The Retirement Red Zone

Are you in the Retirement Red Zone?  This is the period five years prior to your anticipated retirement date and five years following your retirement date.  This is an ultra-sensitive time for retirees as it relates to their finances.  Let’s break down this five-year “Retirement Red Zone.”

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Pre-Retiree Red Zone:

You’re cruising along, saving like mad, casting your dreams for your retirement days… what will you do with all that free time and all the projects and hobbies you’ve been holding at bay.  In the background, the news about the economy is beginning to heat up.  You don’t pay that much attention because after all, for the last 25 to 30 years of savings, you’ve been a buy and hold accumulator.  If something wasn’t working out in the financial market, you would just look the other way, keep saving, knowing that within a week or two, another paycheck was coming along to allow you to make ends meet.  You’ve got your sights on a goal for retirement and because of your behavior pattern of “set it and forget it” for the last 30 years, you do just that.  Meanwhile, you remembered you have an accumulation portfolio.  Therefore, heavily exposed to the stock market.

Now here you are within months of retiring and all of a sudden the bottom drops out of the market.  Faced with a 20% to 25% decline of your retirement assets and knowing you’ll be floating on that financial “vessel” for the next 30 to 35 years…what do you do?  Do you postpone retirement now?  Do you squash some of the retirement dreams?  Do you stick it out longer with your current employer, who you may have even started to burn bridges with, Heaven forbid.  Ahh… the Pre-Retirement Red Zone dilemma.

Post-Retirement Red Zone:

You’ve had your retirement party.  You’ve penciled out your retirement goals and dreams and you’re beginning to initiate on some of those already.  Maybe a new motor home.  A vacation property?  A month-long trip.  Possibly some gifts to family members.  Retirement happened so quickly, you simply barely had the time to worry about your rollover and you left everything as it was while you were working within your 401(k).  While having your morning coffee as a retiree, you look at the TV and notice nothing but red on the screen.  Thinking nothing of it – after all, through those accumulation years you were trained to just ignore it and hang in there – you go about your day.  Having come back then from a long weekend and looking things over on that next Monday, you have just discovered that there’s been a 25% downdraft in the value of your accounts.  Realizing you’re also taking monthly income from this account, you start to get concerned.

In both scenarios, there should be concern.  Making sure you transition from preservation mode to accumulation mode is key to a successful mindset of retirement.  Of course, the work you do with a retirement planner will help make sure that you have a heads-up focus on the perils and the potential dangers that are facing pre-retirees and retirees.  Becker Retirement Group goes through a painstaking process of assessing the retirement picture using specialized retirement planning tools that help identify those perils and those dilemmas before they occur.