I’m Nervous Ep. 110

I have to admit it. I never really enjoyed going to school. In fact, I dreaded this time of year. Summer was still in full swing, but going back to school was right around the corner. I’m pictured with Ansley below when she came by the office recently.
Ansley and David
Maybe that’s why I told my mom I wanted to be a hermit when I grew up. The idea of going up in the woods and sitting on the ground all day alone sounded better than going to school.
I know that I had a terrible perspective, so I’ve tried to explain to Amelia, our rising K4 student, all the great things about school. We’ve told her about all the new friends she’ll make and cool things she’ll learn and more. Amelia pictured below at the pool.
Amelia at the pool
Do you know what her response is? “I’m nervous about school.” We then go into how there is nothing to be nervous about. We then question how our 4-year-old knows about nervousness in the first place. It’s a vicious cycle. But we don’t want our little girl to worry…
Nobody likes to worry, and we really don’t like having to worry about money matters. Today I’ll share with you how we help our clients allocate their retirement savings to shield them from having to worry in retirement. Ansley stayed cool at the pool!
Ansley at the pool
Let’s face it: A lot of people are uneasy about the economy and the markets this year, and you may be one of them. Don’t blame yourself. Most people are doing the best they know how to do and the right answers aren’t always easy to find. Let’s talk about how to remedy some of the potential worries you may be experiencing.
At our office we think about retirement portfolio allocation by using buckets. The first bucket we have is our “liquid bucket” for our expenses. In retirement, we want our clients to have six to nine months of bill paying money in this bucket.
If the roof develops a leak or the car needs new tires, we don’t want to have to liquidate part of our investing accounts to pay for it. We can go to our liquid bucket to pay for those things. This also helps us save on interest that’s commonly incurred by using credit cards for mishaps.
After that we have our “growth bucket.” People sometimes know what this is. It’s the portion of our allocation in the stock market. The growth bucket goes up and down, and up and down, but over time it has gone up. This bucket is important because it helps us maintain our lifestyle in retirement. We’re looking for long-term growth with this allocation.
The problem is what happens if the stock market is down when you’re needing income from that bucket? Or worse, what happens if you didn’t have enough money in your liquid bucket when the roof blows off your house? Then, you’ll have to have a fire sale on your positions to get the funds to pay for it. That’s not good.
Warren Buffett
Wall Street has done a great job of marketing us. So much so that they have convinced us that we should sell our Amazon stock to pay our cable bill. Warren Buffett once said, “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” We take his advice to heart. We can’t be invested in the market for ten years if we are using that same bucket of money to create income. So, what do we do?
This brings us to our last point which is our “income bucket.” The worst year for the stock market in the last hundred years was a loss of over 43%. That’s an impactful loss for the portfolio. We can’t control what the markets are doing so we separate out our income bucket from our growth bucket.
The liquid bucket and income bucket are designed to meet our lifestyle needs in retirement. We use the income bucket to cover all of our income needs for ten years. We want this money to be some place that’s protected. No, we don’t want it buried in the backyard losing purchasing power.
We want it to have some growth. Historically, we could use several asset classes to find something that provides interest or dividends. We’re looking for something that will earn four to six percent on average. This enables us to leave our growth bucket alone for ten years like Buffett suggests and capture the returns of the market. Does this philosophy resonate with you?
Our approach enables us to tell our clients, like I tell Amelia about school, that we don’t have to be nervous about market volatility. When the difficult times come in the market hopefully you’ll remember the team at Clients Excel set your portfolio up with ten years of income. This gives the market time to recover from any potential losses it may face. We do this because our goal is for it to enable you to be worry free in retirement.
Don’t fall into the trap of being completely in equities or pulled out of the market completely. If we’re all in equities, we are suffering this year. And if we are trying to time the market by selling and buying back in at the right time we’ll likely be disappointed.
Do you have a question? Give us a call at 864.641.7955.
Until next week,
David C. Treece
Investment advisory services offered only by duly registered individuals through AE Wealth Management, LLC (AEWM). AEWM and Clients Excel, LLC are not affiliated companies. Investing involves risk, including potential loss of principal. Any references to protection, safety, or lifetime income, generally refer to fixed insurance products, never securities or investments. Insurance guarantees are backed by the financial strength and claims paying abilities of the insuring carrier. This podcast is intended for informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet particular needs of an individual’s situation. Clients Excel is not permitted to offer and no statement made during this show shall constitute tax or legal advice. Our firm is not affiliated with or endorsed by the U.S. Government or any governmental agency. The information and opinions contained herein provided by third parties have been obtained from sources believed to be reliable, but accuracy and completeness cannot be guaranteed by Clients Excel. The use of logos and/or trademarks of podcast hosting sites are the property of their respective owners and are not an endorsement by those owners of our firm or our program.

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