Here’s the rub

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In my last post I made a few references to retirement planning. I’d like to briefly outline the process and talk about why a large percentage of Americans nearing retirement age are completely unprepared.

In preparation for retirement there are three phases people go through:

1. accumulation of assets
2. consolidation of assets and
3. distribution of those assets.

• Phase 1-The accumulation of assets generally occurs during one’s working years, when ‘you’re strong as bull’ between the ages of 30 and 55.
• Phase 2- The consolidation of assets logically occurs between age 55 and whenever the distribution of assets will occur. You’ve worked hard to accumulate your monies and as you get closer to retirement you want to protect your investments and switching to a more conservative approach is in order.
• Phase 3- The distribution of assets often coincides with full retirement where you no longer have the stream of income from your job. It’s time to start replacing that stream of income from your savings… supplemented by you collecting social security, a pension, etc.

Now the rub…

In a perfect world each one of these phases goes off without a hitch, but we all know its not a perfect world. There are often problems along the way. Want to take a guess in which phase these problems are most likely to arise? Wanna take a guess which is the most important of the three phases?

The answer is the same… PHASE 1 - the accumulation phase.

Many of the issues that demand my expertise arise in Phase 2 and Phase 3 of my clients lives. Why? Because that’s when they’ve accumulated a significant amount of assets and need your help managing them. (remember the sweet-spot from the previous post).

Generally speaking this is where many financial planners enter the client picture.

What’s the problem with this scenario?

Answer: You’re getting little to no financial planning advice in Phase 1- (logically speaking) the time when you should need it most. The advice comes in during Phase 2 and Phase 3, but no one is showing you how to build an asset base to get there. It’s really kind of crazy, somewhat inverse to how it should be.

Unfortunately, most people spend Phase 1- (between ages 30 and 55) struggling to figure out what they should be doing when it comes to saving and investing for their future. Sure, they might glom some information from CNBC or have a friend or family member in the investment business but typically thats not enough.

I know I’ve made some generalizations here and I know there are thirtysomething’s out there that are very proactive and have done many of the right things, but I’m talking to those who have not. In my mind, the overwhelming majority of you…

Tags: accumulation of assets, Featured