Bring the Best of the 3 Financial Worlds into Your Retirement
When building a plan for retirement security, it helps to use all of the financial tools available to you.
You are now subscribed
Your newsletter sign-up was successful
Want to add more newsletters?
Delivered daily
Kiplinger Today
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.
Sent five days a week
Kiplinger A Step Ahead
Get practical help to make better financial decisions in your everyday life, from spending to savings on top deals.
Delivered daily
Kiplinger Closing Bell
Get today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.
Sent twice a week
Kiplinger Adviser Intel
Financial pros across the country share best practices and fresh tactics to preserve and grow your wealth.
Delivered weekly
Kiplinger Tax Tips
Trim your federal and state tax bills with practical tax-planning and tax-cutting strategies.
Sent twice a week
Kiplinger Retirement Tips
Your twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirement
Sent bimonthly.
Kiplinger Adviser Angle
Insights for advisers, wealth managers and other financial professionals.
Sent twice a week
Kiplinger Investing Weekly
Your twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.
Sent weekly for six weeks
Kiplinger Invest for Retirement
Your step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.
If the past few years has taught us anything, it’s that the financial markets are like nothing we have ever experienced during our lifetime. Of course, most investors realize the markets do have their ups and downs, good times and bad, and periods of volatility. However, with uncertainty like we have never seen before, it’s more important than ever for those near or in retirement to strive for a plan that includes not only diversified investments, but more importantly, a mix of various types of financial tools, each with its own specific purpose.
By working to strategically incorporate into your plan the worlds of Wall Street, insurance and banking, you may be setting yourself up for a retirement that is built to withstand the challenges the market presents today, AND in the years to come.
The mistake that I find many people make when it comes to managing their wealth at this stage of life is that they only view “diversification” through the lens of their investments, when in reality, they should be thinking about proper diversification in terms of their overall wealth and all the financial tools available to them.
From just $107.88 $24.99 for Kiplinger Personal Finance
Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special Issues
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Traditionally, the worlds of Wall Street, insurance and banking have competed against each other for your dollars by operating in silos and even emphasizing the drawbacks of using financial tools outside of “their space.” However, trying to find the best in all three of those worlds and using a variety of financial tools from each may be the key to a financially successful retirement.
Let’s take a look at these three financial worlds and a few ways each could be incorporated when designing your financial plan:
1. Wall Street
Investments most likely will continue to be used for a large portion of your wealth throughout retirement even though the financial markets have experienced losses greater than 20% at times this year (according to Morningstar data, the S&P ended the second quarter down 20.6%). Some primary purposes for continuing to be invested even moderately/conservatively in the markets would be to keep pace with (or outpace) inflation, protect against longevity and potentially grow additional wealth to leave as a legacy.
Nobody wants to see the loss of purchasing power during their golden years, and over long periods of time and withstanding various periods of high volatility, investing in the market has served a purpose, even during retirement.
2. Insurance and annuities
Both cash value life insurance and various types of annuities can play extremely important roles in a well-crafted plan. The challenge for many people is truly understanding how to best use each of these tools, while navigating through the hundreds of options available in the marketplace.
For example, many people would never guess that they could obtain life insurance after the age of 60, and thus dismiss using this tool. However, cash value life insurance could be the “Swiss Army knife” of retirement because it can have multiple purposes. Beyond providing tax-free benefits to beneficiaries upon the insured’s death, other not-so-well-known features could include accelerating the death benefit to pay for long-term care and even using the accumulated cash value inside the policy for tax-free distributions if structured correctly.
Annuities, which are also insurance products, can also play a very important role in retirement if used for the right reasons. The two primary purposes I suggest someone use an annuity for would be:
- Preservation of principal … even in down markets many annuities will not see a loss in value.
- Lifetime income … they can fill the gap between what your monthly income needs are and what your Social Security and pensions provide. This could help you avoid taking regular distributions from your investment accounts.
