Financial advisors often ask the questions: what are your retirement goals? What do you dream of accomplishing?
These are important questions and are central to the investment planning process. But they are broad in scope and it can be difficult to know exactly how to answer them. An important feature of solid retirement planning is prioritizing your retirement goals into groups.
Do you have enough to cover healthcare expenses? Do you want to buy a second home? Pass along a certain amount of assets to your heirs? Which goal is more important than another?
Prioritizing Your Retirement Goals: Needs, Wants and Legacy Items
Categorizing your retirement goals based on needs, wants, and legacy items can help your retirement planning process. Below is an easy way to think about these:
Structuring a Portfolio to Match Investor Goals
(Click chart for larger version)
For illustration purposes only. Source: J.P. Morgan Asset Management. Bonds are subject to interest rate risks. Bond prices generally fall when interest rates rise. The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s fi nancial condition, sometimes rapidly or unpredictably. Equity securities are subject to “stock market risk,” meaning that stock prices in general may decline over short or extended periods of time. Investing in alternative assets involves higher risks than traditional investments and are suitable only for the long term. They are not tax effi cient and have higher fees than traditional investments. They may also be highly leveraged and engage in speculative investment techniques, which can magnify the potential for investment loss or gain. *Equity, fi xed income and cash are considered “traditional” asset classes. The term “alternative” describes all non-traditional asset classes. They include private and public equity, venture capital, hedge funds, real estate, commodities, distressed debt and more.
What You Need in Retirement
Your needs should be top priority. Sometimes a pension and Social Security retirement benefits can cover living expenses, but other times you need an investment portfolio to provide you supplemental income. Perhaps adding an income producing money manager to your portfolio could be the solution, or making periodic withdrawals from your portfolio might work. A financial advisor can help you decide what retirement income strategy works well for you.
What You Want in Retirement
Your wants are those things you’ve worked hard all your life in hopes of obtaining, and you should be able to use your investment portfolio to help you get them. A long-term investment strategy designed to grow over time can help you reach these goals. Depending on what you’re after, it also might require adjusting your portfolio’s allocation to hopefully generate a bit more return.
What You’ll Leave to Your Heirs
Finally, your legacy goals come into the plan, with the main consideration being what you want to happen to your assets. This can give your assets a longer time horizon (yours + your heirs), thus opening the door to longer-term investment strategies. One possibility would be to increase your equity exposure in hopes of achieving better returns over time, though doing so could mean taking on a bit more risk. Your financial advisor can help you determine the right balance.
Legacy planning also involves estate planning, so you can control how the assets are treated now and in the future. This again requires the help of a financial advisor, specifically one with estate planning experience.
An Investment Plan Can Help Structure Your Retirement Goals
Speak to one of our Wealth Managers today to put your retirement needs, wants, and legacy goals out onto the table, and let us help you figure out a plan for achieving them.
We build investment plans for our clients designed to help keep them on-track for achieving their goals, while also being flexible to create new solutions should your goals or financial situation change.
It’s important to know where you stand relative to your retirement goals, and what you need to do to help make sure you get there. An investment plan offers that solution. Call us today at 1-800-541-7774 to build yours, or get started now by answering a few questions here.
