Estate Planning and Administration
The Third Pillar - Sound Financial Planning
Seeing senior clients with decimated investment portfolios on a daily basis offers some sobering insights. Simply put, many seniors are poorly planned financially. They are often over invested in the stock market or in the stock of the company they retired from, having refused to diversify for fear of generating capital gains taxes upon sale. Nevertheless, the reality is that clients must deal with what is left and are sorely in need of a second (or sometimes first) professional opinion.
Modern portfolio theory has proven that over 90% of investment performance depends on asset allocation strategies rather than market timing. Taking into account the investor’s goals, time horizon and risk tolerance profile, a rebalanced portfolio can do wonders to reduce the client’s exposure to market volatility.
Despite the foregoing, however, retirees have a special financial need. As people get older they should also consider diversifying from variable assets, like stocks, bonds and mutual funds into fixed, guaranteed investments that cannot go down. Some planners refer to this as The Rule of 100. Take your age from 100 and that is the percentage you should be in variable assets. So if you’re 65 years old, you should be 35% in variable investments and 65% in fixed. The reason for this rule of thumb is simple — the older you become, the less time you have to make up any losses.
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For more information on how we can help you with an estate plan, you may request our FREE Estate Planning Guide, come to one of our FREE Seminars or contact us at our offices.
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