As discussed in a prior post, the order in which returns accrue can be the difference between a comfortable retirement and one facing some tough budgeting decisions. The sequence of market returns is out of the investor’s control, but addressing this risk head-on can absolutely be tackled.
In a post for Rethinking 65, our own James Yahoudy, CFP® discusses this topic and lays out some ideas for advisors to consider. Along with illustrations of the challenge and examples of possible solutions, James describes what many advisors also realize about buying bonds for “safety”:
In our opinion, the most powerful lever we can pull to manage risk and maintain returns in today’s market is altering allocations away from bonds. This may seem counterintuitive to the conversation of how to manage risk, but we simply believe there is a better way.
Allocating to assets with correlation benefits is important but having 60% of your life savings in an asset class with minimal income today, a limited buoy based on the current rate environment, and no ability to grow just doesn’t make sense to us.
The full post is great, I recommend hopping over to Rethinking 65 to read the whole piece.
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