The durability of retirement income is critical
* Sponsored content provided by David Guttery, Keystone Financial Group in Trussville.
By David Guttery
TRUSSVILLE — When I’m working with clients to construct a comprehensive retirement plan, the focus is inevitably placed upon the income to be generated. The durability of that income is critically important. Durable implies that
you can neither outlive the income nor can the market take the income away. It’s dependable, and you know it will be there at all times. I want to help clients minimize the risk of outliving their income.
An equally important concern is the mitigation of what I call “The Four Horsemen of Risk”. Those are risks associated with market timing, loss of principal, inflation, and longevity. You can’t have a discussion about income durability without
also considering these risks. Market timing risk comes with retiring at the wrong time. You’ve retired, and have likely begun to liquidate shares for the support of income, but its September of 2008, and the beginning of what eventually came to
be known as “The Great Recession”. You’re compelled to sell an increasingly greater number of shares into the teeth of a declining market simply to sustain the same amount of systematic income.
As the name implies, principal risk is simply the risk that the value of an investment can decline. Inflation is a concern because it’s the erosion of your purchasing power, and the risk is that your investment income will not keep up with future increases in the cost of living.
Lastly, we have the risk that you might outlive your money. We call this longevity risk. I can’t think of any clients who have factored living with their children into their retirement plan. The problem is that most people generally don’t understand that defending against one type of risk generally comes at the expense of greater exposure to the other risks. Ideally, we want to structure a retirement plan that effectively addresses all four. Each client strategy is different and reached only through comprehensive planning.
We identify risk parameters and portfolio objectives through the development of investor profile statements. Then we plan for the production of inflation-adjusted income through tax-efficient sequencing and coordination with other durable sources of income such as social security or pensions.
As I discussed within the editorial of last October, the investments and platforms we may use are simply tools. Each tool brings a unique competency to the table and I help clients identify which of these tools might be of greatest use in their situation. It is possible to mitigate these “Four Horsemen”, but it’s a proactive process that begins long before someone’s retirement date. There is no one size fits all answers to be found in a box, and planning for retirement income is a unique process for every investor.
As a planner, I’m not here to sell products. I’m your fiduciary. I’m your advocate. I’m here to maximize your best interests and help you cipher through strategies in order to find the right one. I need to know how well you’d prefer to sleep at night if we go through another Great Recession. Believe it or not, everyone will not answer that question in the same way, and there’s a myriad of tools out there to fit each unique answer. My job is to understand who you are, your situation, construct a plan, and bring the right tool to the task at hand.
It’s a challenging environment. The markets are volatile, inflation and interest rates are rising, the Federal Reserve is active, it’s an election year, and geopolitical risks are abundant. Times like these call for in-depth, critical and creative thought. I stand ready to assist anyone for whom this is of importance.
(*) = Securities products are subject to investment risk, including possible loss of principal. Before investing, carefully consider the investment objectives, risks, limitations, charges, and expenses of the product and any underlying investment
options. This information can be found in the prospectuses or offering statements. Please read carefully before investing. David has been in practice for 27 years, with a distinctive focus on the management of retirement assets for the production of durable income. David R. Guttery, RFC, RFS, CAM, is an Investment Advisory Representative of Ameritas Investment Corp, and President of Keystone Financial Group, in Trussville, Alabama. David independently offers securities and investment advisory services through Ameritas Investment Corp. (AIC) member FINRA/SIPC. AIC and Keystone Financial Group are not affiliated. Additional products and services may be available through David R.
Guttery or Keystone Financial Group that are not offered through AIC.