Anticipating retirement can evoke concern and uneasiness. You’ve focused on your career or the business you own, with the goal of achieving a comfortable lifestyle during retirement. Now you can look to the future with a sense of accomplishment and confidence as you consider new possibilities. This is the time to take steps toward a secure retirement path and avoid long stretches of financial stagnation or depletion. As Benjamin Franklin advised, “An ounce of prevention is worth a pound of cure.” This article is a guide to how to optimize your finances during the critical three-year period before and during your retirement.
With longevity on the rise, the road to a secure retirement can be a long one, involving many market ups and downs along the way. You can’t control market fluctuations, but you can control your financial path. It is important to know where you are and where you want to go — now that you are transitioning to retirement.
The Stages of Financial Freedom® is a roadmap to help you think about your path and possibilities for your future. Your goal is to keep your finances on track and to enjoy strength, vitality, and endurance as you begin to live off of your assets and benefits. You emerged from the Foundation Stage to Early Growth Stage to Peak Growth Stage over many years, and likely experienced both fortunate and challenging periods. You are now in a place to examine your entire financial picture so you can look to the future with clarity and confidence.
The Transition Stage is the three-year period before and after full or partial retirement. This is a critical time to make the most of what you have. Important checkpoints, decisions and adjustments can be made during this stage.
The Security Stage is when you will live off the assets and benefits you accumulated and set the stage to enjoy a high level of perpetual financial freedom.
What is the ideal first step as you test the waters to begin a three, two, one year countdown to retirement?
Start with a Lifestyle Protection Analysis™ (LPA), which simulates your retirement. The LPA stress tests your financial plan, including your balance sheet, cash flow, liquid savings, brokerage and retirement account balances, portfolio risk levels, social security income and pension benefits. The data is analyzed against various market environments to reveal strengths and weaknesses. The goal is zero probability of depletion when tested against every 40-year period since 1900, such as the Great Depression (1929-1939), Great Recession (2007-2009), Lost Decades (long periods of slow growth and flat markets) and periods of hyperinflation. If your finances are too fragile to withstand worst-case scenarios, the Lifestyle Protection Analysis™ will help identify weak links that need to be adjusted to ensure that your retirement plan is solid.
Finally, as you transition into retirement, it is good to have plenty of room for continual tweaks and adjustments.
To maintain your desired standard of living with no dependence on earned income, your balance sheet must align with your goals and means. The key is to balance the three categories of assets with your standard of living goals and our financial strength, agility, flexibility, and endurance (SAFE) standards.
Your assets are broken down into three buckets:
Similarly, examine your spending. What proportion of your expenses are non-discretionary, discretionary, and extraordinary? Optimizing, with room to spare, is what will help you enjoy your retirement to the fullest.
You have three levers: your balance sheet, your portfolio and your cash flow (spending level) to adjust as needed. Technically, if you have not yet stopped working, a fourth lever is your actual retirement date. This fine-tuning process often demonstrates whether an earlier or later retirement date is advisable.
“Elastic limit” is an engineering term that is a measurement of the amount of stress something can withstand before being irreparably damaged. The elastic limit of your wealth is important to measure and optimize as you transition to retirement.
The art and science of Strength Based Wealth Management®, enables you to enjoy clarity about your Elastic Limit Threshold. On a single page, consisting of “35 Essential Strengths®” are, we believe, the most important strength, agility, flexibility, and endurance measurements. Confidence and clarity come from achieving at least 30 of the 35 Essential Strengths by your desired retirement date. For more details on Strength Based Wealth Management®, the 35 Essential Strengths®, and our proprietary Wealth Optimization Dashboard™, Janiczek.com.
The final step to properly prepare for retirement is to make sure your accumulated assets are prudently managed. You’ll want your investment team to use a robust trading and monitoring system that tailors your portfolio with precision and sophistication.
Align – It’s All About You
Your investment portfolio needs to be aligned with your objectives, needs, time horizon, risk temperament and circumstances.
Intelligent - Escape the Chaos and Complexity
A portfolio manager who utilizes intelligent, common sense investment approach can help you escape noise, hype, and complexity.
Disciplined - Let Markets Work for You
Select a seasoned portfolio manager that stays disciplined to sound long-term approaches and avoids short-term approaches based upon emotions or hunches.
Evidence Driven - Quality Academic, Economic and Investment Research
A portfolio manager who applies strategies based upon sound research and data may add to your probability of success.
Tax Sensitive - Tax-sensitive Strategies can add Great Value
Seek to maximize the after-tax return of your portfolio by selecting a manager that utilizes a variety of tax-sensitive strategies.
Cost Conscious Investing - Lean Portfolio
The net, after-cost performance of your portfolio could be maximized by scrutinizing the expense ratios associated with underlying holdings and trading.
Integrated - Your Wealth Is Like Symphony
Your balance sheet and portfolio are assets (instruments); those instruments need to be finely tuned and played together in harmony with your life. Work with a portfolio manager who practices integrated wealth and investment management.
Independent - 100% Fiduciary. 100% of the Time
Work with an advisor who has your best interest in mind all of the time; avoid salespeople (brokers/agents) who give “advice” incidental to selling products.
Properly preparing for retirement involves quite a bit of expertise and diligence. The good news is that you need not learn or be involved with all this detail and complexity on your own. Rather, you can select to work with a highly reputable wealth management firm that specializes in such matters.
See more information at janiczek.com.
Founded in 1990, now celebrating 32-years of illustrious service to high ($1 to $20 million) and ultra-high ($20 to $200 million) net worth individuals and families.
Named among the top, best and most exclusive wealth advisors in the nation multiple times.
100% Fiduciary. Legally bound to do what is in your best interest 100% of the time.
Fee-Only. Strictly no commissions earned, or products sold. We are pioneers in the fee-only movement that began transforming the financial services industry, for the benefit of investors, about three decades ago.
Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by Janiczek Wealth Management [“Janiczek]), or any non-investment related content, made reference to directly or indirectly in this commentary will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this commentary serves as the receipt of, or as a substitute for, personalized investment advice from Janiczek. Janiczek is neither a law firm, nor a certified public accounting firm, and no portion of the commentary content should be construed as legal or accounting advice. A copy of the Janiczek’s current written disclosure Brochure discussing our advisory services and fees continues to remain available upon request or at www.janiczek.com. Please Remember: If you are a Janiczek client, please contact Janiczek, in writing, if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services, or if you would like to impose, add, or to modify any reasonable restrictions to our investment advisory services. Unless, and until, you notify us, in writing, to the contrary, we shall continue to provide services as we do currently. Please Also Remember to advise us if you have not been receiving account statements (at least quarterly) from the account custodian.
Please Note: Limitations: Neither rankings and/or recognitions by unaffiliated rating services, publications, media, or other organizations, nor the achievement of any professional designation, certification, degree, or license, membership in any professional organization, or any amount of prior experience or success, should be construed by a client or prospective client as a guarantee that he/she will experience a certain level of results if Janiczek is engaged, or continues to be engaged, to provide investment advisory services. Rankings published by magazines, and others, generally base their selections exclusively on information prepared and/or submitted by the recognized adviser. Rankings are generally limited to participating advisers (see link as to participation criteria/methodology, to the extent applicable). Unless expressly indicated to the contrary, Janiczek did not pay a fee to be included on any such ranking. No ranking or recognition should be construed as a current or past endorsement of Janiczek by any of its clients. ANY QUESTIONS: Janiczek’s Chief Compliance Officer remains available to address any questions regarding rankings and/or recognitions, including the criteria used for any reflected ranking.