Dial Down Your Risk Tolerance
Retirees can’t afford to risk it all due to volatile investments, so it’s time to dial down your risk tolerance. Younger people have decades ahead of them, so it’s normal for them to wait out market downturns. But for seniors who rely on this stream of income during their golden years, if the stock market isn’t in your favor, you could end up in deep financial trouble.
Many people have made the mistake of sticking to high-risk portfolios. But think about it this way. If you’re relying on stocks 100% of the time and the market sells off 35%, you would need to alter your quality of life drastically in order to make ends meet.
Say you’re taking 4% distributions in this case, provided you have $1 million in your portfolio. Initially, you could have lived off $40,000 per year but the 35% decline would mean you’d have just $26,000 to live off instead.
Not so glamorous now, is it?
