Most investment advisors generally encourage younger investors to be more aggressive since they have more time for their investments to compound and more time to recover if their investments have periods of decline. On the other hand, investors usually encourage retired investors to be somewhat more conservative since they aren’t constantly adding to their investments and may not have as much time to recover in a downturn.
One thing that I think people ignore is what to do in the “in-between years.” For simplicity, let’s say you’re within five years or so of retirement. What should you do differently over the next few years?
Find Out Where You Stand
If you’re in this position, your first step involves a little informed long-range planning. Take a look at projections to see where your nest egg and future sources of income in retirement stand. I’m always surprised how many people have never done this. But the first step in knowing whether you need to adjust your strategy is to know what position you are in currently.
Be Mindful If You Think You’re In Great Shape
Some people will find that they are in great shape and have the luxury of becoming more conservative with their investments if they want to. This position can potentially reduce the chance of a down market disrupting their retirement plans. Sometimes this can be a significant change, and sometimes it can be more subtle. Remember that the current life expectancy in the US is 79.05 years, so if they are in great shape at retirement age, they still need their nest egg to last in most cases.
If You Think You Need To Catch Up
Some people will find that they are behind schedule, which can get more challenging. This may mean, in some cases, that you shouldn’t back down on the aggressiveness of the investments just yet. But it could mean you make different adjustments, such as retiring later or boosting savings and investment rates. It could be a combination of all of these things.
You probably should be somewhat conscious of where we are in the market cycle. If you get within a few years of retirement and are contemplating these changes, but when the market is down quite a bit, maybe you don’t make the shift “exactly” when it looks like the right time on paper. Perhaps you let things recover a little bit before making a significant shift.
Now is the time to start planning for your future. Whether you’re in the in-between years or ready to take your next step, an investment advisor can help you create a map for where you want to be in the future.
David Jackson, MBA, CFP®, C(K)P™, is the Managing Partner at the Southern Springs Capital Group. For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4585.
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