When you are put into a position to plan your retirement you may feel like a fish out of water, just as I would be if you asked me to insert a picc line into a cancer patient getting ready to undergo chemotherapy treatment.
The multi-appointment process we go through with our clients is designed to educate and inform while providing the guidance to achieve the goals we have clearly identified. Here are some of the more complicated concepts that most people should understand at a high level.
Mitigating Stock Market Risk
None of us likes to lose money, but it has become acceptable to most people that losses are just a normal part of investing. The fact of the matter is that does not necessarily need to be the case. There are multiple investment products and strategies we can seek to limit losses in the market.
Converting Assets into Income
You have done a good job at saving and retirement is looming. Now what? How do you convert your saving into income that is sustainable? I recently on-boarded a wonderful new client who has been retired for a few years. With no guidance, she was getting income from a low-cost brokerage firm. One day she got a phone call from the firm saying she was out of money and she would no longer be receiving her monthly income. This was due to a combination of poor market conditions and unrealistic income demands. Fortunately, there are some remaining assets and together we built a plan that can pay her the income she needs for the rest of her life.
Most people understand that the less they pay in fees, the more money will remain in their pocket. As a licensed fiduciary, I understand that concept very well, but I also see the cost of adhering to that philosophy alone. For example, a person could go out and purchase a small cap ETF with an expense ratio of just .07%. Super cheap, but what happens when the market conditions change and that specific investment vehicle is no longer positioned to perform positively? The low-cost firm you made the purchase from is not going to make a proactive phone call to you with a recommendation that they should sell that ETF and replace it with an equally cheap Gold ETF that may do better in the current market conditions. Watching your fees is very important, but we believe there needs to be a balance between low-cost investing and professional portfolio management.
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Written by Marc Montini, IAR, and Managing Partner of Montini & Farrah Tax Advisory Group.