6How Much Risk Should I Take?

Unfortunately, most retirees and pre-retirees take on entirely too much risk in their retirement “Buy and Hold” portfolios. This common problem results from various reasons; some people want to hedge for future inflation, others think they need higher growth potential to make it through    retirement without running out of money. In  most cases, your advisor simply “advised” you    to put your money in “risky” stuff. When  entering the retirement “red zone”, curbing  your risk back is a pivotal step to developing financial security, and the 100 Age Rule can help you determine the risk that is right for you.

100 Age Rule

A good stepping stone towards a more balanced, recession-proof retirement portfolio is to use the “100 Age Rule”. There are three phases of everyone’s financial life: Accumulation, Preservation and Distribution. When entering retirement, you are moving from the “Accumulation” phase of life in to the “Preservation” phase of life. This means that you need to allocate more money towards safe, income producing assets and take some of your risk off the table. Run this simple calculation: Subtract your age from 100. The answer you get should be close the percentage of your assets that are “at risk”. Your age should then serve as the percentage of your assets allocated in “safe” money investments. However, this is only a rule of thumb. If you need to take income from  your investments, you will need an in-depth Investment Risk Review.

Free Investment Risk Review

In our Asset Protection Review, we strip your current portfolio down and show you exactly where you are at on the Pyramid of Investing. We unveil your current risk to safe ratio, determine a proper ratio that will achieve your income goals in retirement and cover your basic and joy living expenses, and then reposition your “at risk” assets into lower cost, high dividend and income producing positions. The biggest step in determining a proper risk to safe ratio is to know how    much risk you can afford to take. Without an income plan in place for your retirement paycheck, how do you know if you are over-exposed?