During their working years, typically people try to grow their money and tend to be more aggressive. One of the biggest mistakes people make is going directly from the accumulation phase to the distribution phase. I have seen hundreds of people make this mistake which can be disastrous.
My father was in the financial services industry his whole career. In 1970, he chose to go independent so he could provide the best service to his clients, not the sales force. He was very good at what he did and loved helping people and getting to know their goals, fears, and aspirations.
In 1992 he was going to retire. My husband and I decided to give this a chance before the family business was handed over to someone else. We both went to the same college, Glassboro State, which is now Rowan University. We then went through an exuberant amount of training for two years and are continuing education.
Eventually, my husband Brett got out of the business because all we did was talk about work and we were together too much. I then went on to become a Master Elite Ed Slott Advisor, a Master Registered Financial Consultant, and a Certified Financial Fiduciary. My father made a lot of money in the 90’s and asked me to manage his money. He was almost completely invested in stocks and mutual funds and was doing great until the Dot Com Bubble burst. I had been coaching him to get more conservative and he said: “You can’t make money in bonds, just stocks”. He rapidly lost a lot of money until he panicked and went to cash, one of the very worst things you can do.
We recommend that five years before retirement you set up an income plan. A good friend of mine, Jason L Smith, wrote a book called The Bucket Plan. It was the best financial book I have ever read.
I attended numerous classes and understood it’s important to have three buckets to segregate your money. The first is the Now Bucket. This is for money that you need to be safe. For an emergency or upcoming events, the money that you can access immediately is usually held in a bank account. The second is the Soon Bucket, which is money you are going to live on for the next ten to fifteen years. The next bucket is the Later Bucket. This will allow clients to be moderate growth-oriented or growth-oriented so they can still grow their money.
We do a Volatility Tolerance Analysis to help determine where the client feels most comfortable. There is no cookie-cutter method. Every client is unique. If the market crashes they ideally should not be affected heavily, because they have taken the money they need for everyday living in the Soon Bucket, which should not be impacted by the stock market downturn.
Statistics show that among climbers who died higher than 8,000 meters above sea level, 56% passed away on their descent from the summit and 17% died after turning back. Only 15% died on the way up or before leaving the final camp.
Could this be because they may have spent more time planning the ascent than descending? Just a thought and this is critical for planning your retirement.
I highly suggest you buy a copy of The Bucket Plan as you go about developing your retirement plans.
Financial Planning and Advisory Services are offered through Prosperity Capital Advisors (“PCA”), an SEC registered investment adviser. Registration as an investment adviser does not imply a certain level of skill or training. Franklin Planning and PCA are separate, non- affiliated entities. PCA does not provide tax or legal advice.
