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First 10 Years in Retirement Most Critical

I read a research report recently that stated the portfolio returns in the first 10 years of a 30- year retirement actually explain 80% of the eventual retirement outcomes. This means that the #1 investment risk in planning your retirement income distribution strategy is to avoid selling stocks or stock funds in the first 10 years of your retirement. The reason is that if you are forced to sell stocks or stock mutual funds when they are down in value, you are preventing those securities from bouncing back. One way to think of this is that if a stock holding goes down by 20%, it takes a 25% gain to get back to where you started. Therefore, you must have 10 years’ worth of bonds, bond funds or cash to get you through the first 10 years of retirement. Do you?

BTW, the same research report reported something that shocked me. Did you know that the first person who will live to be 150 years old has already been born? Not sure how they arrived at this point, but it’s amazing to think about it.