ThE NINE GOldEN RUlES OF RETIREmENT PlANNING
- IF It soUnDs too gooD to Be tRUe...
Always remember that most investments are sold, not bought.
That means your “advisor” is trying to find some way to entice you
to make that certain investment. In Sales 101 you learn that people
are easily motivated to invest by either fear or greed. Promising
unrealistic returns simply whets your greed appetite. However, if
someone implying a “safe” return of, say 10%, when you know the
banks are safely paying only 2% on CD’s...well, this just sounds
too good to be true. It probably is. Trust your gut that something
doesn’t make sense. Ask lots of questions until it sounds more re-
alistic. Learn all about the risks. Learn what is guaranteed, and
what is not. Make an intelligent decision. Not a wishful one.
- CAsh (FloW) Is kIng!
Remember back in school when you could trade your peanut
butter jelly sandwich for someone else’s goodie in return? Well,
in the grown up world you need cold hard cash to get the things
you want. Accumulation plans are fine for theoretically grow-
ing your wealth, but income plans are king. Make income the
driver of your plan. Consider staples such as bond interest,
stock dividends, annuities, rental real estate. All these invest-
ments kick off cash flow you can then use to buy lots of life’s
goodies. Also, if income is the key, then as long as it is steady
and reliable, the market fluctuations of the principal are sec-
ondary. Contrast this to a heavily-laden accumulation plan in
things such as growth stocks and funds where if you take cash
out on a regular basis, the potential erosion of principal through
withdrawals and market fluctuations could have a significant
negative impact on your ability to continue taking those with-
drawals. What happens if the money runs out? With a reliable
income plan, the money never runs out.
However, say you want some investments in a growth strategy
to meet the objective of having cash available in the future, just
not today. Perhaps you want to self-insure for a possible cata-
strophic illness, or leave the money to your heirs. Just remem-
ber that with ample cash flow, you can still fund things like long
term care insurance, or life insurance that may more reliably
grow your dollars and meet your objectives.
