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financial process

Use the Correct Process for Financial Success

Are You Among the 99% Following a Faulty Retirement Plan?

The following is an excerpt from Momma’s Secret Recipe for Retirement Success, by Dan Ahmad, Jim Files, and Jack Canfield. Get your copy here!

Many retirees do not have their assets allocated properly to give themselves the highest probability that they can receive a high level of consistent income, will never run out of money for as long as they live, and will never suffer a big stock market loss like 2008 again.

In a previous blog, we described in detail the differences between Stage One of Retirement Planning – Asset Accumulation, and Stage Two of Retirement Planning – Income Distribution and Asset Preservation.

When you meet with your financial advisor, even after you’ve retired, the conversation will often be focused on your portfolio. Your advisor may talk about:

  • The growth of your portfolio (even though it actually hasn’t probably grown much).
  • How the market is doing “so well” and you need to ride the wave.
  • How you are diversified by having your 20-30 mutual funds.
  • Adding bonds to the portfolio, if you are worried about risk.
  • How you are in it for the long-term and no matter what, you should “ride out all market volatility.”
  • How they have the best money managers.
  • How they will get you high rates of return.
  • Maybe they will throw in some technical terms like alpha, beta, Sharpe ratio, and standard deviation.
  • How it’s best to defer IRA distributions as long as possible, until age 70 1⁄2, to minimize income taxes.

The advisor might say you are now invested moderately, or conservatively, but they probably don’t define what this means in potential losses. So, your advisor says “moderate” or “conservative,” and you are thinking “low risk,” even though your current portfolio could lose -30%, -40%, or even -50% or more. In many situations, the risk is caused by the portfolio’s primary focus on growth.

Where Your Focus SHOULD Be

During Stage One – Asset Accumulation, the most important aspect is growth. Generally speaking, you should only be in Stage One if you have a minimum of six more years, and preferably ten more years until retirement, so you have time on your side to recover from losses, you are continuing to earn a salary, will make additional monthly investments into your accounts, and you don’t need income yet. In Stage One you aren’t concerned with creating guaranteed lifetime income nor are you worried as much about liquidity and safety.

When you are retired or close to retirement, though, allocating your portfolio with growth as the number one most important goal literally puts your entire retirement security at risk. During retirement, the focus of your advisor should be on helping you to create income that is guaranteed not to run out for as long as you live, and reduce your risk to eliminate the possibility of going through a catastrophic stock market loss.


SEE ALSO: What is the Only Thing Worse Than a Stock Market Loss?


What is Your Biggest Retirement Fear?

What is the single worst thing that can happen to your money in retirement? What’s your biggest fear? Many retirees will say “running out of money before I die,” and they think this means “running out of assets.”

But what they are really trying to say is “they are really afraid they won’t have enough income every month for as long as they live.” Asset values and monthly income are two separate and distinct aspects of your money.

So, the number one most important thing you protect yourself against is “running out of income.” Because if you run out of income, you can’t pay for the things you need and want every month. If you run out of income, your lifestyle changes. If you run out of income, you can’t save any more money in the bank every month. If you run out of income, you lose your financial independence and then have to rely on the government or your family members to support you. If you run out of income, your worst financial fear comes true.

During retirement, what do you have to make sure happens? You have to make sure your number one fear, which is running out of money, doesn’t happen. Running out of money means running out of the income you need.

So, the number one most important goal to have in retirement is creating the maximum amount of income that is guaranteed to be paid to you for as long as you live.

Are You Using the Wrong Process?

We don’t think you have actually done the wrong things with your money.

We do believe if you are like most retirees we have met, you are stuck in Stage One by taking too much risk and not using your assets to create the highest level of income guaranteed to last for as long as you live. So, we don’t think you are doing the wrong things with your money, we just think you are probably going about planning for retirement by using the “wrong process,” by not transitioning into Stage Two.

To explain the concept of using the wrong process we like using the example of baking a cake. Pretend you are going to bake a birthday cake.

You take the pan out, and you spray the non-stick stuff in it. You put the cake mix in. You put two eggs in there, but you don’t crack them, you put the eggs in whole, shell and all, and then you mix everything together.

You bake those ingredients for half an hour. You take the pan out of the oven and mix in the frosting, the oil, the water, and the vanilla. You stir it all around. You put in every single ingredient you were supposed to. It should have all worked out, right? So, you serve that cake. Is it a good cake or a nasty cake? That’s a very nasty cake. You had the right ingredients, but you did not use the correct order, you did not use the right process. For many retirees, the same thing is happening right now with your money. If you don’t use the right process, you’re not going to get the desired end result.

What to Do When You’re Stuck in Stage One

If you are retired or within five to ten years of retirement, and you are focusing on growth first and not paying too much attention, if any, to create a guaranteed lifetime income and safety/liquidity, your retirement security is potentially in jeopardy.

Transitioning from Stage One of Retirement Planning—Asset Accumulation—to Stage Two of Retirement Planning—Income Distribution and Asset Preservation—can be psychologically tough.

First of all, to switch from Stage One to Stage Two you have to admit one painful thing, and that is that somehow, against all of your best efforts, you have gotten older. In our experience, this seems to be tougher on males than females. Stage One allowed you to be aggressive with your investments and take risks, some of the key characteristics of “youth.” Now we are saying, “Hey, you need to slow your aggressive behavior down,” you need to “act your age,” and we understand how you might at first want to rebel. But to ensure your retirement financial security, you will need to make this transition.

