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The Retirement Risk Zone

Chad Leatherwood, CFP, a Wealth Advisor at Summit Wealth Partners

What Is the Retirement Risk Zone?

The Retirement Risk Zone

» by Chad Leatherwood, CFP®, Wealth Advisor

The retirement risk zone is the period that begins 5-10 years before your retirement and ends 5-10 years after you retire. During these years, a series of negative returns can have a devastating impact on your wealth’s ability to carry you through retirement. Short-term financial losses can offset even proper long-term financial planning. Read on to learn more about why the retirement risk zone is critical, and also to get some tips for a financially healthy retirement.

Why Is the Retirement Risk Zone Important?

Any investor knows that market downturns happen. Given enough time, the market builds itself back up and starts to thrive. Responsible financial advisors advise their clients to focus on long-term financial goals because short-term losses are temporary.

However, once clients enter the retirement risk zone, they are less likely to recoup losses following market downturns. Reviewing your portfolio as you approach retirement age allows you to determine how exposed you are to market risk.

1. When You’ll Retire

Now is an excellent time to stress test your retirement income plan to make sure it can support you throughout your expected retirement. Some questions to ask include:

  • If I’m under 65, how will I pay for health insurance?
  • Can I cut back on spending if my investments earn a lower return?
  • Am I willing to downsize?
  • Will my expenses increase after I retire?
  • Should I consider a phased retirement?

Answering these questions allows you to narrow down your ideal retirement age.

2. When You’ll Start Drawing Social Security Benefits

A recent study revealed that 50% of retirees rely on Social Security for more than 50% of their income. Some of the factors to consider before filing for Social Security include. Factoring your cash needs in retirement and coordinating resources with your spouse helps you maximize your benefits.

3. Where You’ll Retire

Your retirement location plays a significant role in deciding when you can retire. Some states, like Florida, have no state income tax, no state inheritance tax, and no state estate tax. Tax-friendly states are a popular destination for people entering retirement.

Withdrawal Strategies for the Retirement Risk Zone

While saving money is a significant part of long-term financial planning, making intelligent decisions about withdrawing your money once you retire also requires attention. Some of the more common techniques include:

The 4% Rule

Developed by economist William Bengen, the 4% rule is a safe starting withdrawal rate for a retirement that is expected to last 30 years. This method dictates that 4% is the starting withdrawal rate, increasing each year for inflation.

Fixed Dollar Withdrawal

A fixed dollar withdrawal plan provides the retiree with fixed payments at specific intervals, typically monthly or quarterly. This strategy provides consistent income during retirement, but it doesn’t account for a fund’s performance.

Safety-First Withdrawal

Safety-first advocates view prioritization of retirement goals as a component of developing a retirement income strategy. Expenses are divided between needs, wants, and legacy goals and then prioritized based on value. Prioritizing your goals allows you to establish an income floor, mitigating the risk of longevity. With basic needs covered, your discretionary expenses are applied towards wants and legacy goals.

How To Practice Proper Financial Planning for Retirement

One way to limit exposure during the retirement risk zone is to practice appropriate long-term financial planning before retirement. Some of these approaches include:

1. Starting To Save Early

It’s never too early to start saving for retirement. The sooner you begin, the more time your money has to grow. Devise a plan, set goals, and practice discipline early to maximize returns.

2. Knowing Your Needs

Experts estimate that you need 70-90% of your pre-retirement income to maintain your quality of life. Compile a list of necessary expenses, and adjust for inflation, to calculate the dollar amount you need to retire comfortably.

3. Contributing to a Retirement Savings Plan

Figure out if your employer offers a retirement savings plan. Annual contributions to a 401k plan make a big difference in the amount you save.

Let Summit Wealth Guide You Through The Retirement Risk Zone

Summit Wealth understands that the retirement risk zone is an anxious time for retirees. That is why we strive to provide the confidence, comfort, and clarity that puts your mind at ease. Our long term financial planning process involves the following steps:


We schedule a complimentary one-hour consultation session where our advisors gather information, assess your current financial situation, discuss long-term goals, and listen to your concerns.


Using the information during our consultation, we begin building your customized financial strategy. We walk you through each step and provide clear action items that align with what’s most important to you.


Once we have formulated your strategy, we put that plan into action. Steps in the implementation process include:

  • Cash flow analysis
  • Liability management
  • Estate planning

Account Monitoring

We provide complete transparency with regular check-ins that update you on your portfolio’s performance. Our conversations include updating you on market fluctuations, life changes, and investment strategy.

Summit Wealth is an employee-owned company that has helped clients reach their retirement goals since 1982. Give us a call today if you’re ready to begin financial planning for retirement.

Entering the retirement risk zone and concerned about your personal finances? Contact Summit Wealth today and learn about how we guide our clients through these important years.