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Expert Report: The Retirement Red Zone

Expert Report: The Retirement Red Zone

In football, the Red Zone is the final 20 yards before reaching the end zone, where the game can be won or lost. In investing, the Retirement Red Zone is the final 20% of your working years, where your retirement future can be won or lost.

At the start of the Retirement Red Zone, just like a football team who’s traveled 80 yards downfield, you traveled 80% of your working years towards your retirement. While you continue to work and accumulate the final 20% of your retirement savings, you must implement a stock market exit strategy to protect the 80% you’ve gained over most of your working years.

If you neglect to implement a Retirement RedZone strategy, you run the likely risk of losing the retirement future you worked years for. Those still invested in Wall Street companies like GE, General Motors, and Enron during their Retirement Red Zone didn’t have a chance. Without an appropriate exit strategy, when Wall Street’s markets crashed, their career retirement earnings vanished, leaving many of them impoverished.

Capital preservation is paramount and is the foundation of a secure retirement.

Everyone’s Retirement Red Zone is unique, which is why I’ve developed this proven formula:

Subtract 20% of your Working Years from your Retirement Age and that equals your Retirement Red Zone Age.

For example:

  1. If your planned Retirement Age is 65 and you started working at age 25, that’s 40 Working Years.
  2. 20% of 40 is 8.
  3. Now subtract 8 years from your planned Retirement Age of 65.
  4. 65 minus 8 equals 57, which means your Retirement RedZone starts at age 57.

What you do when your Retirement Red Zone starts depends on the current stock market environment.

In a down market, it is very difficult, rather tricky – and it’s anyone’s guess – to time exactly when you should take your money off because you don’t know if it will continue to go down or start to come back. Ultimately, you’ll want to talk to your advisor about a stop/loss ratio, so you don’t lose more than you can recoup and throw away your retirement future.

In an up market, particularly one at record-highs, the strategy is simple: Don’t waste any time getting off the market and protect the retirement savings you’ve accumulated over 80% of your career. If you hesitate, the retirement game could be over for you.

For those who don’t yet have access to retirement plans, like 401ks, consider safeguarding your earnings in the plan’s stable, fixed account.

Most likely, you haven’t heard of the Retirement RedZone from your financial advisor, nor have you been given a stock market exit strategy. That’s because your broker has no incentive to get you off the market. They would lose their ongoing fees and commissions.

Seek out a retirement phase advisor that can give you more insight on how to have a guaranteed, secure retirement future.

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