UlTImATE SUccESS GUIdEprincipal. The bottom line is if you can’t swim -- that is, if you can’t
afford to lose any money -- it doesn’t matter which end of the pool
you jump in, you will drown. If you’re in the stock market you stand
the potential to lose money regardless of how diversified your blended
portfolio is. If you need to live on the money at the time, this is critical.
Remember when the market is up, your broker’s a hero, and everyone’s
happy. When the market turns down, the last advice you get is cash out.
Why? Because then your advisor stops making money with your money.
When I speak with couples who attend my dinner seminars, I ask them,
“Do you think your stockbroker, after working together with you for 20
- years, will ever say, ‘Thanks for letting me help you all these years,
but now I have to send you to the guaranteed income planning guy down
the street.’?” They always chuckle and say, “No, that would never hap-
pen.” When you retire, the advisor who specializes in growth and stock
market investments will often keep you in the market and continue to
have your monies at risk. We see folks in their 60’s, 70’s, and 80’s all the
time in this very situation. They have the same portfolios as their kids in
their 40’ and 50’s. That’s just wrong, but it’s not their fault. They sim-
ply did not know there are other investment options available to them,
something their advisor didn’t tell them. It is important to consciously
decide what you are really trying to achieve and customize your finan-
cial plan with the right blend of market risk and safety.
- tAx RIsk AnD tAx ADvAntAgeD stRAtegIes
After analyzing your situation, you realize that you fall short of your
income needs. What then? What if you’re risk averse and not willing to
lose any more than you have? Is there anything else to consider? What
about taxes? Could we reduce, eliminate, or put off taxes, and give your
money more time to work for you, not the government?
As if worrying about losses and market timing wasn’t enough, now it’s
important to incorporate tax planning into your financial planning deci-
sions. Most people worry all the time about the rate of return they are
getting with no regard to the bottom line. As the old adage goes, “It’s
not what you make, but what you keep that counts.” The risk now also
stretches beyond stock market investing to tax strategies. If you’re in
a 40% tax bracket and earn 8% in a mutual fund, you’ll net 4.8% af-
ter taxes. Consider a less risky tax-favored investment. It only needs