We believe these are the three fundamental aspects of money management. A sound retirement plan must provide a good balance of all three – safety, reliable income; liquidity, so that cash is accessible in emergencies; and growth, so that you beat inflation, grow your portfolio to replenish income needs, and leave an inheritance.

What might a good balance include? Liquid investments may include cash, savings, and money market accounts. Low-risk investments may include short-term bonds, insurance products, and bank certificates of deposit. Slightly more aggressive, but still reasonably conservative choices, include fixed income investments, such as corporate or government bonds. Growth investments could include individual stocks and real estate, for example.

Make sure that your retirement plan is well balanced. Schedule a free consulting session at www.mysecondopiniontoday.com for a cup of coffee and second opinion on your current path to retirement.

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One couple came to my office saying they wanted to retire in about five years, at age 60, and they wanted to pay for the kids’ college educations, and they wanted to pay for two daughters’ weddings. “Those are noble goals,” I told them, and I figured they must have the assets to handle them. But all they had was $50,000 in an IRA. I gave them the bad news: They would need to keep working, and they couldn’t afford those tuitions and weddings.

When people hear that, they sometimes search for somebody who tells them otherwise and will validate their opinion. And then they may enter dangerous territory. Never forget: Fearsome creatures can get you in Distribution Land. Visit www.familywealthadvisory.com for more information on how to start laying suitable plans for your future.

Your financial planner should be in the business of helping people thrive in retirement, not patting their backs as they head into peril. That’s why so much emphasis should be placed on defining goals and organizing life priorities; that’s one of the best ways for you to organize your finances.

Who Is The Client, You Or Your Money_

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What about the retired couple who get a phone call one day from their daughter—her husband has left me, she cries, and may I come home with the kids and the dog? All of a sudden they’re buying food for six instead of two, and replacing the carpet.

Or maybe it’s you who are getting the divorce; the rate among people in their 70s is higher than ever*. It doesn’t take much imagination to see what that does to a retirement plan.

Life situations, in other words, have the power to propel you prematurely into Distribution Land, or send you packing back to Accumulation Land. But most all of those situations can be anticipated. You may be able to head them off at the pass.

Retirees need specific advice on longevity planning, managing withdrawals from retirement funds, transferring wealth to heirs, and many other complex issues besides how to allocate their assets. Too often, the focus is on the money and not the humanity.

*Age Power by Ken Dychwald (2000)

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Jerry was unhappier than ever. He thought retirement was going to mean his freedom. What it meant was that he abandoned the little bit of stability he had. And he didn’t have enough money to take his boat out fishing—and that’s his main hobby. He had a pension and a decent amount of money, but he and Jean still felt strapped.

Jerry’s strategy was to spend as little as possible and let the savings grow and also delay his Social Security so that they would have more later—or rather, so that Jean would have more later. He wanted to make sure Jean would be all right without him.

This is an often-typical retirement story. Americans are retiring by the millions, and many others are coming to see that it’s crucial to carefully plan for retirement. So many people pull up their roots in retirement and leave their whole social circle. They start anew, far from home. No longer are they near friends and family. No longer do they see their acquaintances at work. If their career has ended, they may feel they have lost a sense of purpose.

In addition to a whole new lifestyle, fear holds so many people back. Some even hoard, fretting unnecessarily, while others seem oblivious about very real dangers they are facing. It goes both ways. The point is that you may need help. Visit www.distributionland.com for a free chapter of Distribution Land, and start to understand what you need to consider first as you enter retirement. You need to be able to get a grip on what your financial state truly is. A professional advisor can work with you to help you pursue a pleasant and stable retirement in an effort to avoid a situation like Jerry, unhappy and unsure of your retirement future.

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What you need is what many people lack: a written plan that forecasts retirement income and expenses to project how your savings can support your spending so that you can make intelligent decisions.

And you need to talk through what you envision for retirement—where do you want to be, why do you want to be there, who do you want to be there with. How do you feel about being retired? Do you have any concerns or fears? A retirement plan isn’t just about managing money. It has to coordinate your money with your life.

