Issue 36.09
A retirement transition might call for a shift in your investment approach.
Time passes … and priorities change. When you approach retirement, your investment mindset may have to be modified. If you are in your thirties or forties, the goal is accumulation – investing and saving to amass as much as possible for your retirement years. When you are older, the goal changes to wealth preservation – the objective of making assets last through a combination of conservative investing, sensible cash flow, risk management and tax reduction.
A subtle shift. Committed investors who work with a financial advisor often receive guidance to help them adjust their investment approach to new phases of life.
When people are in their forties, they usually begin to approach their maximum earnings potential. This is when many portfolios start to shift toward a mix of growth-oriented and preservation-oriented investments.
In retirement, a financial advisor has to find an asset allocation that will encourage a regular income stream for you without discouraging your potential for growth. It must also be an allocation that you are comfortable with.
There are people in their forties or fifties who have no retirement savings. Many are predisposed to “make up for lost time” and adopt an aggressive investment strategy. This can be dangerous. People may be tempted to invest the bulk of their assets in a “hot” sector of the market, crossing their fingers and hoping for double-digit returns. But as we have seen with the real estate market, what seems “hot” may turn cold. Diversification is just as important for late savers.
The psychology of preservation. “Wealth preservation” is a broad term that can signify a number of financial steps. A good wealth preservation strategy addresses the things that have to be addressed for any mature couple or individual or maturing family.
It should outline how retirement plan savings will be reinvested and managed (asset allocation, investment objectives). It should establish a schedule of sensible income withdrawals. It should provide measures for tax efficiency (in investing) and tax reduction, to potentially increase the after-tax return. It should incorporate an estate plan, to permit the tax-efficient transfer of assets to heirs and/or favorite causes.
Now might be the right time to confer with a qualified financial advisor and discuss a shift in emphasis from wealth accumulation to wealth preservation.
Scott S. Lovell is the founder of Lovell Hathaway, Your Retirement SpecialistSM , and is a registered representative offering securities and advisory services through Geneos Wealth Management, Inc. Member FINRA and SIPC. For additional information, Scott can be reached at (435) 656-2518.
This article was written by Peter Montoya Inc., not the named Representative nor Broker/Dealer, and should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy.