Driving 85 AND texting
Dangerous we all know, yet some choose to do it in the face of terrible consequences. People also continue to retire without a real income distribution plan in place to deal with some of retirement’s biggest risks. That MAY BE because investors are not aware of the risks but I’m here to change that.
I had a meeting with a client the other day who had been out of touch for a long time. We had reached out many times via phone and email but our calls and emails we never returned – FOR YEARS.
The account that we managed for the client up to this point is about 10% of his investable assets as it turns out.
He just retired 6 months ago, and was burning through money from his bank savings account at a quick pace. As it turns out, that was part of a plan that he and his wife paid good money on through yearly planning fees. The plan went on to recommend that after the savings was depleted, that’s right depleted, to spend all of their after-tax dollars, currently weighted at about 80% equities, and then the biggest piece, retirement dollars last. Those retirement dollars in aggregate were invested between 80% and 100% equities. So a lot of stock market exposure.
Upon realizing this I equated the danger to his portfolio to the danger we would face had we made the choice to drive 85 mph while texting. Knowing the dangers, would you choose to do that?
I had MANY problems with this plan – if it can even be called that.
Why spend through all of your emergency savings? In retirement, we always recommend 6-12 months of living expenses be held in a savings account. Life happens right? What happens when you need a water heater, a roof or want to spend a chunk on a trip you can’t pass up? To rely on you market based accounts that could drop at any point by 15%, 25% or 35% to have to solve for monthly retirement income as well as occasional one-off withdrawals, runs the risk of causing great harm to the portfolio. We WANT these portfolios to last as long as we do right?
I laid out a process that we have developed and refined to build a retirement income strategy with all of the major retirement risks in mind. A plan equivalent to driving slower and never texting while driving. We are now working towards that.
I say this A LOT! Do NOT go into retirement with the same strategy you used to accumulate your nest egg. When you are no longer contributing but rather drawing off a portfolio on a regular basis, something as regular as market volatility, can work against you in a big way.
If you are someone you care about is already retired or will be in the next 10 years, have them reach out. Share this video with them. I will be happy to have a conversation about how our process might work for their situation. Friends don’t let friends retire with an accumulation strategy.
As always, if you have any questions, comments or suggestions for further videos, just reach out, I’d love to hear from you.