A Brighter Way
A Brighter Way
Baby Boomers: The Next Chapter is a four-part series intended to guide today’s largest generation as it heads toward retirement. The series also will provide practical guidance for employers as they plan to handle the growing number of retired workers. With topics such as Social Security, investment strategies and more, you’ll see why retirement is just the start of a whole new chapter in life. Part one discusses what you need to know about social security, part three covers transitioning your company to a new leader and part four considers planning for work in semi-retirement.
So that light at the end of the tunnel is no longer a distant visage, it's the real thing, and retirement is looming – a mixture of joy and anxiety as you contemplate that fact. All those years ... going to school, building a career, raising a family, buying that first home, educating children and now… retirement. Maybe you'll work a little and not fully retire, because you enjoy working. Maybe you'll seriously pursue that hobby that you love or move down South. Like most of us, maybe you haven't thought a lot about what you are going to do.
Regardless of what your plans are for retirement, the goal of being financially independent is close at hand… or we at least hope it is. Still though, there are probably a few more years to accumulate and to cap off that retirement nest egg.
The key challenge is how retirement funds should be invested – today and after retirement.
Before that question can be answered, however, additional questions must be considered.
The first three questions can be answered based upon a detailed analysis of your goals and objectives. The last, however, is based upon the type of person you are. Only after these fundamental questions are answered can a proper portfolio allocation be recommended. Once created and agreed to, it can then be populated with high quality investments that will suit your goals as well as your emotional make-up.
For those of you who have been building for retirement through personal savings and company-sponsored retirement plans, "asset allocation" should not be an unknown concept. But there are some misconceptions. For example, assuming that as you approach retirement, your portfolio must become much more conservative is not necessarily true. While it is true that equity holdings are only for the long-term investor, it is also true that an individual age 65 will live an average of 20 years or more, according to actuarial tables. If you are married and planning for two peoples' lives, then both individuals must be considered in developing a long-term strategy. During a period of that length, the very real risk of inflation must be considered. Historically, the most effective long-term hedge to inflation is equities.
Does this mean that you should not be as concerned about market risk and volatility? Of course not. A three-year sustained bear market, as we had from 2000 to 2002, could wreak havoc on a retirement portfolio, especially if you are systematically withdrawing from your account. So looking to protect your portfolio is also an important factor. The key is striking a balance between not being overly aggressive or overly conservative.
How Do I Invest My Retirement Funds? In addition to getting answers to the questions asked in the first section, answers to the following questions are also essential.
Once these questions are addressed, then developing a "retirement" portfolio will flow naturally.
Monitoring and fine-tuning along the way is essential for maintaining a healthy balance within your portfolio, while also easing concerns you might have during this pivotal period in your life.
Having confidence in your plan of action and in your professional advisor will go a long way toward easing your anxiety and enjoying this exciting period of your life.
Rea's strategic partnership with Investment Partners, LTD allows us to work together to pinpoint where you are financially and to structure a plan that meets your needs. For assistance with retirement or personal financial planning, please talk with your Rea associate or contact Investment Partners at 800-401-5800.
This article was originally published in The Rea Report, Spring 2006 issue.
Note: This content is accurate as of the published date above and is subject to change. Please seek professional advice before acting on any matter contained in this article.
