May 2104 Back to Basics

May 2014: Back to the Basics

In Back to the Basics, Income Planning, Investment Management, Long Term Care, May 2014 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.

Our planning process always begins with the same basic question: “How do you plan to use this money?”

When the answer is clear, the choice of investments becomes clearer as well. Since the vast majority of those we serve require a portion of their accumulated savings be used to generate an income during retirement, we will accordingly carve out a portion of the “pile of money” to be used specifically to generate income.

If generating income is your one primary goal, our task is to provide you with a lifetime of security thanks to a lifetime of income.

Let’s make a leap and assume that we accomplish that task of building a lifetime of income. How do you then invest any additional “surplus” money that you may have?

With income needs met, and your surplus money in mind, let’s ask the question again: “How do you plan to use this (surplus) money?” Well, in short, some examples may include travel, hobbies, long-term healthcare funding, inflation protection, gifts to kids, grandkids, church or charity, etc.

See, it all depends on the objectives you have. Depending on your aim, you may choose to invest quite a bit differently. For example, investing to fund travel may be a short-term investment if the big trip to Alaska is next summer. On the other hand, paying for a grandchild’s college education may allow you to invest more aggressively in a 529 College Savings Plan. A gift to your church at your death may be invested differently yet, perhaps using life insurance as a planning strategy. Again, the answer to the question helps us put the proper context and time horizon to your investing strategy.

We recently held an evening education session on inflation-fighting strategies. (Bear with me … this is relevant). Any guesses as to the one spending category that retirees consistently increase as they move through retirement?

Yup. Healthcare and long term care. Every other expense categorically declines as a percentage of a retiree’s household income, but healthcare and long term care will categorically increase! That means that many of our clients may invest some of their “surplus” savings in a strategy to fund long term care expenses.

We’re not going to go any further right now, but remember this: Once you recognize the power of the question, “How do you plan to use this money?” the process of planning becomes much clearer. No matter what scary financial news headlines begin to creep up, if you’ve done your planning right, you can smile and know that you’ll be okay.

If you have questions about your personal situation, contact us for a confidential review.

About 

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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