• linkedin
  • Increase Font
  • Sharebar

    6 steps to weather financial storms in retirement

    What happens when you need to retire during a financial crisis?


    Step 3: Hold asset classes that do not all correlate with one another

    Design a portfolio that is exposed to various asset classes, different management styles and different sectors. One should add investments that do not have a high degree of correlation with the stock market and alternative investments. This methodology can assist in reducing potential volatility while smoothing out future rates of return.

    Related article: How an employer-sponsored retirement plan can help your dental practice transition

    Step 4: Cash reserves

    Always keep a cash reserve available that represents a minimum of six months of living expenses. These funds will be available for any unexpected expenses.

    Step 5: Hedging techniques

    Consider some of the hedging techniques that are available. You may be able to protect a portion of your equity portfolio from a certain percentage to the downside.

    Sometimes, this means giving up a little on the upside, but preservation of principal is important in a declining market, while still giving you upside potential. Some of these strategies are available through annuities.

    Over the years, the annuity market has received its share of bad press regarding high fees and lack of flexibility. Some new annuity products have improved over the years and they can provide a useful role in a portfolio.

    Part of a defensive strategy can be matching a guaranteed income stream from an annuity contract to a certain percentage of essential recurring expenses. This income is reliable, even in a down market, and can be guaranteed for life.

    A reduction in principal will not change this income and, even if the principal were to be depleted, the income will continue.

    Step 6: Actual vs. planned spending

    Compare your actual spending to planned spending annually and make sure that you are not exceeding target withdrawals.

    Related article: Death and the dental practice

    Forecasting the economic and financial climate when you retire is akin to a meteorologist forecasting the weather two, 10 or 20 years into the future. It is little more than an outright guess.

    By implementing the strategies above however, you can be better prepared to successfully navigate any financial storm that may come your way in retirement.

    Wells Fargo Advisors and its Financial Advisors provide non-fiduciary services only. They do not provide investment advice (as defined under the Employee Retirement Income Security Act of 1974 as amended [“ERISA”]), have any discretionary authority with respect to the plan, make any investment or other decisions on behalf of the plan, or otherwise take any action that would make them fiduciaries to the plan under ERISA.

    The views expressed by the authors are their own and do not necessarily reflect the opinion of Dental Products Report, Wells Fargo Advisors Financial Network, or its affiliates.

    Wells Fargo Advisors does not provide legal or tax advice. Be sure to consult with your tax and legal advisors before taking any action that could have tax consequences.

    Variable annuities are long-term investments suitable for retirement funding and are subject to market fluctuations and investment risk.

    A Guaranteed Minimum Income Benefit (GMIB) feature is an optional rider on a variable annuity that is available for an additional annual charge against the income base. It generally may only be selected at the time of contract purchase and cannot be changed later. It can usually be exercised only after a waiting period. A GMIB feature is not a cash or account value. Please be advised that depending on the performance of the investment option selected, the contract value at the time of annuitization could be such that the investor would incur a higher expense with the GMIB option without receiving any additional benefit.

    Unlike variable annuities, equity indexed annuities (EIAs) are typically structured so that they are not securities registered with the SEC. Nor are the sales in EIAs regulated by the SEC or FINRA Regulation Inc.

    John Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...
    Traudy F. Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...
    John S. Grande, CFP
    John J., John S, and Traudy F. Grande, CFPs, are the editors of the Money Matters column. They are owners and principals of Grande ...


    Add Comment
    • No comments available