Phase 1 is titled “ACCUMULATION”. This is the phase of your life where you should concentrate on the accumulation of assets. These assets you are accumulating should be the main focus of what will ultimately fund your retirement years. Since you are younger during this phase and have more time to wait, you can afford to be more risky in your choice of investing.
Experts of Phase 1:
- Brokers: Most brokers deal in primarily managed money, or investments that require constant monitoring. Although you are at the risk of the stock market, you can achieve the highest return from the types of accounts that most brokers specialize in. Brokers (such as money managers from firms like Merrill Lynch, Edward Jones, etc.) make their money by the continued management of the funds they sell to their clients. Without money to manage, they do not make a fee/commission.
- Mutual Funds, ETFs, common and preferred stocks, model portfolios
- Asset Allocation (diversified portfolios of risk-based investments)
Phase 2 is titled “PRESERVATION”. During this phase, you should concentrate on preserving the assets you have worked all your life to accumulate. Time is growing shorter and shorter and you now have less time to get back what you may have already lost. Since timing is so important, you must understand exactly how much risk you can afford to take on. Based on your income needs as well as the goals you have set for your hard-earned retirement dollars, you must invest accordingly. Keeping your money safe during this phase is a key component to achieve a stable income plan, one that you cannot outlive and can always rely on.
Experts of Phase 2:
- Retirement and Estate Planners: Financial professionals that focus their energy solely on retirees or those soon to be retired, deal with investments that focus on the preservation of assets. Planning for retirement is a tricky business that many investors do not have a sound plan for. Rather than accumulation of assets, the preservation of what you accumulated plays a significant role in providing you with an income plan. Almost 60% of retirees run out of money before they run out of life because they have not altered their investment strategies upon entering this phase of life.
- CD’s, Insured Deposits, Government Bonds, Fixed Annuities, Fixed Indexed Annuities, Fixed Income Models
- True Diversification (safe investments with risk tolerance according to individual situations)
Phase 3 is titled “DISTRIBUTION”. This phase determines what happens to the money you have preserved throughout phase 2. Depending on your current financial situation, you may or may not have money left over when your retirement plan has run its course. For those who properly plan to have assets left over for their heirs, it is important that you achieve a distribution (or “estate”) plan.
Experts of Phase 3:
- Estate Planning Attorneys and Retirement Planners: The most important objective once you have passed away is the distribution of your retirement assets to your heirs in the most efficient and tax advantageous way possible.
- Wills, Trusts, Power of Attorney, etc.
- Avoiding probate and estate tax
