Create an Economic Bubble

We currently live in a volatile world with wars, macro- and micro-economic cycles plunging, natural disasters, and our S&P 500 down in the bear market. To avoid the negative impacts on your portfolio, our team at Lord and Richards suggests creating an economic bubble: a field of insulation around you and your family. We come alongside you and build a plan to help you achieve a financially independent retirement, without fear and anxiety. Let’s walk through our step-by-step process.

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The first step is to create a written risk-management plan. There is no substitute for writing down your goals, and this is part of our Financial Independence Review? with you. We learn what's most important to you and help you develop a succinct list of goals, dreams, and values. This becomes the foundation on which we build to help you achieve retirement.

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Once a written risk-management plan is in place, we evaluate where you stand with your current investments. There’s no purpose in creating a roadmap toward financial independence if we don't know where we're starting. We will help you pull together your statements, budget, and retirement date, and then simulate a “stress test” to measure durability. Years ago, my dad had to go through a stress test. Doctors put him on a treadmill to monitor the condition of his heart and discovered some problems. Thankfully, these discoveries were made in the safe, antiseptic environment of the doctor's office. If he’d been out on his daily walk and had an issue, no one would have been there to help him.

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Our office at Lord and Richards is that safe, antiseptic environment, and we bring stress tests for bear markets and chronic illness against your portfolio. There's a 70% likelihood that you or a loved one in your household will need extended care that won’t be covered through Medicare or standard insurance. We need to ensure your portfolio can withstand that burden. The early loss of a spouse is a tragedy we also must consider, as your portfolio can suffer. When one of you passes, the higher of the two Social Security checks remains, not both. Pensions may also interrupt finances if they only applied to the life of one person in a family. Once that person is gone, the pension is gone or reduced as well, and household income is impacted.

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What about the widow tax? If you become widowed and fall under the “single” tax bracket, your tax burden is going to be much more onerous than when you were married and filing jointly. This needs to be considered if you want to maintain the same lifestyle and expenses: living in your home, traveling to see grandkids, and doing the things that you love.

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We rigorously simulate many life events, combined with good and bad markets, and paint a picture of how well your portfolio will be able to withstand them. If your portfolio holds up, we can celebrate, pat ourselves on the back, and grab a coffee together. More often, however, we discover weaknesses. Just as a doctor would do, we put a plan in place to fix them. We need to choose the right tools and put the right plans in place, so that we can keep things on track, even during a negative life event.

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Where do we start?

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First, we must identify what money is going to be needed for your retirement. Our team at Lord and Richards can calculate that for you. We use sophisticated software to determine exactly how much you need to retire and how to save towards that by using a logical sequence and progression.

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In addition to your retirement money, determine what expenses are coming down the pike. Are you putting your kids through college, paying for a wedding, or tackling unexpected medical bills or surgeries? You may have an upcoming vacation. What are the things that are going to require you to be more liquid and have money available? Everyday expenses must be included as well. This is money you need access to regularly to write checks and pay bills each month. With these figures, we can help you partition that money into multiple categories, each requiring different treatment.

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Money reserved for paying bills month-to-month should not be invested in the same way that you would for long-term goals like retirement. Your long-term money should be principle-protected and growing, with a compromise on liquidity. You must be able to let that money roll until retirement and build a plan around it. Money used for everyday expenses needs to be liquid and accessible. The compromise here will not be on safety, but on growth, as it will be kept in your bank account. You decide what to compromise and emphasize, and we help guide you in the process.

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We can create a middle column as well, a “growing reserve,” which has both growth and liquidity. You can access it if you need it, but you do compromise on risk. If that is something you want to avoid, we can help you build a risk-free portfolio. Most people, however, are willing to take some risk for an opportunity for growth.

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Lord and Richards is here to come alongside and help you hedge on the downside so you don't have unlimited loss potential. It is imperative to choose the right tools, create a written risk-management plan, and build an economic bubble that surrounds your family to achieve financial independence and a successful retirement.