David F. Andrews B Comm CFP CLU TEP
A Core Service Solution
When a person speaks of Investing for Income, they are usually past the saving stage and may be approaching the time when they need to consider what happens to their estate when they are gone.
Income
The most frequent concern of newly retired individuals is the fear of outliving their income resources or having to reduce their standard of living in the future.
That brings us to the first big challenge in the search for income. "I have a pool of money and some government pensions. How much can I spend?"
Let's start with the concept of Safe Withdrawal Rates. Safe withdrawal rates are a numerical calculation and have nothing to do with a specific investment. For example:
Assume an investment will earn 6% and you pay 45% tax on the gains. Assume that inflation is 3% and you start by taking 5% per year. The investment will run out in 32 years if you take 3% raises each year for inflation. Now we have to remember that inflation is not constant and in many cases investment returns are not constant. Tax rates can be different too.
The tax treatment of your investments can make a significant difference to these calculations. The type of investment selected and its' specific tax treatment along with the "potential" for investment returns are the key to what you will eventually receive.
It is important to monitor your progress and to periodically assess the impact of investment volatility on your future anticipated income and estate. We can help with all these things.
We provide each client with an annual review of their net worth and a progress report showing how they have been progressing over time. In addition we can help clients develop a future forecast and compare alternatives as time goes on.
Our investment strategies evolve from a clear understanding of your risk tolerance (the ability to live with market fluctuations) and an appropriate asset allocation strategy.
Estate Planning
For many people, Estate Planning is not a priority, other than insuring they have a will. once you realize that you have "enough" and that some portion will be left to your heirs, it is time to consider the most tax efficient method of transfer. Lots of people are in the 70s when this becomes a priority.
Safety
Attitudes change over time. Once again we can generalize and say that when people reach the income phase of their life, preservation of capital (or safety) becomes a much higher priority. Once again it is the individual that must choose the level of risk they wish to assume in the investment process, but many alternatives exist today that can provide complete or partial guarantees. Your advisor can assist you. Frequently the products that are fully guaranteed do not provide a satisfactory guarantee and portfolio design continues to be very important.
We provide each client with an annual review of their net worth and a progress report showing how they have been progressing over time.
