In this final of our three-part series, financial planner Justin King APFS, CFP talks about how he uses cash buffer within a retirement income portfolio to help the client stay the course during a market downturn.
Justin uses Timeline to illustrate how he keeps adequate cash buffer alongside the heavy allocations to equity. The goal is to avoid being forced to sell down on equities during a market downturn. This cash buffer also doubles as a great way of managing client behaviour. By assuring the client that they have ample cash to support their withdrawals during a possible market downturn, the client is far less likely to bail on the plan.
Justin uses Timeline to illustrate the risk and convey a powerful message to the client, stressing that the best time to prepare the client for a market downturn is in a bull market.