Achieve Financial Security in Retirement
Achieving financial security in retirement starts with making smart choices and performing financial CPR. Planning for your retirement is not a simple game anymore. Philosopher Confucius says, “Real knowledge is to know the extent of one’s ignorance.” Realize you don’t know what you don’t know.
Make No Mistakes
Many people just have a hodgepodge of mutual funds and think that is fine when in fact you need a more detailed retirement plan. Retirement is like 20-30 years of unemployment and most have to tackle this without a pension nowadays. You can’t afford to make any mistakes!
Our income analysis goes through how they are currently investing and looks at the success rate of taking income based on that into retirement. Most people never take into account inflation which starts to derail their strategy.
As David Babble, who is a professor of risk management at the Wharton School of Business warns: “If you have a stock portfolio and you withdraw 4% per year + inflation…you have a 90% chance of running out of money in retirement [over 30 years].”
Most people have no clue how much risk they have in their portfolio, and this is the number one mistake we see. We look at their current portfolio to see how much they could lose in certain financial circumstances (like another 2008 happening). Most people take way more risk than they actually should.
Putnam Research Institute says this: “For retirement portfolios whose primary goal is to minimize risk of depletion and sustain withdrawals, optimal equity allocations range between 5 and 25 percent.”
Putnam Institute is telling you that if you are retired, taking income (or required minimum distributions) and you want your money to last, then you should have less than 25 percent of your money in equities, or the stock market.
How does this compare to your current portfolio or what you are hearing on Wall Street?
Tax Analysis
Let me ask you a simple question: does your tax preparer meet with your financial advisor to review your tax situation? To make certain that you are paying the minimum tax to the IRS each year?
If you are like most retirees, probably not. Don’t you think they should? For many retirees, their IRA (or equivalent) represents their largest tax exposure.
How are you handling this tax liability?
What are you doing about it?
What is your exit strategy?
We look at the impact of those required minimum distributions and the impact they can have over your lifetime and then create a strategy to minimize that tax exposure. So what plan do you have in place to best control how much you give to the IRS on these accounts?
Avoid Insanity
Do you remember what Einstein said about insanity? It’s “doing the same thing over and over again and expecting a different result.” Using Einstein’s definition of insanity, one could conclude that it’s totally insane to invest the same way you always have and expect different results.
