How NOT to Run Out of Money in Retirement

Today, I want to talk to you real quickly about a question I’ve been getting asked a lot this past week, and that is, is it too late to make changes to my 401(k)?

So, let’s dive in.

1. Protection

The first thing is, is when you look at making changes to your 401(k), you want to be sure that you have a safety net or some sort of protection type of strategy within that 401(k). And the reason you want that is if you’re within 10 years of retirement, you can see on the diagram in the video above, as an example, if your portfolio would decline by 30%, which case in point in March, if you were fully exposed to the market, you probably saw that, it made you very uncomfortable, and if it did, this is your chance to make those changes.

But let’s say your portfolio did decline by 30%. In this case, it’s going to take a 43% rate of return just to get back to even. I would encourage you to change your mind on the sense that buy and hold, especially in a bear market like we’re in where everything goes down, diversification, buy and hold does not work.

2. Consistency

The second thing that we want to look at is you want to aim for consistency of your returns in your portfolio, and the reason you want to do this, obviously, for the sake of income. Most of the time, you’re always thinking, all of us as human nature are thinking about rate of return, how much money can we make with our investments.

When you’re getting close or are in retirement and making that transition, your mindset needs to change from rate of return to how much income can my portfolio, can my 401(k) provide to me.

3. Investment Guardrails

The third thing is, you want to have investment rules in place. You want to understand what you own, why you own it. You want to have goals and a target to shoot for if you’re going towards retirement and the target for how to produce that income.

So, one of the things that I’ve been telling people to do real simply is just to take out your 401(k), look at what you actually own, and then split it into three different columns.

List the first column as stocks, the second column as bonds, and the third column as cash. And then put your target percentage or the actual percentage that you have currently in those columns. That will start to tell you what type of risk you’re exposed to, and it will also allow you to make changes because now you can see your foundation and now where you want to go.

The second thing you want to do is search out someone who can help you. This bear market that we are just starting is not over. This will not be, most likely, will not be just a V-shaped recovery.

When we go through bear markets, that’s a whole different story, but there’s a lot of ways to profit in bear markets, but you need to be very active.

You need to know how to manage your money accordingly. These questions will help you do that. If you need any help at all, I’m happy to point you in the right direction, guide you through anything, it’s free. And so just go ahead and schedule a quick call with me.