Just like football teams entering the red zone (the area within the opponent’s 20-yard line) should be extra careful to avoid wasting scoring opportunities, so too should Americans approaching retirement abandon aggressive investing strategies.
This is what financial planner Kevin Wade advises Centennial Consultants, Inc.in a column published Monday by the personal finance website Kiplinger.
Wade writes that young workers can put money into riskier investment vehicles, such as stocks, without fear of a sharp decline in the stock market. “That’s because they still have about 40 years to retire and don’t have to worry about major market swings like someone in their 50s or 60s,” he said.
However, once a person retires in 10 to 15 years, they should reduce the level of investment risk they are willing to accept. Wade used the analogy of football teams protecting possession near the end zone because they are “in a good position to score and don’t want to squander the opportunity with a costly mistake.”
“No one wants to suddenly lose 30% to 50% of their portfolio five or six years into retirement because they didn’t adjust their plan correctly,” he wrote.
This is especially true as fewer American workers have access to pension plans. A report comes from Congressional Research Service The study found that the number of Americans receiving pensions fell from 27.1 million in 1975 to 12.6 million in 2019. million increased to 85.5 over the years.
In addition, more and more Americans are concerned about the level of Social Security benefits they will receive in retirement. recent Gallup The poll found that 80% of respondents under the age of 62 and 86% of those in their 40s are concerned that Social Security will not exist by the time they become eligible for benefits.
Federal lawmakers are trying to address Social Security concerns with legislation that would expand monthly benefits by changing the way cost-of-living increases are calculated. The Senate version of the bill, the Seniors Benefits and COLA Act, has not yet been approved by committee.
Wade suggests that people approaching retirement should focus on diversification strategies centered on safer investments, including annuities, bonds and certificates of deposit. He also believes that even if the stock market performs well, a change in mindset among older workers is necessary.
“Let’s say your portfolio is likely to gain 12% to 18% this year,” he writes. “The last thing you want to think about is reducing risk. But you don’t want to be constantly chasing returns as you approach retirement age. In order to chase higher Taking unnecessary risks in exchange for avoidable losses is not the way to spend your retirement.
