The last few months have been interesting times for investors. For those who don't need to be accessing their retirement savings any time soon, these ups and downs don't mean much in the short term. However, it's a different story for those looking to retire soon or who have recently retired.

There is a period before and after retirement called the retirement risk zone… it's a dangerous place!

It is typically considered to be the five years either side of retirement. This decade is when most people's retirement savings reach their peak and start being accessed.

Often, people work hard to squirrel away as much as possible in the last few years of their working life. Then, once they retire, they gradually draw down on their retirement savings to fund their lifestyle.

It's in the retirement risk zone where, if not planned for, unexpected events could derail your retirement. If there is a sharemarket crash, an emergency or an unexpected life event, the results could cause damage so severe it cannot be recovered from financially.

That's because a bad year hits harder when you have more money than when you have less.

As retirement savings decline over time – being used to fund retirement – a bad year well into retirement will have a much smaller impact. At that point, the balance is lower and there are fewer years left to fund, meaning the money may be quite conservatively invested by that stage. If you're a long way out from retirement, you may be more aggressively invested to pursue higher returns, which is fine as there are plenty of years for recovery before the money needs to be accessed.

In recent months, we've seen all sorts of uncertainty created by the conflict between the US and Iran. If you're in the retirement risk zone or approaching it, don't waste another minute… let's get on top of things now, before the next large fall leaves you exposed!

Unfortunately, if things go badly during the retirement risk zone, the potential fixes are often things people would rather avoid. It may mean having to delay retirement and work longer, live on less in retirement and therefore have a lesser lifestyle, or invest in more risky assets to try to make up the shortfall. None of these are great solutions.

There are different ways to approach the retirement risk zone. Adjustments can be made to how retirement savings are invested in the lead-up to retirement, money can be saved and invested into more conservative assets to build up a stockpile, or it could be a combination of these.

Whichever way you look at it, approaching retirement and then retiring is not something you want to do without a plan to navigate the retirement risk zone. You'll have worked too hard to want to leave your entire retirement exposed.

These are not things that need to be feared – they just need to be managed – and you may only get one shot at it. Don't leave your retirement to chance, steer clear of danger and retire on purpose!

Smart financial decisions often come from having a sensible, well-thought-out financial plan. Yell out if you'd like help with yours from an independent financial adviser.

Cheers,

Daniel.

If you'd like to find out more about how independent financial advice could help you manage cash flow, pay off the mortgage faster, get the most out of super and invest wisely, get in touch on 0411 484 464 or head to wealthtrain.com.au.

This advice may not be suitable to you because it contains general advice which does not take into consideration any of your personal circumstances. All strategies and information provided are general advice only.

Daniel McGregor and Wealth Train are authorised representatives of Independent Financial Advice & Education AFSL 520963