Remember picking up the handset of your telephone, waiting for the operator, and then telling her the number you wanted to be connected to? What do we do today? Some of us just have to say, “Alexa, call mom.” What has changed is the control you have when making a call and the ease in which you do it. What has not changed is the need to connect to others remotely.
How does this relate to financial planning? Remember meeting with your financial advisor to discuss what stocks and bonds to include in your long-term portfolio? Today, you might meet with that same person to build a retirement portfolio that includes stocks, bonds, annuities, life insurance, real estate, etc. What has changed is the number of things included in your portfolio, decisions that typically rest with your financial advisor. What has not changed is your control over the investment of your life’s savings, the volatility of the stock market, and the desire to be financially sustainable throughout your golden years.
Retirement plans, particularly financial investments, should, like voice-assisted devices, be in your control and be easy to use. Most people do not control their financial investments, but that can change. Let’s begin by understanding how you got to where you are today.
Have you ever been to Wall Street and on the floor of the New York Stock Exchange? Standing on the floor of the New York Stock Exchange and looking up at the platform where IPO’s (initial public offerings) are announced, you will see a person (usually surrounded by a gaggle) hitting the gavel. What you will not see are hundreds of people yelling, screaming, and waiving papers all over the place. The “floor” is virtually empty, with the exception of seeing it on a few financial shows, like Wall Street Week, Bloomberg and CNBC. The building itself is rather small, with many aisles crowded together, and booths filled with computers. It is still a historic site with a very tall ceiling, long windows, and a narrow walkway above it for viewing. It appears so large on TV; it must because it is our center of the financial universe.
So, what is behind that gavel and all those computers and their algorithms? Speculation. Roger Ibbotson, Professor in the Practice Emeritus of Finance at the Yale School of Management, and Robert Shiller, Sterling Professor of Economics at Yale University, both agree that most financial advice given today and the way it is given is obsolete, like the phone operator. In their many whitepapers, articles, books, and awards (Nobel’s in Economics) they suggest that for today’s retiree or near-retiree that speculating is obsolete. The algorithms they have developed have been adopted by Goldman Sachs, J.P. Morgan, and Bloomberg and many large insurance companies to protect investors from losses. Like your home, your automobile, your life, you can also insure your money from losses.
You got to where you are today in the same fashion as most people: You worked, and you invested. The accumulation period is typically defined as your post-high school/college working years to when you decide to retire. During this period, it is assumed that you will save and accumulate and build up assets, such as a business, house, land, IRA/401k, kids’ college, etc.
The distribution period begins when retire or partially retire and no longer work to accumulate assets. For nearly 50 years you save and invest to create assets to be used in retirement. When you retire you “paydown” or liquate those assets — all at once or individually over time. Your hope is that it is enough to sustain you, your spouse, and your heirs. So, on average, you work and save for 50 years and stop working and spend down over 15 years, actuarily speaking. At least, that’s the plan.
What if you could stop all risk and guarantee growth?
There are ways for investors to no longer worry about the stock market losing value. You no longer need to think about how your retirement portfolio is “performing.” You can relax with the knowledge that your investments will increase when the stock market gains value but are also insured so you do not lose value when the stock market loses value.
This technique allows you to retire and “turn on a spicket” to receive a steady amount of your retirement investment for as long as you live. This method allows you to sleep a lot better at night because you do not speculate about how your retirement money is performing. This method is called insured algorithmic automated trading programs. That is a “mouthful”, but it is simple. Insured Automated Trading Programs are available to virtually anyone.
Kirk Shamberger is a partner with C.K. Financial Resources and has over 30 years of experience in the financial services industry specializing in retirement strategies. He may be contacted at Kirk Shamberger 802-238-8187 or kirk@ckfinancialresourcs.com.
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