A Retirement Strategy
Looking for a plan that may provide a reliable source of income for the rest of your life?
A good retirement plan segments a client’s retirement portfolio into three general segments: Income, Safety and Growth. These areas are further classified into five categories: Lifetime Income, Fixed Income, Relative Safety, Growth & Income and Long-term Growth. At the strategy’s core is the concept of matching assets to liabilities.
Short-term liabilities or income needs are matched against short-term fixed income assets. Longer term liabilities or income needs later in retirement are matched against long-term growth focused investments. This framework provides for an interactive process between our clients and advisors to design a unique portfolio for each client. Time horizon, risk tolerance, total return assumptions, and number of needs vary client by client based on their unique situation.
A properly designed strategy uses less riskier, stable and sometimes guaranteed* investments to draw income, when needed, in order to allow time for more risky investments in the portfolio to potentially grow. When implementing investment solutions, we recommend that our clients avoid taking any more risk than their strategy suggests is appropriate.
* Guarantees are based on the claims paying abilities of the issuing company
Segment #1 – Income
Lifetime Income
This sub segment potentially provides investors a guaranteed* income for life and is suitable for conservative investors who believe they have a long life expectancy.
Fixed Income
This sub segment is designed to spend down over 5 to 7 years thus “buying time” for Segment 2 to potentially grow. This sub segment is usually invested in less riskier, sometimes guaranteed, investments.
Segment #2 – Safety
Relative Safety
This sub segment is a bridge between the Income and Growth segments. This sub segment is designed to replenish the Fixed Income sub segment resulting in additional time for your long-term investments to potentially grow.
Segment #3 – Growth
Growth & Income
This sub segment is designed to provide both Growth & Income for the portfolio over the long term. Income generated from this sub segment may be used to supplement income required from Segment 1.
Long-Term Growth
This sub segment is designed for 15-25 years of growth. Since the other segments have provided time, this segments is designed to grow untouched for near term income.
Diversification may help reduce, but cannot eliminate, risk of investment losses. Historical performance relative to risk and return points to, but does not guarantee, the same relationship for future performance. There is no assurance that by assuming more risk, you are guaranteed to achieve better results. There is no guarantee that this strategy will meet its stated objectives.