There are many questions that need to be answered regarding your retirement.  But there is one question that must be asked and we must not rest until we know the answer.

If you fully understand the 30-year retirement, then you know there is only one way to invest: a properly diversified and professionally managed portfolio. 

Importance Of Determining Your Lifestyle Sustaining Income

It comes down to this question: how must you position your investments to maximize your ability to maintain a 'lifestyle sustaining income'.

Here's a real-life story I heard from a client just recently while we were discussing this topic.  My client's friend retired just about 10 years ago (I'm writing this in August of 2007).  They had bought a travel trailer where they found a plot to rent for $700/year.  They also maintained a home where they lived during the summer.

His friend made a serious omission in his retirement plan.  He positioned all of his retirement savings into a position that fixed his income in something like cd's, bonds or annuities when he retired with the assumption that this fixed income would see him through his and his wife's retirement years.  He had way more than he needed at retirement, he reasoned.  And he did not want to 'lose' it in the market.

This year was the year of the painful realization that he could no longer afford his house payments.  He was buying the same things he had bought when he retired.  He had maintained his same purchasing habits.  He had maintained his conservative spending habits and lifestyle.  But the cost of those same lifestyle sustaining expenses had increased more than he had thought was possible.

Someone needed to at least offer him some better choices.  But the bottom line is this: he did not properly answer 'THE Retirement Question'.    He, no doubt, thought he was playing it safe and conservative.  And he was, except for one risk he had not considered: the risk that the rate of inflation would one day exceed his income that was 'fixed'.

Binary question

So here is the binary question: how much of your savings can you keep in a fixed-income investment if the likelihood of that method of investing also increases the larger risk of the erosion of purchasing power? 

The greater the portion of our investments that we keep 'fixed' the greater the likelihood that our purchasing power will erode.  But the reverse is also true: The greater the portion of our investments that we keep in a beautifully diversified portfolio of equities, the greater the likelihood we get to maintain our current lifestyles for the duration of our retirement years.

This is the last investment question you will ever have to ask yourself because it is the one that should supersede all others if the real risk is the erosion of purchasing power.

Have you determined what must be done to maintain a lifestyle sustaining income for you in your retirement years?  It is THE question that must be answered and it is one of our primary purposes on earth to help you answer that question properly.  So, if you need to ask that question, we hope you will not hesitate. 

Please feel free to call or contact one of our investment and retirement professionals.