1. Use income vehicles that are not subject to interest rate and market fluctuations.
2. Buy guarantees against living too long or unforeseen events.
5. Consider your income from a different perspective than saving for retirement.
4. Allow for cash reserves in times of need.
5. Avoid paying fees on your entire portfolio.
We consider the following 5 strategies for the management
of your retirement income critical to your success.
1. Use purpose-built income vehicles that are not subject to interest rate and market fluctuations. Many times we know what we know and forget to look for alternatives to the common challenges. In the new age, post 2001 and 2008, people looking for fixed income have given up looking because the tools they used to use are subject to the fluctuations of interest rates. Most income vehicles available via online and traditional brokerage firms are traded across an exchange. This creates convenience for tracking, trading and research. The challenge lies with finding investments that provide solutions to the income challenge, that are not traded on an exchange and are not subject to market risk and interest rate risk.
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2. Buy guarantees against living too long and life events. No one I know has a crystal ball. So none of us know how long we are going to live. That being the case, wouldn't it be a good idea to see if we could find a way to make sure we don't run out of income even if we spend all of our savings? Half of all people in America will live to age 85. If you were age 85 years old today there is a 50% you would already be receiving some form of Long Term Care. The cost of long term care in a facility can easily exceed $8,000 a month in most metropolitan areas. Home care, assisted living, and group homes offer lower costs and options, but they are still expensive compared to normal retirement living expenses.
3. Take a look at your income from a different perspective. How about looking at your Retirement Income Plan over a twenty year period. If you could add certainty and guarantees to your portfolio, you could easily look into the future. Our portfolios are built for the specific purpose of providing a lifetime of income. We build in provisions for taking care of surviving spouses as well as passing the remaining assets to your beneficiaries as tax efficiently as possible.
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3. Allow for cash reserves in times of need. Having available liquidity in a portfolio as people transition from one stage of life to another is a critical component in a retirement income plan. There are several experts that have made general suggestions to liquidity. We suggest an amount of available assets, without penalty, equal to one year of expenses prior to retirement. In the transition years surrounding retirement that number can shrink to a sum equivalent to three months of expenses a year after retirement.
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5. Avoid management fees. There is an old adage that states “you get what you pay for.” In many cases that is correct. We live in a different time. We have been conditioned to “NOT PAY” for services. Take the case of your physician. Most plans have eliminated the cost of visiting a primary care doctor. This has measurably improved health outcomes. Free maintenance on your new car measurably improves the resale value, because we actually get the oil changed. With investing, many folks pay a fee to their broker in exchange for their help. There is nothing wrong with that practice. But many people wonder why the performance of the “managed by your broker” portfolio does not perform as well as the market.
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