Today’s question is in regards to someone’s money mindset approaching retirement. Does it need to change? And in what manner does it need to change?

Are You Taking Too Much Risk?

I would say the main money mindset that needs to change approaching retirement, and in retirement, is the risk that people take with their investments. Now, when you’re younger and retirement is much farther away, you can take more risk with your investments. Primarily, because if the investments go down in value, you have time to overcome that. If you’re somebody that’s approaching retirement or already retired, the risk that you took when you were younger in most cases should not be the same risk that you’re taking right now. You don’t have as much time to overcome that and wait for the market to come back. The approach should shift. When you’re younger the approach is more on growth for the investments and volatility is not as big of a killer. When you’re retired and getting closer to retirement, the mindset needs to shift. It needs to be starting to prepare and get ready to provide income. You almost want to act like a pension plan.

Minimize Market Downturns

A pension plan is there to pay income to retirees, and it becomes more important to minimize the downside of things. Now in your life, you have to be more prepared and ready for downturns in the market and protected from downturns in the market. I don’t know many retirees that, if the market goes down, they can say to themselves, well, we’re not going to eat for the next six months, or we’re not going to use electricity, or we’re not going to heat the house for the next six months and we’ll just wait for the market to come back. No, you do not want that to happen.

Maintaining You Lifestyle in Retirement

Additionally, from a mindset standpoint, oftentimes people approach retirement and feel that they need to start cutting expenses and living their lifestyle in a different way. With most people, the goal is to be able to still live your lifestyle and do the things that you want to do. That’s why it’s so important, as you approach retirement, to have a retirement income plan so you can make sure that you can still live your lifestyle and not feel like you have to cut expenses and do things differently.