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Five Years Out And Two Key Risks

What is the most critical period for you as you pursue a financially secure retirement?

It is the five years before you retire.

The financial decisions you make during this stretch will likely have a profound impact on whether you live the rest of your life filled with abundance and joy or scarcity and worry.

Is it time to create a financial plan?

Last week I revealed that having a financial plan can lead to a 2.7x higher net worth on average at retirement, according to Charles Schwab in research carried out by Strategic Business Insights.

Five years before retiring, and each year thereafter, Coffeehouse Investors address the two key risks inherent in their financial future.

Do you address them in yours?

Unexpected healthcare costs. As people age, their healthcare needs tend to increase, and unexpected healthcare costs can become a significant expense in retirement. It is important to consider how you will cover these costs – either through added insurance or through self-funding– when planning for retirement.

Bear markets. To put it bluntly, retiring in a bear market is not for the faint of heart. You are dealing with one type of risk few investors contemplate, called “sequence of returns risk,” explained here. Without re-evaluating your portfolio allocation for possible rebalancing opportunities, the next bear market could take a huge chunk out of your portfolio just as your income has dramatically dropped.

The time to address these two key financial risks is before they wreak havoc on you. 

Anticipate Your Risks

Build a retirement plan that doesn't leave you with fewer assets to generate growth and returns during potential future recoveries.

If you have generated $1 million or more of investible assets and are in or close to retirement, let's construct a financial and investment plan that sustains your wealth throughout your life.