What’s in a Number?
Email This Article Bruce DooleJuly 19th, 2010
Continuing the trend of the last few years, financial news has once again dominated headlines through the first half of this year. There was a stock market recovery of over sixty percent from March 2009 to April 2010, the passing of two new bills aimed at reforming the US healthcare system and financial markets, concerns over a few European countries ability to pay their debt, and on and on. Through all of this, investors continue to read the headlines while trying to keep an eye towards the future and make smart investments. Our goal is to help you understand and use this information, by positioning your investments to give you the highest likelihood of accomplishing your goals in not only the current markets, but in future economic and market cycles as well. In our most recent market update, we discuss the investment opportunities that exist in corporate bonds and high-quality dividend paying stocks. For these timely commentaries and more, please visit our website and subscribe to the weekly commentary written by your advisors specifically for you.
With the recession and subsequent recovery, investors are focused on how the markets have affected one of their largest financial goals—retirement. Seemingly right on queue, many financial companies have tailored their advertisements to soon-to-be retirees. A message that’s recently gained popularity is: do you know your retirement number? You may have seen the commercials showing people carrying their retirement number around with them. The numbers go through all sorts of daily abuse (very timely no doubt but it also makes for dramatic TV) – getting run over, burned and even bitten by a dog. At the end of the day, everyone replaces their number in a case where in the morning the number is returned to its original condition. Commercials like these illustrate two questions that we have been answering for years as financial planners and investment managers: Do I have enough saved to retire? How will the market changes affect me during retirement?
The advertisement tries to simplify the answer to those questions, suggesting that you achieve retirement by accumulating a certain account value. Generally speaking, it’s hard to think of retirement as anything but the value in your portfolio. As you work and save, monitoring your portfolio value can serve as a useful benchmark towards accomplishing a very abstract concept, like retirement. But anyone who has had investments over the years recognizes it’s nearly impossible to time your retirement with the apex of your investment portfolio. And in fact, very rarely are retirement decisions based chiefly on passing a certain account threshold. Most of the time the decision to retire is based on a life event, like: turning a certain age, becoming eligible for benefits, changes at the workplace or a health event. It’s at this time that most retirees find that they shift their focus from monitoring account values…to focusing on another number—their income. Retirement isn’t a number or an account value for most retirees. It’s a lifestyle filled with daily activities.
Our focus leading up to retirement is on identifying your income sources and developing a plan to maximize those sources, allowing you to enjoy retirement without worrying about changes in the economy. In this month’s Planning Perspective, we talk about the three main sources of income in retirement and ways of maximizing them. If you have any questions about your retirement plan or how those account values relate to your retirement income plan, give us a call and we’ll make sure that you understand “your number.”