Making Your Money Last

Don't Let These Revenue Roadblocks Threaten Your Wealth

Safeguard your wealth and your family's legacy by taking these steps to protect your revenue stream before and during retirement.

Professionals and business owners work hard to create wealth during their careers. Disruptive risks to that revenue stream can emerge in many different and unexpected ways. Challenges may arise that threaten financial security past your working years.

In part one and part two of this three-part series, we examined how to protect your wealth through the understanding and management of relationships and regulatory hazards. The third and final threat to explore is the disruption of your revenue. You must prepare and maintain a consistent revenue stream before and during retirement by positioning your investment vehicles to outlive yourself and provide for your family.

Creating and maintaining the desired standard of living during retirement requires vigilant financial planning, market awareness and risk management.

Chart a Clear Course

The first threat to your revenue is the absence of a clear vision of your future financial goals. You need a strong financial plan in place – including tax planning and estate planning — to keep your money from being frittered away.

Income can move in a few distinct ways with limited destinations. You can spend it, give it to family and loved ones, donate it to a charitable cause or give it to the government in the form of taxes. Many decisions are involved in the process of appropriating assets, so having a clear idea of their purpose is critical to ensuring their highest and best use.

As discussed in part two, knowing how your income fluctuates by year ensures that you make appropriate tax payments. You can grow your portfolio and manage risk by charting a long-term plan with a trusted financial professional before retirement. Proper financial planning serves to help grow, save and distribute your wealth while minimizing taxation. For example, a financial professional can help you transfer inheritance proceeds while still alive through a GRAT, which avoids estate tax and provides an annuity income stream.

Changing Tides

Uncertainty about the direction of the economy can cause volatility in the financial markets. Your revenue stream is threatened by this volatility, because substantial losses may diminish your expected income.

For those retiring during or just before a bear market, thorough financial planning is required to ensure your retirement funds will not disappear if the market goes south.

This potential threat is called sequence risk, or the risk of losing substantial principal near retirement when you are about to begin withdrawals from your assets. Sequence risk can be mitigated or eliminated by reallocating assets, so you can ride out a bear market with minimal disruption in your income or loss of sleep. An appropriate reallocation strategy would be to reduce equity exposure in volatile areas of the market in exchange for more income-oriented equities or fixed income.

Rethinking Revenue

Financial planning before retirement should focus on portfolio growth and risk management. While we previously discussed asset-protection and risk management strategies like LLCs, as retirement nears, your focus should shift to minimizing risk. Additionally, having stable income generation is the key to longevity throughout retirement.

Important revenue considerations include:

  • Using financial forecasts to plan allocations. By planning your cashflows into the future, you can determine the appropriate asset mix to service those liabilities.
  • Creating a realistic budget for your retirement years, adjusted for taxes and inflation.
  • Strategizing every investment and adjusting them as the market dictates. For example, if you have lower-yielding bonds, you can exchange them for higher-yielding bonds as interest rates increase.
  • Aiming for a retirement income that meets your budget without diminishing principal. Develop a lifestyle that can be funded solely from the dividends and interest from the portfolio.

Stay Vigilant

Successful retirement planning requires staying abreast of changes in the economy, interest rates and inflation. Preparation and informed decision-making also help preserve and grow the wealth you worked hard to acquire. Lastly, new threats to your wealth may arise, so it is important to stay up-to-date on new legislation and other factors that may affect your financial plan.

You can grow investments faster, enjoy protection from retirement savings threats and benefit from estate-planning strategies by working with a trusted financial professional. Your financial adviser can create a holistic financial plan that relieves the worry of uncertainty and leaves you free to focus on achieving your dreams.

I hope you’ve found this three-part series informative and applicable to your financial planning. I wish you the best of luck in your financial journey, and remember: Preparation prior to making a financial decision is a foundational principle of creating and preserving your wealth!

About the Author

Josh Sailar, CFP®, CPFA

Partner, Blue Zone Wealth Advisors

Josh Sailar is an investment adviser and partner at Blue Zone Wealth Advisors, an independent registered investment adviser in Los Angeles. He specializes in constructing and managing customized advanced plans for business owners, executives and high net worth individuals. He holds the designations of Certified Financial Planner (CFP®) and Certified Plan Fiduciary Advisor (CPFA), the FINRA Series 7, 63, 65 licenses, as well as tax preparer license.

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