Broker Check

Retirement Challenge #5: Have you formalized a dynamic financial plan?

| January 07, 2017
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Your life is unique, so your financial plan should be too. It should help you gain greater clarity around your goals and challenges and create a path for you to follow. There are 3 simple steps to creating a financial plan with many details behind each important component. 

  1. Designing your plan (priorities, goals, needs, wants and wishes)
  2. Building your plan (putting all the financial, lifestyle and legacy pieces together)
  3. Protecting your plan (managing risk and taxes, regular reviews and adjustments)

 Once you have your plan organized on paper including expenses, budgeting and an appropriate investment and income strategy to supplement other sources of retirement income, this is when true management of your life savings really comes into play.  How do you maintain your standard of living, manage life’s transitions and create a legacy? Well, your investments drive a lot of those outcomes.

A retirement portfolio should be diversified and fairly liquid.  Moreover, a portfolio needs to be well designed with a consistent game plan.   It isn’t about beating the markets, it is about harnessing the various markets or indexes in a manner that you can comfortably reach your goals.  It is not a competition.

One major obstacle for many individuals working for large companies is their ownership of large amounts of company stock and how to properly manage that portion of their portfolio, with a tax strategy and to assure they aren’t taking unnecessary risks. 

When you have over 10% of your portfolio invested in single securities (i.e. stocks, including restricted stock and stock options, or bonds), it is considered to be a Concentrated Position.  

Holding a Concentrated Position subjects you to investment risk that is not reflected in the volatility assumptions used in a plan. While the returns for a well-diversified portfolio will usually move up and down with the economy and market in general, your investment in any single stock or bond could suddenly lose most, or even all, of its value. 

What would it mean to your plan if a security in which you have a Concentrated Position suddenly lost 50% or 100% of its value? Could you still attain your goals, or are you putting your future at risk?

Truth be told, unless you have more money than you can possibly spend, investing in retirement really shouldn’t be “exciting”. It is a long-term strategy that supports your needs, wants and wishes. 

Regularly review and rely on your plan, educate yourself, employ a laser focus on achieving your goals and manage the areas in your life that you can control.

Whether retirement is near or far, there is a lot to consider and even more to look forward to when it comes to your retirement. So tackle these challenges head on!  You’ll be glad you did.

If you would like a copy of the complete whitepaper, please provide your name and email address to [email protected]

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