How to Avoid Putting “Needs” Money at Risk as You Approach Retirement

As you prepare for retirement, you will undoubtedly want to accumulate the maximum amount of money and you will be tempted to use high-risk investments to do so.  Your reasoning is you have many years before you will need this retirement income, so even if the market were to drop substantially you have time for the market to return to higher and higher gains.  But this simply isn’t so.

The problem with this thinking is that things will be different as you approach the final ten years before retirement and just because another 10 to 15 years of work seems like a long time to you, it isn’t a long time in terms of the market. If it takes a downturn, 10 years will not be enough time to recoup losses.

To combat the temptation to take unnecessary risks as you get older, I caution you to change from an “accumulation” way of thinking to a “conservation of assets” way of thinking a good 10 years before you plan to retire.  It can be hard to change to a conservative way of thinking when you have been in the accumulation stage for so long — in my experience people work and save and put money at risk to get the highest possible return, all the while checking the market weekly for 40 years as they form a habit of watching. But this habit keeps people from changing as they grow older.

For example, if you see the leaves on trees drop and snow on the ground, you prepare for winter.  But old habits of investing in high-growth assets don’t show you strong enough signs like “snow on the ground” so you keep on doing the same thing you have done for years. But winter for some of us is coming, so now be the time to prepare for it by switching from accumulating money to beginning to conserve it.

Here is a graph that represents enough money to fulfill your basic needs at retirement.  Once these are covered with investments that are safe, then  “wants” money to put at risk to keep ahead of inflation on the “needs” money and provide income much later in retirement.

Wants are just that, WANTS, not must haves. If you continue to stay fully invested in market-risk assets with all of your money as you approach and enter retirement age, chances are the downturns will destroy your ability provide the needs you will have for your entire life.   

It’s always wise to change investing habits with the seasons of your life.  Be alert and put it on the calendar so you change the way you invest and save your money about 10 years before retirement. Pulling out some of the crop by harvesting the seed and storing it away to protect it is always safer than continuing to harvest and replant all of your seed every year. Doing so puts everything you’ve worked so hard for at terrible risk. Okay, so you won’t make as much if you harvest some of the crop and put it away for safe keeping as  you would if you kept reinvesting, but do you want to take those kinds of chances this late in the game? I don’t.

Make sure NEEDS are taken care of so you know how much assets you have left to fulfill WANTS, then take chances with that money.  Contact me with comments or questions:

Stretch Yourself Emotionally Today for a Better Financial Life Tomorrow…

The famed writer, Andre Gide wrote:

“One doesn’t discover new lands without consenting to lose sight of the shore, for a very long time.” 

I love this quote, it is full of pathos but also a lot of hope. To see what I mean, first take a look at the lives of the families who were left behind when their loved ones set sail back in the day on those horrifically risky voyages out on the open ocean. There was no way of knowing if the ship would return. There was no way of knowing what was happening to the people on board the ship during its absence. The amount of stress and worry for these people must have been almost overwhelming. Look at the courage the Pilgrims exhibited to sail across the Atlantic to the Americas. I cannot imagine what it would have been like to bring my wife and children along for this journey not knowing what the end result would be.

Now let’s apply this example of Pilgrim courage in taking some risks to discover a new life by consenting to leave the shore in terms of how you manage your money. 

