Greetings! I trust that this will find you well and enjoying life.
Managing assets successfully in retirement is primarily about structure. I believe that we should develop and maintain three distinct types of asset management to be effective. The three types involve income producing assets, bank assets and portfolio assets.
Consistent adequate income is necessary for quality of life in retirement. We need enough in income producing type assets to generate the cash flow necessary to manage lifestyle needs and our day to day living expenses.
Bank type assets are used for ready access to cash. I encourage retirees to have anywhere from one year to four years in bank type assets depending on comfort level. We draw on bank type assets when our living expenses exceed that of our income generators or when we have additional capital outlays such as travel or home repair. The assurance of safety of principal and liquidity accompanies assets such as these. At times we settle for lower yields in exchange for the stability provided here, but it’s a necessary tradeoff. Adequate bank type assets assure us that we won’t have to fire sale other assets in an emergency or when an opportunity occurs.
Portfolio type assets are critical for most retirees to maintain purchasing power and quality of life in retirement. As needs arise and we spend down bank type assets, at appropriate times in the economic cycles we harvest from portfolio type assets to replace depleted bank assets. In this environment, we are managing a portfolio of various asset classes from a longer term perspective with the objective of growing them for future use.
If you have questions about your retirement planning don’t hesitate to contact us.
Jeff Christian CFP, CRPC