Forbes author Christopher Carosa wrote an article “This Is How You Can Stress Test Your Retirement Savings Before It’s Too Late” guiding pre-retirees on various methods for evaluating how financially fit they may be for retirement. IncomeConductor CEO Sheryl O’Connor was featured as part of the conversation on this very important topic.
Sheryl stressed the importance of employing a well defined strategy to endure turbulent markets.
“Today’s retirees may experience three or more major market declines during retirement,” says Sheryl O’Connor, Founder and CEO of IncomeConductor in Hartford. “Since retirees today depend on their savings as the primary source of income, they simply do not have the luxury of ‘riding out’ these times of crisis as those accumulating assets can. Therefore, retirees need to utilize strategies that protect their savings and income during times of economic crisis or high market volatility.”
She goes on to emphasize the need for a written retirement income plan to measure your stress tests against.
“Many financial professionals take a probability-based approach to income distribution where it is difficult to demonstrate the impact of economic crises, hyper-inflationary periods, and/or unforeseen medical events,” says O’Connor. “It’s critical to use a strategy and technology that creates a written plan that is customized to an individual’s retirement goals. Once you have a ‘base plan’, these negative events can then be modeled to determine their impact on the plan. For example, if the crisis analysis results in the individual’s savings running out before they die, or a reduction of income that is unacceptable, they can then consider their options to address these impacts.”
Finally, Sheryl offers potential ways to shore up an income plan that could not endure your stress testing.
Based on your analysis of the stress test and the relevant risk assessment, “there are several options to address these negative impacts,” says O’Connor, “including transferring some of the risk using guaranteed insurance products alongside investment products, working longer if you have not yet retired, taking more market risk with the investments that will not be needed until later in retirement, adjusting your income goals, or not planning on leaving a legacy.”