The Projects of My Life ® addresses investors’ critical financial concerns during the two most critical wealth phases of their lives: making wealth (or accumulation phase) and keeping wealth (preservation phase).
PROJECT WEALTH KEEP
Overview: Project Wealth Keep is dedicated to preserving assets, employing protected growth strategies, creating dependable income that you can’t outlive and ensuring lasting legacies for retired individuals.
Vital Issue 1: How can an individual or family preserve their wealth?
Preserving wealth at any level is often an elusive and difficult problem to solve, but for the classic wealth preserver crowd, retired individuals and spouses, keeping more of what you have takes center stage.
Wealth preservation relies on a combination of tactics from the five disciplines of financial planning: Risk management, Investments, Tax planning, Retirement planning and Estate planning.
Think about your life in economic stages:
From your mid-twenties through mid-sixties, you are establishing a base of assets. Savings, retirement plans, your home, and possibly a business. This is when you create wealth in the period of time known as the accumulation stage.
But once you retire, the house is paid off, and the kids are out of college and starting their own families, accumulation is no longer the name of the game. Now its all about lifetime income and asset preservation. This is the preservation stage.
In this stage, we are trying to accomplish a number of things: now is the time to refine your objectives-based asset allocation model to lower your exposure by repositioning assets while continuing to seek meaningful returns, and keep the income flowing.
Read: Senior Investors Beware.
Vital Issue 2: How can an individual or family protect market-based growth investments with guarantees not to lose money?
Stock markets are often kind, and they’re often cruel. Young investors can deal with the kindness/cruelty cycles because they have time to get back on their feet after a particularly cruel bear bites them in the assets. Older investors, not so much. That’s when time needs to be your trusted friend rather than a feared enemy, and that’s the time you need to switch from the accumulation stage to a preservation state of mind.
Read: Winning by not Losing.
Switching to a “risk-off” posture means deciding to take profits from risk based assets, especially those stocks in your tax-deferred retirement accounts that have done well. Deciding to take profits is harder than it sounds since human nature persuades us to “hang in there a little longer” to see if we can capture even more gain. This is the “hogs get slaughtered” mentality.
Taking profits and placing them into a guaranteed insured instrument is the smartest thing a newly retired investor can do.
Vital Issue 3: How can individuals or spouses create income they cannot possibly outlive?
Paychecks are wonderful things, but just as all good things come to an end, so too the paychecks. Generating a dependable stream of income that you or your spouse cannot outlive is job number one in retirement, and is one of the central themes of your preservation project.
Throughout your life and career you had that dependable, steady paycheck, and you did your best to handle all the day-to-day necessities of life with it, and you were diligent in setting some aside for tomorrow. Well, tomorrow is here and the paycheck is long gone. Now you live on some combination of social security, pension payments and accumulated assets in personal retirement plans.
Income planning is a delicate maneuver. If you take too much, then assets will deplete at a faster rate, thus harming your preservation goals. If you take too little, then the quality of life suffers, and isn’t a great quality of life the point of building up your asset base in the first place? So a Goldilocks approach (not too much, not too little, but just right) is what we strive for, and this can only occur if we do the legwork and plan for it.
We want dependable lifetime income, but we don’t want our assets to erode.
Read: What’s in Your Bucket?
Vital Issue 4: How can I leave my spouse and family a legacy of worry-free financial comfort?
If real assets are not going to be sufficient to allow a sufficient income and also allow your surviving spouse to live in such a way that alleviates fear and worry after your passing, then life insurance must be considered to create an “instant estate.”
Although an existing health issue may be a roadblock to obtaining a more significant level of protection, it is still a road that must be explored, because you may be more insurable than you think.
Read: But I’m Not Wealthy!
Summary: The four central issues of a strategic wealth preservation project are: the preservation of your accumulated wealth, a protected growth strategy that eliminates risk of loss while maintaining growth of assets, creating a dependable insured stream of income you can’t outlive, and creating lasting legacies through a formalized estate plan.
While individuals and families in the wealth creation and accumulation stages are best served by a coaching-centric protocol, retirees in the wealth preservation stage generally require support and direction in a narrower range of possibilities that reduce or eliminate risk. Successfully achieving each objective will require a coordinated effort by professional specialists, which should start by consulting your Certified Financial Planner.
Live Healthy. Choose Wisely. Move Forward. ℠