1995 was a great year to retire. But retiring in 1994 could have really set back your retirement savings
You can protect your retirement savings no matter when you retire.
Markets go up and down, so returns are sometimes positive and sometimes negative. While you're building your wealth this doesn't matter too much, as the good times can make up for the bad times over the long term. But in retirement, the timing of market returns is crucial to how long your income lasts. This is called sequencing risk.
If there's a market downturn just before or just after you retire and your investments lose value, there's less time for them to recover. So it's important to manage sequencing risk.
What can you do about sequencing risk?
Think about capital protection: exposure to growth assets combined with capital protection of your portfolio is more likely to generate the long-term returns you need, without worrying about negative returns.
Think about income protection: you can protect your income payments to ensure that your income is paid over a 10- or 20-year period, or for the rest of your life, regardless of when you retire, how long you live and how markets perform.
