How to Tell if You’re Taking on Too Much Risk (Or Too Little!)

Imagine this: You check your retirement account and see a drop in value. Your stomach tightens. Thoughts race through your mind: Should I sell now before it gets worse? Is my retirement in danger? If you’ve ever felt this way, you may be carrying more risk in your financial plan than you’re comfortable with.

On the other hand, some retirees play it too safely. They avoid any market fluctuations but then worry about whether their savings will last. So, how do you know if your investments align with your actual comfort level? The answer lies in recognizing the warning signs of a risk mismatch before it could lead to costly decisions.

Are You’re Taking on Too Much Risk?

Risk isn’t just about numbers—it’s about how you feel when market conditions change. Here are some considerations your investments may be riskier than what feels right for you:

• You check your accounts constantly – If every market dip has you glued to your portfolio, feeling anxious about what’s next, that’s a sign your investments may not match your emotional comfort level.
• Market swings cause real stress – Do you lose sleep when the market drops? Or find yourself worrying about whether you’ll need to change your lifestyle?
• You’ve made panic-driven decisions before – Have you ever sold investments out of fear during a downturn? If so, it’s important to consider the potential risks involved. .
• You feel pressure to “chase” returns – Are you investing in riskier assets because you feel like you’re missing out, even though it makes you uneasy?

The problem with taking on too much risk is that it often leads to emotional decision-making, which can cause retirees to buy high, sell low, and derail long-term financial plans.

 Are You’re Being Too Conservative?

On the flip side, playing it too safely can also create financial stress. Here’s how to know if your retirement plan might be too cautious:

• You constantly worry about running out of money – If you’re overly conservative, your savings may not grow enough to keep up with your needs, especially over a long retirement.
• Your money isn’t working for you – If your portfolio barely moves over time and inflation is eating away at your purchasing power, it’s important to consider strategies to help protect your retirement income. You avoid making financial decisions out of fear – If you hesitate to adjust your investment, it could be due to your fear of risk.

While protecting assets is essential, too much caution can be just as dangerous as too much risk—it can lead to financial stagnation and missed opportunities.

How a Financial Professional Can Help

So, how do you find the right balance? The key is to align your financial strategy with both your emotional comfort level and your long-term needs.

This is where working with a financial professional can help make all the difference. An advisor can help:

• Identify whether your risk tolerance and portfolio are truly aligned
• Provide stress-testing scenarios to see how different risks impact your retirement
• Guide you away from emotional decision-making in response to market fluctuations
• Find prudent investments to support your long-term retirement goals without unnecessary risk

If you’re unsure whether your portfolio matches your true risk tolerance, let’s talk. Our team can help you assess your current approach and make adjustments that fit your unique comfort level—so you can retire with confidence, not worry. Reach out today to schedule a conversation.