fbpx

When you are young, your planner will suggest a growth portfolio – because you are young, you can take a little bit more risk than most people. When you have kids and you start to approach middle age, your planner is going to suggest you move to a balanced portfolio, maybe a little less growth and a little more income. And when you are getting close to retirement, most planners will say, now we need to liquidate – sell everything and go into an income fund or an annuity. There is a major flaw to this strategy!Financial Planning 101


Basic Financial Planning

Financial Planning – 101- What everyone tells you you should do with your money.

Financial Planning Key ElementsHere is a crash course on basic financial planning. When you are young, your planner will suggest a growth portfolio – because you are young, you can take a little bit more risk than most people.

When you have kids and you start to approach middle age, your planner is going to suggest you move to a balanced portfolio, maybe a little less growth and a little more income. And when you are getting close to retirement, most planners will say, now we need to liquidate – sell everything and go into an income fund or an annuity.

This is Financial Planning 101 and probably sounds very familiar to you. In my opinion, there is a major flaw to this strategy.

The flaw is that in retirement, at the time when you want to protect your ability to earn income, they are taking growth out of your portfolio. Let’s say that you have an asset or assets that are worth 3 million dollars, which many of our clients have or are on the path to having when they retire.

The income that you can earn off the asset or assets, down the road in retirement, let’s say, is between 4 to 8 thousand dollars a month. This is really good. Now what if this asset grows by 4 to 5 percent every single year. At 3 million, that is 120 thousand dollars in growth, and if it grows by 4 percent again the following year, remember the value is now 3.12 million, and 4% of that is 124,800. This is the compound effect.

It is the growth aspect – and this compound effect, that truly leads to wealth. Why is it necessary to take the growth out of your portfolio at retirement? Does removing the growth really eliminate the risk that we are worried about?

In my opinion, no – it does not. I want you to leave here today with the realization that it is fine to have growth in your portfolio, even during retirement. And it is totally fine to have debt in retirement. That risk is not automatically removed from the equation with no growth or no debt – it depends on the kind of debt you are carrying.

Our concepts are very basic, but very different from traditional financial planning. To learn more you can watch our One Property Away Webinar, or book your free no obligation consultation or call (778) 233-2377.

Financial Planning – Basic Concepts


Find this content useful? Share it with your friends!