In the Abundance of Counselors There May Be Safety

The American Automobile Association (AAA) has long been known for safety and security, and those same tenets apply to an appropriate asset allocation in retirement. Asset allocation by itself – the idea of not having all one’s financial eggs in one basket as a hedge against volatility – is not enough in later years. Deeper yet is the appropriateness of the allocation, or, how the allocation reflects the owners’ goals, age, risk tolerance and ability to live with - or recover from - sudden changes in value.

Retirement’s “AAA” is a manifestation of goals. However, many retirees have not thought about goals beyond enjoying good health, travel and not outliving their money. A retirement planning specialist can help uncover and document short and long-term objectives. The specialist will utilize a risk-tolerance test – something that perhaps only 10% of adults have completed – to gain an understanding of the clients’ comfort – or discomfort- with the potentially sudden loss of assets’ value. Additional inputs can include the clients’ age; the time until full retirement (often 2 – 4 years); and how risk reduction should organically increase with age.

With information in-hand, the specialist can craft an allocation that safely addresses overlapping or even competing goals. A desire for high returns will carry an element of risk not present in an allocation intended to support sustainability rooted in longevities stretching past 85 years. Holistically, the plan should address all of the client’s assets and the impacts of taxes and anticipated healthcare.

Transparent costs should be expected by clients to achieve an appropriate asset allocation that meets their portfolio’s needs for safety and durability. Depending on the scope of service, costs can be flat per specific service; an annual percentage of assets for ongoing management; or commission-based per transaction.

Today’s financial and medical complexities nearly demand the expertise of a specialist who can create a 30-year plan for retirees who’d prefer to put more effort into the logistics of a three-week vacation. Having an appropriate asset allocation that exceeds simple diversification can be critical to meeting the ongoing needs of retirees