Okay, your 401(k) has become a 201(k) and you’ve lost a ton of money in the market. You actually believe those researchers who claim the sting of a financial loss is much more intense than the smug satisfaction of a large gain. Yeah, gains bring relief, but losses bring on sleepless nights and worry. If you’re in your 40′s, 50′s or 60′s, you’re probably more motivated than ever to instruct your financial advisor to take a little more risk so your portfolio can benefit from a little more reward.
Risk vs. Reward
But too much risk is probably what got you in trouble in the first place, even if that risk wasn’t fully recognized by you, your advisor, or the markets. The most important path you can follow at this point isn’t necessarily to pump up your portfolio with extra risk, but to bring down the cost of your anticipated retirement lifestyle through smart, thrifty, and frugal living.
Your ability to retire in the future will be dependent on one thing: cash flow. If you can reduce your need for cash in retirement, your options really open up.
How to reduce the need for retirement cash
1. Pay off debt. Nothing sucks the wind from your portfolio’s sails quite like debt payments. If you want to retire in the next 20 years or so, learning to live on less by avoiding debt will be a key factor both then and now.