Adjusting Your Investment Strategy as You Age


There are three phases that every investor goes through as they make investment decisions during their life. While it would seem logical for investors to naturally progress through these phases, the truth is that many investors fail to adjust their investment strategy as they age. When investors have an investment strategy that is inappropriate for their age, they increase their risk of being financially overwhelmed, especially if they are invested in risk-based securities. Moreover, investors are not always cognizant of certain cost increases that are associated with getting older and often overlook the need for long-term care services. As a result, millions of Americans enter retirement and are immediately confronted with having to navigate the financial maze of uncertainty, while being blindly led by unscrupulous brokers who fail to provide fiduciary guidance in terms of reducing the risk of their clients. For this reason, it is essential for investors to understand the three phases of investing to properly adjust their investment strategy as they age. 

The Three Stages of Investing

The first stage is the accumulation phase. This is where the investor launches their career and starts to save money. An investor will stay in this phase for the majority of their working years before transitioning into the retirement phase. This transition typically takes place sometime in their mid- to late 50s. During this phase, investors will reduce their exposure to risk by transitioning from stocks, bonds, and mutual funds to vehicles that guarantee principal protection. The final stage investors experience is the transfer phase. At this point, the investor prepares to pass on their assets and their legacy to their heirs. The problem is that investors get stuck in the accumulation phase and instead of transitioning to safer waters, they are often advised to stay on the high seas of risk. 

Part of the reason why Americans over the age of 65 hold on to their high-risk stocks, bonds, and mutual funds is because they have a broker or financial advisor who fails to provide fiduciary guidance by recommending safer investments like those found in the Crash Proof Retirement System. While some investors have enough funds to weather the storm of market volatility, the majority of Americans unfortunately do not. Instead, American retirees lose years of precious growth time, which may cause a drastic change in their lifestyle that they may never recover from, given their limited timeframe in retirement. 

Lost growth during an investor’s retirement phase is far more detrimental than what a younger individual would experience during their working career. To represent this relationship between lost growth and recovery time, researchers at Retirement Media, Inc. studied the relationship between the number of years it takes for the stock market to recover after an annual loss. Our team tracked the S&P 500 index for 94 years, starting in 1928 and identified 29 instances when the stock market had a negative year. Of those 29 negative years, 14 were market crashes — a drop of more than 20% in one or consecutive years — with a median recovery time of 8.5 years for the market to grow back to its previous high. 

While recovery times vary for every market crash, there are an infinite number of variables that impact how long it takes investors to recover their nest eggs. In fact, there is no guarantee that an investor will recover when the stock market falls. This was evident in the early 2000s as investors were hit with two life-changing market crashes spanning from 2000 to 2002 and again in 2008 to 2009. These two crashes erased 14 years of precious growth time as the S&P did not reach its previous high until 2014.

Assuming an investor is able to recover 100% of what was lost during a market crash within the median time frame, those years spent recovering are wasted. More importantly, these are years that a retirement aged individual does not have, especially when living on a fixed income. When investors are young and take a financial hit on the stock market, they have time to continue making contributions to their investment accounts because they are earning an income. Retirement phase investors on the other hand are not as financially flexible because they aren’t actively earning an income and are more susceptible to complications with costly medical expenses and the damaging effects of inflation. 

Inflation and Poverty

Outside factors such as inflation and medical costs magnify the damage that can occur when a retirement aged investor leaves their nest egg at risk on the stock market. In fact, inflation is so high today that economists are calling it a “silent retirement killer.” One of the reasons why poverty rates among older Americans is over 9% is due to the rising costs of long-term care services, such as being placed in a nursing home or assisted living facility. For women, the poverty percentage is even higher and gradually increases as they age. Up to 65% for women over the age of 65 live at or near the poverty line, according to the Director of The Center for Retirement Research at Boston College, Alicia Munnell.

Contributing to these poverty rates is the immense cost of long-term care services. The Department of Health and Human Services statistics state that 70% of Americans over the age of 65 will need some kind of long-term care assistance, lasting for an average of 3 years. Investors have to account for these troubling statistics as they transition from their working years to retirement and reflect these trends in their investment strategy because investors who are unprepared face the risk of bankrupting their nest egg. Regardless of the stock market’s performance during their retired years, simply not being prepared for long-term care expenses has the power of depleting their nest eggs and pushing Americans into poverty. 

The Costs of Long-Term Care

While most Americans have experienced what it is like to have a loved one enter a nursing facility, far too many have a misconception that Medicare and Medicaid will cover the costs of their care should they fall ill or incapacitated. The truth of the matter is that Medicare covers skilled services from a physician that consists of restoring the health of the patient and does not cover long-term care services. Medicaid, on the other hand, does pay for long-term care services, but recipients must qualify by first depleting their assets by paying out of pocket for care — effectively putting themselves into poverty and having no other feasible way of affording care. 

Long-term care services are considered non-skilled care from a nurse or caregiver that assists with the activities of daily living for their patient. This includes such activities as bathing, eating, dressing, toileting, and transferring in and out of bed. Although the majority of care is provided in the patient’s home, there are nursing homes and assisted living facilities that can cost upwards of $100,000 a year in some states. The national cost of a private room in a nursing home, costs over $108,000 a year. Considering the average length of care is 3 years, a patient should be prepared to spend more than $324,000 on their care during that time in a nursing home. Since the average household retirement account value ranges between $350,000 and $430,000, according to the Board of Governors of the Federal Reserve System, the average cost of a nursing home alone would bankrupt an investors nest egg. Couple those retirement needs with a stock market crash, and it quickly becomes a devastating financial scenario for Americans in their retired years. 

You can read more about the importance of budgeting during your retired years by reading, “How Budgeting Needs Change During Your Retirement.” 

Protecting Retirees Nest Eggs

Americans over the age of 65 face a variety of challenges and dangers that could impact their nest egg and turn their dream retirement into a nightmare. After spending decades accumulating a wealth of savings, investors cannot afford to miss the transition from the accumulation phase of investing to their retirement phase. Although a market crash can take several years to recover from, investors who took the time to protect their nest egg with a proprietary Crash Proof Retirement System remained safe, with peace of mind, knowing that their retirement was secure when the stock market crashed in 2020 and again in 2022. 

Many investors who have an exclusive Crash Proof Retirement System also have peace of mind about long-term care expenses. After taking the time to meet with the team of licensed educators at Crash Proof Retirement, many Crash Proof Consumers have obtained long-term care protections, which gives them the security of knowing that should they need care, they can receive it from anywhere in the world without bankrupting their nest egg. 

To learn more about how you can protect your nest egg from the dangers of stock market volatility, call 800-722-9728 or fill out the form on our contact page to schedule an appointment today. You can also head to the official Crash Proof Retirement YouTube page to watch to over 300 testimonials from our over 5,000 Crash Proof Consumers who were once concerned about their retirement savings, but now have peace of mind.