President Franklin Roosevelt once said, “There is no tragedy in growing old, but there is tragedy in growing old without means of support.”
How would you answer the following question: why do you invest your money? If you are like most folks, you would respond with something like, so it will increase in value. I would argue that what we are really investing for is “income.” In other words, I suggest that most investors focus too much on the growth of their assets instead of what the income would be from their nest egg. I encourage you to remember that income is the outcome! If you agree, then we must ask ourselves two critically important questions:
Back in the day, when many companies offered a defined benefit plan, the answer was straightforward and simple for most peeps—company pension and Social Security checks. If one were fortunate enough to have saved money during their working years, the additional savings would be a bonus. Regrettably, as of 2017, only 16% of Fortune 500 companies offered a defined benefit pension plan to its new hires, according to a Willis Towers Watson report. That is a dramatic drop from the 59% of companies offered pensions in 1998. Did you know there are now only 14 Fortune 500 companies that offers a pension plan?
Instead of having traditional pension plans, most companies incorporate the familiar 401k plan, which I have argued for years puts relatively complex investment decisions in the hands of individuals with little or no financial expertise, which is incredibly problematic. Nevertheless, it is what it is, and it does not appear that we are ever going back to the days of company pensions.
Therefore, it is essentially up to us to figure out the retirement income maze. In the end, there are only three things that we can do to potentially achieve our retirement income goal: save more, work longer or take more risk. As you might expect, distributing assets in a way that ensures that we get the most out of your retirement without running out of money is a difficult balancing act. I believe that far too many retirees are taking too much risk because they are focusing on growth and not income. Sadly, far too many investors do not even know they are taking the unnecessary risk. Moreover, I find that most people fail to realize the impact of taxes on their retirement income. For example, if we have a 401k worth $1 million we really only have about $700,000 or so because Uncle Sam is going to take his share when money comes out of our IRA or 401k!
So where do we begin to navigate our way to having a good understanding if we will have enough income during our retirement years without the worry that our money may not last? With Wells Fargo Advisors, it begins with The Envision planning process, which is a sophisticated complimentary planning method that combines goal-based advice with advanced statistical modeling,
Wells Fargo Advisors’ unique Envision process creates an effective, easy-to understand method for clients to prioritize and achieve important life goals. Ultimately, the Envision process helps one live the life they have the best way they can, without undue financial sacrifice or overexposure to risk. Of course, Wells Fargo Advisors is not the only firm that offers sophisticated planning software, so I encourage you to reach out to your financial advisor to inquire about the above-mentioned process.
Please remember that income is the outcome and I urge you, nope…I beg you to take the necessary steps to make sure that you are on an appropriate path toward achieving your retirement income goals while reducing the risk of running out of money. Remember that income is the outcome, so plan accordingly so that you can live the so-called golden years you desire.
Harry Pappas Jr. CFP®
Managing Director-Investments
Master of Science Degree Personal Financial Planning
Certified Estate & Trust Specialist ™
Certified Divorce Financial Analyst™
Pappas Wealth Management Group of Wells Fargo Advisors
818 North Highway A1A, Ste. 200
Ponte Vedra, Florida 32082
904-273-7955
harry.pappas@wellsfargoadvisors.com
The use of the CDFA™ designation does not permit Wells Fargo Advisors or its Financial Advisors to provide legal advice, nor is it meant to imply that the firm or its associates are acting as experts in this field.
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IMPORTANT: The projections or other information generated by Envision (R) analysis tool regarding the likelihood of various investment outcomes are hypothetical in nature, do not reflect actual investment results and are not guarantees of future results. Results may vary with each use and over time. Envision® methodology: Based on accepted statistical methods, the Envision tool uses a simulation model to test your Ideal, Acceptable and Recommended Investment Plans. The simulation model uses assumptions about inflation, financial market returns and the relationships among these variables. These assumptions were derived from analysis of historical data. Using Monte Carlo simulation, the Envision tool simulates 1,000 different potential outcomes over a lifetime of investing varying historical risk, return, and correlation amongst the assets. Some of these scenarios will assume strong financial market returns, similar to the best periods of history for investors. Others will be similar to the worst periods in investing history. Most scenarios will fall somewhere in between. Elements of the Envision presentations and simulation results are under license from Wealthcare Capital Management LLC. © 2003-2018 Wealthcare Capital Management LLC. All Rights Reserved. Wealthcare Capital
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