For those who have been retiring for a few years, planning goals have shifted from accumulation and growth to income planning and capital preservation. There is no "one size fits all" approach at all, mainly because each set of facts and circumstances is different. For example, those who include debt in retirement must consider ways to repay their debts before retirement. Those who plan to work part-time must consider the tax implications of their income and develop the most effective way to obtain social security benefits. One thing is certain - in almost all cases, stable and predictable income is needed throughout the retirement period. It is the key to success. The budget is always an important factor that will not change during the lifetime of the program and during retirement. Most retirees use this process to budget fixed and variable expenses and use that data to plan travel and other retirement activities. Planning a realistic lifestyle is a key factor that can better ensure that pensions do not run out before life.
Capital preservation is a key factor in the age of 60 and retirement. As Mark Twain once said, "People are more concerned about the return of their money than the return of money." While each retire must make its own asset allocation decisions based on the level of risk they are willing to accept – the industry rule of thumb has always been that you can determine the maximum exposure of the stock market by subtracting one age from 100. For example - a 60-year-old should have no more than 40% [100-60] of investable assets exposed to the stock market.
Growth investment has always been a place to better ensure that one's assets exceed inflation. Due to relatively low inflation and even lower interest rates over the years - the stock market has performed well for patient investors who experienced the Wall Street storm during the 2008-2009 period. Investors who are now 8 years old are now deciding whether to continue doing so or to earn their income and reduce risk. With all the economic, political, international and emotional turmoil that emerges today - these decisions can be painful.
Today's mention of alternative investments is still more than any time I remember in my nearly 30-year career. As these products become more mainstream, retirees will seek to praise more and more of their portfolios in an attempt to generate safer and more sustainable sources of income – and to have assets that are unrelated to traditional investment models. By placing alternatives in a portfolio, investors can reduce the beta of their investments [measuring risk] while generating predictable and stable returns in locations where risk is reduced, rather than other traditional Wall Street options.
Finally - let "a duck in a line" when preparing to retire - confirm that all estate planning documents are up-to-date and important. These will include wills, POAs, living wills, health care directives, trusts [if necessary], etc. A reliable review of all insurance is also designed to pay close attention to the possibility of planning long-term health care costs.
Orignal From: Planning considerations for approaching retirees
No comments:
Post a Comment