  • First, you must try new things if you want to handle your money well and most importantly, if you want to keep it. If you’re not willing to get educated and look at new options for spending, paying down debt, and saving, then it’s like staying on the shore and not going anywhere. You will be safe (maybe) in what you do know, but you won’t be able to find any new options that might bring you much better success.
  • Second, if you leave the “port” so to speak for a long time, by learning how to control spending for an extended period of time, paying the price to get out of ALL debt in a short amount of time, and understanding what it takes to save over the long-term, you will find that you can create your own passive income. This will allow you the wonderful opportunity to not only retire wealthy, but have the means to help others as well. When we have passive income we are truly free! The more options that come into play, the more excitement comes to our lives.
  • Third, financially you can set sail by holding yourself accountable weekly as to how you are spending the money you have earned.  This is hard to do, at least emotionally, much as it would be to leave home and family to sail to the New World, but it opens up all kinds of new options you have never dreamt of before. This is the hard part of “losing sight of the shore, for a very long time.”   As you build a spending plan, examining the last 12 months of how you spent money, then share this detail with your spouse, you will be amazed at what you learn about yourself… what you value, what your real priorities are, and what you want to change NOW!  You will become totally transparent to yourself and your partner and this of course will make you very vulnerable. However, with the vulnerability comes opportunities financially that are not possible when you are closed off to your true self when it comes to spending, borrowing, and saving money. Remember, as long as the ship is in the port, it is safe, but as they say, that is not what ships were built for.

Building a spending plan, a debt plan, and a retirement/savings plan with yourself and/or your partner is the best way I know of to test your ability to discover “new lands” financially that are not possible playing it safe on the shore. But because they are plans, it is also the safest way I know of to make emotional changes that will positively affect your finances without costing you any more money out of pocket and without risking your family and relationships in the process.

Here’s how to start this process of “leaving the shore to discover new financial lands”:

  1. Create a 12-month history of the way you have spent money.
  2. Divide this spending into categories so you can see what you really value. Will you be surprised at how important eating out has become to you, or that you spent $1,000 in one year on spa treatments?  Maybe that’s important to you, but if you really didn’t want to spend all that money at McDonalds then it’s time to make change. WOW! This can be so hard as you face the future knowing how inefficient you have been with your money.
  3. Make a spending plan for how you want and need to spend money over the next 12 months. This is where the voyage gets more exciting and feels less risky.
  4. Track how you spend money so you can stay on track. Compare how you actually spent with how you planned to spend and make adjustments.

The Pilgrims left England not knowing what would become of them.  The result of their courage is what you and I enjoy today.  We enjoy the freedoms and liberties to travel as we wish, with one currency, along with the rule of law and order.  Amazing is the sacrifice of our forefathers so we could have it easy.  Don’t blow all that opportunity by refusing to stretch yourself emotionally when it comes to proper financial management.  I ask you to stretch yourself today, do the hard things today so you and your family will be far better off in the future.

What the Risk of Inflation Means to Your Retirement Fund

In the past few posts, I have been talking in detail about the five risks to your retirement that you must deal with now if you want to have a healthy retirement later. Inflation is another major risk to your retirement but most people don’t really give it too much thought. 

What is inflation? Investopedia (2016) defines it as this:

Inflation is the rate at which the general level of prices for goods and services is rising and, consequently, the purchasing power of currency is falling.

There are more classical and older definitions of inflation, which include the idea of measuring the rate of the money supply. As governments continue to manipulate money markets in their favor, they expand or contract the amount of money in circulation, thus the idea of “measuring” the money supply. For example, if all the money in circulation was represented by X, and the government printed 30 percent more of X, that would mean the money supply was inflated by 30 percent. The symptoms of this would typically be rising prices to buy the same goods, which means your money is worth less and doesn’t go as far to provide you with your needs.

What that means to you as a retiring consumer is this:

Let’s suppose you retired with $500,000 in your retirement account; let’s also suppose you needed $50,000 to cover all your expenses in a year, which would be about average. But, if the money supply is inflated by 30 percent and costs therefore go up by 30 percent, that means next year, you would need $65,000 to cover all your expenses.

