In the NFL, the term “Red Zone” has come to mean that portion of the field between the 20 yard line and the goal line. Offenses and defenses are routinely measured by their effectiveness in this area.
When applied to the retirement conundrum, the term “Red Zone” has come to mean that part of your investment life that begins 5 years prior to actual retirement and last until 5 years after your retirement date. Your performance when you are in this Red Zone will largely dictate the ability of your investment resources to carry you through your retirement in the lifestyle that you desire.
Approaching the Zone
Before you get to the Red Zone, your investments can be somewhat riskier and more highly leveraged because you still have time on your side. If the market slumps or you make an investment miscue, there remains adequate time to recover for the problem in time to be ready for entering the Red Zone! Typically, most of a person’s investment ‘nest egg’ is invested in higher performing stocks and mutual funds during this time.
Entering the Zone
As you enter the Red Zone, the whole paradigm shifts, all at once. You no longer have time on your side and must be much more conservative in your thinking and in your investing. Mistakes made and market slumps from this point forward cannot easily be recovered from and may, in fact, delay the date of your safe retirement. At this point the shift to more debt vehicles (bonds & bond mutual funds) should be occurring so that your risks are minimized.
During this time, you are hopefully fully employed and generating a healthy income while you look forward to your wonderful day of retirement. Many planners recommend starting up some sort of supplemental income stream during this time to ease your transition into retirement. It can be as simple as writing articles or a book on your hobby or craft or perhaps buying & selling on eBay. Opportunities abound if you just look for them.
Your Goal Line
When you finally get to your actual retirement date, ‘pull the plug’ and venture off into retirement, this can be an exciting time. The thrill of having the freedom that you have looked forward to for so long is exhilarating, but the worry of your financial future can be bothersome. You have to change your thinking rather dramatically at this point. Preservation of your retirement nest egg is critical, so you must be careful to not jump into big purchases just because you can.
The final 5 years in the Zone
It is during the last 5 years of the Red Zone that having a ‘side project’ source of extra income can be particularly great. First of all (and most important to many), is the feeling of self worth that you get from having something to work on. After the excitement phase wears off, many just-retired folks get depressed and feel empty as they mourn the loss of the career to which they have been so devoted. Having a source of supplemental retirement income can fill that void, give you something to look forward to and, at the same time, produce some extra cash flow.
Unless you are particularly adventuresome, you likely will not be looking to make a million dollars or ‘Get Rich Quick’. No, just something that produces a thousand or two dollars per month and still permits you’re the retirement freedom that you want – will be a good fit. There are many, many such sources of supplemental retirement income available, particularly on the Internet. If you can build a revenue stream around the knowledge of and passion for something that you have learned in your life, then it will be even easier and more fun!
Think about it. How can you leverage your knowledge in a certain closely defined niche for your retirement income and satisfaction? You will be glad you did!
Resources: Don Seibert is a retired business executive who, as an Expert Author, writes timely articles and books on many issues concerning ways to profit from your accumulated knowledge Having retired three times, he now is the host of http://www.LeverageYourExperience.com Visit the site for a complete discussion of Retirement Income Options.
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