Is Your Retirement Plan Protected From Market Risk?

Is Your Retirement Plan Protected From Market Risk?

September 19, 2016

Do you get stressed over our unpredictable economy? Watching the market every day can be frustrating or exciting or both. You do your part, working hard to save for retirement and choosing suitable investments. But just doing your part is not always enough; market risk is a real thing and we have limited control over it.

Most of us believe that if we sit tight and trust our plan, our investments will grow over time. This may be true, but the amount of growth also matters.

Market Risk and Retirement Income Planning

In a comprehensive research study , Wade Pfau, a prolific retirement researcher, demonstrated the impact of market risk on retirement income planning. He analyzed 151 hypothetical portfolios that each earned market returns, finding that the amount of money accumulated at retirement varied widely, depending on when the working person was saving. Different 30 year periods produced different results. Was the market strong during the period a person worked and saved, or was it weaker?  

Along with the importance of timing, Pfau found that the final years of retirement accumulation, when the value of the portfolio was at its peak, had the most impact on how much a person retired with. If your retirement date falls near the start of a bear market, your nest egg may be depleted quicker than if your timing was different. What can you do about this? How can you minimize the risk of something that isn’t completely in your control?

Common Responses to Market Risk

One way to limit the impact of market risk is to divide your strategy, putting some of your funds towards products with minimal market risk to meet your basic needs while the balance can be put toward more aggressive, growth-oriented investments. This would take care of your necessary expenses while still helping prepare for the future.

But how much do you need for each part of this strategy? And can conservative investments earn enough to meet your basic needs when interest rates are so low?  

Another common approach to market risk is to lower your exposure to equities in the years right before retirement.

But how can you know when you can afford to retire? And what happens if you lose your job unexpectedly?

Downside Protection

We believe a portfolio should have downside protection, limiting your exposure to setbacks, but we don’t believe that the most common approaches to this are always the best. What if there was a way to remain invested, earning a solid return, and still sleep well at night? What if it required learning about investment strategies you aren’t yet familiar with?  

If you’d like to learn more about how we help clients manage market risk, please reach out to us at or (913) 663-1144.  We can offer a second opinion on your portfolio and financial life.

About Michael Goostree

Michael Goostree is the founder of Goostree Financial Group, an independent, father-son financial planning firm serving individuals, families, and business owners in the greater Kansas City metropolitan area. With more than 45 years of experience in the financial services and insurance industries, he brings a wealth of knowledge to the table in regards to retirement planning, wealth management, and insurance. Believing plans are the key to success, he focuses on building comprehensive and personalized plans for every client he works with. To learn more about how Michael may be able to help, connect with him on LinkedIn, call his office at (913) 663-1144, or email him at .

About Toby Goostree

Toby Goostree joined Goostree Financial Group in 2006 after completing his graduate degree at the University of Arizona.  He is a CERTIFIED FINANCIAL PLANNER™ practitioner with over 10 years of experience and has worked, over the past two years, to become a Certified Financial Transitionist™, an expert in the stages of transition as well as the way to approach it.  His ideas have appeared in The Wall Street Journal.  To learn more about Toby, or how he can help you, connect with him on LinkedIn, send him an email at, or call him at 913-663-1144.