KEY IDEAS2018-10-16T00:02:09+00:00

CLOSE TO RETIREMENT?

YOUR PORTFOLIO SHOULDN’T LOOK LIKE A 30 YEAR OLD’S.

CLOSE TO RETIREMENT?

YOUR PORTFOLIO SHOULDN’T LOOK LIKE A 30 YEAR OLD’S.

A 30 year old’s focus is on growing their portfolio as quickly and by as much as possible. They can blow themselves up and they still have 30 years to make it back again. If you are in your late 50’s to early 60’s you don’t have 30 years to make back a big loss. As you begin to transition your portfolio to prepare for retirement your focus now should be to make sure your portfolio is as bulletproof as humanly possible. To do that you have two big jobs to do:

Your first big job is to make sure that at this stage of your life that you don’t have any big losses. You still want and need growth but you must keep from having big losses.

Your second big job is to begin creating the dependable, sustainable income that you’re going to need to pay your bills and lead a comfortable life in retirement.

A 30 year old’s focus is on growing their portfolio as quickly and by as much as possible. They can blow themselves up and they still have 30 years to make it back again. If you are in your late 50’s to early 60’s you don’t have 30 years to make back a big loss. As you begin to transition your portfolio to prepare for retirement your focus now should be to make sure your portfolio is as bulletproof as humanly possible. To do that you have two big jobs to do:

Your first big job is to make sure that at this stage of your life that you don’t have any big losses. You still want and need growth but you must keep from having big losses.

Your second big job is to begin creating the dependable, sustainable income that you’re going to need to pay your bills and lead a comfortable life in retirement.

NO BIG LOSSES

If you’re like most of our clients in their late 50’s to early 60’s you probably have more money than you’ve ever had before, and the last thing you want at this stage of your life is a big loss.

NO BIG LOSSES

If you’re like most of our clients in their late 50’s to early 60’s you probably have more money than you’ve ever had before, and the last thing you want at this stage of your life is a big loss.

If you have a big loss at this stage of your life it will dramatically affect your ability to retire on your terms. You will either have to work longer than you had planned for or you will need to live a smaller lifestyle with less security than you had hoped for. You simply don’t have the time at this stage of your life to come back from a big loss. You still want and need growth for your retirement but you must protect what you’ve worked so hard to achieve.

If you have a big loss at this stage of your life it will dramatically affect your ability to retire on your terms. You will either have to work longer than you had planned for or you will need to live a smaller lifestyle with less security than you had hoped for. You simply don’t have the time at this stage of your life to come back from a big loss. You still want and need growth for your retirement but you must protect what you’ve worked so hard to achieve.

MORE INCOME THAN YOU NEED

Income is what makes the world go round in retirement. You will need dependable, sustainable income that you can count on to pay your bills and to lead a comfortable fulfilling life for 20 to 30 years without a paycheck. As a matter of fact, you should plan to create more income each month than what you actually need.

MORE INCOME THAN YOU NEED

Income is what makes the world go round in retirement. You will need dependable, sustainable income that you can count on to pay your bills and to lead a comfortable fulfilling life for 20 to 30 years without a paycheck. As a matter of fact, you should plan to create more income each month than what you actually need.

If you have more income coming in each month than your expenses going out, you can continue to build your savings over time. Then, when you need to replace a car, or go on a vacation or pay for a wedding you can take care of these larger expenses out of your savings instead of your portfolio; and you will know exactly how these savings will be replaced.

I once met with a new client with a $2.5 million portfolio that mentioned that he was taking his family on vacation to Italy. My wife and I honeymooned in Italy so I started telling him all of our favorite cities to visit. I realized that I was more excited about his trip than he was so I asked him why. He told me “Bill, I just took $20,000 out of my portfolio for this trip and with the way the market is acting I don’t know when or even if that money is ever going to be replaced. So in my mind, as crazy as this seems, I feel like I’m $20,000 closer to running out of money.”

He didn’t have an asset problem, he had $2.5 million. He had an income problem. If he had more income coming in than what he needed and he took the $20,000 out of savings he would know exactly how his money would be replaced and he would have enjoyed his vacation with his family much more.

This is a great example of how having plenty of income coming in can allow you to enjoy your retirement more fully. It’s far easier to give yourself permission to spend savings that are being replenished than it is to spend principal.

If you have more income coming in each month than your expenses going out, you can continue to build your savings over time. Then, when you need to replace a car, or go on a vacation or pay for a wedding you can take care of these larger expenses out of your savings instead of your portfolio; and you will know exactly how these savings will be replaced.

I once met with a new client with a $2.5 million portfolio that mentioned that he was taking his family on vacation to Italy. My wife and I honeymooned in Italy so I started telling him all of our favorite cities to visit. I realized that I was more excited about his trip than he was so I asked him why. He told me “Bill, I just took $20,000 out of my portfolio for this trip and with the way the market is acting I don’t know when or even if that money is ever going to be replaced. So in my mind, as crazy as this seems, I feel like I’m $20,000 closer to running out of money.”

He didn’t have an asset problem, he had $2.5 million. He had an income problem. If he had more income coming in than what he needed and he took the $20,000 out of savings he would know exactly how his money would be replaced and he would have enjoyed his vacation with his family much more.

This is a great example of how having plenty of income coming in can allow you to enjoy your retirement more fully. It’s far easier to give yourself permission to spend savings that are being replenished than it is to spend principal.