It’s called the retirement risk zone—the period of several years before your retirement date and the initial years of your retirement. The risk is a severe market downturn and its impact on your retirement savings.

A falling market just before retirement could cause unprepared investors to postpone their retirement or modify their desired retirement lifestyle. If the market suffers a downturn soon after retirement, you risk drawing income from investments that have lost value. Also, unless you’re still working or own a rental property, you won’t have earned income to make up for the losses.


Changing your portfolio’s asset allocation to focus on low-interest, low-risk investments would offer a safeguard against market volatility, but most investors need growth in their portfolio to support 25 years or more of retirement. How do you provide for the long term while also keeping your portfolio safe through the retirement risk zone?

Fortunately, many solutions are available to solve the safety versus growth dilemma. The one that’s best for you depends on your retirement income sources, liquid net worth, risk tolerance, desired retirement lifestyle, estate plans and whether you support your spouse.


Some investors are well served by the traditional approach of increasing fixed-income investments while decreasing equities as they approach retirement. The transition should happen over several years so you don’t risk selling a large portion of equity investments when the markets are at a low point. When retirement arrives, several options are available, including basing withdrawals on an annual fixed-dollar amount or a fixed percentage of retirement savings.

Another strategy is to build a reserve of cash and low-risk fixed-income investments that can provide a couple or several years of retirement income. If the market drops when you retire, you can access these funds to support your retirement while markets recover. Some investors help build this reserve in later years with the extra cash flow that results from children leaving home and having a paid-off mortgage.

Yet another method is to build a portfolio based on investments that generate income, such as corporate bonds and dividend-paying stocks. When an investor implements this strategy before retirement, they reinvest the distributions to purchase more shares or fund units. During retirement, the portfolio’s income becomes part of the investor’s regular income stream—even when the market suffers down periods.

These are just a few of the strategies available to safeguard your retirement plans against a market downturn occurring at an inopportune time. When retirement is on the horizon, we’ll look at your situation and the suitable options, and then determine which solution will give you peace of mind through the retirement risk zone.

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