Tom Provides Advice for Those Who Start Saving Later
Transcript:
Katie Nealis: So we have another question that came in from Otto and it says, If I start a retirement account later in life, should I be more or less aggressive?
Tom Vaughan: Oh, yeah, that’s a good question. Because here’s, here’s how I’d answer that. First of all, luckily, we already did the first piece. So if you look at what I did with the MonteCarlo simulation, and you look at how we first you know, put everything in the plan, we run the basic MonteCarlo simulation, that’ll give you a really good idea based on your current mixture, whether it’s going to work or not. And then you do the stress testing and your stress test against the, you know, the, you know, Great Recession, downturn, stress test against inflation, those will give you some idea as to how aggressive you need to be, because that’s what you kind of start with. And you might find that you need to be more aggressive if you’re have a shorter time period before retirement. But you have to be really careful because in the end, your own personality, and what you can effectively take on as risk is actually way more important than any program telling you what risk you need to take.
So if I run the program, and it says, Oh, you need to have 80% of your money in stocks, and then we go through riskalyze, and really look at what that means and how much money you could lose. And you’re like, no way, there’s no way I can handle that I wouldn’t sleep at night, then we need to kind of go back and take a look at the plan itself and see what we have as outflows And should we be making an adjustment? Should you retire a year or two later? How much difference does that make? We can do all kinds of what ifs to try to see what happens there because so that I think the question isn’t so much, you know, hey, I’m closer to you know, retirement age, and I need to make more money, because you can lose more money to, you know, especially in short periods.
It’s really what risks Do you need to take versus what risk you can afford mentally, in your own risk tolerance to take and finding that balance is really critical. So it kind of depends. There’s probably not a great blanket answer that and, as with most things in the financial planning arena, you know, it revolves around the plan, and that’s the tool and it’s a very powerful tool. I’ve had very good success with that over the year. So I that’s what I lean on. But that’s that’s a great question. It is something that comes up