Do you find yourself worried as you near retirement that you will run out of money in the future? Usually, at this time, retirees or soon-to-be retirees begin to think about their reliability of income aka ROI. Before you look at your options, we thought we should help as you plan on generating your retirement income from your investment portfolio and your “Sequence-of-returns risk”.
You may be thinking – what is “Sequence-of-returns risk or sequence risk”? It’s the risk that an investor will experience negative portfolio returns early on in their retirement. Sequence-of-returns risk is a significant threat because retirees have little time to make up for losses.
It’s human nature to doubt yourself when investing and question yourself on whether or not your timing was right. Often times, we worry that we may experience losses if we buy in a down market or pay too much in an up-market. However, no matter your gains and losses, this actually does not impact your portfolio during accumulation, assuming no additions or withdrawals. In the end, the average return will still be the same no matter the path you took to get it there.
As you get closer to this stage, managing a “sequence of returns” is one of the most essential and important things a retiree can do. It is so important for you to have this done with your goals and risk tolerance levels in clear focus. We understand that retirement planning is complicated and we believe coordinating with your advisor is a fundamental part of this process.
At CJM we know how important this is for you and your family and we believe this is the most valuable information an advisor can provide a client.