July 2019 Volume LIV Number 4


Retirement Panning: It's About so Much More than Investing

November 2016 Volume LI Number 6

Contributed by Jeffrey E. Wherry, CFP, CLU, ChFC
Managing Director, Wealth Management, Treloar & Heisel Wealth Management

Perhaps you’ve started setting aside some money toward retirement in one or more different savings vehicles. Or maybe you’d like to save, but you don’t know where to get started. What we frequently come across in our practice are clients who haven’t given much thought to how much they ought to be saving. More often than not it’s because they worked with financial professionals who didn’t chal- lenge them to examine how much they really should save. Instead, the focus is on the actual investments, and of course, the return on those investments.

As a financial planner, I find an excessive focus on returns troubling. If there is one thing neither you nor I have any control over, it is the performance of the stock market. What can we control? Our saving and spending! As basic as it sounds, the most useful thing a financial advi- sor can do for you in the introductory phase of your relationship is to help you figure out how much you need to save and how to create those savings.


Once you know how much you can save, then you can talk about a realistic timeframe for your retirement. Most importantly, a good advisor will talk to you about your vision for retirement, the kind of lifestyle you would like to lead. This conversation is necessary for de- termining how much retirement will cost. Now that you know what you can afford, versus how much you can expect to spend, the real work begins. Your advisor should present some strat- egies to help you bridge the gap between where you are today and where you’d like to be.


Tax efficiency is one of the last things average investors look for when thinking about where to put their money. It should be their first priority. Some investment vehicles are tax- preferred at the time of contribution; others are tax efficient when you take withdrawals. You need to know your options (Roth, defined benefit plans, IRAs, etc.) and choose wisely for your particular situation.


OK, now that we are in the correct tax bucket, let’s talk allocation. Allocation means the distribution of stocks to bonds and cash in our overall portfolio. Your investments must be aligned with your retirement goals. If you have plenty of time you can afford to take more risk, but if retirement is around the corner, you’ll want to allocate more conservatively. Research shows that 90 percent of your investment success is based on allocation of your portfolio* and not based on the actual funds in your bucket. Let’s recap, because this is important: the allocation is more important than the actual investment itself.


It’s easy, in the zeal of the saving, to lose track of things that could easily derail your dream of sipping frosty beverages against a beautiful sunset. Gaps in your overall financial plan could hold you back from your goals.
What would happen if you were to become disabled, or too ill to work? What if you had major damage to your property?

A properly designed retirement plan integrates disability income insurance, life insurance, and property and casualty insur- ance, wherever the need exists. Any risk that you absorb now takes money away from your future. Why not shift that burden to an insur- ance company? For a relatively small premium, you can avoid the potential for a large out-of- pocket payment that could jeopardize your larger plans.


Yes, seriously. Your existing retirement program needs the equivalent of a boot camp. Will it be able to withstand the ups and downs of the markets? How much before it breaks? Thankfully, in the financial industry we have access to tools that can simulate stormy seas without risking your real cash. Your advisor should be using Monte Carlo simulations to as- sess the realism of your assumptions. Granted, there are no guarantees in life, but your retire- ment plan definitely needs a reality check.


If you’re like most of our specialist clients, you are probably too busy to figure this out on your own. Sit down with a financial plan- ner early on to do some big picture thinking. Understand what’s feasible and what’s not, and create a game plan. We frequently hear: "I didn’t realize it would take so long or cost so much…if I had known this ten/fifteen/twenty years ago, I could have made it work with less pain." That said, it’s never too late to start planning.

Good luck!

*Determinants of Portfolio Performance, Financial Analysts Journal (July/August 1986): 39-40, Gary P Brinson, L. Randolph Hood, Gilbert L. Beebower
Securities, investment advisory services and financial planning services offered through duly qualified Registered Representatives of MML Investors Services, LLC, member FINRA / SIPC. Supervisory Office:Six PPG Place, Suite 600, Pittsburgh, PA, 15222, Phone: (412) 562-1600. Treloar & Heisel, Inc. is not a subsidiary or affiliate of MML Investors Services, LLC or its affiliated companies. CRN201806-202756

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