Written By: A. Suzanne Robertson, CFP®

The markets wreaked havoc on even the best strategized portfolios last year.  Coupled with inflation running amok for so long, it’s no small wonder so many retirees were reduced to panic.  The good news is inflation continues to ease, and the markets – while still volatile – are showing little glimmers of opportunity for well-positioned investors.  At this point, many people in and/or preparing for retirement are looking at the damage done to their portfolios and questioning how much buying power they’ll have left once inflation has normalized.  The biggest questions on everyone’s mind are “Do I have enough money now to support my lifestyle for the next 30 years?” “Is my portfolio allocated properly to endure the rest of my life?” And, “How much do I need my portfolio to earn each year for my withdrawal strategy to be sustainable?” If you don’t know the answers to these questions, it’s time you called your financial advisor.  If your current advisor can’t answer them, I’m begging you, please call Carlson Financial!

When I first started out in this industry, I was taught the Rule of 100. Start with 100% and subtract your age. Allocate that percentage to equities and growth – what Carlson Financial clients know as the Roof.  The remainder (your age), allocate to safety and income, or what Carlson Financial clients call the Foundation.  “But Wait!” you say, “I’m a Carlson Financial Client. I’m 70 years old and I certainly don’t have 70% of my portfolio in my foundation!  What is she saying??” Let me explain! There are a number of reasons why that rule may or may not be appropriate for you.

The primary reason the Rule of 100 might not be appropriate for you is because your portfolio is your portfolio.  The allocations in it were crafted carefully around your needs and life expectancies.  Rules of thumb simply shouldn’t apply. When the Rule of 100 was created, most people lived only a few years into retirement.  Now, it’s common for your retirement savings to have to last 30 years or more.  This requires much more growth potential than your portfolio would have if it was invested 70% in safety.  Second, have you seen what happened (and is still happening) in the bond market? Enough said. If your advisor had you 70% in bonds 2 years ago, you’d surely have fired them by now.  In markets as volatile as ours recently, rules of thumb simply cannot apply.  

As advisors we must look deeper than just your age.  We have to consider your specific liquidity needs and keep an eye toward sequence of return. I think we all realize that withdrawing from a portfolio will limit its future growth.  Well, sequence of return refers to how that limitation is magnified in the beginning stages of a withdrawal strategy, and it could dictate the difference between your money outliving you or you outliving your money.  As investment advisors, we need to make sure your portfolio is positioned as such to let you sleep at night, but still be able to capture opportunities for growth that will enable it to last throughout your retirement and leave something behind to your heirs.  It is why, at Carlson Financial, we insist on helping you develop an income plan and withdrawal strategy prior to delving into your investment plan.  It simply wouldn’t be prudent for us to chase higher returns on money you need to withdraw to pay your bills.  At Carlson Financial we don’t follow rules of thumb.  We craft your investment plan by breaking your portfolio up based on when you’ll be needing to access it. Your current needs will be kept liquid and safest. That part of your portfolio allocated for your longest-term needs will be invested more aggressively.  As tax planners, we want the most growth to occur in your tax-free accounts so you’ll likely see your Roth IRAs invested more aggressively than your traditional IRA or non-qualified accounts.  It’s all part of how we make your portfolio work for you.  

This brings me back to the original questions. Do you have enough money to last the rest of your life? Is your portfolio strategically allocated in such a way as to benefit from our current markets and hopefully help offset some of the effects inflation has had on your buying power?  And, how much do you need to make on your investments to ensure your plan will remain viable?  If you don’t know the answers to all of those questions, it’s time to call your financial advisor.

Say What?

You’ve got (the wrong) mail! Golfer Scott Stallings’ invitation to compete at the Masters this year took longer than expected after it was accidentally sent to another man by the same name. Stallings said he’d been checking his mailbox five times a day in anticipation of receiving the green envelope when he finally received a social media message from the “other” Scott Stallings that read, “Hi Scott. My name is Scott Stallings as well and I’m from Georgia. My wife’s name is Jennifer too! I received a FedEx today from the Masters inviting me to play in the Masters Tournament April 6-9, 2023. I’m 100% sure this is NOT for me …”

This week in history

1950 – Disney’s “Cinderella” opens in theaters. Six years in the making, Cinderella became one of Disney’s best-loved films and was one of the highest-grossing feature films of 1950. 

1962 – John Glenn became the first American to orbit Earth. 

1972 – The Volkswagen Beetle overtakes the Model T as the world’s best-selling car when the 15,007,034^th Beetle came off the assembly line. 

If you have any questions, we’d love to chat! Call us at 844-CARLSON (844-227-5766) today!