Planning Ahead - February 11, 2009

Plan retirement in phases

Bob CondronFebruary 10, 2009 

Bob Condron, CFP, MSFS, is a representative of Bridge Financial Partners. Call him at 548-8875 or email

The retirement plans of many individuals were dealt a serious blow in 2008. The impact to retirees and those about to retire may be more severe than to those who are still in the accumulation phase of their lives.

In retirement, planning shifts from accumulation and growth to income distribution, as well as asset and inflation management.

Not keeping all your eggs in one basket seems like pretty simple advice. Yet, too often we view our retirement fund as a single lump sum. A new paradigm would be to see your retirement funds as "buckets of money."

Using three buckets of money, clients would separate funds to meet needs and timelines.

Historically, bear markets have lasted an average 18 to 19 months. One of the longest and most severe began with the crash of 1929 and ended in 1932. The 1932 bear market saw the Dow Jones Industrial Average lose 89 percent. With this in mind, the first bucket will hold enough money to cover your income needs for two to three years.

Investment choices for your first bucket should be conservative and highly liquid. The key to this account is ready cash not subject to market fluctuation. This account may allow you to weather a financial storm and avoid having to sell other investments in a down market.

Your second bucket will hold sufficient funds for years four through nine. With a slightly longer time period, it is hopeful that you can obtain a slightly higher return on your investment by accepting a longer maturity. These investments should have limited volatility.

Over a long period of time, inflation could reduce the value of your savings. Inflation has been held in check recently but it would be unwise to not consider this a risk.

Your third bucket will hold investments that will be needed in 10 years or longer with a focus on growth and moderate volatility. Greater risk offers the opportunity for higher returns, but does not guarantee it.

More than anything else, 2008 has required everyone to review and evaluate how their money is invested. If you have not done so already, it is time to meet with your financial adviser and begin to plan again for today and the future.

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