Hello, Things have been busy in Kidville. Ansley has her first dentist appointment. It wasn’t too long ago that Amelia had her first. Read about it here. Amelia had K-5 field day last week and Mallory volunteered. I think Mallory went to mainly take pics of Amelia… And since Mexican food is my favorite, we had to eat it for about three days in a row since it was Cinco de Mayo recently! Ansley below.

Oftentimes when folks come to see us to talk about their situation their underlying question is, “Am I going to be okay?” They are trying to figure out if they’ve saved enough, how to take income out of their portfolio, and how to plan their retirement. It’s not uncommon for people to get busy with life and lose track of what accounts they have and how they are working. And often people have an advisor who has helped them accumulate funds, but now the dynamics have changed. The days of accumulation are fewer and now we need to begin taking income from our accounts. It’s one of the most overlooked aspects when it comes to investment management. Mallory and Amelia at field day.

We walk our prospective clients through our Excel in Retirement process that begins with Social Security. If we haven’t claimed yet, we figure out how to get the most from it. From there we go through our green, blue and red money in our 3 Roles of Money process. Our green money is our liquid bank money. Ideally, we’ll have 6 to 9 months of bill paying money in the bank so that we can avoid using credit or having a fire sale on our investments when an emergency strikes. If we get more than one year of bill paying money (essentially what it takes to pay your bills each month), we consider that to be lazy money, because it generally isn’t earning a rate of return that is keeping up with inflation. Ansley at the dentist.

Then we have our red money, which is our market and growth money. We assign our long-term growth money to the stock market, because historically it’s been a great tool to protect our purchasing power. When we’ve put money in the market in the past, it has allowed our money to grow with the overall economy, thereby helping us ensure we are able to maintain our standard of living later in life. The challenge, though, is the down years. If a stock market crash happens during your distribution period you run the risk of running out of money sooner than you otherwise would. That’s called sequence of returns risk. Warren Buffett 28 years ago said, “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.” How do you do that in retirement when you’re selling positions for income?

How we deal with this issue is we section off our blue and green money—our lifestyle money. Ideally, in our blue money we have whatever it takes to pay our bills each year for ten years plus any other projected aspirational expenses. If this is challenging to figure out, we tend to put 40% to 60% of a person’s investable assets in the blue bucket. We invest the blue bucket to be as stable as possible because we are going to use it as our first drawdown location in retirement. Ideally, it’s going to go up a lot more than it goes down, and by the time the blue money is drawn down, Lord willing the red bucket has highly appreciated (like it historically has). Then we split the red money and refill the blue bucket. After I draw this out and explain on the whiteboard or on a Zoom call, people commonly say, “That makes sense.” What we are doing is creating a system. Everything in life functions off systems. Certainly, your investment portfolio should too. I love the clarity that this brings to our clients, and our folks are empowered to use their money they’ve prudently saved. It’s rewarding watching the process transpire. Until next week, David C. Treece, Financial Planner 864.641.7955

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Clients Excel, LLC is an independent financial services firm that utilizes a variety of investment and insurance products. Investment advisory services offered only by duly registered individuals through Creative One Wealth. Creative One Wealth and Clients Excel, LLC are not affiliated companies. Neither the firm nor its agents or representatives may give tax or legal advice. Individuals should consult with a qualified tax professional for guidance before making any purchasing decisions. Clients Excel, LLC is not affiliated with or endorsed by the U.S. Government or any governmental agency. Clients Excel, LLC has a strategic partnership with tax professionals and attorneys who can provide tax and/or legal advice. Published on 05.08.2024.