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Additionally, Social Security benefits can also be seen as a form of annuity, providing monthly payments during retirement. For many individuals, the expected present value of Social Security benefits can range considerably—up to $800,000 in some cases—further emphasizing the significance of these cash flows in retirement planning.
Balancing Risk with Cash Flow Needs
While Tom's rationale appears sound, there are important considerations he should take into account. If he’s nearing retirement and has a timeline of five years or less, heavy exposure to stocks could pose a risk. Stock market volatility can derail retirement plans, particularly if negative market conditions emerge before retirement.