Unexpected Market Challenges To Account For Before Retirement

When you feel comfortable entering the next chapter of your life, what’s the best way to create a steady stream of income that lasts as long as you do?

“In order to have your money go the extra mile, it’s important to have a plan,” says Mark Yegge, professional fund manager and founder of the Wealth Investors Club. “You need to think about the consistent opportunities in the market in order to leverage your current portfolio, in order to grow the income you already have. You also need to continue to adjust to important factors that may shift, such as your expenses, the market, your tax situation, and your time horizon."

Other than Social Security, many retirees have no source of guaranteed income other than retirement savings. Plus, unlike previous generations, you may not be covered by a pension plan at work. Chances are, you’re going to have to rely on your own efforts to support yourself. Here are three common challenges you might face once you start living off of your retirement savings:

Challenge #1: Changes in your spending needs

Most of your retirement planning relies on assumptions: how much income you’ll need, what your expenses will be, how much your investments will earn you yearly, and how long you’ll live. As helpful as the planning is, in reality, they’re just guesses, making it difficult to forecast your actual spending over the next few years.

For example, if you need more income than you anticipated—for health care costs or other needs—how will that affect the longevity of your savings? If you rerun the numbers and discover your savings are likely to fall short, how do you make ends meet without sacrificing your own spending desires.

"There are plenty of things you can do to accommodate a significant change," Mark says. "But the challenge becomes figuring out what you should do—and that's where expert help and a comprehensive retirement income plan that's updated and revised at least every few years, if not annually, can be helpful."

Challenge #2: Volatility

Unpredictable market swings happen, and when they do, it’s important to have a concrete plan to handle your investments. Events like 9/11, The Financial Crisis in 2008, and the Covid-19 for instance, have disrupted the market in the past twenty years. In short, these types of events are those that defy our ability to predict them, making it therefore difficult to predict your income and retirement needs.

When they occur, they can have a profound impact on financial markets. These days, trading is often conducted electronically at lightning fast speeds among numerous participants around the world. In addition, trading doesn’t stop when the market closes, and the advent of social media has accelerated the speed at which decisions are made. Put it all together and the climate is conducive to greater volatility than we’ve experienced in the past.

In order to truly plan for this kind of volatility, it’s important to have an investment system that works in any type of market. Even better, an investment system that can make secure and reliable profits in every market.

Challenge #3: Inflation

Inflation is the rate at which the prices of goods increase on an annual basis. It’s hard to believe, but on January 1, 1981, the U.S. inflation rate was a whopping 13.9%. After hovering between 1% and 3% for much of the past several years, it has risen substantially in 2021 and well into 2022. As of June 2022, inflation sat at a whopping rate of 9.1%. But, even relatively low rates of inflation can have a harmful effect on your purchasing power over time.

For example, $1,000 today will only be able to purchase $552 in goods 30 years from now with a 2% annual inflation rate. With a 3% rate, that $1,000 will only buy you $412 worth of goods. And if inflation goes up to 5% or 6%, the results could be far more drastic.

For many retired people, higher inflation is especially difficult because they may be living on a fixed income that can’t support rising costs. In addition, many of the goods and services most often used by retirees are already experiencing greater-than-average price inflation.

What to Do in To Prepare For These Unexpected Challenges

Years ago, once in retirement, an oft-used strategy was to reallocate your portfolio from predominantly equities to predominantly fixed income and to live on the interest generated by these holdings. With today’s interest rates near record lows and life expectancies expanding, this strategy may no longer be viable.

To truly allow yourself to enjoy retirement, life comfortably, and have more than enough money to last you throughout your lifetime, it’s important to have a concrete investment strategy that allows your money to work for you.

Mark Yegge has developed a strategy to invest based on this principle; that your money needs to work for you. His over thirty years on Wall Street combined with the $13B of securities he’s invested throughout his career have allowed him to design a trading program that aligns with these values.

Interested in learning more about the strategy, click here for more information and to see if we can help you.