Proper Diversification and Strategic Planning in Retirement
In the context of retirement planning, proper diversification and strategic planning are essential tools for managing the impact of uncontrollable factors such as market volatility and tax changes. As discussed in the podcast episode with Leslie Hammock, these elements play a crucial role in providing a more stable and confident retirement income.
Understanding Market Volatility
Market volatility, often referred to as “red money,” represents investments in the stock market that can fluctuate significantly. Leslie emphasizes the importance of diversification to manage this risk effectively. By spreading investments across various asset classes that are non-correlated to the market, retirees can help preserve their portfolios during market downturns.
During the accumulation phase, individuals may focus on growth-oriented investments. However, as they transition into the preservation and distribution phases of retirement, the strategy should shift to include more stable, income-generating assets. This approach helps safeguard retirement income against market downturns, particularly during critical periods when retirees begin to withdraw funds.
The Role of Strategic Planning
Strategic planning involves anticipating potential risks and creating a comprehensive plan to address them. Leslie highlights five key risks in retirement: market risk, tax risk, longevity risk, interest rate risk, and the risk of needing long-term care. Each of these factors can significantly impact retirement income if not properly managed.
- Tax Risk: Tax laws are subject to change, and retirees must be prepared for potential increases in tax rates. Strategic planning can involve utilizing tax-efficient investment vehicles, such as Roth IRAs or municipal bonds, to minimize tax liabilities in retirement. By understanding the implications of tax changes, retirees can make informed decisions that protect their income.
- Longevity Risk: With increasing life expectancies, retirees must plan for the possibility of living longer than anticipated. This requires careful consideration of how to allocate resources to ensure that income lasts throughout retirement. Leslie points out that many people may not realize the financial implications of needing long-term care, which can be a significant expense. Strategic planning can help address this risk by incorporating long-term care insurance or other financial products designed to cover these costs.
- Interest Rate and Inflation Risk: Interest rates and inflation can erode purchasing power over time. Leslie notes that retirees should have exposure to investments that can grow in value and keep pace with inflation. This might include equities or real estate, which historically provide returns that outstrip inflation. By diversifying into these asset classes, retirees can better protect their income against the effects of rising prices.
Leslie shared: “Financial planning isn’t a one-time event. It shouldn’t be piecemeal. Retirement and Estate Planning should go hand in hand. I am committed to walking beside my clients every step of the way”
About Leslie Hammock
Leslie Hammock was born in Perry, Georgia, graduated from Stratford Academy, and later graduated from Mercer University in Macon, Georgia. He began his career with Mass Mutual. After a number of successful years, Leslie founded his own firm. Leslie has extensive personal and professional experience with an emphasis on Retirement and Estate planning strategies for professionals, business owners, and individuals working in both private and government sectors.
Leslie has been the recipient of the National Quality Award. He is also a long-time member of the International Association of Registered Financial Consultants (RFC), a member of the National Ethics Association, and an Independent Fiduciary Investment Advisor.
Leslie is an approved adult financial education instructor and holds classes at numerous local colleges on the subjects of Investment Planning, Retirement Planning, Social Security Maximization, Estate Planning, and many other topics.
Leslie is dedicated to developing lasting relationships with all his clients in their wealth accumulation and preservation objectives. He takes pride in his ability to provide clear, easily understood strategies using various financial products, services, and cutting-edge analytical technology.
Learn more: http://www.retirebydesign.com/
Disclosures: Securities and investment advisory services offered through Integrity Alliance, LLC, Member SIPC. Integrity Wealth is a marketing name for Integrity Alliance, LLC. Retire By Design is not affiliated with Integrity Wealth.
Disclosures: Diversification does not guarantee a profit or protect against loss in a declining market. It is a method used to help manage investment risk.
Disclosures: Not associated with or endorsed by the Social Security Administration, Medicare or any other government agency.
Maximizing your Social Security Benefits assumes foreknowledge of your date of death. If as an example you wait to claim a higher monthly benefit amount but predecease your average life expectancy, it would have been better to claim your benefits at an earlier age with reduced benefits.
