Retired or Thinking About Retiring

When you are retired or thinking about retiring, financial planning takes on a whole new set of concerns. The principal challenge in retirement is having enough money to buy the things you need and want for the rest of your life, in light of the fact that the cost of almost everything will go up every year. Even today’s low rates of inflation can have a devastating impact on your cost of living over a 20+ year retirement. And because stock market volatility can be unsettling and low interest rates make it hard to earn a decent return on stable bond investments, investing correctly is incredibly important for retirees.

Wall Street and the insurance companies have responded to these challenges by offering an array of expensive products with various minimum return “guarantees.” Many of these products prey on peoples’ fears and usually are not the best solutions for protecting a lifestyle over a long period of time. At Keatley Wealth Management, our clients are able to get a clearer picture of their risks in retirement and how these risks can be mitigated through our highly detailed planning process that is integrated with our evidence-based investment strategy. Our experienced team will help you look past current market conditions and direct your focus onto a financially secure future.

Living well in retirement means enjoying your days and sleeping well at night – knowing you have trusted financial advisors and a plan that works for the long haul. We can get you there.

Planning for the Worst Case Scenario

Bert had a busy and lucrative medical practice that afforded him and his wife, Gina, a very comfortable quality of life. Bert and Gina had been long-time clients so in 2007 when they said that they were ready to retire, we were prepared. Knowing that retirement was close at hand, we had already begun an in-depth analysis of Bert and Gina’s financial goals and resources. An integral part of every client’s retirement planning process, this analysis “stress tested” the couple’s investment portfolio under a variety of different market and inflation scenarios, preparing for both best and worst-case scenarios. Together we decided to implement a globally diversified investment portfolio that paid the couple a comfortable monthly withdrawal for them to live on and enjoy.

The worst case scenario became a reality in the fall of 2008. As the financial crisis unfolded into the early months of 2009, domestic and international equities fell to approximately half their value and the value of Bert and Gina’s investment portfolio dropped. Fortunately for them, the hit on the portfolio was not as severe as it could have been because their investment portfolio was highly diversified. The portion of their nest egg that was invested in stable-value bond investments was available to meet Bert and Gina’s spending needs for more than five years if needed. This provided an ample cushion and there was no reason to sell their stock investments at the depressed values seen in early 2009. Our thorough scenario planning and the resulting investment strategy we had put in place in 2007 helped them to live securely while riding out the storm in 2008 and 2009.

Today, Bert and Gina are fully enjoying their retirement. The financial crisis did not impact their standard of living or future prospects. And it certainly didn’t change their ability to enjoy what they really value most - traveling together and spending time with their children and grandchildren.

Building and Diversifying

Richard was an accomplished business owner who lived for his family. It was his desire for their future well-being that fueled his own financial success. He worked hard and did very well. For years, as he grew his business, Richard also grew his investment portfolio, buying stock in a well-known North Carolina bank. In 2007, Richard decided it was time to transition his business to his sons and focus on retirement with his wife, Nina. When we met with Richard and Nina, they had about 80% of their considerable investment account in this single bank stock. The stock had performed well, paid a nice dividend and was generally viewed as a smartly-managed, successful company. Richard and Nina knew they would pay a hefty tax on the capital gains if they were to sell the stock, and given the excellent reputation of the bank they saw no reason to do so.

At Keatley Wealth Management, we never want our clients to pay taxes if they don’t have to. However, we believe it is important not to let taxes alone dictate important investment decisions. We felt strongly that having so much of Richard and Nina’s wealth in a single investment was an unacceptable risk, regardless of how successful the company had been. We presented Richard and Nina with some fact-based analysis of what their best and worst case scenarios could be if they were to hold on to this single stock. After considerable discussion, Richard and Nina agreed to sell the stock, pay the capital gains tax and invest the proceeds in a globally-diversified portfolio of stocks and bonds. A short time later, they were glad they did.

“We felt strongly that having so much of Richard and Nina’s wealth in a single investment was an unacceptable risk, regardless of how successful the company had been. ”

During the financial crisis in late 2008, that bank’s stock price collapsed more than 90% and the bank itself was acquired by another bank. Investors who owned the stock lost nearly all of their money, never to be recovered. But because they were well-diversified, Richard and Nina’s portfolio suffered only a moderate, temporary decline during the crisis. Sadly, Richard is no longer living, having passed away in 2010. Nina is still a client of ours and enjoying her golden years, just the way Richard had wanted and planned.

The case studies presented are not a guarantee of future performance or success. Services for actual clients are customized to each unique situation; therefore, investment and financial planning outcomes will vary among clients and results may be better or worse than those scenarios depicted. Information provided is for illustrative purposes only and should not be considered specific investment or financial planning advice. Nothing herein is intended as an endorsement of Keatley Wealth Management by any person.