Can You Protect Your Retirement From Natural Disasters?

Hurricanes, wildfires and floods have wreaked havoc in the U.S. this year. Having a disaster plan in place could help protect you financially in the moment and the aftermath.

A woman stands in floodwaters looking toward an unflooded road ahead.
(Image credit: Getty Images)

When a natural disaster strikes, you want to be prepared so you can get through it. The desire applies to protecting your retirement plan, too.

Hurricane Ian, the wildfires in Arizona, spring tornadoes in Kentucky, and the Montana floods are a few natural disasters that the United States has endured in 2022. According to the National Oceanic and Atmospheric Administration (NOAA), these, along with several other weather and climate disasters in 2022, amassed almost $30 billion in losses (opens in new tab) through the end of September.

No one can predict when disaster strikes, but when it does, being prepared could be the key to getting through it. At Retirement Planners of America (opens in new tab), we help retirees build a plan to help prepare them for different disasters and to mitigate risks to their retirement plan.

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We believe it’s essential to keep your risk at a manageable level to you. We have a core value of discipline, which means we only want to take as much risk as necessary to accomplish your financial goals. So, if you’re taking more risk than you need to, when the disaster strikes or the bad times come, you could lose more than you are comfortable with.

Have a Strategy to Deal With Financial Storms

So, the first step to help determine how much risk is appropriate for you, and then work to build a portfolio that is designed to match the level of risk you’re taking. So, for us, that means being diversified in the makeup of what you have in your portfolio, or the collection of financial investments you have. They are part of the decision making leading you to the amount of risk necessary to accomplish your goals.

The next step: We at RPOA believe that you should have a protection strategy, where there are times when you take your entire portfolio to cash. This strategy, our Invest and Protect Strategy (opens in new tab), has helped us shield our clients from devastating losses during previous financial storms. 

The strategy signaled us to help protect our clients from the current financial storm. That's why we told our clients to get out of all equities in April, and soon after that, we also said to get out of all bonds, because of the storm the Fed was generating in the bond market with the rising interest rates. We like to think of this as taking our clients down into the storm shelter, where we're riding out the storm.

We believe having a strategy that caps your losses is important.  It was Kenny Rogers who sang, “You’ve got to know when to hold ’em, know when to fold ’em.”  And there are times if there's a bad enough financial storm coming, that maybe it's time to fold ’em.

Prepare Financially Before Disaster Strikes

When disaster strikes, it’s all about preparation. We believe that preparation relates to your finances, too. So, if you're still working, then we advise that you should have three to six months of expenses in cash. That way, if something terrible were to happen, either in of the market, or because of a natural disaster, you've got cash on hand to help cover you.

If you are retired, then we believe you should have six months to a year of expenses in cash. When the market is not working in your favor, we don't want you to be drawing money out of your investments while they're dropping in value at the same time. So, we want you to be able to live on that cash for a while, let the market go crazy and do what it does, and then consider going back to living on your investments. At that point, you’ll need to replenish your cash account, and rinse and repeat.

Put Together a Financial First Aid Kit

First aid kits can be necessary in disasters, and we feel the same goes for financial first aid kits. While we think your emergency fund in cash is a good place to start, but we also think having some actual cash in hand in case your ability to get cash is hindered. When natural disasters strike, electricity may be down, meaning the ATM won’t work, and credit card payments might not go through.  

So, you probably want to have enough cash on hand to be able to buy food and water and whatever else you need for about a week. It doesn't have to be thousands of dollars, but we think it should be enough to get you past that first week after a natural disaster.

Plan, Plan, Plan

A plan is integral to helping you get through tough situations, including natural disasters. Because we want you to have financial peace of mind, we advise you to make your plan about five to ten years before retirement. At RPOA, our goal is to help make your money last as long as you do.

Don’t get caught when disaster strikes. If you’re 50 or over, we believe the time to plan is now, not when you’re in the middle of retirement or in the midst of a disaster. Confucius said, “A man who does not plan long ahead will find trouble at his door.”

All expressions of opinion reflect the judgment of the author, Ken Moraif, as of the date of publication and are subject to change. Ken Moraif is a controlling owner and investment adviser representative of MMWKM Advisors, LLC, doing business as Retirement Planners of America (“RPOA”), which is an SEC registered investment adviser. Registration as an investment adviser is not an endorsement by securities regulators and does not imply that ROPA has attained a certain level of skill, training, or ability. Ken Moraif has worked in the financial services industry since 1988. He has been a CERTIFIED FINANCIAL PLANNER™ professional since 1998. Certified Financial Planner Board of Standards Inc. owns the certification marks CFP®, Certified Financial Planner™ and federally registered CFP (with flame design) in the U.S., which it awards to individuals who successfully complete CFP Board’s initial and ongoing certification requirements. 

This article should not be construed as a solicitation to effect, or attempt to effect transactions in securities, or the rendering of personalized investment advice. Any target referenced in this article is not a prediction or projection of actual results and there can be no assurance that any target will be achieved. RPOA makes no warranty, express or implied, for any decision taken by any party in reliance upon the information discussed.

All investment strategies have the potential for profit or loss. Investment strategies such as diversification do not assure or guarantee better performance and cannot eliminate the risk of investment losses. There is no guarantee that a portfolio employing these or any other strategy will outperform a portfolio that does not engage in such strategies. Economic factors, market conditions, and investment strategies will affect the performance of any portfolio and there are no assurances that it will match or outperform any benchmark. Past performance is not indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy will be profitable or equal any historical performance levels.

The Invest and Protect Strategy refers to a strategy RPOA fundamentally employs for its clients. RPOA previously employed a similar strategy that it referred to as the “buy, hold, and sell” strategy or “buy hold, and protect” strategy. Ken Moraif is the author of “Buy Hold & Sell: The investment strategy that could save you from the next market crash.” Although the name of this book is similar to the Strategy, it is not an actual representation of how Retirement Planners of America would manage its clients’ assets or a representation of its benefits.

Historic references to recommendations made under the strategy that predate 2011; and statements such as and similar to: “we told our clients to be out of the market in 2007 and 2008,” “we told our clients to get back into the market in 2009,” and “clients that followed our advice were out of the market in 2008;” refer to strategies collectively employed and recommendations collectively made by RPOA’s principals while employed at Eagle Strategies, LLC., and also at Cambridge Investment Research Advisors, Inc. Three of the five principals remain as principals today, including founder, Ken Moraif. RPOA has been employing the Strategy since its inception in 2011. Therefore, any references to RPOA’s performance or its investment advisory recommendations predating 2011 generally refer to recommendations made by its principals at the respective other firms described above.

Readers of this article should not rely on the content as the sole basis for any investment decisions. A professional adviser should be consulted and/or independent due diligence should be conducted before implementing any of the options directly or indirectly referenced. Any hyperlinks included this article are provided as a convenience for educational and informational purposes only. RPOA does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether hyperlinked within the article or otherwise incorporated herein, and takes no responsibility for the same.

This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC (opens in new tab) or with FINRA (opens in new tab).

Ken Moraif, MBA, CFP®, CRPC®
CEO and Senior Adviser, Retirement Planners of America

Ken Moraif, CFP, is CEO and senior adviser at Retirement Planners of America (opens in new tab), a Dallas-based wealth management and investment firm with over $4.3 billion in AUM and serving over 8,000 households (as of May 2019). He is also the host of the radio show "Money Matters with Ken Moraif," which has offered listeners retirement, investing and personal finance advice since 1996.