The second psychological hurdle, and possibly the most difficult thing to do for both males and females is switching from being a “saver” to a “spender.” Think about it, for years and years while you were working, you saved and saved, you did without and sacrificed, you tried to be frugal, allowing you to be a “master saver,” a “master asset accumulator.”

It’s not easy to turn off the “accumulation switch” and it’s very difficult to visualize “spending” the money you “saved.” But you have to remember why you saved all the money in the first place – it was to actually use the money you saved to create income when you retired that would last for as long as you lived. It was to improve your life during retirement. You “saved it” so you could “spend it.”

So, how do you actually transition from Stage One to Stage Two? You simply re-prioritize how your assets are allocated to give you the best chance you will never run out of money for as long as you live, and you will never suffer a big stock market loss again. To bake your perfect retirement cake, to create your perfect portfolio, the correct process of allocation of your assets during Stage Two of Retirement Planning – Income Distribution and Asset Preservation, the opposite of Stage One, – is prioritized.


SEE ALSO: The Most Important Thing About Retirement Success


The 3 Bucket Safe Money Approach

During retirement, Stage Two, you have to shift how you view and handle your money. At this time of your life, you can be hurt far more by losses than you are helped by big gains. You probably have not transitioned into Stage Two because no one has advised you to do so, and no one has helped you do it. It is likely that no one has given you the answers. The secret to successfully transition from Stage One to Stage Two is to use the concept we call the “3 Bucket Safe Money Approach”:

  • Bucket #1: Guaranteed lifetime income – Step 1 is to decide how much income you need from your assets for the rest of your life. Invest the amount needed into Bucket #1 to create a stream of income that is guaranteed to be paid to you for as long as you live.
  • Bucket #2: Liquidity/Safety – Step 2 is to decide how much money you should keep liquid in the bank.
  • Bucket #3: Growth – Step 3 is to invest the remaining assets for growth. But don’t accept full stock market risk and do not follow the “old school” advice you have been given in the past to “Ride Out All Market Losses.”

If you allocated your assets for guaranteed lifetime income first, liquidity/safety second, and growth third, would you understand your money better in retirement? Would you worry about it as much? Would you have a higher probability to achieve your goal of retirement success?

Has anyone ever discussed this exact process and order with you before: guaranteed lifetime income first, liquidity/safety second, and growth third? We know they haven’t, but why not? What do stockbrokers tell you to do? They may tell you to put all your money in the stock market. What do bankers tell you to do? They may tell you to put all your money in the bank. What do life insurance and annuity salespeople tell you to do? They may tell you to put all your money in annuities and life insurance.

Does it make any sense to put all your money in just one of the three categories? Of course, it doesn’t. So why do they tell you to do it anyway?

It may be because they are influenced by how they get paid. To design the proper retirement plan, an advisor has to have access to all three categories. If your advisor does not work with and advise you to use all three categories, they may not be looking after your best interests, they may be looking after themselves.

Final Thoughts

It is important to have access to all three asset categories to ensure the best plan to help you meet your goals. If you don’t have access to all three categories, you might not be able to design the best plan for yourself. You need the ability to have guaranteed lifetime income assets, assets in the bank, and growth assets in the stock market.

If you’re ready to finally abandon what may be the wrong process and use the correct one to protect and preserve your retirement, contact us today. At Peak Financial Freedom Group, we believe it’s important to feel you have control over your future. We look forward to helping you achieve the financial independence you desire.

If you liked the content in this article, click here to grab the cliff notes for Mommas’s Secret Recipe for Retirement Success, by Dan Ahmad, Jim Files, and Jack Canfield.


This information is provided and intended to be used for general educational and informational purposes only and is not intended as a solicitation for you to buy or sell any financial product. This information is not mean to be relied upon as actual financial or tax advice. The ideas, thoughts, and strategies presented here are those of the Management Team and provide an insight to our views at Peak Financial Freedom Group, LLC and its affiliates. None of this information is intended to give you specific tax, investment, real estate, legal, estate, or financial advice. The planning and ideas in this data are not suitable for all individuals or situations. Consult a qualified financial professional before making any investment decision.
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2019(1), 2020(2), and 2021(3), Five Star Professional Wealth Manager Award - Dan Ahmad and Jim Files have been nominated for and have won the 2019, 2020, and 2021 Five Star Wealth Manager awards. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Once awarded, wealth managers may purchase additional profile ad space or promotional products. Award does not evaluate quality of services provided to clients. The Five Star award is not indicative of the wealth manager’s future performance. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. Award winners represent an exclusive group of wealth managers who have demonstrated excellence in their field by satisfying 10 objective selection criteria. For additional information on the Five Star award, including a complete list of the 10 objective selection criteria and their research/selection methodology, go to https://fivestarprofessional.com.

Investment advisory services are offered through Fiduciary Solutions, LLC, a Registered Investment Advisor (CRD #148118). Insurance products and services are offered through PFFG Insurance Agency LLC, a licensed insurance agency (CA License #0N14013). Peak Financial Freedom Group, LLC is a financial planning and umbrella marketing organization, which enables the provision of multiple financial services under one brand. Peak Financial Freedom Group LLC, PFFG Insurance Agency LLC, and Fiduciary Solutions LLC are affiliated entities with common ownership and control. Jim Files is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1620449) and is a licensed insurance producer with PFFG insurance Agency LLC (CA Insurance License #0F06511). Dan Ahmad is licensed as an investment adviser representative with Fiduciary Solutions LLC (CRD # 1491561) and is a licensed insurance producer with PFFG insurance Agency LLC (CA Insurance License #0732913).

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