February 2014: Back to the Basics

In Back to the Basics, February 2014, Investment Management by Adam Cufr

It has been brought to our attention that a return to the basics of financial and retirement planning would be helpful. Back to the Basics is a study of the fundamentals.

“Is this it? Is the stock market beginning to crash? Adam, what do you think?”

January was not kind to many investors in the stock market. After tremendous gains in 2013, the investing world was reminded that the market can go down in value after all. This reality check has inspired many to ask what is likely to happen next. Is this simply the result of stock values getting too high relative to company earnings? Or is this because the Federal Reserve Bank appointed a new chairperson, Janet Yellen, who will stop “stimulating” the economy through aggressive bond purchases by the Fed? Let’s get back to basics.

The basics of sound retirement planning require that your plan is prepared to respond to both of the following inevitable scenarios:

  1. The market goes up.
  2. The market goes down.

Either way, you should be okay if your planning is done correctly. If the market goes up, you should have an appropriate (for you) amount of risk-based investments that participate in a rising market. If the market goes down, you should have an appropriate (for you) amount of guaranteed accounts that do not lose value and may also provide benefits like guaranteed lifetime income and long term care funding assistance. In other words, when markets go up, you’re participating, when markets go down, you’re protected. It’s a balanced approach.
If you’ve been reading the Steward for any length of time or are working with us to build and maintain your plan, this should sound quite familiar to you. This balancing act is the foundational concept of what we do to help retirees achieve their enough in retirement. We must remain very clear on WHY this approach works and HOW it can free you up from the worry of market declines to focus on other priorities in your life.

If you are like many others who have the majority of your investments in your 401K or company retirement plan, this balancing act is much more difficult to attain. Why? The guaranteed accounts I described are generally not available inside company retirement plans. Your choices for protection against a stock market decline are usually money market funds or bond funds. Put very simply, bond funds are currently not as “safe” as they once were because of the very low interest rate environment we are in. When interest rates rise, bonds and bond funds tend to decline in value. Therefore, bonds and stocks both present the investor with significant risk.

If you are concerned about the risk in your company retirement plan, please contact us. We have strategies that may add some value to you.

Properly managing risk is a critical matter to understand. If you would like to learn more, consider joining us at some or all of our upcoming OFF THE RECORD learning sessions. We will cover this concept in great detail, in a clear and straightforward way. The information I’m sharing could be worth many thousands of dollars to you and may make each day’s economic news a bit easier to endure. Whether the market is neutral or negative, you can have a positive outlook.


Adam Cufr, RICP® (Retirement Income Certified Professional®) is a financial advisor and founding principal of Fourth Dimension Financial Group, LLC providing personal finance and retirement planning services. Adam is a Columnist for Retirement Advisor Magazine. He is also a sought-after media commentator and thought leader. Adam was named one of The 20 Most Creative People In Insurance in 2015 and is a columnist for Retirement Advisor Magazine and the author of Off the Record – Secrets to Building a Successful Retirement and a Lasting Legacy.

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