Market Losses in Retirement

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

How much of your money should be “safe” as you enter retirement⁉️

I talk with people every day about creating financial security in retirement and one question that surfaces repeatedly is how much money people should have “at risk” in the market as they enter retirement.

This is a great question.

Obviously everybody has a different financial situation and appetite for market risk, but there is a good rule of thumb that works well for a lot of folks that I will get to in just a moment.

People who have done a good job saving for retirement often use a large chunk of their retirement assets to create retirement income, but even if their money isn’t used in that fashion, most people still value safety more than aggressive growth and volatility in retirement.

But how much should you truly have safe (meaning not exposed to any potential losses in the market)⁉️

A good rule-of-thumb is to keep your age as a percentage safe from market losses, or as what I commonly refer to as “safe money”.

This means that if you’re retiring at 65, about 65% of your retirement assets should be somewhere safe and not susceptible to the ups-and-downs of the market (which in turn, allows you to be a better and more successful investor as well).

This can be done very effectively by leveraging insurance companies and the contractual guarantees that they offer, but it doesn’t have to be.

Like I mentioned, based on your retirement income and estate planning goals, this will look a little bit different for everybody.

I think the first, most important bucket of safe money is your money being used to generate income (this is just a supplemental income source that you can create to layer on top of your social security and/or your pension…if you have one).

Your retirement income is the most critical element to the success of your retirement, that’s why it’s imperative that the income portion of your retirement portfolio is unaffected by bad years in the market.

Beyond your retirement income, you can also have a segment of your wealth in a variety of indexed accounts that participate in the growth of the market, without any risk of loss (this is another type of insurance vehicle that not a lot of people are aware of).

Or, you can go more of a traditional route, having money in cash, CD’s, or in various types of bonds and/or bond funds.

The point is that you want to slowly begin allocating your money into safer environments as you get closer to retirement.

The bottom-line is if you have done a good job saving for retirement, and have an effective income plan in place leading into retirement, then you don’t NEED to take on unnecessary risk in retirement…

BUT… if you have an appropriate amount of safe money, or money protected from market losses, then you have the freedom to invest more aggressively and gear your money for GROWTH….if you really want to.

Or, you can start repositioning your assets in a way that they can be transferred completely tax-free to your loved ones.

Let’s chat 💬😎