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Thoughts in Charts: Withdrawal Timing

The timing of your cash withdrawals matter. The U.S. Stock market has persisted upward for the last 150 years; however, this has not been without periods of dramatic downturns. Some of these downturns lasted a significant amount of time.

Over a long period of time, the investor is likely to be compensated for risk. But this graph illustrates that there are periods of time where it’s very unprofitable to withdraw from a stock investment. A key part of your portfolio construction should be to avoid “needing” to withdraw more volatile stocks during those downturns.

While anticipated cash needs within the next year or two are often easier to identify, don’t forget to talk to your advisor about potential cash needs within the next 10 years as well. The goal is to create a portfolio with the appropriate level of risk for your shorter-term requirements and the ability to let your longer-term assets ride out the storms.

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