We've all heard these cliches before: "The early bird gets the worm," "Slow and steady wins the race," "A penny saved is a penny earned." What makes them so powerful is their truth and simplicity. Yet, how many of us actually put into practice the wisdom contained within them? Our Retired Tech Executive fits more than a few cliches, but in a good way. He has that special X-factor that caused many to rally behind him. This client worked long hours at a professional services company, then finished his career as the CEO of a public MedTech company.
With many mouths to feed and out-of-state college educations to pay, our client looked like many other upper-middle class families. His children did well in school, and attended some of the finest universities in the U.S. Once his children finished college, our client took over as CEO of a prominent MedTech company. Accumulating assets and stock options changed the client's finanical picture from typlical to sophisticated. During our first few years with our client we did the following:
1) Created a comprehensive financial plan to model decisions in key areas like estate planning, gifting, investment strategy, private equity, home-buying, large purchaes, and retirement age.
2) Regularly performed "what-if" tests to explore the implications of major financial decisions.
After his retirement, our client is spending more time with family and on the things he loves rather than working. He has increased withdrawals from his portfolio. At this stage, having the comprehensive financial plan allowed us to explore how much cash he can take from his investments without running out of money.
If interest rates were higher, we could suggest more investments in fixed income. However, historically low rates have forced us to use a total return approach where we sell assets to meet income needs rather than buy investments that pay interest. This is a problem many investors are facing. The key for our client is finding investments that grow enough to meet his income needs but are not too risky.
We use the phrase "hit singles and doubles" frequently. Our client has accumluated sufficient assets to meet his retirement needs. He doesn't need to take extra risk to grow his portfolio, he just needs to avoid big mistakes. His next challenge is deciding what retirement lifestyle he and his wife want and how to gift what's left over.
Our client is in a great position, one that many investors dream about. The reason he has gotten to this point is because he created a hyper-accurate financial plan with us more than ten years ago. That plan has guided our financial decisions and prevented our client from making the costly errors that many other investors make.
The lesson learned is plan early and plan often to avoid the big mistake and reach your financial goals.
One of the greatest challenges our clients face is finding a course that balances all of their goals in the current investment landscape.