Five Years from Retirement? Do This.

The five years before retirement are what David McKnight calls the Retirement Danger Zone, a window where a stock market crash could trigger Sequence of Returns Risk and even derail a well-designed plan.

In this episode, he breaks down the retirement planning strategies that build an income floor, create a Volatility Shield, and protect your tax rate before it's too late.

Show Notes

• In this episode, David McKnight talks all things "Retirement Danger Zone", the 5-year time window that precedes your retirement. 

• When you're 20 years from retirement and the stock market crashes, it stings but you still have time to recover.

• If you're only a few years from retirement, on the other hand, a stock market crash may force you to take distributions from a portfolio that just lost 30 or even 40%.

• That move may send your portfolio into a death spiral from which it never recovers, also known as Sequence of Returns Risk.

• Even a well-designed retirement plan can be devastated by that risk.

• If you're five years from retirement, the first step is to establish an income floor: figure out how much income you'll need each year to cover your essential living expenses.

• Your essential living expenses may be completely covered but you're still going to have discretionary expenses – which fall into two categories.

• Those can be so-called shock expenses (e.g. a new roof, an unexpected medical expense, etc.) or aspirational expenses (e.g. vacations, hobbies, etc.).

• Normally, you would pay for those expenses by taking money from your stock portfolio… but what if the market is down when one of those expenses arises?

• "This is why, by the time you retire, you should have 3-5 years of discretionary expenses accumulated in a properly structured, properly funded Indexed Universal Life Insurance Policy", stresses David.

• David explains how a so-called Volatility Shield can help you when the stock market takes a tumble.

• The strategy shared by David can increase the sustainable withdrawal rate on your stock portfolio from 4% to as high as 8% with a 95% confidence rate.

• And there's one more critical step to consider during your final five years before retirement: protecting yourself against higher taxes.

Mentioned in this episode:

David's national bestselling book: The Guru Gap: How America's Financial Gurus Are Leading You Astray, and How to Get Back on Track

DavidMcKnight.com

DavidMcKnightBooks.com

PowerOfZero.com (free video series)