Greetings! I trust that this will find you well and enjoying life.
In retirement if you need or want the growth that the markets have historically provided how do you manage the volatility? A number of processes come into play. However, two that I want to mention today that are extremely important are a structured income plan and cash reserves.
A foundational discipline in managing assets in retirement is an income plan that provides reliable, consistent income. It’s imperative to have structured income coming in from income generators each month to meet your day to day living expenses. Having assets structured purely to meet lifestyle needs allows you wait until an appropriate time to sell or harvest assets that are market driven. Having an income plan in place funded by social security, a pension, income annuities, dividends or interest income goes a long way in managing the risk of avoiding selling an asset when the market is down. Expressed in another way making sure you avoid fire selling an asset in order to rob Peter to pay Paul.
Another important principal in being able to wait until an appropriate time to sell involves adequate cash reserves. Having adequate cash reserves that are stable and easily accessible for emergencies or opportunities is imperative in the process of managing market driven assets. Adequate cash reserves provide the benefit of waiting until the investment is valued appropriately to take gains or harvest. The amount in cash reserves varies from retiree to retiree ranging from one to three years income based on comfort level. A strategy to avoid having a lot in cash or bank type assets yielding low returns, is to have a home equity line of credit on your home that would upon demand provide money in the event you need it or want it. Having this in place allows the investor to have access to cash, maximize management of portfolio type assets and to wait until an appropriate time to sell portfolio type assets in the event a need arises.
Structure and discipline are fundamental in succeeding financially in retirement. If you have questions or feel that we can assist with anything related to retirement don’t hesitate to call.
Jeff Christian CFP, CRPC
Fast is fine, but accuracy is everything.