Pete and Sandra have seen both of their sons married, purchased their future retirement beach home are looking to retire relatively soon. Pete has enjoyed a successful career and has considerable savings and miscellaneous investments to complement his current 401(k). They came to us for help; to define a sustainable range of retirement spending and for investment management.
In our first meeting, we discussed how to balance their desire to reduce investment risk while achieving the portfolio growth required for distributions to keep pace with inflation. Our answer to this dilemma is our Time Horizon Investment philosophy. We advocate reserving conservative assets for near-term income, which allows longer-term assets to be increasingly oriented to growth. We know that the longer growth investments can stay invested, it becomes more likely for those assets to achieve desirable returns.
Together, we defined anticipated expenses and explored strategies for maximizing Social Security. This enabled us to determine the supplemental cash flows needed from investments. Next, we explored timely investment ideas, long-term care protection and caring for parents. We set a time to share our analysis of current investments, recommendations going forward and visual models of their projected annual situation. We use both comprehensive planning tools and proprietary models to determine how to allocate each client’s resources to our Investment Strategies, providing an increasing income for the first 15 years and ample time for the remainder to pursue long-term growth.
Pete and Sandy elected to work with us because they found comfort in our process, appreciated our Service Model and after firing a brokerage firm, no longer want to make investment decisions. We were able to address their desire to reduce risk, both by educating them on the need to outpace inflation and insulating long-term growth investments with adequate time. They also found value in addressing potential long-term care needs and our Generational Conversation services to facilitate discussing elder parent’s finances, care management, etc.
Since Pete is a few years away from retiring there is no need for immediate distributions. We rebalanced their investments and established a new account targeted to provide initial income needs and reduce their overall stock exposure. Our paradigm intentionally avoids the practice of drawing across all investments for income, which can rapidly deplete savings in a down market cycle. For an inciteful look at why this is important, review our piece on Why Systematic Distributions are Destined to Fail. As their retirement approaches, we will continue migrating enough to more stable assets to fulfill their earliest income needs.