Are You in the Retirement Red Zone?

If you are within five years of your retirement date, you are in the retirement red zone.

This zone extends for five years before and five years after retirement and represents a very critical phase that determines the course of your golden years.

In sports, this red zone is where you have a chance to score, but if you’re too risky you could make mistakes and you also must take steps to protect the ball. It’s all together exciting and unsettling.

As we know, the days of pensions have pretty much disappeared, leaving your investments, savings and Social Security to sustain you through all the years of your retirement. Add to that predicting how many years you’ll be in retirement, whether or not you’ll need money for medical expenses, and how much you’ll need for travel and entertainment. This creates many reasons to have a long-term plan in place. It is important that your assets work for you during this red zone period. Avoid taking these retirement red zone risks.

Risk #1

It is common for people to retire and go straight from accumulation to distribution without making changes to their portfolio mix to provide safer income. It is a mistake to continue to invest with too much risk when you’re approaching or entering retirement. If the market corrects and you need money, then selling investments for income will deplete savings more quickly and ultimately allow for running out of money sooner. Many workers planning to retire around 2009 ended up having to work a few more years due to losses in the sudden market crash.

Risk #2

Many people overlook the fact that they will go from not spending every dollar that comes in each month during working years, to spending every dollar from savings and investment accounts and having reduced income sources. This makes expenses even more important, meaning you must create a specific budget that maps out your fixed costs, from food to utilities to entertainment. As people live longer, there is a longer time period to plan for, making budgeting even more important.

Risk #3

During employment years, healthcare is not typically an ongoing concern and at least part of health care expenses are covered by employers. In retirement, health care expenses can significantly increase. You may need to consider additional insurance, especially if you retire before the Medicare-eligible age of 65. Planning ahead for medical expenses is critical, since it could significantly impact retirement years.

Risk #4

The first few years of retirement are often the most expensive. Retirees spend on average, around 80 percent of their working annual salary. It is important to take your annual income needs, and subtract out pensions, Social Security, and other income sources. The amount that remains will be the amount that is needed from investments. The four percent rule indicates you should withdraw four percent of your investments each year in retirement. This rule generally helps to create a picture of how to achieve success for an estimated 30-year retirement period.

Navigating the retirement red zone can be challenging. Consulting a financial advisor for a personalized retirement strategy can help to minimize these risks and help make your retirement transitional period comfortable. It is a good feeling to go into your long-term retirement confident that you have already won the game.

If you have questions, schedule an appointment on our online calendar by selecting the date and time that is most convenient for you! You can also always reach us at

Bayntree Wealth Advisors provides comprehensive financial planning and wealth management. The Bayntree team specializes in all aspects of financial health, including retirement planning, risk management, investment advice, tax strategies, estate planning and insurance.

Bayntree does not provide specific legal or tax advice. Please consult with your tax advisor or legal professional for guidance with your individual situation.

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