Your Wealth Reserve: Is ‘Liability-Driven’ investing right for you?

What to do when the market is down?

Buffett has often advised investors to buy quality stocks when they are on sale like now. He is doubling down on his energy bets like Occidental and Chevron. He bought more Apple too. Celanese is another of his dip buys. Will these be the winners of the future? Who knows? Even Buffett is not always right so you can diversify by buying an energy index on sale. Or you can buy shares in the largest growth firms like Apple, Microsoft, Amazon, and Tesla. Of course some of my readers buy quantum computing firms like RGTI or IONQ for the future. Some buy the Vanguard Top Ten on the assumption that these funds will continue to return 11% throughout their retirement.

https://www.amazon.com/Vanguards-Top-Ten-mutual-funds/dp/150073909X

Can a fee-only financial planner help you?

Goals, Inventory Identify Distribution, Tax, and Estate Issues and Opportunities are the steps you need to take to be assured of retirement income. For example, if you inherit an IRA from a non-spouse you are required to liquidate the balance of the IRA in a more compressed time frame than previously expected. “A good planner can help you understand the effect of current legislation and make appropriate adjustments to the financial plan to account for the changes.” Slight shortfall: If you will have less income than you planned, you can address gaps in income using some basic strategies. You may also need conversations about adjusting goals and ensuring those goals still fit your situation. Severe shortfall: If you have not prepared for retirement and it appears unlikely that you will meet your income goals, a planner can suggest strategies you may employ to improve the situation. You will need difficult discussions about redefining your family’s goals. A planner can help you implement your retirement income plan including when to start Social Security, pension, IRA RMDs, etc.

https://www.amazon.com/Reset-Your-Retirement-Income-retirement/dp/1512304344

Should you claim Social Security benefits early?

Many advisors suggest you wait to claim benefits because every year you wait may increase your benefit by 8%. In our family, I was not able to find a new position after my financial services company was merged and I was “redundant.” I started at age 62 and have been receiving HALF of what I qualified for if I had waited until age 67, my full retirement age. Luckily my spouse kept working and filed after age 70 so the maximum possible benefits are being paid to make up for my decrease. For the rest of our lives, I will receive about HALF what my spouse receives. We were lucky we met with an SS rep so we qualified for larger benefits. Of course the rules have changed and they are complicated. I recommend you obtain an appointment at your local office if you can. If that is not possible, buy an analysis. It is important to understand what you could receive: benefits can easily top $1 million over 30 years of retirement for a couple.

https://www.amazon.com/Maximize-Social-Security-Benefits-Retirement/dp/1495439224

Is ‘Liability-Driven’ investing right for you?
Your advisor may have suggested this strategy. Liability-driven investing attempts to match your portfolio’s investment strategy with future liabilities. Liability-driven investing is typically associated with a defined benefit pension, but is becoming more popular with advisors helping individual clients investing for retirement. For most people this strategy is the same as the investing bucket strategy. You segment funds among different time horizons or risk tolerance bands in order to keep a withdrawal rate that corresponds to time left in retirement. Thus your money is sitting in 1. short-term bonds or CDs, 2. balanced funds and 3. long-term equities. Your ‘liabilities’ are your expenses or obligations. If you need money available in 1-2 years, you tap bucket 1 and so forth. Returns are usually greatest from your equity holdings so you keep growing your assets for use later. Your advisor may be using more sophisticated terms but the strategy is the same as the common sense one Buffett recommends.

https://www.amazon.com/Warren-Buffetts-Vanguard-Funds-Retirement/dp/1496148592/

Investment behavior research and your biases

Why do we hold on to losers and sell winners? Why do we engage in vigorous trading when studies show we lose money? New studies about our way of thinking about money have provided some guard rails that may keep us from big mistakes. Fact: we spend more time planning a vacation than planning for our financial future. People with money have a plan—investment and retirement plan. People who most NEED a plan don’t think they need one. Set goals, find strategy, set up plan. List financial goal priorities. Know your biases and avoid them with help. For example, we buy a stock or fund that just went up. It goes down but we don’t face it and lose more money. Or if the stock goes up we feel we must sell to win. Instead of diversifying a portfolio for safety, we buy more of the same. Many keep buying their own company stock. We know this strategy is risky so we worry instead of investing in a plain index fund. Even with new information, investors stick with their original purchase. We tend to think we are super brilliant when our purchase does well. Most of us mistakenly rely on past performance. Usually winners become losers during the next period. Buffett’s strategy beat best advisors.

Let Warren Buffett be your advisor: https://www.amazon.com/Warren-Buffett-Your-Investment-Advisor/dp/1518690963

This is what your advisor says when they don’t want you

Advisors work in an industry that requires them to make money from your money. Are you happy with a service that you have no way of knowing if you are getting the right level of service? Advisors don’t want to lose you if you are going to give them $ millions in assets. They don’t want to lose you if you could have $ millions in assets. But they only have so much time and they must produce revenue for themselves and the firm they work for. They don’t want to waste time with you if you take up too much time for too little revenue. So how do they get rid of you without making you mad or worse making the person who referred you mad? The term they like is ‘FIT.’ You don’t ‘fit’ with their minimum revenue goal or you don’t ‘fit’ with their type of services. As sales people they have learned the kind of customer to seek and keep. Their object is to make money so if you don’t have enough or will cost them more time than they can spend, you will have to learn how to help yourself. Millions have had to learn to manage their own financial life. You must understand what your advisor means: time to leave or stay.

https://www.amazon.com/What-Your-Advisor-Really-Means/dp/1542964520/

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