May 2019 Volume LIV Number 3


Treloar & Heisel

July 2018 Volume LIII Number 4

Are Your Investments Appropriate for Your Retirement Goals?
Aligning risks and returns to the needs of your financial plan
Contributed by Jeffrey E. Wherry, CFP®, CLU®, ChFC®
Managing Director, Wealth Management
Treloar & Heisel Wealth Management
"Are my investments appropriate for my retirement goals?" This is a question we hear frequently. Obviously, the answer is different for every person. Here is how we go about determining our response.
Before you even look at investments, consider your retirement goals.
     In our practice, before we even address the issue of investments, we will do a thor- ough analysis of  a client’s financial picture in retirement.  Questions we ask include:
•When would you ideally like to retire?
•What kind of lifestyle would you like to have?
•Will you work still, a little, or not at all?
•What active and passive income sources might you have?
Investment returns should fill the gap between your future income and
future spending. So before you decide how to structure your investments, let’s look at
your cash flow in retirement.
Let’s take a look at your spending in retirement.
While retirement may be twenty or thirty years out from now, looking at today’s spend- ing patterns actually provides huge clues as to what future spending might look like.
     Some expenses that people may be cur- rently running through their dental practice may become personal expenses in the future. These include car expenses, and some types of insurance. Some current expenses may not exist at all in retirement. Frequently this will include mortgages, debt, and the need to continue saving.
     Other, new expenses may take their place! Extended medical care, or other household support is expensive. There may be more travel in the picture, spoiling the grandchil- dren, new hobbies, and other things people do when they have more time and freedom.
Now let’s take a look at your income in retirement.
     What income sources will continue for you in retirement? This may include Social Security payments, a pension perhaps if you worked as faculty or in a hospital that offered such a program, or rental income from prop- erties you own. If you decide to scale back at work over time, we’ll factor in your (reduced) income into the equation.
     If you have assets from the sale of a practice, those, too, will be taken into consid- eration.
     The difference between your incoming cash flows, and your projected expenses needs to be filled by your investment portfolio.
Now let’s see if your investments are appropriate for your goals.
     The first thing that we need to do is understand a person’s risk tolerance for in- vesting. We do this by determining their ‘risk score.’ A simple questionnaire, and the use of specialized financial planning software gives us insight into an individual’s tolerance for fluctuations in the market.
     The reason that risk tolerance is so impor- tant is because we want to make sure that the investment program we recommend is within an individual’s range of expectations – for both risk and, commensurately, returns.
     We know the markets will go up, and we know the markets will go down. An educated investor knows that if the value of his/her holdings goes down in a particular month or quarter, this is to be expected. Alternately, if
a portfolio is doing exceedingly well – beyond expectations – the person won’t get carried away and decide to invest exclusively in those assets that are top performers at this moment in time. The point is to stay the course for the long term, and make suitable adjustments along the way.
     We always discuss with our clients, in advance, how they might behave in a bull market (when markets are up), what they an- ticipate they might do in a bear market (when markets are down), and what could poten- tially happen in a financial crisis. Thinking through these scenarios helps mitigate what might be a purely emotional response through some rational thinking.
     Sometimes, the return that your portfolio needs to produce in retirement is greater than what your risk tolerance will allow. At this point we have a conversation with the client. The choices are to either increase savings, or to slightly ratchet up one’s tolerance for risk. For most people, frequently, it’s a combina- tion of both.

Investment Advice offered through WCG Wealth Advisors, LLC a Registered Investment Advisor doing business as Treloar & Heisel Wealth Management. Treloar & Heisel Wealth Manage- ment is a separate entity from The Wealth Consulting Group and WCG Wealth Advisors, LLC.
This information is for illustrative purposes only and is not intended to represent any specific investment vehicle.
42 July PDT 2018  | Treloar & Heisel

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