Retirement

Summer vacations transport us to a comfort zone we long to maintain. Retirement, like summer, should be filled with the faces, places and activities that warm our hearts and feed our souls. Each of us travels a different path on summer vacations and a different pace to retirement. Let us not forget the preparation, soil and toil required to plant, feed, nurture and weed the landscape of our future.

Prepare the Soil

Preparation of the landscape involves consideration of the risks that can delay, or destroy a retirement plan. The risks of disability and early death exist, and are usually managed through the purchase of insurance. However, there is a third, more insidious risk, and that is the risk of outliving your capital base.

It is important that we recognize vocational income as a non-renewable resource. When vocational income stops, the cash flow required to maintain an active, comfortable lifestyle must come from a combination of pensions (public and/or private), personal savings and investments.

Plant the Seeds

Living below your means today will allow you to shift excess cash flow to personal savings and investments.  It is imperative that you create an asset base capable of supporting your retirement lifestyle. The existence of a private pension, whether taken as an annuity or lump sum, forms a hedge, sturdy and green, while personal savings and investments add the color to your golden years. Anyone without a sufficient private pension to support their retirement lifestyle must plant their own hedge. 

Feed Your Garden

Cash flow is the water that feeds your personal portfolio. Harness the power of that flow by controlling your spending. The annual savings necessary to create a retirement asset base depends on many factors. The most important of those factors is the age at which you begin saving for retirement. Other factors include the lifestyle you expect to maintain in retirement and the amount you save annually toward that goal, the number of years you plan to work, the number of retirement years you fund as well as assumptions about rates of return and inflation. 

Personal portfolios, like hedges, take time to grow and mature. Planting early with an annual savings rate of 10 to 15% of gross income can yield a substantial asset base. Putting the power of compounding to work for you as soon as possible allows you to save less on an annual basis while accumulating a larger asset base – over time. The longer you wait to begin your retirement fund the higher your annual savings rate must be.

Remember to keep an emergency fund. Those funds represent the bulbs of winter and can brighten the darker days without disrupting your financial plan. As work schedules ease and spontaneity is possible, personal spending may spike. 

Remain focused on your financial goals. Use debt wisely; it is like a fertilizer. Mortgage debt can enhance your lifestyle while consumer debt should be used sparingly, and credit card balances should be paid in full each month. Credit card debt, like weeds, can spring up quickly and be costly to manage.      

Nurture and Weed

Review portfolio objectives and constraints each year so your asset allocation can be adjusted. The mix of cash, bonds, stocks and alternative investments must be appropriate to your age and stage of life. Bonds can provide the annual income necessary to avoid volatility in lifestyle. Stocks and alternative investments enhance returns and provide color to your portfolio. Concentrated positions should be avoided. They violate the symmetry of a balanced portfolio and increase your risk of weeds.

Make Wealth Creation a Reality

As we grapple with fast-paced lives and the challenges of daily living, it is important to remember that we must also prepare for the future. Slow down, close your eyes, lift your head into the breeze; visualize those carefree days of retirement, and describe them if you please.  We are listening.  

Wealth creation takes time and financial fortitude.  Make time your friend by committing early to a structured savings plan. As your financial garden grows, it will require attention. We can provide the financial conscience necessary to stay the course.   

Along the way consider whether, with whom, and in what amounts you will share your wealth.

Wealth transfer to family, friends and charity is best accomplished through planning. Allow us the privilege of assisting you in accumulating, expressing and transferring the bounty of a life well lived.