Inflation is a silent thief. Most governments use it to pay deficits and debt because it ends up costing them less, and most people don’t feel it, even if they are for sure being affected by it. Henry Hazlitt said:




The long term effects of inflation are devastating to a nation’s economy, and once it begins it is difficult, if not impossible to stop. You can see the effects of inflation on the US dollar in the following graph:


So, while this is a snapshot of how inflation affects the entire economy, think of the effects inflation has on you personally and your retirement! If you don’t have income that continues to grow each year, without depleting your current retirement accounts, you are going to end up running out of money.  For exciting ways to create a predictable retirement you cannot outlive, regardless of inflation risk, contact me:


5 Risks to Your Retirement

For so many people, retirement is a scary word. They hear so many horror stories about people who were all set up to retire, and then the market crashed and they lost half of their retirement or, they didn’t have a plan, and ran out of money. So many stories can make retirement a scary thing to tackle.

Did you know the average retiree only has money planned for eight years of retirement, when in reality they need to plan for closer to 20-25 years?

Nearly all experts today attribute this failure to one major problem: the lack of a clearly written financial plan. When you plan for your retirement, with all the facts in front of you, it is easier to foresee some of the problems that will come up. That isn’t to say that you’ll eliminate all financial problems and never have a hiccup; it does mean, however, that with planning, statistically you have a much better chance to live comfortably during retirement.

To make a plan that works, you must understand the 5 major risks to your retirement:

  1. The risk of LOSS; also called market risk.
  2. The risk of losing CONTROL and liquidity of your money.
  3. The risk of running out of money (INCOME).
  4. The risk of INFLATiON.
  5. The risk of TAXES.

I am going to tackle each of these risks one post at a time. First, let’s discuss the risk of loss.

The Risk of Loss (Also Called Market Risk):

Americans have been put in a corner with market risk. Since 1974, when retirement-fund-paying went from the employer to the employee with ERISA legislation, and in 1978 with the birth of the 401(k) section of the IRS tax code, Americans’ retirement money has been put at risk. There are many details with this, but the long and short of it is that Wall Street was able to get pension money away from employers, who typically had invested it in insurance companies, long-term real estate bonds, and other various conservative investments, and instead started having employees invest their own contributions (with a match sometimes from their employer) in the market. This happened when pensions started going away and employees had to get involved with the investment world through 401(k)s and IRAs and become directly responsible for building their own retirement instead of expecting it from their employer. This was a huge windfall for Wall Street investment firms as they now had control over trillions of dollars of retirement money. But, it left the employee at HUGE risk.

Before that, your parents, or maybe your grandparents, went to work forshutterstock_261713222 40 years, were given a gold watch, and then retired on a company pension that their employers were contractually obligated to pay for the rest of their lives. Due to these pensions, the employers were very careful with how the money was invested, and they only put it in conservative, time-tested investments that would not risk the income of their employees. This is called a defined benefit retirement plan, because the benefit (the amount you receive each month) is defined and laid out in your employment contract.

Now, we have a different system. Typically, employers have turned over retirement accounts to a financial firm to make investing choices for you (this is called a 401(k) or IRA). You can contribute specified amounts to these plans, changed every so often by Congress, and your employer can choose to match certain percentages; because of this these plans are called qualified plans, or defined contribution retirement plans.

Since the switch was made to the 401(k) and other retirement accounts (traditional IRA, 403b, TSP, etc.), the risk of making sure your retirement was safe was transferred from your employer over to you. And since you are not likely to be a savvy Wall Street investor with tons of time on your  hands to ensure the safety of your investments, YOU take all the market risks and all the losses. 

Because you now have the risk of the market, this means you should understand everything your retirement account is invested in. But that rarely, if ever, happens. Typically, once a year, your employer will have the company who manages the funds in their 401(k) plan come to your place of employment and do a presentation about the retirement plan. With little turnout, they typically explain a few ideas to a few people, and leave it at that. Here are some of the problems with this ridiculous process:

  1. Fuzzy Math. As I have explained in previous posts, everyone has heard that if you leave your money in the market, you’ll get a 10-12 percent return, right? You hear it on talk radio, the financial squawkers on TV, and all over the place. The problem is, that isn’t the full story. That is an AVERAGE  rate of return, but what you need to look for is what I call the “cash on cash rate of return,” or what’s actually in YOUR pocket at the end of the day.

