Risky Business – Challenging Times
I remember getting calls from potential clients asking me to help them after they moved all their money out of equities in response to a major market downturn - particularly during the 2007-2009 recession caused by the mortgage crisis.
I would tell them that I wish they had called me before taking such a drastic step as I could have helped them modify their asset allocation rather than get out of the market entirely.
Everyone has a great risk tolerance when the market is hot. But you need to consider that markets fluctuate and have an asset allocation that you can live with during times when markets are down.
Even the most famous economists don’t know for sure what the markets will do. Market timing doesn’t work.
Perhaps some people are finding out now that they need to de-risk a bit. People who have recently retired or are about to retire need to consider sequence of return risk as big losses during this period can have a serious long term impact on their investments.
The value of guaranteed income in retirement can’t be overstated. That’s why I’m a big fan of delaying Social Security for at least the higher earning spouse unless both spouses have short life expectancies or there are other unique circumstances. It’s the best annuity money can buy and offers inflation protection without any market risk.
As for possible cuts in Social Security benefits down the road due to underfunding, I find it hard to imagine people who are already collecting benefits being affected as it would be political suicide.
Everything has some risk. Annuities have carrier risk and some also have market risk.
I suggest getting professional advice if you need assistance. It's worth the money!
Francine Duke
I would tell them that I wish they had called me before taking such a drastic step as I could have helped them modify their asset allocation rather than get out of the market entirely.
Everyone has a great risk tolerance when the market is hot. But you need to consider that markets fluctuate and have an asset allocation that you can live with during times when markets are down.
Even the most famous economists don’t know for sure what the markets will do. Market timing doesn’t work.
Perhaps some people are finding out now that they need to de-risk a bit. People who have recently retired or are about to retire need to consider sequence of return risk as big losses during this period can have a serious long term impact on their investments.
The value of guaranteed income in retirement can’t be overstated. That’s why I’m a big fan of delaying Social Security for at least the higher earning spouse unless both spouses have short life expectancies or there are other unique circumstances. It’s the best annuity money can buy and offers inflation protection without any market risk.
As for possible cuts in Social Security benefits down the road due to underfunding, I find it hard to imagine people who are already collecting benefits being affected as it would be political suicide.
Everything has some risk. Annuities have carrier risk and some also have market risk.
I suggest getting professional advice if you need assistance. It's worth the money!
Francine Duke
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