Financial Strategies Group

FINANCIAL STRATEGIES GROUP 14 5. Safe Money Matters As an investment tool, cash is often considered a growth inhibitor. However, as a financial planning tool, cash can have profound benefits. Throughout the course of our lives, we encounter many unanticipated expenses. During our working lives, these expenses surely have negative implications, but during retirement years, when living on a fixed income, these expenses can be truly devastating. Retirees should look to maintain cash reserves sufficient to cover major home and auto repairs as well as medical deductibles. In addition to cash for emergencies, I often advise retirees to maintain cash or cash equivalents in their portfolio. Over the course of a retirement cycle, it is quite likely a portfolio will experience several bear (down) markets. Withdrawing from an account while it is experiencing significant losses can fatigue a portfolio. If a portfolio is being drawn down at too great of a rate, it leaves the portfolio with less in assets to help it recover when the market turns from negative to positive. Ultimately, drawing down a portfolio when the market is down could compromise a retirement plan and raise the chances of a retiree running out of money. Maintaining 2-4 years' worth of planned withdrawals in a conservative non-market correlated asset, such as cash or short term bonds, can allow for a safety value. When a portfolio is experiencing heavy losses, an investor could utilize their "safe money" for income. This, in turn, will allow the more market correlated assets in their portfolio some time to weather and hopefully recover from market turbulence. Embracing sound investing principles can significantly enhance retirement outcomes. By diversifying investments across various asset classes, individuals can mitigate risk and potentially achieve higher returns over the long term. Regularly rebalancing the portfolio ensures it aligns with the individual's risk tolerance and financial

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