Step 3 of the Retirement Planning Process is “Strategically Deploying Your Retirement Resources”.
This is where the real heavy lifting comes in and strategy truly begins. It is where an advisor can be worth their weight in gold, since they have already seen retirement situations such as yours and have experience in maximizing resources.
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Covering every technique is outside the scope of a single article, so I will summarize the main principles in play.
MAXIMIZE PREDICTABLE INCOME
You can begin by maximizing how you elect your Social Security. We have an entire 2 hour course on this which explains the main ways to get the most out of this benefit. The difference between an optimal and non-optimal election strategy can be hundreds of thousands of dollars over an entire retirement.
If you have a pension option, you can maximize it by strategically electing either the lump sum or monthly pension option. Based on your other circumstances, the monthly pension option will have sub-options to maximize such as single life or various types of joint life.
If you have annuity income, you can coordinate the optimum time to begin income with the other resources that you working with.
MAXIMIZE INVESTMENT ASSETS
You maximize investment assets during retirement by determining the primary purpose of each investment account dollar between the competing priorities of growth, income, liquidity, and protection.
Once each dollar has a clear priority, you will find the best company and strategy to maximize it.
If a dollar is for growth, you’ll find the best company that will balance long term growth with minimizing volatility and loss.
If a dollar is for income, you’ll find the best company that will provide the maximum amount of lifetime income per dollar invested.
If a dollar is for liquidity, you’ll find the highest yielding alternative that maintains availability of the money.
If a dollar is for protection, you’ll find the strategy that provides the highest amount of growth potential and liquidity available without the risk of loss of principal.
MAXIMIZE HOUSING WEALTH
Housing wealth can be strategically deployed in some of the following ways:
- Downsizing at retirement to either eliminate mortgage or add additional assets into your portfolio.
- Purchasing a home with a Home Equity Conversion Mortgage (HECM) in order to add additional investment assets to your portfolio.
- Eliminate a mortgage using a HECM.
- Activate a HECM Line of Credit for future flexibility to pay for long term care costs, reduce or eliminate market volatility, or fund any other important retirement goal.
Putting it all together is a complex process with many moving parts. Coordinating everything usually involves using financial planning software that integrates the risk and return information of your current investments.
For me, this is the fun part of my job.
I see myself as a retirement planning architect, helping a client take the raw materials and constructing their desired retirement in blueprint form initially, then constructing it piece by piece so that they final product matches the blueprint.
Nobody would ever just pick up a hammer and saw and start trying to build their dream home. They would first envision every detail, layout, and function on paper (blueprint) first. In the same way, entering into retirement with just a general idea of how you’ll make everything work is not the best plan.
Take the time to plan and create your blueprint first, making sure that you have enough raw materials to complete the job.
