When it comes to planning for retirement, one of the most important factors to consider is how to manage the risks that could impact your future financial security. At our firm, we use the 5 pillars of wealth management to build well-rounded, diversified portfolios using these pillars—Asset Management, Protection Planning, Tax Management, Legacy Planning, and Financial Planning. All of these pillars are important to helping ensure that your financial future is secure.
A couple of weeks ago, we touched on the third pillar—Tax Management—so today our focus will be on the second pillar and why it can play such a crucial role in your retirement portfolio.
What is Protection Planning?
In simple terms, protection planning means identifying potential risks to your wealth and taking steps to protect yourself from those risks. While investing can help you grow your money, it can also expose you to various types of risk. These risks include things like market fluctuations, health emergencies, unexpected life events, or changes in laws that could affect your financial situation. Protection planning is all about making sure you have strategies in place to handle these risks, so you don’t end up losing what you’ve worked so hard to save, especially when it comes time to retire.
Protection planning, as part of our comprehensive wealth management approach, covers Risk Management and goes beyond just identifying risks. It helps to ensure that your financial future remains secure despite unpredictable circumstances.
Why Protection Planning is Important for Your Retirement Portfolio
- Protecting Your Savings from Market Volatility
The stock market can be unpredictable. While investing in stocks, bonds, and other assets can offer great returns, it also comes with ups and downs. In the years leading up to retirement, it’s important to have a strategy that can work to protect your savings during market downturns. - Safeguarding Against Unexpected Events
Life can throw unexpected challenges your way—whether it’s a sudden health issue, an economic downturn, or even a major personal emergency. These situations could affect your ability to work or your need for additional healthcare services. Protection planning helps you plan for these possibilities, and a well-thought-out retirement plan can all help you face the unexpected without jeopardizing your retirement savings. - Ensuring Consistent Income in Retirement
One of the main goals of retirement planning is to make sure that you have enough money to cover your expenses for the rest of your life. If your investments aren’t properly managed for protection, you could end up outliving your money. By balancing risk and reward in your portfolio, protection planning helps ensure that you have a consistent income throughout retirement, even during periods of market volatility. - Protecting Your Family’s Future
For many people, one of the biggest concerns about retirement is ensuring that their loved ones are taken care of. If something unexpected were to happen, you’d want to know that your family is financially protected. Protection planning helps ensure that your family’s future is secure, no matter what life throws your way.
The Bucket Plan® and Protection Planning
By using the Bucket Plan system in every portfolio, it allows us to take a comprehensive approach to protection planning. Every retirement portfolio is divided into different “buckets” based on a person’s time horizon and risk tolerance.
“NOW” Bucket: focuses on short-term needs and is invested in low-risk, liquid assets to cover your living expenses for the first 5-10 years of retirement.
“SOON” Bucket: designed for mid-term needs, and it typically includes investments with moderate risk to provide growth over the next 10-20 years.
“LATER” Bucket: optimizes for long-term growth, with oftentimes higher-risk investments that aim to grow your wealth over a longer period.
By structuring portfolios this way, we can help ensure that a person has enough stability and liquidity in the short term, while still allowing for growth in the long term. This method helps protect against market downturns and offers the flexibility to weather different types of risks.
Conclusion
Protection planning is an important part of any successful retirement plan. It’s not just about growing your money—it’s about protecting it, too. By taking steps to minimize potential risks, you can work to ensure that your retirement is secure, even in the face of uncertainty.
If you’re ready to take control of your retirement and build a portfolio that prioritizes protection planning, we’re here to help. Contact us today to learn more about how we can help you safeguard your future with a customized retirement plan that works for you.
