retirement

Retirement Roulette? Letting It All Ride on Stocks May Not Be Best

For those in or near retirement, gambling too hard on today’s record-setting bull market could be more risk than they bargained for.

Have you ever watched somebody playing roulette at a casino – or maybe just in a movie?

The chips pile up as the person gets lucky. And then he starts to get greedy.

You, of course, see the inevitable coming, and so you wonder: Why doesn’t he play it safe and set at least some of that aside? When the tide turns, and he loses everything, you shake your head.

But there’s a chance you’re doing the same thing with your investment portfolio.

With an eight-year bull market and a series of record-setting highs, it’s hard not to be – let’s not say greedy, but definitely enthusiastic.

If you (understandably) moved from more conservative financial vehicles to stocks to grow your wealth – or just to keep up with inflation – it may be time to take some chips off the table as you close in on retirement.

Yes, it’s fun watching your account balances grow month to month and year to year. But at some point, the market will have to correct, and there could be a serious downturn. If you’re in retirement – or close to it – when that happens, you may not be able to recover.

The stock market appears to love our new president, but that doesn’t mean record growth is guaranteed to continue. Not to mention that we’re in a global economy and our future is intertwined with dozens of other countries. Moves to protect our borders, slow immigration, disrupt trade agreements and perhaps impose tariffs are bound to have some effect on the marketplace. And then there’s terrorism, threats from emerging nations and anxiety among some of our longtime allies.

Change – good or bad – can be unpleasant.

Start by developing a plan

So, how can you help protect yourself from the pain and still make the most of the current market?

Do some math. Figure out how much income you’ll need to get by every year in retirement. (And plan for a lot of years. It could 20 or 30, or longer.) Then add up the income streams you know you can count on: a pension, if you have one, Social Security and other stable sources that aren’t dependent on the vagaries of the general marketplace. If there’s a gap between those numbers – and if you’re a Baby Boomer, there probably is – you’ll have to find a way to fill it.

Should you need to pull a chunk from your retirement accounts every month, make sure that money is positioned in a way that can help make sure it won’t take a massive hit if there is a market correction.

There are myriad vehicles out there that can help lower your risk, including:

  • Dividend-paying stocks
  • Annuities
  • Municipal bonds

If you don’t have a pension, you can create your own guaranteed income stream to help complement your Social Security income, so you hopefully don’t have to spend your days worrying and watching CNBC.

Have a frank talk … together

Talk to your financial professional about which solutions might be a good fit for you. But before you go, heed this bit of advice: Both spouses need to take part in the conversation.

That guy at the roulette table who loses all his money? He seldom has his wife at his side. She’d probably stop him – or grab a couple of stacks and run back to their hotel room. After all, it’s her money, too.

At our firm, we’ve found that many women are prudent when it comes to finances and value smart planning. They know the odds, and if their spouse dies, they want to remain financially independent.

Once the two of you have developed your retirement income plan, if there’s something left over, you can head back to the market. And let the chips fall where they may.

Kim Franke-Folstad contributed to this article.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Your Own Retirement are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, or guaranteed income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company.

About the Author

David Hickey, CPCU

Managing Director, Your Own Retirement

David Hickey is a managing director at Your Own Retirement in Cranberry Township, Pennsylvania. He has over 30 years of experience in the insurance, finance and investment industry. Hickey has earned the Certified Property and Casualty Underwriting designation from the American Institute. He has a Bachelor of Arts degree in English from the University of Pittsburgh. Hickey has contributed his time to coaching baseball and ice hockey; part and parcel of raising five children with his wife of 31 years, Susan.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
Dividend Increases: 14 Stocks That Have Doubled Their Payouts
dividend stocks

Dividend Increases: 14 Stocks That Have Doubled Their Payouts

Looking for companies executing substantial dividend increases? These 14 stocks have upped the payout ante by a minimum of 100% this year.
November 26, 2021
Resist the Impulse to Buy These 14 Holiday Gifts
shopping

Resist the Impulse to Buy These 14 Holiday Gifts

Don't let those holiday sale promotions persuade you into buying something now that will be much cheaper later.
November 18, 2021

Recommended

Taxes in Retirement: How All 50 States Tax Retirees
Tax Breaks

Taxes in Retirement: How All 50 States Tax Retirees

We rated every state, plus Washington, D.C., on how retirees are taxed. We considered taxes on Social Security and other retirement income, tax exempt…
December 7, 2021
The Most-Overlooked Tax Breaks for Retirees
Tax Breaks

The Most-Overlooked Tax Breaks for Retirees

Unfortunately, seniors often miss tax-saving opportunities that are available to them. Don't let that happen to you!
December 3, 2021
How 10 Types of Retirement Income Get Taxed
retirement

How 10 Types of Retirement Income Get Taxed

When you're planning for retirement, it's fun to contemplate all the travel and rounds of golf ahead of you, but don't forget about taxes.
December 3, 2021
12 States That Tax Social Security Benefits
social security

12 States That Tax Social Security Benefits

You may have dreamed of a tax-free retirement, but if you live in one of these states, your Social Security benefits may be subject to state taxes.
December 2, 2021