On April 29, 2020

Money Matters: Your definition of risk changes in retirement

By Kevin Theissen

During your accumulation years, you may have categorized your risk as “conservative,” “moderate,” or “aggressive” and that guided how your portfolio was built. Maybe you concerned yourself with finding the “best-performing funds,” even though you knew past performance does not guarantee future results.

What occurs with many retirees is a change in mindset—it’s less about finding the “best-performing fund” and more about consistent performance. It may be less about a risk continuum—that stretches from conservative to aggressive—and more about balancing the objectives of maximizing your income and sustaining it for a lifetime.

You may even find yourself willing to forego return potential for steady income.

A change in your mindset may drive changes in how you shape your portfolio and the investments you choose to fill it.

Let’s examine how this might look at an individual level.

Still believe

During your working years, you understood the short-term volatility of the stock market but accepted it for its growth potential over longer time periods. You’re now in retirement and still believe in that concept. In fact, you know stocks remain important to your financial strategy over a 30-year or more retirement period.

But you’ve also come to understand that withdrawals from your investment portfolio have the potential to accelerate the depletion of your assets when investment values are declining. How you define your risk tolerance may not have changed, but you understand the new risks introduced by retirement. Consequently, it’s not so much about managing your exposure to stocks, but considering new strategies that adapt to this new landscape.

Shift the risk?

For instance, it may mean that you hold more cash than you ever did when you were earning a paycheck. It also may mean that you may be suggested to buy investment products  that shift the risk of market uncertainty to another party, such as an insurance company. Salespeople often pitch annuities to retirees for just that reason. However, buyer beware!

The guarantees of an annuity contract depend on the issuing company’s claims-paying ability. Annuities have contract limitations, high fees, and charges, including account and administrative fees, underlying investment management fees, mortality and expense fees, and charges for optional benefits. Most annuities have surrender fees that are usually highest if you take out the money in the initial years of the annuity contract. Withdrawals and income payments are taxed as ordinary income. If a withdrawal is made prior to age 59½, a 10% federal income tax penalty may apply (unless an exception applies).

The march of time affords us ever-changing perspectives on life, and that is never more true than during retirement.

Kevin Theissen is the owner of HWC Financial in Ludlow.

Do you want to submit feedback to the editor?

Send Us An Email!

Related Posts

 What’s in a name?

June 25, 2025
There’s nothing like a talk show to spark an idea for a column. Hosts Kelly Ripa and her husband, Mark Consuelos, recently discussed how people’s first names often serve as clues to the decade in which they were born. Some names that are rarely chosen today were popular in previous decades.  The given name that…

No patch left unskied

June 25, 2025
I’m calling it.   I drove around the long way, hoping to catch one last glimpse of the patch before we actually began hiking up into The Canyon. Partly because I wanted to see what I was getting into and partly because I wanted to make sure she was still there. I honestly wasn’t sure…

Pack up your troubles

June 25, 2025
The longest day of the year has officially come and gone, which means we are now on the slow, downhill slide toward winter.  Given that the days are currently long and the temperatures are nearing their peak, my family has opted for the traditional summer beach vacation. This is nothing new since we’ve rented a…

Life in a shell: eastern box turtle

June 25, 2025
As a budding naturalist growing up in the concrete-heavy environs of Boston, I would regularly thumb through my family’s collection of nature books and daydream about the creatures within. One species I was particularly drawn to was the eastern box turtle. These charismatic terrestrial turtles have high-domed shells festooned with colorful yellow or orange markings…