Wouldn’t it be great if a crystal ball could tell you today what you need for a financially secure tomorrow? Maybe you remember that Twilight Zone episode when a man goes back in time and knows exactly what to buy to build his fortune. And then there was the TV show called Early Edition when a man receives a newspaper with tomorrow’s news. We all wish we had an inside edge that could make investing easier, but nothing about the future is guaranteed.
Food and fuel prices can be volatile and unrestrained. A bag of regular groceries in the good old days would cost about $10 but now that same bag will cost about $30+. A gallon of gasoline was $1.43 in 2004, rose to about $3.50 in 2013, and is still about $3.00 in 2018, double its price 14 years later. It’s evident that your retirement funds need to exceed the pace of inflation. Remember, too, that people are generally living longer than ever before and therefore will need their retirement funds to last longer.
Clearly, you need to know what you’re doing when investing for the future, and because there is so much to know, your best decision may be to hire the services of a fee-based financial advisor. A financial advisor is a licensed professional trained to take advantage of and protect against the complexities of investing, possessing years of experience studying the markets and recommending investments that are individually appropriate for each client.
Your financial advisor, serving as your retirement analyst, will inquire about a variety of factors that define your current circumstances and your desired retirement lifestyle. Expect to be asked the following, and more:
1. Your current age and planned age of retirement: This information indicates the range of time available for investments to build.
2. Your current and projected income: An accounting of the funds you are receiving today today, such as salary, dividends, or annuities, will be considered along with your anticipated income from pensions, inheritances, and Social Security benefits.
3. Your current and projected expenditures: A review of your monthly and annual spending will determine if the money could be spent more wisely, resulting in savings that can be applied now to your investments instead. As you remember, simply saving the expenditure for a cup of fancy coffee could save $2,000 a year, money that could augment your future lifestyle instead.
4. Your current and future income tax rate: Depending on your income today, your tax rate might be high but it is likely to be less in the future. Your advisor can help you structure your investments to benefit from reduced taxes.
5. Your rate of return: Your investments need to be closely analyzed to assure they are earning the rate of return you need so you can achieve your retirement goals without endangering your portfolio with excessive risk. Portfolio construction is a science and an art, and you need to find a financial advisor who can customize your portfolio to precisely match your needs.
6. Projected inflation: Inflation has measured 4% annually in the last 50 years or so, but this is an average. As you get closer to your retirement, a higher inflation rate might prevail, so you need to guard against this by making appropriate investments today.
7. Your health history, and the health history of your spouse: This is important because it suggests how long you may live … thus bearing on the amount of financial resources you may need. This is a good occasion to diagnose the need for long-term care insurance or some other accommodation should you become infirm.
Obviously there are no guarantees your funds will be sufficient when you retire, but by planning now the odds are in your favor that the funds you need will be available on time. You and your financial advisor should review your portfolio closely every quarter to make sure you’re receiving your annual required rate of return.
The fees you’ll pay for the services of your financial advisor will be offset by the secure knowledge that a seasoned professional investment expert is closely watching and safeguarding your future, and increasing your wealth at the prescribed pace. Just as you would go to a doctor or dentist for regular checkups, you should regularly check on the financial health of your portfolio’s investments.
Looking into your crystal ball with the help of your financial advisor will help you part the mists of uncertainty so as the years go by, your treasure, which is your secure and comfortable retirement lifestyle, materializes more and more firmly the closer you get.
If you’re interested in discussing what’s in your financial crystal ball, make an appointment to consult with your financial advisor today.
We hope this article about securing your financial future was informative. Please contact us so we can review the possibilities for building and safeguarding your personal wealth while enhancing your retirement. Thank you!
Joseph M. Maas, CFA, CVA, ABAR, CM&AA, CFP®, ChFC, CLU®, MSFS, CCIM
Synergy Financial Management, LLC
13231 SE 36TH Street, Suite 215
Bellevue, WA 98006