By: Mike Gertsema
Investors approaching retirement (or there already) have hopefully done some planning to be sure they can retire comfortably. Once you’ve run the numbers the planning isn’t over, it’s just beginning.
If you are retired, you have way too much time to think about financial what-if scenarios. The last thing we want to do is run out of money in retirement, live a restricted lifestyle or go back to work.
With improvements to financial technology, we’re able to run many of the what-ifs imaginable right there in the office and talk them through. We can stress test your portfolio and look at future performance, as well as do a risk sensitivity analysis so your portfolio is positioned comfortably for you.
A Case of the What-Ifs
In the last couple of weeks, we’ve had clients send us emails with as many as ten different what-if scenarios, each with their own story and context.
Can we afford to buy an RV, buy a pickup, a travel trailer with all the slide outs, buy a house down south for winter? Maybe rent a house instead of buying? Will we have to sell our current home? What about buying a vehicle to pull behind the RV?
Will we be able to leave a legacy to the kids? Is it possible to have an enjoyable retirement, live off your investments, and leave a legacy? What about taking your entire family on a vacation to a resort? I’m sure we can create scenarios of all shapes and sizes, and it’s normal to want to enjoy a well-deserved retirement.
Your Portfolio Should Fit You
What about income taxes in the scenarios above or what if we have a catastrophic event? Does my financial advisor consult and collaborate with my CPA or tax preparer when doing some of the financial what-if scenarios?
A lot of times the CPAs get the tough job of delivering the bad news when it comes to the what-ifs. They wish they would have been consulted when the decisions were made, and they’re right. Your CPA, financial advisor and attorney are all part of your team and should focus on your best interests.
While most of us think of our financial advisor as the investment guru, there’s much more to the job. Yes, the investments are critical to the success of your retirement and should include risk management as well as overall return, but it should involve more.
What about risk? Could you be doing better with your investments so that we could have fewer what-ifs? Is there a way to get a better return on your investments with the same amount of risk or even less risk?
A Dedicated, Tech-Savvy Advisor
With the technology currently available, we’re able to do scenario analysis for the best and worst times, like 2008, which is still fresh in all our minds. Your advisor should be able to make the complicated simple and be transparent with all fees and charges.
Your advisor should meet with you at least once or twice a year to discuss the markets, your cash flow, income taxes, your goals and the what-ifs. You should receive a follow-up letter with all the items discussed in the meeting for clarity and review.
At Gertsema Wealth Advisors we say: It’s not the way it used to be, it’s the way it should be. We offer all the above, and we believe it’s going to change and only get better for both clients and advisors.