Treece Talk Blog

Every advisor has an investment philosophy, and mine is different than most. As a retirement planning specialist, I help people accept risks to manage their funds. This is especially important for those nearing or in retirement. Risk management is crucial in this process.

Crazy World, Growing Risks

In today’s fast-changing world, financial risks are escalating. I don't think retirees should just wait out market downturns; it's not the best strategy. This is especially true if you retire during a major downturn, which can significantly reduce your portfolio’s longevity.

Risk Acceptance in Action

I work with insurance companies to provide guaranteed returns or income. I also collaborate with money managers who handle market downturns. These managers will get out of the market in a downturn to avoid severe losses and then re-invest when the timing is better.

By blending strategies from various managers I can proactively address unsystematic risk. This type of risk, also known as specific risk, is specific to an individual company, asset, or sector. 

This customized diversification strategy is a more flexible and active approach than the traditional 60/40 ETF portfolio.

The typical 60/40 portfolio has 60% stocks and 40% bonds. This mix can do poorly at times. Bonds may lower returns when the market is strong. Stocks can fall during a market downturn. 

Fear Factors of Financial Security

People spend years saving up for retirement. When the time comes, many people are unsure about using their savings. They hold back from enjoying this new stage of life.

Many retirees have enough money to enjoy their retirement. However, they often hesitate to follow their lifelong dreams and wishes.

I want you to know how much you can safely spend while maintaining a safe withdrawal rate. However, maintaining financial confidence in retirement goes well beyond investment withdrawal strategies.

• I stress the importance of insurance, especially long-term care insurance. This type of care can quickly deplete a lifetime of savings in just a few years. Unfortunately, 70% of Americans will need long-term care services at some point in their lives. 
   
• I provide useful tools to keep your legal documents current, beneficiaries up to date, accounts properly titled, and ensure all are easily accessible.

Mitigating Sequence of Return Risks

Sequence of returns risk concerns the timing of returns. For example, if you retired in 2000 at the start of three years of double-digit market losses, or in 2008 when the S&P 500 was down 38%, the withdrawals you took then shortened the lifespan of your portfolio.  

By planning ahead, like using a conservative bucket for the first year’s income, you can avoid selling stocks at a loss. You can then refill this bucket when the market improves.

Maximizing Value for Your Fees

What value are you getting for the fees you pay?

If a financial planner and money managers are helping you avoid losses and maximize gains, the fees are worth every penny.

By diversifying your investments, you’re getting real value for your fees versus a cookie-cutter 60/40 portfolio.

Preparing for Future Uncertainties

Lastly, I don’t believe in telling pre-retirees or current retirees to just ride a down market out. The world is getting crazier, and there will undoubtedly be more disruptions and risks we can’t even imagine now. I wouldn’t take that advice myself, and I won’t give it out, either. 

A smart risk management plan is important to help protect your retirement savings. This ensures your savings have safeguards, no matter how the market changes.

If you’d like a second opinion on your portfolio, I am here to help. Let’s talk — schedule a quick consult here.

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