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Douglas Hermann
Douglas is a Certified Financial Fiduciary, founder, and owner of Stone Eagle Financial. He serves as the President and founding member of a small business consortium that serves the River North Art District (RiNo) of Denver. Douglas built his practice on the belief that all people deserve financial well-being and freedom in retirement. Website: doughermann.retirevillage.com

Office: (720) 415-7546 | Stone Eagle Financial

Changes In Your Risk Tolerance And What That Means For Your Financial Future

July 5, 2022/in Retirement Planning/by Douglas Hermann

During your accumulation years, your attitude towards investing may have fluctuated between “conservative,” “moderate,” or “aggressive.” Knowing your long-term goal was retirement, you may have been willing to ride out the market’s ups and downs. Now that you are nearing retirement, your risk tolerance has changed. You can no longer afford to lose money, even if it means giving up potential gains. It is time for you to consider de-risking your portfolio. De-risking doesn’t mean you should avoid all growth opportunities. You should, however, be more selective in your choices. By understanding your evolving circumstances and goals, you can develop a plan that will help you achieve a safe and sound retirement.

Here is what de-risking might look like for the conservative investor.

Your time horizon has shrunk. When you were working, your time horizon was essentially infinite. You could afford to take some risks because you had the time to make up for any losses. Now that you are approaching retirement, your Time Horizon has shortened, and your aim is to avoid risk.

Your goals have changed. While working, your primary goal was to grow your nest egg. Now that you’re retired, your goal is to generate income and preserve your capital. You might wish to limit your exposure to the stock market because you’ve seen too many retirements ruined by losses in a bear market.

You may need to rebalance your portfolio. As you age, you may need to rebalance your portfolio to ensure it is in sync with your goals. For example, you may need to sell some stocks and use the proceeds to buy income annuities.

You may need to adjust your withdrawals. When you were younger, you may have been able to take larger withdrawals from your portfolio without affecting its long-term sustainability. Now that you’re retired, you may need to adjust your withdrawals to ensure they don’t deplete your nest egg.

It could be time to consider new types of investments. In addition to traditional stocks and bonds, consider different investments that can provide income and stability in retirement. This includes assets such as guaranteed income annuities.

Consider making changes to your Social Security plan. Depending on changes in your situation, you may need to adjust when you start taking benefits.

Consider long-term care insurance if you haven’t already. This type of insurance can help cover long-term care costs, which can be very expensive. Long-term care insurance is an essential type of insurance for people who cannot care for themselves. It can help relieve the financial burden on family members and loved ones.

Stay diversified. Even in retirement, you’ll want to keep your portfolio diversified across asset classes and different types of investments. This will help you weather market volatility and protect your nest egg.

Assess your risk tolerance and take the first step towards ensuring a comfortable retirement by talking to a qualified financial professional today.

 

 

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