It’s common for clients to walk in because they want investment advice. However, what they really need even more than investment advice is financial planning. As we get older, the stakes of do-it-yourself investing get higher. First, we (hopefully) have more money than we’ve ever had before. While this is certainly positive, we also have less time until we need the money. The combination of these two facts increases the stakes for making sure we don’t make a mistake. This concern is what leads many investors to seek investment advice.
Being proactive in seeking investment advice at this stage of life can be a great step in the right direction. But often, there is an underlying issue beyond the investments that needs to be addressed. The real need is often financial planning.
What investments you own or should own can only truly be evaluated properly in the context of what they are to be used for. It’s natural to feel an attachment to an investment that has performed well in the past. The issue is that many of those investments were made during the accumulation phase of your life. Preparing for retirement frequently requires us to reexamine the portfolio we have and ask ourselves the question: Are the investments that got us here going to get us through the next phase of our life? The answer often is that what got us here will not get us through retirement. The reasons involve far more factors than saving for retirement entailed.
When you are saving for retirement, the formula is fairly straightforward. Buy low-cost, well-diversified investments and change them as little as possible, including through down markets. However, when we near retirement, many more factors come into play. This is where the need for planning really begins.
First, how much do we really need? We have to have a baseline to measure, or we’ll never know how much money is enough to retire. Next, which account or combination of accounts do we draw down first? How should the assets be titled? Do we want to leave money to the kids? If so, how much percentage of the estate should we leave them? Should it be an outright inheritance, or should it be held in trust? What’s the most tax-efficient way to draw down and eventually transfer these assets?
Clearly, there is a lot more to think about when it comes to nearing or living in retirement than what investments you should own. This is the point of financial planning. This is where comparing the lowest-cost investment advisor falls short. The investments only matter in the context of the greater plan for the investments themselves. I always like to say that planning should drive the investments, not the other way around. This is the time that you want to pay for advice: not just financial planning, but tax advice from your CPA and estate planning from your attorney. The time to be cheap isn’t when you are making major life decisions that will affect not only your retirement but future generations as well. Now is the time to get it right. It costs a whole lot more to fix a mistake than it does to not make one in the first place.
Financial planning and investments are two completely different things but should work hand in hand to ultimately lead to an enjoyable retirement.
Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. Reich Asset Management, LLC is not affiliated with Kestra IS or Kestra AS. The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation. To view form CRS visit https://bit.ly/KF-Disclosures.
Eric is President and founder of Reich Asset Management, LLC. He relies on his 25 years of experience to help clients have an enjoyable retirement. He is a Certified Financial Planner™ and Certified Investment Management AnalystSM (CIMA®) and has earned his Chartered Life Underwriter® (CLU®) and Chartered Financial Consultant® (ChFC®) designations.