Take a look at this fuzzy math:


Even though on it’s face, it looks like the person in the graph will get an average return of 14 percent over four years, they really won’t. With all the ups and downs, that percentage rate is affected by the balance during the ups and the downs. The 14 percent return is not figured on a static $1,000 balance — if it were, by the end of the four years based on this fuzzy math and the 14 percent return on investment, you would have $1,140 in the bank. But you can see from the graph that the person has even a little less than $1,000 in the account at the end of year-four, so that 14 percent return is a bogus number.  

Because you take all the risk of loss and Wall Street doesn’t want to lose your business when you feel that risk, they inflate the rates of return in complicated graphs and percentages. The cash on cash rate of return is rarely explained or shown to you. This is why so many Americans feel like they can’t get ahead on retirement!

  1. Fees. Up until very recently, the fees charged to your accounts were almost completely hidden from you. Legislation has changed that in a way, but all it did was make the financial firms have to disclose to your employer a little more explicitly their fees, but this didn’t have the desired effect of helping employees understand the fees. Fees on 401(k) accounts are still very high, and this takes a huge bite out of your retirement. The problem with this isn’t necessarily the fees, since if the fees are justifiable and the rate of return is acceptable and you agree with it, then you are getting what you paid for and that is fine. But, the fees that are hidden that you are paying and don’t know about, those fees are the problem. screen-shot-2016-09-16-at-2-31-17-pmYou don’t agree to them and they are passed along to you, sometimes for the benefit of the financial management firm, sometimes for the benefit of your employer, and sometimes for the benefit of them both. But, you are left out of the benefit altogether, and it is not disclosed to you.
  1. Timing of Returns. In a study completed in 2015 by WealthVest, it was shown how significantly the timing of your investment returns can affect your overall net gain. The timing of returns says that if you suffer early losses in your retirement years, it can greatly impact your retirement as you will be drawing on those funds to live, and it can leave your retirement fund decimated. So, according to the mainstream logic, all you need to do is guess correctly when to retire by not having a loss in the first five years of retirement! Good luck with that.

As part of this timing of returns, it is extremely important to understand the Fuzzy Math many financial firms use after a period of losses. For example, in 2008 many people lost a lot of money due to the economic downturn we experienced. Many people lost up to 40 percent of their money, and it was devastating. This is a real risk posed to you if you have all your money in the market. Now, let’s use some round numbers to illustrate the point of timing. Let’s suppose you have $1,000,000 in a 401(k), and it’s 2008. You lose 40 percent just like that and the balance is now $600,000.

This was painful! Remember, this ACTUALLY happened to people.  So, how did the media and the financial firms spin it? They said to expect these ups and downs, and to look at the long-term, and to be patient and to keep investing and it would all come back. And, boy did it ever! The year 2009 ended up being a banner year. They showed that even though 2008 was a huge loss, they were excited that 2009 had a 25 percent average return! Most Americans thought since they lost 40 percent one year, and gained 25 percent back the next that they only had 15 percent to go to get back to their original balance, right? Wrong. The problem was the the timing of returns. They lost 40 percent, and the 25 percent gain was based on the balance after losing 40 percent, not the original value of the investment account.  In order to come out on top and regain the original amount before the 40 percent loss, gains in 2009 would have had to be higher than the losses in 2008 to recapture what was lost.

Here’s what it looks like:

Original balance: $1,000,000

Profit/Loss in first year: -40%

New balance after first year: $600,000

Profit/Loss in second year: +25%

New balance after second year: $750,000

That  means the profit in the second year was $150,000. Fine. But if you still had the original $1,000,000 in 2009 and enjoyed that banner year with its 25 percent return, you would have earned an additional $250,000. So this means that you are behind in terms of time by $100,000.

