Broker Check

Practical Planning Tip: Women and Wealth - Sequence of Returns Risk

March 22, 2024

Today we’re going to continue our discussion on women & wealth. Since it is Women’s history month, The videos through the end of March will be on this topic. Today, I want to discuss Women & Retirement, specifically today I want to focus on Sequence of returns risk.

The challenges women face when planning for retirement contribute to the fact that women 65 and older are twice as likely to live in poverty than men of the same age.

Understanding these obstacles and planning accordingly, is the best way to overcome them.

Sequence of returns risk: The order of annual investment returns or annual withdrawals is a major concern for retirees who are living off income from their investments. This risk is MAGNIFIED for women who need their assets to last for their longer lifespans. If a female client experiences a 3-decade long retirement, but has a string of lower-than-expected returns or takes larger withdrawals EARLY in retirement, the timing may have significant financial ramifications in the decades to come.

Some of the strategies I use with all my clients, but particularly female ones to mitigate this risk are:

  • Encourage them to work longer: Obviously, the longer one works, the longer they can postpone withdrawing from their nest egg. If a bad string of returns presents itself near retirement, and you are still working, this mitigates this risk.
  • Work part-time: It may not be necessary for full-time employment to mitigate against a string of bad market returns. Simply a few hours of work a week may do the trick. And…
  • Establishing a bond tent: This is when investors maintain a 2-3 year cushion of expense money in very short-duration bonds or in cash. If the market tanks, investors can withdraw funds from here instead of liquidating their portfolio in a down market.

You can WATCH the full video here.