3 Things 2-14
02/14/2022 Although MAS is a financial services company, not everything published herein will be about numbers or investing. But no matter the topic, we hope for three things: 1) That you find the time you spend engaged worthwhile. 2) That you’ll reach out to us for help in any of our areas of expertise if something we discuss creates an urging in you to do so. 3) That you’ll share this with somebody new each time you read it. Thing One One Question And Three Buckets If you’re at or nearing retirement and your post-working income isn’t all guaranteed (say through a combination of social security and pensions), you’ve likely wondered how to go about patching it all into a plan. In that vein, we offer for your consideration the one-question and-three-bucket approach. The question: It’s longevity based and, of course, you don’t really know the answer, but your plan needs to have an endpoint, at least for the purpose of doing the other calculations, so ask yourself, how long will I live in retirement? Answering that question will help you reduce the risk of outliving your savings since social security typically only covers about 40% of post-retirement expenses. The Buckets: Safety, Income, and Growth
The safety bucket. Simply put, this bucket is a set aside for emergencies. It’s an acknowledgment that you should have some cash that is readily accessible for life’s unexpected events.
The income bucket. This is the cash flow plan that provides a steady stream of payments to you. It can include things like social security, pensions, annuities, and retirement plan distributions. Add this bucket up, see where you stand, and determine if and where you need to make adjustments. If you determine you do need more in this bucket, for instance, you might need to pull from the third bucket.
The growth bucket. This is the one you have invested to earn an inflation-beating return. It can be used to add to your other two buckets or to the fourth bucket that we didn’t mention which is your legacy bucket. Whatever you don’t spend will get passed on to those you designate. That’s your legacy.
This was a very simplified overview. Please reach out to us to get started on your own, specific plan. In this regard, age is nothing but a number. Whether you’re 22 or 62, we can help.
Thing Two A Four Letter Word, But Not A Bad One Crypto-Currency, Meme Stocks, Non-Earning Tech Stocks. Those things are risky, right? Yep, we’ve seen those categories reach dizzying highs and nauseating lows in the last twelve months. What about more traditional offerings like Banks, Healthcare, and Industrials, are those risky? Sure, those categories have been on a bit of a roller coaster recently as well. Well, what about bonds? Those are safe right? Nope, in a rising interest rate environment, owning long-term bonds is risky. I mean, you do get all your cash back, but it’ll be worth less than when you put it in so, in that sense, you will have lost money via the purchasing power loss. So what to do? Put your money under a mattress? Buy a money market fund? You could do either. But what you should do before deciding is declare what your intentions are. Are you investing or are you trying to make a quick buck? Both are ok and there is no value judgment being made here. But the question is important because you can use the answer, combined with your understanding of the distinction between risk (the four-letter word) and volatility can make the decision-making process a more straightforward one. If you are investing, you need to understand that the ups and downs of the market (sometimes wild ups and downs) are an inherent part of the process. That’s volatility. You (and/or your advisor) should pick good companies, or sectors, or whatever investments you prefer and know why you have them. Then, when the inevitable swings take place you’ll be able to take comfort in your knowledge of volatility and your faith in your long-term plan. Will the risks be eliminated? Not at all. Your investments could technically go to zero but, assuming they aren’t in obscure, unproven (by way of demonstrated and increasing earnings records) companies, history suggests that over the long term you should do fine. If you are out to make a quick buck, you need to understand that in the short term, the risk is amplified by the fact that NOBODY knows what will happen to the stock price from day to day. That means you need to be prepared to lose a quick buck as well. If you’re ok with that, have at it. If you’re in the first category and you need help. Let us know. If you’re in the second category, let us know if you ever need help with the first category.
Thing Three Just A Thought Never be limited by other people’s limited imaginations.” — Dr. Mae Jemison