Here at The Price Group, we have helped hundreds of families plan for and walk through the complexities of retirement. One common theme that we have noticed over the years is trepidation around the concept of retirement – even when the family has the necessary financial means to enjoy the retirement of their dreams. Because of this, we thought it helpful to write about four steps that can be taken to help make retirement LESS scary.
1. Retire "To" Something
“I haven’t figured out what I am going to do during the week. I have been driving into the office for as long as I can remember.” We hear this a lot. And if you are thinking this about your pending retirement, rest easy as you are in good company. With that being said, we think dreaming about what retirement can look like is most useful prior to retirement. Retirement dreams can mean different things to different people. We will encourage clients to “dig a little deeper” if their answer is to “finally relax at the house during the week.” We think the following questions can be helpful when dreaming about retirement:
• Where can you serve?
• Where can you give back to your community?
• What family members can you invest more time in with your additional free time?
• What friends would you like to spend more time with?
• What experiences do you want to have with your spouse or extended family?
We have found that those who find a purpose in retirement tend to enjoy retirement more, and oftentimes, live a more fulfilled life.
2. Generate Cash
This may go without saying, but you need cash every month in retirement to pay for your needs, wishes and desires. We believe having an investment process in place to help create consistent and re-occurring income is vitally important. Here at The Price Group, we do this with dividend-paying stocks, private credit strategies (when appropriate), and traditional bonds. Our goal is for a client family to generate enough cash each year from their investment income and Social Security payments (absent any other retirement income streams). In the scenario where the investment portfolio is not generating enough cash, we like to set aside the needed cash outlay in our irreplaceable capital strategies like CDs or higher yielding money market funds. Our goal is to help ensure that you will NOT have to sell any investments at the “wrong” time.
3. Implement a Holistic Financial Plan
We call our financial plan a Live Well Plan. We call it this because all clients want to live well in retirement. Our Live Well Plan includes cash-flow projection, estate planning strategies, multi-generational planning, tax-optimization strategies and more. Having a financial plan is important because it can help you track if you are ahead of track, on track or behind track during retirement. We have also found that this plan helps to provide comfort when financial markets are turbulent.
4. Take the Right Amount of Risk
The fact that the average investor underperforms most stock market indices is well documented. This is because emotions can take over when markets get volatile. While volatility is unavoidable, you can make sure that you are taking the “right” amount of risk in your investment portfolio during retirement. We do this by creating your Family Index Number which helps determine what rate of return you need to achieve on average over a market cycle. We have found that a retiree’s risk budget can oftentimes be much different than it was while they were working.
Moving Forward
While financial planning on the front-end of retirement cannot solve all of your worries, it can help alleviate some of the fears that you might have. Remember, retirement is NOT an event – it is an on-going process. Your holistic financial plan needs to be dynamic and flexible to adapt to the investing environment that is constantly changing around us.
About the Author
Matt Price serves as a Partner and Managing Director for The Price Group of Steward Partners. He resides in Houston with his wife, Emily, their four children and "Fisher" the family golden retriever. Matt studied at the University of Pennsylvania – Wharton School of Business for his Certified Investment Management Analyst (CIMA®) designation after receiving his undergraduate degree from the University of Tennessee - Knoxville. Over the past 12 years, Matt has helped families make high quality, common sense decisions regarding their wealth and their legacy. Matt firmly believes everyone needs a wealth coach!
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The views expressed herein are those of the author and do not necessarily reflect the views of Steward Partners or its affiliates. All opinions are subject to change without notice. The strategies mentioned do not guarantee a profit or protect against loss and may not be suitable for all investors. Each customer’s specific situation, goals, and results may differ. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security.
Past performance is no guarantee of future results.
Equity securities may fluctuate in response to news on companies, industries, market conditions and the general economic environment. Companies cannot assure or guarantee a certain rate of return or dividend yield; they can increase, decrease or totally eliminate their dividends without notice.
All investing involves risk including loss of principal.
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