Our proposal was to cash in most of the stock they accumulated and place it into more conservative insurance-based products that would have protected their principle against stock market losses, and generated the income they needed to enjoy a stress-free retirement.
Unfortunately, things were not that simple for this couple. Both had been with this company for many years and the stock had been very good to them. Additionally, this was at the height of the first tech bubble. In their eyes, they would live on the dividends of the stock in retirement and watch the stock continue to split and double in value.
Our proposal was rejected.
Needless to say, timing was not on their side. Within months, the markets suffered a major correction and they lost 50% of their value in less than a year. I spoke to the advisor a few months later and he told me that his clients were both were forced back to work to try to regain the $1 million they had lost. I can only hope they did not suffer the same fate in the corrections of 2008 and 2013.
The five years prior to and immediately after retirement will have the largest impact on the lifestyle you will enjoy in retirement. In those years, time is no longer on your side and greed will devastate your plan.
As retirement approaches, early to mid 50’s, start to evaluate your goals and the risks you may be taking. Update the allocation of your portfolio, and consider the addition of insurance-based products to minimize the overall risk of the entire portfolio.
Watch this video and see how the changes in the market can effect your retirement.
Written by Marc Montini with Montini and Farrah Tax Advisory Group