80% of mountain climbing deaths occur on the way down.
Source: David Rosell, "Failure is not an Option, Creating Certainty in the
Uncertainty of Retirement" - 2013
It’s the climb down the mountain
you have to be worried about.
One of the themes we like to emphasize regarding a smart retirement strategy is what we call “climbing down the mountain.” It’s based on the fact that most mountain climbing accidents do not occur on the climb up the mountain but on the way back down the mountain.
Likewise, while accumulation strategies are very important to building up your nest egg (climbing the mountain), developing sound strategies for how you’re going to spend your retirement savings (coming down the mountain) are just as important, if not more so. Ignore this distribution phase and you could find yourself either lowering your standard of living or running out of money in the latter phases of your retirement.
The Allegis Bucket Strategy
The Allegis Bucket Strategy leverages three, and sometimes four, elements to create a complete retirement plan that strives to maximize the growth of your money during your working years and potentially increase the likelihood that you’ll have the funds to enjoy a long, happy, fulfilling retirement.
Most retirement experts agree that a withdrawal rate of 3 to 4 percent* of your retirement savings will provide you with a safe income stream throughout your life. By establishing a base of guaranteed income, complementing it with a set aside amount of protected principal and liquid conservative investments, and, finally, protecting it through a package of insurance products, Allegis strives to increase your withdrawal amount as much as possible, thus getting you all the way to the bottom of that mountain safely and comfortably.
*Source: Wade P. Phau and Wade Dokken, “Rethinking Retirement” – 2015
The four buckets
A check arrives every month
for as long as you need it.
Bucket 1: Guaranteed income
Every month a check—or checks—arrives. You know how much you’ll receive and are assured that it will appear in your mailbox or bank account as long as you live. No matter what the stock or bond markets do, you know you’ll get a predictable stream of money.
The vehicles we include in this bucket are Social Security payments, possible company pension plans, real estate income, and annuities.
Take advantage of opportunities. Address emergencies. The money in this bucket is always available.
Bucket 2: Conservative liquid accounts
Usually this takes the form of conservative, dividend-bearing mutual fund accounts*.
The money in this bucket is always available, generally within just a few days. The dividends you earn, though not guaranteed, are likely to be paid and they can be used to support your retirement or reinvested for use later.
Our objective is that these funds earn a reasonable rate of return over the long run.
*Dividends are anticipated but not guaranteed
The money you place in this bucket will never lose value due to poor market conditions.
Bucket 3: Protected principal
This bucket combines the properties of Bucket 1 and Bucket 2 – typically found in an equity-indexed annuity.
Left untouched, any funds you place in this bucket will be there when you wish to access them. You will never lose money, and you may likely see a modest return over a specified period of time. The amount of the interest you earn depends on the performance of a few basic, easily measured factors, including 10-year treasury bond rates and the Standard & Poor’s 500 stock index. What’s more, while your account can grow from one year to the next, it is never affected negatively by a bad year in the market.
The only limitation you face is the money is not totally liquid. You can withdraw up to 10 percent of the contract value each year without penalty. Nonetheless, you’re earning a reasonable return, and increasing your income, without facing the crevasses of the financial markets.
Safeguard your family from potentially drowning in long term health care costs.
Bucket 4: Protecting your assets
As life spans increase, the need grows to protect your income from being absorbed by medical expenses, long-term health care costs, and even the death of a spouse.
Allegis provides a package of insurance and estate preservation products that can safeguard your wealth and protect you and your family from these financially eroding factors.
What’s the best way to address it to meet your retirement goals? Call us at 866-271-0215 or
fill out this form to set up an appointment with one of our trained, experienced financial advisors.
Sequence Of Returns
The stock market is unpredictable. It can go up. It can go down. And we’re never quite sure what it’s going to do from one quarter to the next. This volatility can be frightening enough during the accumulation phase of a retirement strategy, but a market in a downward spiral during the first years of what are supposed to be “the best years of your life” can be terrifying to a new retiree, who have to ask themselves “Will these early declines combine with the withdrawals I plan to live on ultimately drain my retirement funds too quickly?
That danger has proven to be real. It even has a name: “Sequence of Return Risk.”
It means if the returns on your investments are low at the beginning of your retirement, it may not matter if they get better later. The withdrawals could deplete the portfolio before the “good” returns finally show up. In other words, if the timing for your retirement is right as far as what the markets are doing, your money is likely to last as long as you and your spouse’s retirement does. Get the timing wrong, and your money will likely not last over the course of your lifetime.
So how can you mitigate the risk associated with Sequence of Returns? The financial advisors at Allegis Financial Partners can suggest a number of ways.
Talk to us today at 866-271-0215 or fill out this form to set up an appointment with one of our trained, experienced financial advisors.