Steve Sexton, President of Sexton Advisory Group and host of his very own radio show, “Winning in Life,” is regularly featured on the San Diego Entertainer’s E&L TV show. Steve has been providing expert financial advice to E&L viewers for over three years. This week, he continues to share his five part series on San Diego Living on the CW called the 5 most costly mistakes retirees make and introduces mistake #2: Having too much portfolio risk.
When you are younger, you can take on more risks because you have time. However, when you’re old and retired, you shouldn’t be keeping too much money in the stock market because retirees tend to need more emergency money than non-retirees. Steve explains that there are three stages of money that go along with your life:
Stage 1 – Youth: Savings
Banks are one the first financial institutions that people are introduced to. Banks are an essential part of saving for retirement. People should be saving no more than 6-12 months of income (cash) in the bank. If you are saving any more than this, you are overdoing it!
Stage 2 – Adult: Investment & Growth
According to Steve, this is the stage of Wall Street. The purpose of this stage is to grow and accumulate money. The biggest mistake here is that people forget that this stage is not about preservation.
Stage 3 – Maturity: Preservation & Income
This is the stage where most people have reached financial security. The purpose of this stage is to transition from growth and accumulation to preservation and income. Many retirees don’t realize that they are putting too much risk on their portfolios at this stage in their life.
According to the Putnam study, retirees should only have a maximum of 25% stock. The important thing that Steve is emphasizing on in this segment is that once you are old and retired, your days of investment are over.