In the Fourth Quarter of Financial Planning? Focus on Defense

You're closing in on your retirement goal. It's time to play defense. And even if your financial adviser did a great job on offense growing your money, it may be time to look for a new coach.

(Image credit: Todor Tsvetkov)

We’re in the thick of football season right now, and whether you’re a longtime fan or a casual observer, you’ve probably noticed it’s the players on the offensive side of the ball who always get the most attention.

A good defense is appreciated, of course, especially in tight situations. It’s the guys who move the ball who get the real love, and there’s a very good reason for that.

The offense scores the points. The team can’t win if they don’t score. The more they score, the more thrilling it gets.

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As a financial professional who specializes in asset-protection strategies, I can’t help but notice that the same thing holds true when it comes to wealth management. It’s the accumulation side of things that gets most of the focus from investors who, quite naturally, want to see their money grow and grow and grow. It’s a thrill to see that balance go up every month, just like putting points on the scoreboard. The people who make that happen for their clients can be the “superstars” of the financial industry.

Yet, any game plan that doesn’t include a solid defense just isn’t complete. No matter how much you’ve earned and saved, you can’t count on a win until you’re confident you’ll have enough to meet your income needs in retirement. It’s all about protection — especially these days, as pensions are becoming a thing of the past for so many workers.

Remember when your grandparents and parents marched steadily down the field toward retirement and spiked the ball when they reached the goal line? They knew they’d won, because they had a pension they could depend on, along with Social Security and their savings. Most workers now have an IRA, 401(k), 403(b) or a similar tax-deferred retirement account — maybe even multiple accounts from several different employers — which they’ll have to transition into a paycheck in retirement. If that’s you, before you can leave the field with a victory, you should figure out a way to help create a reliable income stream you (and your spouse) won’t outlive.

To accomplish this, it may mean saying thank you and goodbye to the financial professional you have now, the broker or adviser who’s really great at offense, and looking for someone who could be great at working on a defensive option. The skills it takes to manage a portfolio for a couple in their 60s are substantially different from those used to manage money for a couple in their 40s or 50s. You can start by finding a professional you trust, who understands how to get your family to your goals without any last-minute setbacks. It’s also helpful to find a “coach” who can help with everything from investing, to income and tax-efficient planning, to trusts and wills, to working with strategic partners to help with establishing power of attorney and health care proxies, along with legacy planning and insurance — or someone who has a team of advisers who can accommodate all those needs, instead of referring you to outside professionals.

Focusing on defense also usually means moving away from riskier investments and toward something safer, including annuities, which can offer the sort of stable return required in retirement. If you have more than you need once you’ve figured out your income plan, or if you’re among the few who still have a pension, you probably can be a little less conservative — maybe even throw an occasional Hail Mary.

Preserving what you have is a key to retirement success — no matter how big your lead. In retirement, the best defense is diversification. That means some stocks, bonds, mutual funds and other investments tied to the market. It may also mean moving away from the securities side of things a bit and keeping some money in the bank (and maybe some under the mattress).

Rewriting your game plan, reorganizing your assets and, possibly, replacing your current financial professional won’t be easy. A broker wants to manage your money forever — so he probably isn’t going to tell you to put some money in the bank or insurance investments. A banker probably won’t tell you that the interest on CDs and savings accounts isn’t keeping up with inflation and taxes, so you should invest a portion of your wealth in the market or annuities. An agent who sells only insurance products may try to convince you that’s the only way to go. It’s a gridiron turf war for your money — and you as the team owner, biggest fan and head referee, have to decide what’s best.

There’s nothing wrong with cheering for the financial professionals who built your nest egg through the years. (Or yourself, for that matter, if you successfully DIYed it.) But it takes both offense and defense to help make a plan work to and through retirement. If you’re in the fourth quarter of your work life, and you want to avoid going into overtime, now is the time to make choices that can help secure your financial future.

Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and LAW OFFICE OF WALTER E. BAK are not affiliated companies. Investing involves risk, including the potential loss of principal. Any references to protection benefits, safety, security or lifetime income generally refer to fixed insurance products, never securities or investment products. Insurance and annuity product guarantees are backed by the financial strength and claims-paying ability of the issuing insurance company. Neither the firm nor its agents or representatives may give tax advice. Individuals should consult with a qualified professional for guidance before making any purchasing decisions. 00355278

Kim Franke-Folstad contributed to this article.


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.

Walter E. Bak, Attorney, Investment Adviser Representative
Founder, Law Office of Walter E. Bak

Attorney Walter E. Bak is the founder of the Law Office of Walter E. Bak, which is dedicated to helping individuals, families and businesses protect and preserve their wealth through financial and estate planning.