You just gained 25 percent in a year, a great return, so it seem that you only need to have a few more good years to get the additional $250,000 back. But, in fact, in this scenario if you lost 40 percent you would need a 67 percent return in order to get back to where you were before the market dropped. If you earned 25 percent of it back in 2009 (which was not a typical year by the way) you would still need another 42 percent to regain it all. When people made 25 percent back in 2009 and got all excited about the fact that they made so much of it back in one year, they started believing that they probably had enough time before retiring (if, fingers crossed, nothing crazy happened again in the market) to get it all back. But what they didn’t realize is they actually needed another 42 percent and that there would be no way most of them would have the time to make up this kind of loss.  This kind of fuzzy math without a real, honest explanation of how rate of timing works in the market is what has HourGlasskept the financial firms in business. They make you feel like you’re doing the right thing by investing with them, but you still feel like you are not getting ahead.  The general public feels it, but doesn’t know how to put their finger on it, or know what to do about it. “Hmmm, how can that be?” you scratch your head and wonder. Now you know why. 

I recently asked a new client about her interaction with her 401(k) planning company at work, and she said they lectured everyone the same way: If you are young, they said, you need to “be aggressive,” and buy riskier assets in the plan to get a higher return. If you are middle aged and getting closer to retirement, (which is where my client is at about 45 years of age), they said you need to “be aggressive” to make sure you make it to retirement. If you are older and getting close to retirement and perhaps a little short on retirement funds, they said you need to “be aggressive” to make up for lost time.

Really? All they are doing is passing the risk on to the clients, probably for some “aggressive” funds that pay them more commission, which can be a breach of fiduciary responsibility. This is all too common, and it can lead someone to lose their hard-earned retirement money, and in many cases I have seen, it delays retirement and causes way too much stress and problems trying to work when people are too old to work.

Market loss is a MAJOR risk to your retirement.  If you have most of your money in these risky 401(k) or IRA accounts, I recommend getting solid investment advice from  You can get help playing the market, which is what you have to do if you are trying to build retirement using a 401(k).  He can help you in this effort. But if you’re thinking it’s time to get into retirement funding that does not require you to absorb so much risk on your own, contact me and I will be happy to discuss at no obligation, the myriad options available to you that will help you build a predictable retirement on ANY income that you cannot outlive:  

In my next post, I will deal with the second major risk to your retirement funds:  CONTROL.

How to Cope with Constantly Changing Rules…

The best way is to anticipate change…

We live in a world where few things ever stay the same. That’s why knowing the rules of the financial games you play must be followed by the idea that the rules of those games are always changing.

When the world changes, the rules change and these alterations introduce certain risk into your life. Change brings uncertainty. When something changes, it can take a while to adapt to its new form and function and requires a bit of time to distinguish how the modification will affect a situation.

Change forces you to take risks during that period of adjustment between the known, comfortable past and the new, uncertain future.
Regardless of how hard you try to avoid it, change will occur and that change will bring risk with it. It is your job therefore, to determine the degree of risk that is acceptable for you to take by keeping up with the way the changes to the rules of the financial games you are playing will affect your security going forward.

Understand Your Risk Tolerance to Better Plan for Retirement

What is your tolerance for risk? Knowing how well you handle the stress of uncertainty is very important when it comes to creating a more predictable retirement.
Part of retirement planning is dealing with the risks and also the potential for return on money you invest to help fund retirement.

Risk:  Measured by the potential for loss in the valuof your investments.
Return: The profit or loss on your investments.

Deciding how much risk to take is not just based on financial factors — it is also based on your emtoions. Some people are not comfortable watching the value of their investments go up and down with the  markets. This means they have a lower risk tolerance. Others may be able to better handle this. They may be focusing more on long-term results and not reacting to short-term events. Regardless of your risk tolerance, a successful investment strategy should give you the maximum potential return within your investment comfort level.

So what is your financial risk tolerance?

To help my clients determine this, I have them consider the following two things:

1. Historical performance of investment options.
2. Investment Time Horizon (or the number of years  you have left to save).

