Are You Taking More Risk with Your Wealth Than Necessary?

How to reduce your nest-egg's ties to the fortunes of Wall Street
Written by: Drew Kellerman

How often in life do you deliberately take unnecessary risks? My guess is, “not often”. If you are like me, your judgement and sense of self-preservation prevents you from doing the sort of things that might have appealed to you as a teenager.

Your aversion to pointless risk-taking is likely the result of the wisdom you’ve gained from decades of life experience. You have “been there and done that” and survived to tell the stories. Now a mature adult, your desire to stay in one piece outweighs your need for thrilling adrenaline rushes.

But what about your portfolio? Your nest-egg? Is your life’s savings exposed to unnecessary market risks?

Not long ago, retirees could put their savings in CDs, money market accounts and US treasury bonds and safely earn 6, 7 even 8% interest. They could live off this interest and never touch their principal. There was no need to expose retirement savings to the risk of losses.

Now, with interest rates near historic lows, many retirees must spend down principal for income. To keep from running out of money, they are investing in “risk assets”, hoping that they can achieve the needed growth to replenish their accounts. And so, they tie their nest-eggs to the fortunes of Wall Street.

They know they are taking a gamble with much of their life’s savings, but they feel compelled to shoot for the market’s long-term average returns. The fear of running out of money late in life overrides the desire for safety. Plus, the stock market has been growing nonstop for nearly a decade!

This reminds me of a true story about my family that I’d like to share with you.


Misplaced Fear

I’ll never forget the day my Mom told me she wanted to invest her retirement savings in growth stocks. I was shocked. She was already living off her portfolio; NOT a time to take more investment risk! I begged her to reconsider, even though I wasn’t her financial advisor at the time. (I was just leaving military service.)  

My pleas fell on deaf ears. Gripped with the fear of outliving her money, my Mom instructed her broker to buy shares of internet companies, having heard that they were the best growth stocks.

This was in 1999.

By then, tech stocks had experienced nearly a decade of extraordinary gains. Investor optimism had turned to euphoria. People were throwing money at any company with “.com” in the name. That year, the NASDAQ Composite Stock Index shot up in price by nearly 85%! [i]

You know what happened next. The stock-buying mania ended badly. Over the next two years, the NASDAQ lost 78% of its value as the “tech bubble” collapsed. [ii] Naturally, my Mom sold when she couldn’t take it anymore, swearing off stocks forever. In the process, she lost roughly half of her nest egg.

Those losses completely changed her plans, forcing her to radically downgrade her lifestyle. Even with our help, she’s lived ever since on a shoestring budget, working part-time jobs to make ends meet. Last year she sold her home to use the equity for income. She now rents a small, one-bedroom apartment.

The most frustrating part of this story? My Mom’s fear was misplaced. She had enough savings to enjoy abundant income for life with a conservative investment plan. All that risk exposure was unnecessary, and she paid a dear price for it. (A similar scenario unfolded for many retirees a few year later in 2008-2009.)


Road Map to Reducing Risk Exposure

How much portfolio growth do you really need? More specifically, have you calculated the rate of return your portfolio must average over time to achieve your income and legacy goals? What if you could achieve this outcome while taking less investment risk? Would that be appealing to you?

Recently, we incorporated a simplified planning approach designed to show you how you can achieve your financial goals in retirement while minimizing market risks to your nest-egg.

This analysis is empowering and enlightening because you can now see precisely how much growth you need to achieve your goals. Plus, the compound annual growth rate your portfolio needs may be lower than you expect, providing you with the opportunity to reduce your market risk exposure.

We don’t want you to go through my Mom’s experience. As such, we are providing this analysis free of charge, and with no obligation. Contact us to schedule an appointment. We look forward to serving you.


Drew Kellerman is available at 253.509.0390 or

Drew Kellerman is an investment adviser representative of, and advisory services are offered through, Phase 2 Wealth Advisors LLC., a Washington state registered investment adviser. Phase 2 Wealth Advisors LLC is located at 4423 Point Fosdick Drive NW, Suite 100-4, Gig Harbor, WA 98335. Phase 2 Financial LLC is an affiliate of Phase 2 Wealth Advisors LLC.