Navigating the intricate maze of retirement planning in Austin has always presented its fair share of challenges. But today, these challenges may become even more nuanced as we are in a disturbing era marked by significant financial volatility and persistent inflationary pressures.
Retirement planning isn’t as easy as it used to be. If you are 50+ years of age and have accumulated substantial wealth, we believe transitioning into retirement in today’s economy requires a comprehensive retirement plan and an investment strategy with a horizon of 30 or more years after retirement.
As an Austin wealth management firm specializing in helping successful individuals create and implement customized retirement plans, we want to share some insights you can consider to help better position yourself for retirement, especially during volatile market conditions.
Planning for your retirement in Austin? Be sure to read our Quick Guide: Comprehensive Guide to Wealth Management in Austin
The Traditional 60-40 Asset Allocation Model
For many years, the 60/40 asset allocation model – 60% of a portfolio is allocated to stocks and 40% to bonds – has been heralded as the neutral standard for adequate diversification and conservative risk management. Many large financial institutions have used and continue to use this model with their clients.
Historically, this one-size-fits-all strategy offered investors a balanced approach: the growth potential of stocks combined with the relative stability and higher income from bonds. The underlying philosophy was that stocks produced growth and bonds added stability for clients who categorized themselves as moderate risk takers.
While the 60-40 model has served many well in the past, we think the complexities and demands of today’s financial environment necessitate a more nuanced and dynamic approach to asset allocation and risk exposure.
Market volatility has surged between geopolitical tensions, technological disruptions (such as AI), and evolving global trade dynamics. And there is no end in sight. 2024 will likely experience the same in an election year. In our experience, this impacts the efficacy of the traditional 60/40 model in offering adequate defense during downturns.
Given the swift pace of change in global markets, there may be benefits to being more tactical, making asset allocation decisions based on evolving market conditions rather than sticking to a static, one-size-fits-all model.
Tactical, Defensive Strategies for Modern Retirees
Remember, retirement is an individual journey. People’s circumstances, risk tolerance, financial goals, and timelines differ. Therefore, market conditions are going to impact people differently. You can benefit from a custom-tailored investment strategy that is fine-tuned for current market conditions and aligned with your financial goals.
While traditional investment portfolios often lean heavily on stocks and bonds, we recommend embracing a broader asset allocation approach that seeks to take advantage of various asset classes. Alternative investments provide flexibility that more closely matches current market conditions and the needs of investors.
- Real estate, whether through direct property ownership or real estate investment trusts (REITs), offers potential capital appreciation and a steady stream of rental income. It can also hedge against inflation because rents are indexed to inflation. Property values tend to rise over time, which can make income-producing real estate a valuable addition to your retirement portfolio.
- Structured assets, such as structured notes and Defined Parameter investments, offer opportunities for downside protection with either fixed or index-based returns. These assets may not outperform in periods of significant equity upswings, but they can provide the opportunity for protection and lower volatility in downbeat markets like we are experiencing now.
- Private equity and private debt are additional alternatives to traditional equity and fixed income markets. Private equity involves investing directly in companies with direct ownership, bypassing the stock market, and investing in private debt, which seeks to provide high distribution rates derived from private lending. If you have a longer time horizon and a higher illiquidity tolerance, these investments may work for a smaller percentage of your portfolio.
Sector Investing for Retirees
At its core, sector investing refers to a strategy where your investment portfolio comprises stocks or other types of investments in particular sectors of the economy. Examples of sectors include technology, healthcare, energy, and finance.
Rather than casting a wide net over the entire market, sector investing allows investors to focus on areas they believe will outperform other sectors in the short and medium terms. Sector investing is not just about chasing returns; it’s about strategically aligning your portfolio with the market’s ever-changing landscape.
How does this apply to you as a retiree?
Once you retire, managing risk should be a top priority because you have less room for error. Sector investing can be a strategic tool for retirees for two main reasons:
- Diversification: Even if you’re inclined to be conservative, putting all your investments in, say, fixed income might not be the right decision. Incorporating a mix of sectors can add diversification, thereby potentially reducing risk. For instance, while the tech sector might be more volatile, the utilities sector could be less volatile. Or consumer staple stocks may perform better during periods of high inflation than consumer discretionary stocks.
- Tactical Growth: If you’ve been watching the market and feel specific sectors are poised for growth based on current trends or future predictions, sector investing may allow you to position more of your portfolio to benefit from this growth. This can be especially important for retirees looking to combat inflation and increase nest eggs that last several decades.
The Importance of Financial Agility
Financial agility isn’t just a strategy; it’s a valuable discipline when you invest your retirement assets. As a successful individual focused on your financial health, we believe it’s vital to adapt to market changes promptly.
Think of your investments like a well-tended garden. Over time, without the proper attention, some plants may grow faster than others, leading to an imbalance in the garden. Regular monitoring and refinements may be needed.
Finding A Financial Advisor in Austin
You’ve worked hard to accumulate significant amounts of wealth over the years. Once you leave the workforce, having the right financial partner for you. To serve as your advocate and guide can become even more crucial. Finding the right Austin financial advisor for you can be the difference between living the type of retirement you want versus a retirement full of compromises.
How do you increase the probability of living a comfortable lifestyle and having financial security later in life when you need it the most?
Many people use a more intuitive process when they select a wealth management team. The alternative is a more disciplined, objective approach focusing on four crucial factors: experience, fees, ethics, and alignment with your goals.
