Date: Mar 06TH, 2024

Why Risk Management Matters in Transition and Retirement

While it’s important to minimize risk in our finances at all times of life, it’s particularly important to do so during times of life transitions such as the birth of a child or retirement. A young, childless person likely has years or even decades to recover from an adverse financial event. A family about to send a child to college or an individual or couple about to retire does not. 

The Financial Impact of Significant Losses

The 2008 financial meltdown that was presaged by the collapse of investment bank Lehman Brothers was the biggest crisis the nation had experienced since the events of 1929 that led to the Great Depression. Hundreds of billions of dollars of government bailouts may have forestalled a repeat of the 1930s, but the events still led to significant pain for ordinary Americans. After the crisis, hardship came in the form of soaring mortgage foreclosures and job losses. By 2010, the unemployment rate had risen to about 10 percent, and many ordinary Americans watched the value of their retirement funds (or college funds for their children) drain away. 

While no one can predict the future, it’s foolish to imagine that events like those of 2008 could never happen again. If you’re on the cusp of a major life event, how do you protect your assets from such a possibility? While it’s true that the federal government has put some safeguards in place to eliminate some of the practices that led to the 2008 recession, other challenges can arise quickly, as we saw with the market instability resulting from the COVID-19 pandemic. 

Strategies to Safeguard Your Investments

Ordinary investors can take steps today to protect their wealth from global economic turmoil by ensuring that their portfolios are diversified. One of the methods recommended by experts includes investors seeking alternative assets that are not correlated to either the U.S. dollar or the stock market. This way, savers are better prepared to protect their savings and hedge against risk.

Risk Management by Asset Protection

Some of the best ways to protect your financial wealth are outlined in the following section.

Diversification. Diversification is the practice of spreading your investments around to different types of products so that your money is not concentrated in one area, which could wipe out a significant amount of your wealth if the asset were to tank. By doing so, you can reduce the volatility of your portfolio and protect yourself over time. 

Asset allocation. This refers to the practice of shifting more of your total investments to lower-risk securities such as fixed-income and money market securities rather than the stock market. 

Protective investments. A professional financial services firm can help you evaluate and choose the right mix of stocks and bonds that will minimize your risk while maximizing your return potential. These vehicles might include structured notes, annuities, and buffered ETFs. 

These tactics can help savers and investors mitigate losses and ensure a more secure financial future.  Prime Wealth Advisors can help you focus on asset protection and navigate financial transitions and retirement with confidence.

Learn how Arizona-based Prime Wealth Advisors’ full-service retirement planning, tax, estate, and wealth management can help you ensure you maximize your financial position. Call 623.77.PRIME or visit our website for more information.