Some of you will read this and determine I’m trying to sell you something. To some extent you’re right as I would love to have you enroll in one of my online courses at Successful Retirement Secrets.

On another level, I’m interested in helping you come to terms with what you should do with your retirement savings, whether it’s already been taxed as income or not.

You may also know that I’m no longer in the business of selling you investments. I’m in the business of teaching you a new way to think about and plan your retirement. My game is to teach you questions to ask of yourself, and answer. Not my answers, but your answers.

From the title above, most of you will assume I’m talking about investment risk. And you’d be right. While there are other risks, we live in a society where having more money is almost always better than having less money. It tends to dominate the discussions about retirement goals.

And since a high percentage of us have less money than we’d like to have, finding ways to minimize market risk and at the same time provide more retirement income is always on our collective minds.

A concept often talked about is asset allocation. This means developing a strategy that puts your money across various investment categories effectively reduces market risk. At least that’s the idea. Unfortunately there are many ways to screw it up.

Rather than investment categories such as stocks, bonds, real estate, and sub-categories such as domestic large cap equities and/or small cap international growth equities, try thinking about it as income allocation. Here we’re talking about income from dividends, interest, annuity payments, and withdrawals. The goal is to reduce income volatility and the taxes you have to pay.

In my email inbox today, there was an email from a trusted source offering a guaranteed 5% yield. It happens to be what is known as a secondary market annuity. You buy an existing contract with roughly $200,000 and in 2040, you get a lump sum of $550,000.

Obviously if you’re 21 years away from retirement and want that to become part of your retirement income cash flow, there’s no market risk unless you want to liquidate the position before 2040. Then you’re subject to the market risk resulting from the prevailing interest rates at the time you liquidate.

But back to the idea of minimizing risk. One of the questions that I present in the online courses I’ve written is “How much investment risk can you handle before you get nervous?’’. If you tell me “Not very much.”, I’m going to push you toward what is known as an equity income annuity. Here you remain exposed to the markets but a third party is involved that guarantees you’ll not lose money. ( http://tinyurl.com/y6e569p8 )

If you’re comfortable with lots of risk, then I’ll steer you toward global equity ETFs. You might lose your shirt or you might hit a home run.

There are web sites out there that are free to explore all this. Just don’t expect those sites to leave you alone and not try to sell you on their solution, or answers. At this stage, the only answers I want you to have are your answers to the questions I share with you in my online courses.

Finally, risk in not something to be afraid of and avoided completely. The greater danger is not knowing how to manage it. If you don’t expose yourself to investment risk, the danger is running out of money before you run out of life.

Tony Kendzior \ June 28, 2019