Historical Performance
The volatility of the funds you are considering investing in can be examined by looking at their historical performance. If from that performance you see major shifts in that particular investment vehicle and this is something that makes you nervous, you may wish to look at other less unstable options.

The following chart is a good example of the volatility of the market over a 25-year period, showing the ups and downs of stocks, bonds, cash, and inflation:


Investment Time Horizon
In addition to historical performance, you will need to look at how much time you have left to save, or the Investment Time Horizon — this will also help you determine how much risk you can take. This number should influence your investment strategy. The more years you have until retirement, the more risk you can accept because you have a longer time to hold your investments. This means that you can better weather the ups and downs ofPrinciple 7: Time your investments and take advantage of the overall long-term growth potential they offer.How many years do you have until you need to retire? I use the following guides to help my clients answer this question:

Long-term horizon (15 or more years):  If you have this much time to invest, you may want to consider placing at least some of your money in higher-risk investments to maximize potential returns. You have more time to take more risk.

Intermediate time horizon (5 to 15 years):  You are still able to invest for higher returns, but you may want to limit your overall risk. A major setback could affect the amount you’ll have after retirement (remember, you could live 15 or 20 years into retirement).

Short-term time horizon (5 years or less): You will want to limit your risk even more. If anything major happens to your nest egg at this point, the chances are slim that you will be able to make it up with just a few years of investing to go.  Do not take major risks here!

For more information on retirement planning options, contact me or Peter: 801-292-1099.

Negotiating the Retirement “Red Zone”

The retirement “red zone” is the age bracket of 55 to 65.  It’s the last ten years before you plan to quit active work.  This period of time is critical to your retirement success.  If you lose money during this time, you may not have enough time to make up the losses.  If you think you have problems now, just make this fatal error in judgment and see how you feel then.

Let’s say you have an adequate amount of money for retirement, but five years before you retire, the value of your retirement account drops by 25 percent.  Will this loss keep you from reaching your retirement goal?  If so, make sure you place your investment in a safe place — a place not subject to market risk.  I repeat, at the five-year mark, if you have enough money to fund your entire retirement, take this money out of the market and put it somewhere safe!! Keep your money safe from market risk. As you move your money over to a safer place, could this mean you only get a small rate of return?  Probably.  But if your path to retirement income is adequate, why put it at risk?  RememberRiskGamewhat season of life you are in, the retirement planning season.  This is called the “autumn” of your life, not the “springtime.”  Don’t play with money that you may need in the winter season of your life… the time when you will need that money for a long-term care facility, for example.

My message is short and to the point.  Don’t risk your retirement money once you get within 10 years of quitting active work.  Don’t do it!  The risk/reward relationship is not good here.  Don’t gamble with your retirement money.

Now, let’s assume you are the other guy, the guy that doesn’t have near enough money to retire on.  You may be inclined to risk all the money you have to try to make up for lost time. The pressure you may feel at this point can be merciless.  However, I beg you, do not risk whatever you have in a retirement account.  Don’t do it!  Address this problem in other ways, including the following:

  • Rethink your retirement plan, including changing the age at which you will stop working.
  • Adjust how much income you will live on in retirement
  • Create a spending plan, if you do not have one, and figure out how you can get out of more debt, sooner based on tracking your spending according to that plan.
  • Look at available resources that you can use to fund retirement, including property you can rent out, money you could put into a small real estate investment, etc .

My experience after 45 years of helping people prepare for retirement is DO NOT RISK YOUR RETIREMENT NEST EGG, NO MATTER HOW BIG OR SMALL, ONCE YOU REACH THE RED ZONE.  Don’t do it! Resist all temptations to do so, or you will be sorry.  

