Real Deal Retirement

by on October 20, 2017

To explain real deal retirement, let’s take a look at a question a client recently asked.  The client uses income from Social Security and an annuity to pay all current living expenses, and recently asked if she should put 100% of her paycheck into the stock market.  To answer this question, I posed another question: “Is it possible you might encounter an unexpected expense at some point?”

What would happen if you needed money in the next 5 days for something like a car repair, a new roof, or the heat pump goes out?  What if an even bigger emergency occurred, like a health or long-term care need arose?  I think she got my point, and I’m betting you do too.

When making your financial plan, you need to think realistically and take everything into consideration.  A real deal retirement includes unexpected circumstances.

Emergency Fund

A well thought out plan includes an emergency fund.  This is totally liquid money not subject to loss potential.  Something like a money market account, you won’t get much on the return side.  However, you will have added peace of mind, no loss potential, and immediate access to your money without penalties.  I usually recommend 4-6 months of expenses here.

Next, I can tell you – there are times when an 80 year old person should not own a single bond in their portfolio –by the same token- there are times when a 30 year old person should not own a single stock in their portfolio.  Think about it.

Emotional Investing

The blanket question of should I own “all stocks” doesn’t address how to deal with “downside risk.”  In other words, how will you react when there are losses in your account?  At what point will you be uncomfortable with that downside?  If your account lost 20%, how would you handle that?  Suppose your investments went down 37%, how do you stop the bleeding?

For most people, avoiding loss is a crucial element.  Emotionally, we are not set up to see the money we worked for disappear.  This is especially true when you had nothing to do with that loss.  Emotions get in the way of making smart money decisions.

We all know that we should sell high and buy low – right?  But knowing and doing are harder to do than most can handle.  There is a smarter way to approach investing than “Buy and Hold”

If you invest in the right asset class during an up-trending market, you will no doubt make money.  If you remain in that same asset class during a downturn, you will lose money.  From a logical perspective, does it make sense to keep that investment while it loses money?  Does it make sense to ride an investment up and then down?

Logical Investing

Staying invested during good times is logical.  But is it logical to stay invested in stocks when you’re losing money?  There are many investment opportunities which may better serve you needs.  These include:

  • real estate
  • stocks (both here in the US and foreign companies)
  • bonds (corporate, government bonds, foreign bonds)
  • Commodities (gold, oil, farming and agriculture, natural resources)


Removing emotion and biases from investing increase your probability of being successful.

For example, I have clients who think Proctor and Gamble stock is sacred.  They wouldn’t sell regardless of what happens.  This is a bias.  I also talk with people afraid of investing overseas due to unknown political environments, currency changes, etc.  Again, this is a bias that skews your decision process.

The answer lies in mathematics.  I’m betting you don’t want to accept that.  But I know if you remove emotion and biases from the investment equation, you help protect yourself from emotional decisions.  Fear and greed won’t control your decisions.

The Solution

At Maestro Wealth Advisors, our tactical models are formula driven.  Built on mathematics, they help protect us from human biases that lead to bad decisions.

Take our current situation – we have had a good market rally – are stocks too high?  Some say yes- others say no.  Are foreign stocks cheap now?  Again, depending on who you listen to, the answer with be either yes or no- kind of funny really.  One of them will be right- the other not.  Are we one and done on interest rates?  Crystal ball stuff really.  All of these are great conversation at the dinner party.

If you have a money management process that directs your portfolio assets into what is right now the highest potential asset choice and reduces or eliminates those assets that are losing and detracts from your returns would you have a better outcome?  The Answer is yes.

If you have a formulaic math driven portfolio which does not keep you invested when the markets are declining, but instead puts you into a safer mode while those declines happen and also will shift back to more growth assets when the markets signal an all clear; is that a better way to approach investing?  We think so.

Real Deal Retirement

Smart-Secure-Simple.  Find out how to help both protect your nest egg and also grow your money with this informative paper written by our team at FormulaFolios.

Also, for that money you have in your company sponsored retirement plan, get yourself a monitor.  Know when you are reaching a level of downside that would make you react.  If you would react to a change at down 15% in your retirement account at work then wouldn’t you like to be notified when you were down say at 9 or 10% so you would begin to think about what you want to do?  Start asking questions.

Ask us about WealthGuard, an internet based monitoring system which will give you notifications via phone text or an email when your investment account begins to reach those danger zones that you determined in advance.  This allows you to have time to decide your best course of action.

Ready to get MORE out of your retirement?

Kickstart your retirement plan by requesting our complimentary MORE toolkit today.
Here's what you'll get:

Customized Social Security Benefit Summary
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Financial Organizer
to summarize all aspects of your financial affairs

Portfolio Evaluation
showing how your investments have performed historically and the fees that you are paying

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