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Planning During the "Home Stretch"

September 15, 2015
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If you are like many of the families I work with, your financial resources have been pulled in many different directions over your adult lives. Perhaps, you started families and began to get your footing in new careers while in your 20s. In your 30s and 40s, you may have turned houses into homes, planned for children’s college, got promotions, changed jobs or you may have even started a business of your own. With retirement in sight, now is the time to think completely differently about your finances. 

With more than 30 years of experience in the financial industry, I have come to believe that one of the biggest challenges in achieving financial independence is knowing what to do as one approaches the “home stretch” of their working career – those last five to ten years right before retirement.​ 

We have all heard from financial experts in the media to take risk and grow our assets as much as possible for retirement, but this simple advice can be disastrous if a big loss occurs as one comes down the home stretch.  Think of a big football game... individuals approaching retirement are like a team who has the ball on the 25 yard line with the goal line in sight, trying to score a touchdown.  For an offensive team, many things change when you get in the red zone. The short field reduces your playbook, the options available to you on how to reach the goal.  The last thing the team wants to do is have a fumble or a major penalty that sets them back or prevents them from achieving their goal.   

Many people at this stage of life have become comfortable with risk in saving and investing; however, it is time to rethink this paradigm when it comes to planning strategies in this “home stretch” before retirement.  There are two major components to planning during this life stage: protecting the nest egg our clients have worked their lifetimes to build and determining a spending strategy for retirement. 

One of the most important ways I help clients is to first help them protect them against significant financial losses​ during the last quarter of their working careers. These planning strategies include asset protection through various types of appropriate insurance as well as finalizing their legal documents and forms of ownership. Also, we work on appropriate asset allocation that will minimize losses, both before and during retirement, to their nest egg. Clients at this stage of the game cannot afford a dramatic negative market correction.  

Just as important as growing and protecting money is making sure that there is a spending strategy during retirement.  While combating age old economic forces such as taxes and inflation, due to continued advances in medical technology and wellness, longevity is an increasingly powerful pressure on money during retirement. Maximizing less risky sources of income for retirement is critical for clients living off their assets. Therefore, appropriate Social Security analysis as well as putting in place other guaranteed sources of income is essential to making money last a lifetime.   

Going back to the football analogy, where is your team as you drive into the red zone? Is this a nail-biting finish, the beginning of a comeback, or the final touches on a solid lead? There are sound financial principles that are true no matter which stage you are in.  However, the strategies that you apply should be tailored to your specific circumstances and life stage. The strategy changes when you are in the red zone and you know your plays are finite.  There’s an intangible pressure there.  But great teams, and great individuals, adjust their strategy accordingly and are able to reach their goal.