- Experience: Theoretical knowledge is valuable, but there’s no substitute for decades of experience. Look for a wealth management firm in Austin that has advised clients similar to you during economic ups and downs.
- Fees: Understanding how your financial advisor is compensated is crucial. Every dollar of expense is one less dollar you will have for future use. Don’t underestimate compensation structures. They can impact the types of advice you receive and the overall performance of your investments. Awareness of your overall expenses can ensure you are not paying for services that do not benefit you.
- Ethics: When considering the importance of your financial future, hiring a fiduciary financial advisor is wise. Fiduciaries are held to the highest ethical standards in the financial service industry. They’re legally bound to act in your best financial interests, ensuring transparent and unbiased guidance. Unlike other advisors who are not fiduciaries, their primary commitment is to you, not to third parties that pay them commissions to sell you their products.
This crucial distinction helps ensure you receive recommendations tailored to your unique financial interests and goals, building a trusting relationship to help you pursue a successful long-term retirement plan.
- Alignment with Your Goals: Financial advice has never been a one-size-fits-all business. That is just a less expensive way to deliver financial advice and services to many clients. Your advisor should take the time to understand your personal and financial goals. This is designed to ensure that the advice you receive will be aligned with your unique needs and aspirations.
About Beck Capital Management
Since our inception in 1997 and our rebranding as Beck Capital Management LLC in 2009, we’ve held a privileged position as an SEC-registered advisory firm dedicated to helping high-net-worth individuals and institutions achieve their financial goals.
For us, it’s about planning futures, managing assets, and forging genuine partnerships with our clients. We take deep dives to understand your unique financial situation and then develop a solution tailored to your specific needs.
Connect with our team today to learn more about our comprehensive retirement planning services.
Nothing contained herein is to be considered a solicitation, research material, an investment recommendation or advice of any kind. The information contained herein may contain information that is subject to change without notice. Any investments or strategies referenced herein do not take into account the investment objectives, financial situation or particular needs of any specific person. Product suitability must be independently determined for each individual investor.
Neither Asset Allocation nor Diversification guarantee a profit or protect against a loss in a declining market. They are methods used to help manage investment risk.
Investing in securities involves risk of loss that clients should be prepared to bear. No investment process is free of risk; no strategy or risk management technique can guarantee returns or eliminate risk in any market environment. There is no guarantee that your investment will be profitable. Past performance is not a guide to future performance. The value of investments, as well any investment income, is not guaranteed and can fluctuate based on market conditions.
Sector Strategies: Portfolios that invest exclusively in one sector or industry involve additional risks. The lack of industry diversification subjects the investor to increased industry-specific risks.
Market Risk
The value of the structured investment may depend upon the value of the underlying index or security(ies). Investors do not directly participate in the returns of the underlying index or security(ies).
Income Risk
Under certain structures, anticipated income may not be fixed or guaranteed and may be dependent upon the performance of an underlying index or security(ies). Investors should review the offering documents to determine how distributions are calculated.
Payout Features
Depending upon the products structure, return at maturity may be in the form of a pre-determined number of shares in the underlying stock, rather than cash, and may be based on the performance of the underlying security(ies) or index. The market value of those shares may be substantially less than the principal amount of the notes and in certain cases may be zero. In some structures, investors may not participate in all or even a portion of any increase in value of the underlying security. Investors should review the offering documents to determine how the return on the structure is calculated.
Call Features
Structured notes may have early redemption rights for the issuer of the security, which if exercised would result in a required redemption prior to maturity and loss of any remaining coupon payments. It is likely that an early call by the issuer will be to the issuer’s advantage and to the disadvantage of the investor. In certain structures the call may occur automatically based on the performance of the underlying index or security.
Other Considerations
Past performance is not indicative of future results. An underlying index (or security(ies)) can fall as well as rise.
Structured products are complex financial instruments and product features may greatly vary from product to product. Always thoroughly understand the product features and risks before investing and consult with a qualified financial professional and tax advisor. As with any type of investment, prudent investors should diversify their portfolios with the assistance of a qualified financial professional.
REIT
A REIT is a security that sells like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. REITs receive special tax considerations and typically offer investors high yields, as well as a highly liquid method of investing in real estate. There are risks associated with these types of investments and include but are not limited to the following: Typically no secondary market exists for the security listed above. Potential difficulty discerning between routine interest payments and principal repayment. Redemption price of a REIT may be worth more or less than the original price paid. Value of the shares in the trust will fluctuate with the portfolio of underlying real estate. There is no guarantee you will receive any income. Involves risks such as refinancing in the real estate industry, interest rates, availability of mortgage funds, operating expenses, cost of insurance, lease terminations, potential economic and regulatory changes. This is neither an offer to sell nor a solicitation or an offer to buy the securities described herein. The offering is made only by the Prospectus.
Private Placements are non-public securities, which can be offered to “Accredited Investors” only. These offerings are presented to investors using a Private Placement Memorandum (PPM) rather than a traditional publicly registered securities offering document called a prospectus. The PPM outlines the terms of the offering along with the suitability requirements of the investor.
These securities have not been approved or recommended by the United States Securities and Exchange Commission or any state securities commission or regulatory authority.
These securities often do not have any public market for the Interests. Investments in said Interests are speculative and involve a significant amount of risk