November 2019 Volume LIV Number 6


Treloar & Heisel

May 2019 Volume LIV Number 3

 Do You Know Your Retirement Ready Score?
The importance of a stress-tested portfolio

Contributed by Jeffrey E. Wherry, CFP®, CLU®, ChFC®, Managing Director, Wealth Management, Treloar & Heisel Wealth Management
As financial planners, we often wish we had a crystal ball to tell the future. The reality is that we don’t. Because one of the questions we are most frequently faced with is: "Am I on track for retirement?" This, surely, is a challenge for any saver. We all want an optimal balance between living in the present and being comfortable in the future. No one wants to experience discomfort in either scenario.
Thankfully, there are some robust tools that may help us determine whether we are adequately prepared for retirement. In our practice, we use the concept of the "Retirement Ready Score," also known as "stress-testing" your portfolio. Basically, this entails taking your exist- ing investments and entering them into financial planning software that calculates thousands of scenarios of the various ups and downs that your bundle of investments may experience in real life. In some scenarios, you may end up in positive territory, in others you may not fare as well.
We enter your age, and the final report we generate shows us how many scenarios actually result with you having money at age 100. Say in 80 percent of the scenarios you still have money – then your score would be 80. Our hope is that you will have a minimum score of 70, in order for us to feel fairly confident that you are possibly on track for retirement.
Great question. If we see a retirement score that’s low, it’s an indi- cator of one or more foundational issues.
First, you may not be saving enough. How much you have to start out with absolutely plays a role in how much you will have at age 100. So, if you’re not saving enough, we would recommend that you increase how much you are setting aside.
Some people are actually setting aside a healthy amount of money on a regular basis, and still find that their retirement ready score falls short. This is an indication that your portfolio may not be adequately allocated for your situation. By simply changing your risk tolerance a bit (but still not be over aggressive), you may be able to get more return and raise your score to a higher range.
All too often, we find that raising the retirement ready score may be resolved by a combination of two factors: saving more, and re-allocating into more appropriate investments that align with your goals and risk profile.
As financial planners, it’s our job to continue to monitor your performance because investment returns certainly aren’t guaranteed going forward. So, if we have a lower than anticipated returns envi- ronment, we may need to change some of the parameters. If we have a higher return environment, we may be able to actually scale down the risks we’re taking.
We recommend stress-testing your portfolio once a year. By doing so, you will have a much better understanding of what is realistically achievable given your current actions. And while stress-testing is not an exact science, it could help to see if you continue in this vein whether you’ll get to your destination, or if you may have to make some alternative decisions later on in life.
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.

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