We can hope that our retirement money invested in the stock market or mutual funds will do well when we are ready to retire. We can hope that Social Security will be there for us when are ready to retire. We can hope that we are working with an investment professional who understands the difference between accumulation of assets and distribution as income. We can also hope that our retirement money is being managed cost efficiently and appropriately for our risk tolerance and age. We can hope that our retirement income plan is sustainable, will provide steady income and has plenty of liquidity. We can also hope that we have the courage to plan for our retirement income and not bury our heads in the sand hoping that it’ll all turn out okay. We can also hope that we do not get ill or die without a will or trust in place.
If you fit the category of people who have put off planning, don’t feel bad you are probably in the majority. From 2001 until 2011 the markets went nowhere and had a couple of significant drawdowns. In bad and declining markets, it is human nature to receive your statement from your brokerage and just toss it in a drawer unopened because we really don’t want to see the damage. Many people do not have life insurance because they don’t want to face the fact that they may actually die someday. People can also justify not having life insurance or disability insurance believing that they do not need it any more when in fact, there passing or disability would create a liquidity issue for their families.
Instead of hoping all these things will be okay, why don’t we know that they will be okay? You can find out what your Social Security benefits will be depending on when you take them by going to the Social security government website. If your 401(k), 403B or IRA are made up primarily of mutual funds that are really designed for accumulation of assets and not for distribution as income, you may want to consult with an advisor that can show you how to get predictable, sustainable income from those investments. Make sure that your assets are also liquid. You should mitigate market, credit and interest rate risk with your income plan. The equity markets have been good the last nine years, so it is easy to become complacent and risk your retirement money in the equity markets. Don’t rely on the equity markets for your retirement income. The equity markets are more a growth vehicle than an income producing vehicle.
There’s a humorous commercial on TV that shows a husband-and-wife doing every conceivable chore in the house or yard to avoid retirement planning. Across the street set their neighbors with an insurance salesman who flips around his laptop saying they your retirement plan is all done. Both, in my opinion, are exaggerations. An insurance product alone is not going to solve your retirement planning needs.
Take the time and muster up the courage to look at a retirement plan that is sustainable, steady and design for income, growth and provides liquidity, just in case!
Mark Patterson is Chief investment officer with MHP Asset Management and can be reached at (603) 447-1979 or mark@mhp-asset.com.
