Case studies of high risk retirement planning

The Story Of A 65-Year-Old Woman Who Gambled With Her $1 Million Savings… Without Even Knowing It

Hello all,

Today, I want to share an interesting story about a client of mine.

When we first met, she gave me a brief introduction of her financial situation. At the time, she was 65 years old. Single and retired. She was renting out her empty rooms from her 4-room flat, and made a monthly rental income of about $1000.

My first impression was that this was a standard case. There was nothing unusual about her situation. I’ve met many clients who were in similar situations, renting out rooms in their own homes for some extra cash on hand.

But little did I know, I was in for a big surprise.

When I asked her if she had any other investments in her portfolio, she said yes. So I asked her to show it to me.

At that point, looking at her overall financial outlook, I was expecting her to have a few small investments here and there. But when she told me her entire portfolio size, I was completely shocked.

Her entire portfolio came up to $1 million!

In summary, her portfolio consisted of a collection of various funds and stock investments which she bought from banks.

Now, let’s take a look at the pros and cons of her retirement planning.

Pros of her retirement planning 

Based on the combination of funds and investments in her retirement portfolio, she did have the possibility to yield potentially very high returns.

That’s the good part.

Cons of her retirement planning 

The downside, however, was that her investments came with a very high level of risk. Usually with stock investments of a higher risk asset class, their valuations and potential increase in value are largely based on market movements.

This was something she was unaware of.

You see, when she made the decision to invest in her portfolio, she was only informed of the potential yield her investments could bring. However, she did not know the kind of risk that was involved.

In other words, to put it simply: She was misinformed.

At her age and ability to make income, she should not have put such a large percentage of her savings in such a high-risk portfolio.

Instead, what she should have done was to stabilise her portfolio and ensure she can constantly draw on her “pot of gold” without assuming any unnecessary risk.

After all, she was already 65. Her objective should have been to and enjoy a comfortable retirement. So that’s what I did for her.

I reassessed her entire portfolio. Educated her on the portions of her portfolio where she can afford to assume lesser risk. And most importantly, I helped to modify her portfolio so she can receive a regular stream of income.

 

Here, let me break it down into numbers quickly:

Assuming she is looking at a monthly income of $3,000, $1,000,000 will last her around 27 years. Which means this can sustain her up until she’s 92. Not to mention the fact that this excludes her potential rental income.

In other words, there was absolutely NO need to take any high risks on her capital. She would be able to enjoy a rather comfortable lifestyle with her existing savings.

So now, she has the freedom to do what she wants to, in her golden years. Peace of mind, financially.

All because of one simple factor: “Activating” her portfolio to let her receive positive cash flow!

Let me ask you a simple question:

Do you know the full nature of your current financial portfolio? Do you know the level of risk you are assuming with your investments? Are you entirely sure that your portfolio is in line with your financial or retirement objectives and goals?

A lot of people have made the same mistake my client made, which was to simply make investments according to the potential profitability of the returns.

However, it is very important to consider many other factors: Market conditions. Market volatility. Corrections in valuations. Not to mention the economic climate of the areas in which your investments are located in, all these will affect you on how to plan for retirement in Singapore

Ultimately, we all want to make money. But the key differentiating factor between those who invest successfully, and those who fail, is simply the level of understanding of your portfolio.

So I want to extend a helping hand. To those of you who want to make sure your financial portfolio is accurate, according to your needs and wants.

If you’d like to know more about whether your money is being put to good use, feel free to drop me a message down below with your details, and I’ll get back to you shortly:

Read: How I Helped My Client Retire 5 Years Earlier With One Retirement Blueprint