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About 20 minutes into my seminar I ask the audience if they agree that investors should make safer money decisions as they get older. Without fail every hand goes up. It makes sense right? We don’t party the same as we get older, we don’t eat or exercise the same, we don’t (hopefully) dress the same. However, what I see every day is that folks open accounts with an investment strategy and stick to that same strategy for decades. Everything in their live changes, and most of the world changes but yet here they are…65 years old, on the verge of retirement investing like an over eager 20 year old. You’ve planned for this moment for 40 years, saved enough, taken risks, raised a family and you have 100% of your money in the stock market? What happens if the market crashes 3 years before you retire and 45% of your money is gone until it recovers? JP Morgan says that the average bull market last 54 month and the average bear market people lose 45% of the money they have invested in the market. That means that, on average every 5 ½ years the market corrects and people lose massive amounts of money. How long do you plan on being retired? For most people they plan on living 20, 30, 40 years in retirement. How many times do you think the market will correct? 4? 5? I don’t have that answer and neither does your current advisor but it seems common sense to me that if you exited the market you could literally guarantee that all of you won’t lose money no matter what the stock market does. But instead you leave all your money in mutual funds and just pray that the fund manager has his crystal ball all shined up. Why not use one of the oldest, simplest and most widely accepted financial planning tools available? It’s called the Rule of 100. Here’s how it works…you take 100, minus your age and whatever is left is the most % of your wealth you should have at risk. So if you are reading this and you are 65 you should have no more than 35% of your wealth at risk. 100–65+35% It’s not an exact science but it’ll show you have aggressive you really are. Take a look at your own money. Do the old Benjamin Franklin thing and draw a line down the middle. On one side put all your money that has risk. This is you stocks, mutual funds, variable annuities, ETF’s, etc. On the other side put your safe money: Bank Accounts, CD’s Fixed and Fixed Indexed Annuities, etc. Chances are you are much more risky than you think. My advice is if you have enough money to retire like you’ve always dreamt of stop taking unnecessary risks. If you can’t afford to risk any money than stop risking it.
