PLANADVISER - March/April 2022 - 16

trends
Retirees and the 'Risk Zone'
Most Boomers have yet to hear of SOR risk and its threat to their golden years
SEQUENCE of returns risk-the combination of unanticipated
volatile market conditions and planned withdrawals-is the
danger of locking in losses when an unfortunately timed
withdrawal is made from an investment portfolio that has
suffered a significant recent loss in value.
Most retirement savers are unaware of the threat they
face during the five to 10 years before and after they retire,
says Ron Surz, president of Target Date Solutions and author
of " Baby Boomer Investing in the Perilous Decade of the
2020s. " He calls this time frame the " risk zone. "
" During these uncertain times, any market decline
beyond a person's expected annual return creates sequence
of returns risk, " says Jeff Cimini, senior vice president,
retirement product management, Voya Financial. " Both
employees nearing retirement and retirees may be
negatively affected by recent events. "
However, Cimini says, proper retirement income planning
can help retirees navigate what will likely be at least a
few market corrections over the course of their retirement.
He cites the " 4% rule " as a frequently used guide for
retirement spending, noting the method is often considered
somewhat antiquated. The approach involves adding up
all
investments and withdrawing 4% of that total during
the first year of retirement, while adjusting the withdrawal
dollar amount in the following years to account for inflation.
While by no means foolproof, this method can help blunt the
impact of shorter-term market moves by preventing large
withdrawals when markets fall.
Katherine Roy, chief retirement strategist at J.P. Morgan,
says plan advisers should ensure investors who are about to
draw on their retirement assets are aware of SOR risk. She
says those who retire during a period of negative or volatile
returns will only weather it if they can stay invested and keep
a long-term view; the danger is when assets must be drawn.
Buckets and U-Shaped Glide Paths
Roy is an advocate for the bucket strategy, which many
advisers use to make sure clients have a cash reserve of
about one to three years. This is the first bucket, which is
complemented by a mid-term investment bucket and a longterm
bucket. Roy says the strategy can also involve de-risking
prior to retirement, at around age 50, assuming a person has
16 | planadviser.com March-April 2022
Art by Ellen Weinstein
http://www.planadviser.com

PLANADVISER - March/April 2022

Table of Contents for the Digital Edition of PLANADVISER - March/April 2022

A Digital Divide
Staying Power
The Prospects of Staying Virtual
Another Retention Tool
Is It Time to Let Go?
The Evolving Use of RFPs
Best Interest Reasons For a Rollover
Guaranteed Lifetime Income
PLANADVISER - March/April 2022 - C1
PLANADVISER - March/April 2022 - FC1
PLANADVISER - March/April 2022 - FC2
PLANADVISER - March/April 2022 - C2
PLANADVISER - March/April 2022 - 1
PLANADVISER - March/April 2022 - 2
PLANADVISER - March/April 2022 - 3
PLANADVISER - March/April 2022 - 4
PLANADVISER - March/April 2022 - 5
PLANADVISER - March/April 2022 - 6
PLANADVISER - March/April 2022 - 7
PLANADVISER - March/April 2022 - 8
PLANADVISER - March/April 2022 - 9
PLANADVISER - March/April 2022 - 10
PLANADVISER - March/April 2022 - 11
PLANADVISER - March/April 2022 - 12
PLANADVISER - March/April 2022 - 13
PLANADVISER - March/April 2022 - 14
PLANADVISER - March/April 2022 - 15
PLANADVISER - March/April 2022 - 16
PLANADVISER - March/April 2022 - 17
PLANADVISER - March/April 2022 - A Digital Divide
PLANADVISER - March/April 2022 - 19
PLANADVISER - March/April 2022 - 20
PLANADVISER - March/April 2022 - 21
PLANADVISER - March/April 2022 - 22
PLANADVISER - March/April 2022 - 23
PLANADVISER - March/April 2022 - Staying Power
PLANADVISER - March/April 2022 - 25
PLANADVISER - March/April 2022 - 26
PLANADVISER - March/April 2022 - 27
PLANADVISER - March/April 2022 - 28
PLANADVISER - March/April 2022 - 29
PLANADVISER - March/April 2022 - The Prospects of Staying Virtual
PLANADVISER - March/April 2022 - 31
PLANADVISER - March/April 2022 - Another Retention Tool
PLANADVISER - March/April 2022 - 33
PLANADVISER - March/April 2022 - Is It Time to Let Go?
PLANADVISER - March/April 2022 - 35
PLANADVISER - March/April 2022 - The Evolving Use of RFPs
PLANADVISER - March/April 2022 - 37
PLANADVISER - March/April 2022 - 38
PLANADVISER - March/April 2022 - Best Interest Reasons For a Rollover
PLANADVISER - March/April 2022 - Guaranteed Lifetime Income
PLANADVISER - March/April 2022 - C3
PLANADVISER - March/April 2022 - C4
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