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Fisher: You are ready for retirement, but is your portfolio?

Frederick A. Fisher
Submitted to The Union
Photo for The Union by John Hart
John Hart | The Union

For the past year or so, I have had many introductory meetings with potential clients, who come to me because they are ready to retire and feel that now is the time to have someone review their overall financial situation.

Fortunately, from a saving stand point, most have saved enough for what they believe they will need to fund their retirement. However, during these initial meetings I have uncovered three areas that have the prospects, taking a second look at their retirement picture.

They are as follows, realistic income needs, portfolio construction, and insurance needs. To illustrate, I will use the couple of John and Jane. During our initial meeting, they stated that they wanted to retire in five years when John would turn 66, his full retirement age for Social Security. As I reviewed our Confidential Financial Questionnaire, I noticed that they entered $60,000 for annual income needs. I then compared that to the tax return they provided and found that they had earned more than twice that much last year. I then asked them how they came up with the $60k figure. They stated that once they added up their non-discretionary expenses, mortgage, food, utilities, etc. it seemed like a reasonable number, because their home would be paid off, and they could now spend the amount they were putting away every month. I then went on to state that from my experience, I felt that they were underestimating their income needs, because of the lifestyle they have become accustomed to over the last decade.



After a brief discussion, explaining my rationale, they agreed that $80k was a more reasonable target, especially if included Long Term Care Insurance premiums to the future budget. I next went to review their retirement portfolio, and without really going into great detail, I could tell that they had, what I like to call a classic “accumulation” portfolio. Meaning that it had mostly growth stock mutual funds, or stocks, and little in bonds, real estate, or international. Upon a later in-depth look, my instincts were correct, their portfolio was a high risk, high reward portfolio. At our next meeting, I asked them if they knew the amount of risk they were taking in order to achieve their past returns. They did not, but did realize that once they stop working their tolerance for risk will go way down.

I explained to them that a retirement portfolio is a distribution portfolio and not an accumulation portfolio, and income and lower volatility are the keys. In their case this involved a major overhaul to their current portfolio. I explained that in a low interest rate environment, it is difficult to produce the income and growth that is needed to fund a retirement, without potentially dipping into principal, from time to time. I then explained that harvesting capital gains when available, and carrying higher cash balances, are strategies we use for our retired clients.




Lastly, I let them know that we would focus a portion of their assets on income (dividend and interest) producing investments as diversifying away from an equity heavy portfolio can help to lower risk. In cases like these I have found the prospects to appreciate the information, and leave with a better understanding about their retirement picture, and the possibilities it may bring.

This article is being provided for informational purposes and should not be considered a recommendation. Investment decisions should be based on an individual’s goals, time horizon and tolerance for risk. Please see a financial professional before taking any action.

Diversification cannot ensure a profit or prevent a loss. Equity and fixed income investment prices are volatile and when sold they may be worth more or less than purchased value. Fixed income investments also have credit, default and interest rate risk. Dividends from equities are not guaranteed and may be modified or canceled at any time. Past performance cannot guarantee future results.

Contact Rick Fisher at 530-273-4425, or frederick.fisher@natplan.com. Branch address: 565 Brunswick Road, Ste. 15, Grass Valley, CA 95945.


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