Am I Financially Prepared for a Downturn at 81 with $240K in Mutual Funds?

Answer:

Experts recommend conducting a comprehensive evaluation of your financial situation. Additionally, a financial advisor might be beneficial—should you seek an advisor, you can utilize one.
This complimentary resource can connect you with a fiduciary advisor.
, provided by our partner SmartAsset, along with websites such as CFP Board and NAPFA – although self-guidance might also be an option for you.

Encountering problems with your current financial advisor or searching for a new one? Send your queries or issues via email.
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Initially, understand that not every mutual fund is alike. Some act as simple savings tools with very low risk levels akin to money markets. Other types aim to mirror indexes—whether they focus on fixed-income securities like bonds or emphasize equity-oriented assets such as stocks. Still others involve active management strategies designed to surpass benchmark returns and can thus carry higher risks.
According to Amy Hamasaki, who holds certification from the CFP Board and works for Mountain Wealth Planning, following the guideline of subtracting your age from 100 suggests an ideal 19% investment in equities when you reach 81 years old. However, she recommends considering a slightly adjusted strategy: allocating between 20-30% towards stocks, 40-60% into bond holdings, and reserving about 10-20% in liquid reserves.

You must think about how mutual funds fit into your overall plan: “To suggest an investment without understanding its intended purpose would not serve you well,” explains Josh Gallogly, a certified financial planner at Milestones Financial. This is akin to a physician recommending treatment before properly diagnosing the issue.”

The intended use of the money should guide decisions about investment and acceptable levels of risk. For necessities, allocate funds into secure options such as high-interest savings accounts, money market funds, or brief certificates of deposit. Similarly, ensure that emergency reserves remain readily available through placements in high-interest savings, money market instruments, or ultra-short Treasury bills.

Think about your tax scenario as well: It isn’t evident whether you own the mutual funds through a retirement account or a taxable one. “Should the mutual funds mentioned be part of a retirement account, then you won’t face any tax implications due to changes in your portfolio. However, if these mutual funds reside in a taxable account, shifting your investments will result in some taxes owed. Usually, you have the flexibility to move between various funds from the same company; however, assessing potential tax impacts before finalizing any moves should always be considered,” explains Marguerita Cheng, a certified financial planner with Blue Ocean Global Wealth.

In addition to talking through your fears and advising you through downturns, working with a financial adviser can help you understand the risks associated with different investments and investment vehicles. “Mutual funds are not inherently risky, they’re just a bucket that holds investments. They can hold different investments from growth stocks to treasuries, more risky to less risky. There are lots of options out there and a good adviser will help you navigate the myriad of options and match recommendations to your comfort level and goals,” says certified financial planner Anthony Ferreria at WorthPointe Wealth Management.

Additionally, to prepare yourself for potential market fluctuations, Hamaski suggests gaining clarity about both your revenue streams and expenditure items, encompassing tax obligations. “By doing this, you’ll be able to forecast your financial outlay and sustain your lifestyle based on these income sources throughout your lifetime,” he explains. It’s best to collaborate with a Certified Financial Planner (CFP) who prioritizes your welfare over their own profits. Alternatively, dedicate effort towards comprehending the specific risk levels associated with each of your mutual funds along with calculating the yearly reduction rate from your investment portfolio. A commonly advised benchmark is maintaining a 4% drawdown ratio per annum, according to Hamaski.

What type of financial advisor could be suitable for you?

When opting for the financial advisor path, ensure you choose one who operates on a fee-only basis and holds certification as a Certified Financial Planner (CFP). These professionals must fulfill rigorous educational demands, successfully undergo examinations, accumulate several thousand hours of relevant professional experience, and uphold a fiduciary duty—ensuring they prioritize your needs over their own interests. To find such an advisor, consider using
This complimentary resource can connect you with a fiduciary advisor who suits your needs.
, courtesy of our partner SmartAsset, along with websites such as CFP Board and NAPFA

“Collaborating with a financial advisor who has the time to understand you and tailor your financial plan to ascertain both the necessary and affordable levels of portfolio risk might be the most effective way to alleviate these worries,” explains Gallogly.

You could choose to manage your own money or opt for a robo-advisor at a much lower cost than hiring an actual financial advisor. Given that you’re debt-free and prefer cautious strategies, you may well handle this independently without professional assistance. Alternatively, consider scheduling a single consultation with a fee-based, advisory-only planner. This meeting can provide assurance by having another pair of knowledgeable eyes assess your financial strategy.

Have an issue with your financial adviser or looking for a new one? Email questions or concerns to
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