financial planning

When speaking to groups about retirement and financial planning, I often use the phase hope for the best and plan for the worst. This is most appropriate for those who are planning on retiring in the next few years or are in retirement right now.

When creating an investment strategy for your retirement there are three key investment characteristics to keep in mind: income, safety (risk) and potential growth. While you need to have all three as part of your investment strategy, depending on your financial stage of life you need to focus on one over the others.

Another challenge in creating the right strategy for where you are in life has to do more with ignoring how the investment winds are blowing at the time and focusing in on your personal and financial goals. During strong market moves to the upside, we will often hear that we are being too conservative because we believe it is important to have a certain amount of your assets in lower risk investments to provide balance and income when you need it.

During market pullbacks, like the one we are experiencing now, we will hear exactly the opposite sentiment. Dump my growth investments and move everything into cash or something similar.

This is where a strong plan that hopes for the best and plans for the worst is essential to being financially secure. We use many different types of investment strategies customized for each of our clients’ situations. Different strategies for different needs and different markets cycles.

Certain types of annuities, bond ladders and cash reserves become more important in down markets which is why we include these in our financial plans along with other types of stock and bond strategies which do well in up or flat markets.   The key is not to get caught up in the current market environment when planning your investment strategy because we believe that there are very few if any money managers that can time the market up or down.

This is why when the market is moving up and you are nearing retirement it makes little sense to put all your investments into the market. Just like it makes little sense to abandon the market completely as it pulls back.

Market investments provide long term growth which is important for retirees because retirement can span 20 to 30 years. Annuities, bond ladders, cash and similar investments provide liquidity and safety for times like these.

There is an old saying, everything in moderation. It is true for the food we eat, the fun we enjoy and the investments we use to secure our financial future.