“If you fail to plan,
you are planning to fail.”
– Benjamin Franklin
benefit and instead have an ;nsurance policy to protect their spouse or
beneficiaries. ;n some cases, not only can it protect loved ones, but some
insurance policies allow for the death benefit to also be used for long-term
care. ;his can ensure that the benefit will be used during one’s life, death,
or both. ;his is an irrevocable decision, so consult with a financial advisor
before finali;ing your election.
;he ma;ority of pension benefits do not have a ;C;;;; ;Cost of ;iving
;d;ustment; increase with age, therefore, consider what the money will be
worth in 20 years. ;ssuming above a three percent in;ation rate, a ;;,000 a
month pension would only be worth about ; 2,000 a month in 20 years. ;or
those with a lump sum option, consider the option to invest and generate
an income stream that has the ability to offset in;ation pressures over time.
;here do you draw your money from when you need it; ;rom an ;;;;
;ell stocks; ;0;;s; ;eal estate; ;rokerage accounts;
;ou have worked very hard for your money and decisions on when and
where to use your money can have ill-intentioned conse;uences.
;lan where your money will come from instead of putting it all into one
pot. ;n retirement, you should consider having long-term, mid- term, and
short-term investments to help protect you from market ;uctuations while
ma;imi;ing your income potential. ;ore conservative investments go in
short-term, moderate investments for mid-term, and more aggressive in
long-term. ;icking and choosing investments to li;uidate on a monthly
basis can be stressful, and most advisors show you how and where to save
but not how to create an income stream from your investment assets.
;hen drawing income directly from a ;0;k, the plan provider will
typically sell shares or ;units; to send you a monthly amount you re;uested.
;he issue with this strategy is that you are indiscriminately selling shares
in an up or down market regardless of price. ;n a down market, you are
selling shares at a lower price and therefore cannot allow time for those
shares to recover essentially burning the candle on both ends. Consider
investments that provide a dividend or yield that allow you to draw income
without selling shares.
;aving an income spend-down plan can help minimi;e ta;es. ;or
e;ample, if you are taking all of your income from your ;;;, this could
potentially put you in a higher ta; bracket. ;he goal is to determine how
much money to draw from each of your investment assets to ma;imi;e
your returns and minimi;e your ta; conse;uences.
; recent ;anguard study pro;ected investors’ portfolio returns over the
ne;t ;0 years to be between three and five percent annually versus nine
to ;; percent they have en;oyed over the last decade. ;any pre-retirees/
retirees have invested with a ;0/;0 stock/bond ratio and think their
portfolio is diversified and able to generate enough income. ;n the past,
bonds have yielded five to seven percent, but now most estimates put
pro;ections for bond returns at an average of two percent. ;t is important to
e;amine having some portion of your investments in alternative assets or
alternative strategies to work to minimi;e volatility and potentially increase
return. ;s few as two percent of the ;.;. population has a truly diversified
portfolio with alternatives. ;iversification may allow you to hedge against
in;ation and interest rates.
;here are three ma;or types of risk that people fail to analy;e;
investment risk, longevity risk, and in;ation risk.
;nvestment risk ;tied to se;uence of returns; is the possibility that your
investments could lose value because of movements in financial markets.
; recession historically comes once or twice every decade. ;f you had
retired during that time and were forced to sell investments to fund your
retirement e;penses, then you would have lost a great deal of the upside
when the market recovered. ;or e;ample, ;isney stock had dipped down
to ; 20 in 200;; you may not have been able to wait for it to recover and
then sell when the price was much higher. ;ow that it has been ;0 years
since the last recession and many have en;oyed great returns since then,
it would be wise to re-evaluate their investments to make sure they are in
line with their time hori;on. ;any individuals who visit the Ideal-LIVING
2. Not having a proper retirement income spend-down plan
3. Having an antiquated investment portfolio
4. Underestimating risk