Are Seniors Too Risky?
By: Max ValaVanis, CFPⓇ
When was the last time you rode a roller coaster? For most seniors, the answer would be years or even decades. The appeal for flying around on a guided bullet doesn’t linger long for many senior citizens. Why would it? Despite many theme parks boasting about their safety, taking such a risk doesn’t make sense. So why would you ride a roller coaster regarding your retirement? If the rapid rise and fall of The Hulk at Universal Studios makes you sick, wouldn’t the same be true for your investments?
Year after year, we see the Baby Boomer generation investing heavily in equities, such as the S&P 500. This generation believes in the market’s resilience and in sticking with investments while they’re down. According to Vanguard, investors aged 55 and older have a median allocation of 63% in equities. Unfortunately, equities can cause the most turbulence in an investment portfolio. Since the 1980s, Baby Boomers have experienced a multitude of market crashes, from Black Monday in 1987 to the pop of the dot-com bubble in 2001, to the 2008 Great Recession. Baby Boomers have survived these calamitous events as the market eventually pulls through. So why be more conservative?
While admirable, this ideology can be a double-edged sword. In retirement, hitching your nest egg to the market could cause a considerable decline in quality of life. If the stock market does descend, like a roller coaster, it can take you for a ride. During the aforementioned events, most of you readers were employed. In these times, the stock market may crash, but you likely still earned that paycheck week in and week out. The reliability of income was usually enough to offset market worries for most Baby Boomers. So, what happens when the comfort of the paycheck disappears, and all you have left is Social Security and your vulnerable nest egg?
Retirement investing is about managing the money in your piggy bank. During the 2008 Great Recession, too many retirees left their money in the stock market and saw their retirement savings suffer significant losses. For example, the S&P 500 dropped 38.49% in 2008 alone. This serves as a cautionary tale for senior investors today: maintaining too much exposure to the stock market in retirement can jeopardize your financial security when you need it most. Seniors should want to maintain and use their retirement funds as effectively as possible. This means investing your retirement savings in a customized portfolio that helps you preserve your quality of life while protecting your money in case of an emergency or for your loved ones.
Frequently, investing aggressively in equities isn’t the best way to achieve this success. A careful and curated portfolio is often the ideal strategy for your goals in retirement. We at ValaVanis Financial specialize in crafting these customized retirement strategies. If you are worried about market risk or want a portfolio tailored to your needs, call us at 321-956-7072. We offer a no-obligation appointment for readers of the Senior Scene and can help you get off that roller coaster.
Securities offered through J.W. Cole Financial, Inc. (JWC) Member FINRA/SIPC. Advisory services offered through J.W. Cole Advisors, Inc. (JWCA). ValaVanis Financial and JWC/JWCA are unaffiliated entities.