When you are in your career and receiving guaranteed, monthly paychecks, it’s an easier decision to gamble in the stock market. The reason I call it “gambling” is because that’s exactly what it is!
Imagine going to a casino with only $20 in hand. You place $5 into a slot machine. You have now given up complete control of that $5. What happens to that $5 from that moment forward relies on the fate of that one, single slot machine and you have absolutely zero control over what it decides to do.
So, what ends up happening? You end up losing that $5 in the blink of an eye, leaving you with $15 left of gambling money.
You decide another slot machine may give you better luck. So, you move to another slot machine and put another $5 into it. This time, you end up winning $15 from that! Great! You’re ahead now and you’re feeling confident, so you decide to go all in.
You put your whole $25 dollars in that slot machine, hoping it will do what it did last time. But that’s not always how it works. So what ends up happening? You end up losing every single dime and you walk out of that casino empty-handed, as most people do. That’s why it’s called “luck” when someone wins.
Why am I painting a scenario like this for you? Because losing $25 in a slot machine isn’t a huge deal, but losing your entire life savings to the stock market is. And gambling with a slot machine is not much different than gambling with the stock market in retirement.
When you are receiving a steady income from your job, you have the time and money to make up for any potential stock market losses.
In retirement, you no longer have that option.
I am by no means suggesting that you should completely stay away from the stock market in retirement, because that’s not how I feel. However, when it comes to generating income that you depend on to cover basic living expenses, the market will not provide that for you. It will not guarantee you a consistent and reliable income month in and month out.
In retirement, your first order of business should be creating a reliable income stream that will cover your basic living expenses for the rest of your life, no matter what. Once that is in place, you can more safely participate in the stock market without it being as big of a risk. In retirement, exposing your hard-earned savings to something as fickle as the stock market needs to be carefully planned out to avoid depleting everything you have.
Because of the constant volatility of the market, the old rules of retirement no longer apply in today’s economy.
Once upon a time, the safest way of determining how much to withdraw from stock market accounts during retirement was based off of something called the “4% rule.”
This rule stated that you could safely withdraw 4% from your accounts every year without running the risk of depleting it. Considering the unpredictable state of the economy, how “safe” do you think this rule is today? If your guess is, “probably not so safe,” you guessed correctly.
What happens if you follow this rule and end up depleting your accounts 20 years into retirement? Where do you go from there? Put simply, the 4% rule is no longer considered “best practice” when it comes to generating retirement income.
Sure, it can generate income, but will it last?
Don’t risk finding out. You’ll learn that it wasn’t worth it when you’re forced to reduce your spending at age 85. With time comes new advancements, and this is especially true in the world of retirement.
There are now solutions that could give you everything you want in retirement: reliable income, growth potential, stock market participation, coverage for unexpected healthcare needs, guaranteed financial protection for your heirs, and more. Ask about it today.