Feb 3, 2022
Any sports fan that enjoys football knows how important the red zone is for their team’s success. If the team is able to execute and limit their mistakes, they’ll have a better chance at scoring a touchdown and maximizing their chances to win.
That same idea can be applied to your retirement as well. We call it the financial red zone and it’s the final 5-10 years before retirement and the first 5-10 years in retirement. This 20-year period is crucial for your financial health and long-term success, but it’s also a time where mistakes are magnified.
The truth is that time is no longer on your side when it comes to money. The investing strategies you used when you were in your 20s and 30s don’t apply anymore because there’s less time to make up for missteps. And that’s why we work diligently with our clients when they enter the financial red zone.
We want to ensure that we aren’t making the same mistakes that retirees before us made, and we can take lessons from 2000 and 2008 and apply them to our own finances moving forward. When it comes to the mistakes that happen in the red zone, one of the most common things we see is people trying to ramp up their investments in those final few years to try to squeeze out as much as they can before they stop working. But returns aren’t guaranteed and we saw that during the financial crises of the past two decades.
The next mistake we see is heading into retirement and that next chapter of life is doing so without a plan. You might have been able to slide by most of your career without putting one in place, but failing to have a plan now creates a lot more risk for yourself. Items like Social Security, healthcare, and RMDs that you haven’t needed to worry too much now need your attention. A financial advisor can help you prepare for everything you know you’ll need in retirement along with the things you can’t predict.
If you’re someone that’s been proactive with planning throughout your career, it will pay dividends in the red zone. Not only will it be a much less stressful process, but you’ll have a strong grasp on much of your finances. Let’s say you decide to retire early. It’s more manageable if you’ve already started the planning. Plus, predicting retirement income streams gets easier and easier as you closer to retirement and you’ve already gotten a jump on that as well.
There’s plenty more we’ll discuss with clients when they come in to meet with us in the red zone but these are some of the things to be thinking about. If you’re approaching retirement and want to get started on these items, get in touch and we’ll be happy to help.
TIMESTAMPS:
1:38 – Birthday party
2:39 – Being careful close to retirement
4:07 – The football comparison
5:44 – What is the Financial Red Zone?
6:17 – Mistakes we see
9:54 – Not having a plan
12:46 – Being proactive
15:54 – Eliminating debt
17:26 – Know your net worth
22:02 – Everyone’s situation is different
MORE INFORMATION: https://www.flemingfinancialservices.com/podcast