When using any type of insurance product in your lineup, I suggest consulting a fiduciary to review best options and explain both the pros and cons of these tools.
3. Banking
Having cash at the ready for any number of purposes is more important now than ever. This could include money for dozens of unexpected expenses, home repairs or even large purchases you anticipate making over the next 12 months. How much cash someone needs to have on hand is specific to their upcoming needs. However, having at least six to eight months to cover known fixed expenses is normally a minimum to feel comfortable.
The list for needing cash is endless, but it’s something that should not be overlooked. Whether that’s simply setting aside money in a basic money market account or setting up a home equity line of credit for use if needed, make having cash on hand a significant part of your overall plan.
This may not be the “sexy” part of retirement planning but if done right, it could help you avoid the need to take distributions from your investment accounts in times of down markets.
The worlds of Wall Street, insurance and banking may not always seem to “play nice” together given they are quite often competing for the same dollars. However, crafting a retirement plan that includes the best from all three could provide a foundation built to make your golden years amazing.
Investment Advisory Services offered through Trek Financial LLC, (Trek) an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Annuity guarantees are backed by the financial strength and claims paying ability of the issuing insurance company. Financial products and services if recommended may include investment advisory fees, commissions and/or other charges. Trek 325
Investment Advisory Services offered through Trek Financial, LLC, (Trek) an SEC Registered Investment Adviser. Information presented is for educational purposes only. It should not be considered specific investment advice, does not take into consideration your specific situation, and does not intend to make an offer or solicitation for the sale or purchase of any securities or investment strategies. Investments involve risk and are not guaranteed, and past performance is no guarantee of future results. For specific tax advice on any strategy, consult with a qualified tax professional before implementing any strategy discussed herein. Trek 21-115.
-
Ask the Tax Editor: Federal Income Tax DeductionsAsk the Editor In this week's Ask the Editor Q&A, Joy Taylor answers questions on federal income tax deductions
-
States With No-Fault Car Insurance Laws (and How No-Fault Car Insurance Works)A breakdown of the confusing rules around no-fault car insurance in every state where it exists.
-
7 Frugal Habits to Keep Even When You're RichSome frugal habits are worth it, no matter what tax bracket you're in.
-
For the 2% Club, the Guardrails Approach and the 4% Rule Do Not Work: Here's What Works InsteadFor retirees with a pension, traditional withdrawal rules could be too restrictive. You need a tailored income plan that is much more flexible and realistic.
-
Retiring Next Year? Now Is the Time to Start Designing What Your Retirement Will Look LikeThis is when you should be shifting your focus from growing your portfolio to designing an income and tax strategy that aligns your resources with your purpose.
-
I'm a Financial Planner: This Layered Approach for Your Retirement Money Can Help Lower Your StressTo be confident about retirement, consider building a safety net by dividing assets into distinct layers and establishing a regular review process. Here's how.
-
The 4 Estate Planning Documents Every High-Net-Worth Family Needs (Not Just a Will)The key to successful estate planning for HNW families isn't just drafting these four documents, but ensuring they're current and immediately accessible.
-
Love and Legacy: What Couples Rarely Talk About (But Should)Couples who talk openly about finances, including estate planning, are more likely to head into retirement joyfully. How can you get the conversation going?
-
How to Get the Fair Value for Your Shares When You Are in the Minority Vote on a Sale of Substantially All Corporate AssetsWhen a sale of substantially all corporate assets is approved by majority vote, shareholders on the losing side of the vote should understand their rights.
-
How to Add a Pet Trust to Your Estate Plan: Don't Leave Your Best Friend to ChanceAdding a pet trust to your estate plan can ensure your pets are properly looked after when you're no longer able to care for them. This is how to go about it.
-
Want to Avoid Leaving Chaos in Your Wake? Don't Leave Behind an Outdated Estate PlanAn outdated or incomplete estate plan could cause confusion for those handling your affairs at a difficult time. This guide highlights what to update and when.
