Financial Planning

Can Your Financial Game Plan Get You to and Through Retirement?

You need to prepare yourself for all three phases of your financial life: accumulation, preservation and distribution.

I've learned a lot about preparing for challenges in life from football. I played college football, coached high school football and now I coach my children's teams.

As an investment adviser, I use the principles of the game every day to build financial strategies that help get clients to and through retirement. Keys to these strategies include understanding what phase of life you're in, learning the different worlds of investing and asking what you want your money to do for you.

Know Your Phase

There are three phases in your financial life, and each phase utilizes different products and strategies.

1. Accumulation Phase

It should start around age 20. You've just started working, and hopefully saving. Time and earning potential are on your side during this phase. If you lose 30% or 40% of your portfolio in a market crash, like many people did in 2008, you have time to make it up, and also have new money coming in to help make up any losses.

2. Preservation Phase

This phase begins around age 60. You're getting ready to retire, and you're no longer in a position to make up big losses in your portfolio. You've worked approximately 40 years to build a nest egg—now is the time to consider revamping your financial strategy to help protect your assets from market volatility.

3. Distribution Phase

At retirement, many people wonder, "Will I outlive my money?" That's a scary question. You want to make sure your money lasts the rest of your life, and since workplace pensions have mostly disappeared, you may need your retirement savings to deliver a steady income stream.

Know Your Worlds of Preparing for Retirement

Generally speaking, there are three ways an individual can prepare for retirement, through three different sources: banks, Wall Street and insurance companies.

1. Bank

Money here is generally regarded by consumers as secure from the risks associated with the stock market, liquid, and most accounts are insured by the FDIC up to $250,000 per Social Security number. However, understand you won't get much growth in rates of return from these assets. Another option for this money is to get a home equity line of credit for home improvements such as a kitchen or bathroom renovation. Interest rates are so low that this makes more sense than taking a chunk of your money out for improvements.

2. Insurance

Annuities are contracts you purchase from an insurance company. For the premium you pay, you can receive certain fixed or variable interest crediting options that compound tax-deferred until withdrawn. Using annuities in your retirement strategy keeps the principal safe from market volatility. They can also make sense for transferring wealth to loved ones and providing a lifelong income stream. While fixed annuities provide a guaranteed income stream for life (backed by the financial strength and claims-paying ability of the issuing insurer), they generally have lower interest rates which means lower interest credits to your contract.

3. Wall Street

Money here is at risk of market volatility. However, over time you generally receive more growth than you can get from the banking world or insurance world. Investments such as stocks, bonds and mutual funds may be a good choice for your long-term money. Over time, you will likely get better returns, while keeping up with the rate of inflation and cost of living. However, investing involves risk to principal.

Does Your Financial Adviser Work in All Three Worlds?

This is important. Hire an adviser who works in all three worlds of retirement planning. Doing so helps create a balanced retirement portfolio, with some money that is insulated from big market drops, and some money positioned with market risk to take advantage of market gains.

Remember, you want your money to grow, you want your money to be protected when nearing retirement, and you want to be able to access your money.

In the banking world, your cash is secure and liquid in certificates of deposit (CDs) and money market accounts. You protect your principal, but won't get much growth.

In the insurance world, your principal is protected from market volatility and can accumulate in annuities. Annuities allow you to create a lifelong income stream; however, annuities are less liquid because they have extra costs and penalties for early withdrawals and come with surrender charges.

In the Wall Street world, your money can grow and be liquid in mutual funds, stocks and bonds. You can keep up with the rate of inflation, but you take on risk.

Place your investment money in all of these worlds. With the help of a financial professional working in all three, you can begin to move down the field toward a confident retirement!

Chad Slagle is the president and founder of Slagle Financial LLC in the St. Louis area. He is the host of The Chad Slagle Show, "Coaching You to and Through Retirement," a local television series. He is an Investment Adviser Representative and insurance professional.

Dave Heller contributed to this article.

About the Author

Chad Slagle

President, Slagle Financial LLC

Chad Slagle is the president and founder of Slagle Financial, LLC, in the St. Louis area. He is the host of The Chad Slagle Show, "Coaching You to and Through Retirement," a local television series. He is an Investment Adviser Representative and insurance professional. Slagle Financial focuses on tax efficiency strategies and retirement planning. He is a member of the Better Business Bureau.

Most Popular

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer
Coronavirus and Your Money

Where's My Stimulus Check? Use the IRS's "Get My Payment" Portal to Get an Answer

The IRS has an online tool that lets you track the status of your second stimulus check.
January 18, 2021
Biden Calls for $1,400 Payments as Part of $1.9 Trillion Relief Package
Coronavirus and Your Money

Biden Calls for $1,400 Payments as Part of $1.9 Trillion Relief Package

Under Biden's plan for a third stimulus check, the $600 second-round stimulus checks would be increased to $2,000.
January 14, 2021
When Could We Get a Third Stimulus Check?
Coronavirus and Your Money

When Could We Get a Third Stimulus Check?

President-elect Joe Biden and others in Congress are pushing for a third-round of stimulus checks, but it might be a while before we get them.
January 18, 2021

Recommended

10 New Year’s Financial To Do’s (You’ll Feel Great When You Check Them Off)
retirement planning

10 New Year’s Financial To Do’s (You’ll Feel Great When You Check Them Off)

Once you run through this checklist, you’ll be in great shape for a prosperous and organized new year.
January 18, 2021
Fund Your IRA, Cut Your Taxes
Tax Breaks

Fund Your IRA, Cut Your Taxes

There’s still time to make a 2020 IRA contribution and lower your tax bill.
January 13, 2021
10 Least Tax-Friendly States for Retirees
retirement

10 Least Tax-Friendly States for Retirees

When it comes to state and local taxes, retirees in these states are likely to pay more than retirees in other states.
January 12, 2021
How to Spot (and Squash) Nasty Fees That Hide in Your Investments
retirement planning

How to Spot (and Squash) Nasty Fees That Hide in Your Investments

Your annual investment statement might look hot this year, but it’s probably missing one very important figure: the fees you paid.
January 8, 2021