To help make my point, I share a story of one of my clients I’ll call Thomas that will make you sick. Thomas had just enough money to retire.  In the back of his mind, he thought he could keep working if he had to, so he place 50 percent of his money into a risky investment and two years later lost it.  Then Thomas’ knees got arthritis in them and he was in excruciating pain every day, until he was forced to quit his job. He told me if his knees had not gone out on him, he would have been shutterstock_224050600okay.  Why did Thomas take that risk?  What extra amount of money might he have gotten out of this risky, last-minute adventure that would have been worth all this trouble?  Let’s say that Thomas’ risky investment had paid off.  In my experience, all it would have taught him was to keep taking more risks.  He would have kept taking risks at an age that he really couldn’t afford.

Here’s another story of risking retirement money:  Samuel, I’ll call him, had a good job and making good money.  He and his wife always wanted a bigger home on a larger piece of land.  At age 60 they sold their home and purchased their dream home twice the size of their old home. Financially speaking, as long as Samuel kept his job up and through age 67 they would have no problems. Unfortunately, Samuel’s employer fired half the staff and reduced his hours by 25 percent.  Right after this, in 2008, the U.S. economy tanked causing housing values to plummet, so much so that there was no equity left in Samuel’s new house.  His wife had to go to work to make enough money for the short-fall in income and they no longer had extra time to travel and do the things they loved.  They put their home up for sale, but could not sell it.  Today the value of their home has increased, but not back to any respectable level.

Place yourself into Samuel’s shoes for a minute.  How would you feel if you lost 43 percent of your retirement account, then your monthly income dropped by 25 percent, and there was no equity in your house but you had planned to retire in five years?  Now take that answer and ask yourself this question, “Was the bigger house worth it?” I have seen this kind of situation play out over and over again.

The red zone is a critical time where no financial mistakes should be made.  Don’t put your money at risk if you are now in the red zone, it just isn’t worth it!

The Real Facts about Market Risk

My calculations show the returns on all investment accounts average an annual 3.8 percent rate. I read many investment account brochures and study the associated graphs, which show returns at 11.9 percent.  But personal interviews with my clients always indicates that the more accurate rate of return is around 3.8 percent (or to make it easy we’ll just round up to 4 percent), nothing close to the 11.9 percent advertised.  If you need more proof than this, I beg you to do your own calculations, and make sure you take those calculations over a long period of time, not just the last five years.  If you conclude that your rate of return is close to mine, a simple 4 percent, then lock down the investments that are earning you this return so you are getting a nice steady (but low) profit. I now want to use this rate to make a gigantic point.

Since we can assume a low but steady 4 percent overall rate of return, why would you allow the risk of losing a much, much larger amount of money if the market changes dramatically in a few months?  In other words, 4 percent is all you will ever “average” so why would you leave your money at risk of losing so much more (like in 2008 where many people lost as much as 43 percent) just to end up with what we have established is what you’ll get over time (say 30 years) of 4 percent? You know you will never average more than about 4 percent, so again, why risk a much greater loss, only to end up with 4 percent average in the end?  I am asking this question over and over again because people just don’t seem to get this at all.
Timing seems to be everything when it comes to market risk.  If the timing goes against you just before you retire, you will be forced to wait a long time before taking out money to live on.  And with less money, if you start taking this money as planned, you will run out a lot quicker.  In my experience, you must avoid market risk when you arrive at age 55, or when you are within ten years of retiring.  Do your own research and find out how long it takes for the market to return to where it was before a big drop.  Judge for yourself when to move money to avoid market risk.  In case you didn’t know it, you are in charge.  The HR person is not, nor is your employer in charge of your retirement.  Nobody else cares as much about your money as you do.

If you are not going to be satisfied with just 4 percent then you have two choices:

1)  You can spend countless hours learning how to play the market and become and expert investor and take on huge risks in an attempt to make more than just 4 percent


2) You can save lots of time and money and learn more secure ways to invest your money other than just in a 401(k) or IRA, such as real estate, equipment leasing, etc.

I urge you to learn more about Money Mastery Principle 10: “Money in motion creates more money,” and the secrets of the great money masters in maximizing their resources and learning how to get their money to do more for them than just sit in a tax-deferred government retirement program.