Let’s say that sitting in front of you is a 1000 piece jigsaw puzzle. Where would you start? Most say on the edges or the corners. But what if you started with the picture on the cover of the box? Why? Because until you know what that picture looks like, all you’re doing is moving pieces around with no goal in mind.

Creating a unique plan requires finding the right balance of hopes and dreams, the desired lifestyle, and the income needed to support it. It requires investing for a target income while still commanding a return that beats inflation. Determine whether they are being realistic. If your asset base is relatively modest, you cannot take lavish vacations, support multiple charities, help all your children, play golf daily, and still have enough income for the rest of your life.

Need some advice and guidance? Go to www.distributionland.com for a free chapter of my book Distribution Land: A Retiree’s Survival Manual for Transitioning to a World of New Rules & Unexpected Dangers.

The post The New Meaning of ROI and How it Affects Your Retirement Planning appeared first on Distribution Land.

An accountant and his wife recently came to my office to prepare for their retirement in a few years. They had about $2.5 million in CDs and bonds, and they had figured out how much they wanted in retirement income. They presumed all was well. But my projection showed their portfolio in a death spiral by their early 80s.

“You know what that means, right?” I asked them. They risked running out of money.

“Yeah, it means I don’t believe it, how’s that?” the accountant said.

I showed him the numbers, and as a CPA he understood them, yet couldn’t quite grasp why this would be happening.

“Have you ever seen Jurassic Park?” I asked him.

“Sure. Dinosaurs gone bad.”

“Right. Remember the scene where the boy tells the archaeologist he wouldn’t be afraid of a raptor?” I asked. “The guy shows the kid a petrified claw and demonstrates how a raptor could shred him to pieces. But then he explains that the raptor that would be staring him down wouldn’t be the one he’d have to worry about. In fact, he wouldn’t have to worry about him at all. See, Velociraptors hunt in packs and it’s the ones to the sides that are going to kill you, and you’re never going to see them coming.”

The CPA furrowed his brow.

“You were scared,” I explained, “because you saw that market risk in front of you, staring you down. So you put all your money into CDs and bonds so you wouldn’t have to worry about market risk. But off to the side—and I don’t think you see it coming—are inflation and longevity as well as other risks that may kill you.”

As you plan for retirement and venture forth into Distribution Land, you will face perils. Don’t be afraid. Be prepared. Visit www.mysecondopiniontoday.com for a free consultation and advice on if you truly are prepared with your current financial plan.

The post What You Don’t See: The Difference Between a Well-Laid Plan or Falling Short appeared first on Distribution Land.

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Ideally, you need to know if you have enough assets and investments to retire happily and safely. Here are the first three steps you and your financial advisor should take:

Step 1: Estimate how long retirement income will be needed. How many years must the assets last? Are you and your spouse healthy? Is there a history of longevity in your family?

Step 2. Identify and manage the numerous risks, such as inflation, longevity and healthcare expenses, just to name a few. then try to reduce the risks, as much as possible,

Step 3. Start to convert resources into income, regularly updating the plan. Converting assets for lifetime income is the fundamental strategy in the retirement income planning process.

To get a ballpark figure, you can use this standard approach to calculating income needs: (1) figure average monthly expenses, (2) add up any lifetime income such Social Security and pension, and (3) subtract the monthly income from the expenses to determine any gap. To see if the gap can be filled, add up all financial assets and multiply by an expected annual rate of return, then divide the result by 12 for a monthly income stream. If it fills the gap, you can retire.

If it doesn’t fill the gap, look at some other approaches. You have various options: Increase your returns where possible; find other lifetime income sources; spend less in retirement; work full or part time; postpone the start of Social Security or pension payments; increase your savings; or tap into your home equity.

Of course, your financial advisor is there to help you determine the best course of action for maintaining your income stream or uncovering ways to increase that income stream for the right retirement plan for you.

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