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By Sharon Ann Hamilton

Dear Sharon Ann:

July 8, 2015 (San Diego’s East County) - I will be 66 years old and retired by year-end. I am single, in good health, my parents are still living and healthy, and my grandparents passed away in their late 90s so it is likely that I have at least 30 years ahead. I am concerned that my nest egg will not last as long as I do. I want to know for sure! Is there a way to prove the projections made by my financial advisor? I have about $1.5M in 401K investments, I own my own home outright, and Social Security will be $2350 per month.

Signed: I want to KNOW for SURE!

Dear Know for Sure:

There are many ideas about wealth management and how to structure a retirement portfolio. The professional you understand and trust is the best one for you. As a former financial advisor and wealth manager I understand how we can get very complicated with projections like ‘expected inflation and growth’, fancy software involving asset allocation and forecasts like the Monte Carlo simulations, and it gets really complex and scary. What if the projections are wrong? What if the market doesn’t perform as expected? What if inflation shoots way up?

Over 25 years of observation as a professional the only FOR SURE way to work this out is summarized like this: make a commitment to yourself to use less than you earn. This commitment will keep you going and your portfolio growing over your lifetime so take it seriously! It is simple, but not easy. Calculate your invested assets all together on paper [setting aside your home value for the moment.] At the end of the year, calculate how much your portfolio has grown. For example if your $1 M has grown by 10% you have an increase of $100,000. Some people might be thrilled with the $100,000 ‘profit’ and go right out and spend it. Some people are afraid of spending anything and will sock it away in a conservative place like a CD. Others spend some and save some. Let’s look at what happens when you allow yourself to spend some and save some, the middle strategy. In this illustration you spend half of your gain - $50,000 and save half.

The second year your portfolio is worth $1,050,000 and you earn 10%. The gain is $105,000. You earned profits on more money. Again you spend half, re-invest half. The second year you can spend $52,500. You have given yourself a 5% increase in income. You can continue like this forever. Whatever the gain is you can allow yourself to spend half and reinvest the other half. This conversation needs to happen with your financial advisor at the beginning of every year so you can budget properly. Still it is simple, but not necessarily easy.

All portfolios will have assets that fluctuate, but at different times. This is the benefit of asset allocation.  What is asset allocation? The art and science of diversifying investments in a variety of assets or as my granny always said, “Don’t put all your eggs in one basket.” Real estate may decline but likely at a different time than a bond portfolio. Stocks can be stabilized over time with asset allocation strategies.

What happens if your portfolio does not earn a profit.  With the best of advisors in the broadest spectrum of investments you may have a flat year. You might cry, but then tighten your belt and remember your commitment to yourself to live only on what you make.  It might be the hardest goal you ever set for yourself, but worth it over time.

You can see that working with your advisor each year to make a plan for spending, saving, and giving plays an essential role in your quest to KNOW FOR SURE your investments will last through your lifetime. Alternatively you could educate yourself to become your own advisor, however that is long-term plan. Recently I heard that if you read a book a week on your subject, in a year you would become an expert. The best strategy given this information is to meet with your advisor regularly AND begin reading your book a week. Then you will have the education to participate in your own plan.

Part of the great mystery of life is coming to the realization that we are responsible for our own lives and the details therein. We can bury our heads in the beautiful, sandy beaches that surround us, or we can commit to learning vital information for our wellbeing. It is simple, but not easy! Oh yes, you CAN read at the beach!

The Retirement Concierge offers trust verification services as well as home organization assistance as a team member alongside of attorneys, trustees, and fiduciaries. We do not offer legal, financial or tax advice. We also wrote A 10-Step Action plan for Defining Your Mission helping Boomers on the verge of retirement to plan, make and manage life transitions. (619-818-8575).










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