Focus on a Purpose-Based Retirement Portfolio


Focus on a Purpose-Based Retirement Portfolio

You need different types of investments to address all the risks you face in retirement.


I have asked thousands of retirees and pre-retirees what retirement means to them. I've heard answers including relaxation, freedom, family, travel, time and more.

SEE ALSO: 10 Financial Decisions You Will Regret in Retirement

One thing I never hear is "money," even though that is what most retirees spend their time thinking about. They go to seminars, read books and peruse articles such as this one to try to improve their retirements through the improvement of their financial situations. And they focus much of their time on finding the next best investment for their assets, jumping from one investment vehicle to the next and one financial adviser to the next, looking for the silver bullet to solve all their retirement woes.

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What are those woes, you ask? They fit into a few individual boxes: liquidity for emergencies, income to last a lifetime, growth for inflation protection and estate planning for our legacies.

And the truth is: There is no perfect financial vehicle to address these issues all at once. In fact, there is no such thing as a bad investment. Yes, you can read article after article explaining how bad an annuity is—or how great an annuity is, for that matter—or similar remarks about any other type of financial vehicle. But in my opinion, nine times out of 10, it comes down to adviser bias. It may be a captive adviser only allowed to sell certain types of products, a securities broker who is limited to the at-risk investment world that his company was founded on or an insurance-only producer unlicensed to utilize the world of at-risk investments. Whatever the reason, that person has an agenda to sell you on a specific product.


A better approach is to isolate each liability you may face during your retirement years and solve them systematically. In the end, it's all about purpose. Once you identify what your risks are, you can figure out the emphasis and dollars needed to address each of them and find the most efficient investment vehicles to do so. The bank offers great options for your emergency fund; annuities offer great options for guaranteed income you cannot outlive, backed by the financial strength of the issuing insurer; the stock market offers great options for inflation protection; and insurance companies offer great solutions for health care protection and legacy preservation.

This focus on solving for each liability of your retirement systematically also allows you to bypass some of today's current economic obstacles, such as record-low interest rates and nosebleed stock-market valuations. There has never been a more prudent time to find the most efficient way to solve each of your retirement risks than today.

Still, people tend to look for a one-stop solution. For example, the average person retires with a portfolio of mutual funds and expects it to be their emergency plan, income strategy, inflation protection and estate plan, all wrapped into one. If you took this approach, and the market takes a dive like it did in 2008, where would you get your emergency money? If you live longer than expected, where would you get your income? If you have a major health care problem costing thousands of dollars a month, how long would your money last?

I liken it to this analogy: If you wanted to get a boat, you would get a boat. If you wanted a car, you would get a car. If you somehow couldn't make up your mind, would you want to end up with an amphibious vehicle, much like the Duck boats of World War II? These are slow on land, slow on water, uncomfortable, a little dangerous and very expensive. You could have much more efficient travel had you bought a car and a boat to use for their individual purposes. Not only would it have saved you money, but it would be faster, safer and more comfortable at the same time.


Don't get so wrapped up in certain investments because of financial adviser and institutional bias. Find an adviser who can provide you with all the tools and services to most efficiently accomplish your financial goals without bias, allowing you—not them—to make the decision on what to do with your life savings.

There may never be a more important time in your life for financial education than when you step into retirement. Take time in making your decisions, and make sure all of your bases are covered. You may not get another chance.

See Also: Build Your Retirement Plan With a Strong Fiscal Foundation

Casey B. Weade is president of Howard Bailey Financial Inc. in Indiana, an insurance professional and author of the book, The Purpose-Based Retirement.

Investment advisory services may be offered through Global Financial Private Capital LLC, an SEC Registered Investment Adviser or Howard Bailey Securities LLC, a Registered Investment Adviser.

Keith Morelli contributed to this article.

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.