Robert Powell’s Retirement Portfolio: Are you in the retirement ‘risk zone’? These investments might be able to protect you.

by | Jul 15, 2022 | Stock Market

Are you in the retirement risk zone — the five years before and after retirement? If so, you’re more exposed to the negative effects of loss to a much greater degree than other investors, according to a report published by Milliman Financial Risk Management.

That’s because those in the risk zone are likely withdrawing money from their nest eggs during market corrections or, worse yet, bear markets. And this combination of portfolio withdrawals with market corrections can shorten a portfolio’s life by seven years or more, according to Milliman. Read: These problems in plain sight are creating a huge problem for older Americans According to Milliman and others, buffered or defined-outcome ETFs, a strategy that historically was only available through insurers and investment banks, can be used to manage and mitigate what’s called sequence-of-returns risk, as well as some other pesky retirement risks (inflation, longevity and volatility). So, what the heck is a buffered or defined-outcome ETF? “Buffer ETFs are funds that seek to provide investors with the upside of an asset’s returns (generally up to a capped percentage) while also providing downside protection on the first predetermined percentage of losses (for example, on the first 10% or 15%),” wrote Emily Doak, director of ETF Research at Charles Schwab Investment Advisory, in a recent report. “Most of the buffer ETFs currently on the market have a one-year outcome period,” according to Doak. “Meaning that the caps and buffers (as stated) apply only to investors who purchase on the rebalance date and hold the ETF throughout the entire outcome period.” …

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