I have found most people have never been told the plain simple fact that there are two (2) separate and distinct stages of planning for retirement:
- Stage One (1) of Retirement Planning – Asset Accumulation
- Stage Two (2) of Retirement Planning – Income Distribution and Asset Preservation
By not realizing and understanding these two (2) distinct stages exist, and that they are total opposites of each other, retirees and those people nearing retirement, face huge, possible insurmountable threats to their financial security. One of the biggest mistakes I see people make is not transitioning from Stage One (1) to Stage (2); staying in or being stuck in Stage One (1). This basically means they continue to invest like they did when they were 40 years old, even though now they are 55, 65, or 75. And this makes NO sense at all.
Stage One (1) – Asset Accumulation
During Stage One (1) of Retirement Planning you were saving money for retirement and were in Asset Accumulation mode. You were young, made a good salary you could count on month-after-month, invested on a regular monthly basis into your 401K/403B/457/IRA, had ample time to recover from any large losses, invested fairly aggressively because you wanted maximum growth, were willing to take on a fairly high-risk level, and didn’t need income from your assets.
During Stage One (1), if you are like most people, you learned how to save, and if you were dedicated, you just may have become a very good saver. You didn’t necessarily like investing, because it was very confusing and you hated losing money, but you learned that you really liked saving money, and you saw that you were good at it. So, you kept doing it, you kept saving month-after-month, year-after-year, decade-after-decade. And voila, now you’re retired, or close to it, and you have a big pile of money you have accumulated. You have succeeded in saving money, but you find yourself worrying more-and-more about your money each day. The reason you worry so much is you are stuck in Asset Accumulation mode with a lot of risk and volatility and haven’t created an actual plan to transition into Stage Two (2) of retirement planning to minimize large losses and create dependable income that will last for as long as you live. No wonder you are worried! Who wouldn’t be?
Stage Two (2) of Retirement Planning – Income Distribution and Asset Preservation
If you are retired, or soon-to-be-retired, you must transition your assets into a plan for Income Distribution and Asset Preservation – Stage Two (2) of retirement planning. You cannot stay stuck in Stage One (1). You can’t leave things to hope, luck, and chance anymore; if you do, it just means you will keep on worrying every day about your money.
Take a look around, take note, take inventory, of where you are right now at this very moment of your life. You are no longer working. You are no longer making a good salary. You are no longer investing into your 401K/403B/457 on a regular monthly basis. You no longer have time on your side to recover form large losses. You can’t afford to invest aggressively and be subject to high volatility; and you need income from your assets now. Yes, I know, it’s true, unfortunately, this all means you are no longer young, and you can’t plan your finances and investments the same way you did 30 years ago, 20 years ago, or even 10 years ago.
Here’s the bottom line: at this time of your life, you can’t afford to lose what you worked so hard for, you have to protect and preserve your assets and make sure your income doesn’t run out for as long as you live. I’ll say it again, you must minimize volatility, eliminate large losses, and guarantee your income won’t run out, regardless of stock market crashes, investment performance, or longevity.
The Solution – Have Your Plan Set In Stone – Get Everything In Writing
I have found one of the biggest problems, fears, and causes of anxiety for many retirees is that they have no idea how they will use their assets to create their monthly retirement paychecks that will last for as long as they live, they are worried they will run out of money. In my 37+ years of experience in the financial industry,
I have found the very best way to create a successful retirement is to have a comprehensive written retirement income plan, with all the details about your money in writing, showing:
- How much income you will receive every year throughout your retirement.
- Where each income source comes from each year.
- When each income source starts, stops, increases, decreases, and what income is guaranteed for life.
- How much income tax you will pay on your income.
- What your net monthly income after-taxes will be.
- How to allocate your assets to reduce your risk of a large loss.
- What will happen if you or your spouse passes away; how will the survivor survive financially.
- How much you can potentially leave to your beneficiaries.
If you have a plan that does all these things, you will have successfully transitioned from Stage One (1) of Retirement Planning – Asset Accumulation to Stage Two (2) of Retirement Planning – Income Distribution and Asset Preservation. If you don’t do these things you will continue to base your financial security, and your family’s financial security on hope, luck, and chance. If you don’t do these things, I am sad to say, you will continue to worry about your money, a lot.
Keep your money safe out there!
None of the material in this presentation is intended to give you specific tax, investment, real estate, legal, estate, retirement, or financial advice, but rather to serve as an educational platform to deliver information; nor is it intended to show you how the strategies presented can specifically apply to your own tax, investment, estate, financial, or retirement position, but rather to offer an idea of how these principles generally may apply. This data is furnished with the understanding that the authors and publishers are not engaged in rendering you legal, real estate, accounting, estate, investment, tax, financial, retirement, or other professional advice or services through this presentation. None of the material in this presentation is intended as a solicitation for you to buy or sell any financial product. Nothing is directly or indirectly guaranteed by this presentation. A fixed index annuity with an income rider can protect your savings from losses and provide you guaranteed lifetime income, but you could incur surrender charges, gains aren’t guaranteed, you’ll pay a fee, and guarantees are backed by the financial strength and claims paying ability of the issuing annuity company. Any investment in stocks, bonds, or mutual funds can lose principal, even with a stop loss, and there are no guarantees of gains. All investments involve risk and investment recommendations will not always be profitable. The sale or liquidation of any stock, bond, IRA, certificate of deposit, mutual fund, annuity, or other asset to fund a new portfolio and/or annuity may have tax consequences, early withdrawal penalties, or other costs and penalties as a result of the sale or liquidation. You cannot invest directly into a stock market index. Illustrations, projections, and hypothetical examples are used to explain concepts and are not indicative of potential results you could receive; past performance is no guarantee of future results; and results are not indicative of any particular investment or income tax situation; your results will be different and could be lower or higher. Insurance product features and benefits, such as guaranteed lifetime income riders, are subject to contract terms, limitations, fees, and the claims paying ability of the insurance company issuing the contract. Consult with a qualified investment, tax, legal, and/or retirement advisor before making any decisions.
Peak Financial Freedom Group – 2520 Douglas Boulevard, Suite 110, Roseville, CA 95661 (916) 791-7063
Investment Advisor Representative of and Advisory Services offered through Fiduciary Solutions, LLC, a Registered Investment Advisor. Peak Financial Freedom Group, LLC and Fiduciary Solutions, LLC are affiliated entities. Peak Financial Freedom Group provides no Advisory Services. Insurance products and services provided by independent agents. Jim Files CA Insurance License #0F06511 & Dan Ahmad CA Insurance License #0732913